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+
+ - DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT, AND INDEPENDENT AGENCIES APPROPRIATIONS FOR 1998
+
+[House Hearing, 105 Congress]
+[From the U.S. Government Publishing Office]
+
+
+
+
+ DEPARTMENTS OF VETERANS AFFAIRS AND
+ HOUSING AND URBAN DEVELOPMENT, AND
+ INDEPENDENT AGENCIES APPROPRIATIONS
+ FOR 1998
+
+=========================================================================
+
+ HEARINGS
+
+ BEFORE A
+
+ SUBCOMMITTEE OF THE
+
+ COMMITTEE ON APPROPRIATIONS
+
+ HOUSE OF REPRESENTATIVES
+
+ ONE HUNDRED FIFTH CONGRESS
+
+ FIRST SESSION
+ ________
+
+ SUBCOMMITTEE ON VA, HUD, AND INDEPENDENT AGENCIES
+
+ JERRY LEWIS, California, Chairman
+
+TOM DeLAY, Texas LOUIS STOKES, Ohio
+JAMES T. WALSH, New York ALAN B. MOLLOHAN, West Virginia
+DAVID L. HOBSON, Ohio MARCY KAPTUR, Ohio
+JOE KNOLLENBERG, Michigan CARRIE P. MEEK, Florida
+RODNEY P. FRELINGHUYSEN, New Jersey DAVID E. PRICE, North Carolina
+MARK W. NEUMANN, Wisconsin
+ROGER F. WICKER, Mississippi
+
+ NOTE: Under Committee Rules, Mr. Livingston, as Chairman of the Full
+Committee, and Mr. Obey, as Ranking Minority Member of the Full
+Committee, are authorized to sit as Members of all Subcommittees.
+
+ Frank M. Cushing, Paul E. Thomson, Timothy L. Peterson, and Valerie
+ L. Baldwin, Staff Assistants
+ ________
+
+ PART 2
+ Page
+ Selective Service System......................................... 1
+ Neighborhood Reinvestment Corporation............................ 41
+ Council on Environmental Quality................................. 205
+ American Battle Monuments Commission............................. 391
+ Cemeterial Expenses, Army........................................ 415
+ National Credit Union Administration............................. 177
+ Community Development Financial Institutions..................... 93
+ Consumer Information Center...................................... 449
+ Consumer Product Safety Commission............................... 503
+ United States Office of Consumer Affairs......................... 625
+
+ ________
+
+ Printed for the use of the Committee on Appropriations
+
+ ________
+
+ U.S. GOVERNMENT PRINTING OFFICE
+40-256 O WASHINGTON : 1997
+
+------------------------------------------------------------------------
+
+ For sale by the U.S. Government Printing Office
+ Superintendent of Documents, Congressional Sales Office,
+ Washington, DC 20402
+
+
+
+
+
+
+
+ COMMITTEE ON APPROPRIATIONS
+
+ BOB LIVINGSTON, Louisiana, Chairman
+
+JOSEPH M. McDADE, Pennsylvania DAVID R. OBEY, Wisconsin
+C. W. BILL YOUNG, Florida SIDNEY R. YATES, Illinois
+RALPH REGULA, Ohio LOUIS STOKES, Ohio
+JERRY LEWIS, California JOHN P. MURTHA, Pennsylvania
+JOHN EDWARD PORTER, Illinois NORMAN D. DICKS, Washington
+HAROLD ROGERS, Kentucky MARTIN OLAV SABO, Minnesota
+JOE SKEEN, New Mexico JULIAN C. DIXON, California
+FRANK R. WOLF, Virginia VIC FAZIO, California
+TOM DeLAY, Texas W. G. (BILL) HEFNER, North Carolina
+JIM KOLBE, Arizona STENY H. HOYER, Maryland
+RON PACKARD, California ALAN B. MOLLOHAN, West Virginia
+SONNY CALLAHAN, Alabama MARCY KAPTUR, Ohio
+JAMES T. WALSH, New York DAVID E. SKAGGS, Colorado
+CHARLES H. TAYLOR, North Carolina NANCY PELOSI, California
+DAVID L. HOBSON, Ohio PETER J. VISCLOSKY, Indiana
+ERNEST J. ISTOOK, Jr., Oklahoma THOMAS M. FOGLIETTA, Pennsylvania
+HENRY BONILLA, Texas ESTEBAN EDWARD TORRES, California
+JOE KNOLLENBERG, Michigan NITA M. LOWEY, New York
+DAN MILLER, Florida JOSE E. SERRANO, New York
+JAY DICKEY, Arkansas ROSA L. DeLAURO, Connecticut
+JACK KINGSTON, Georgia JAMES P. MORAN, Virginia
+MIKE PARKER, Mississippi JOHN W. OLVER, Massachusetts
+RODNEY P. FRELINGHUYSEN, New Jersey ED PASTOR, Arizona
+ROGER F. WICKER, Mississippi CARRIE P. MEEK, Florida
+MICHAEL P. FORBES, New York DAVID E. PRICE, North Carolina
+GEORGE R. NETHERCUTT, Jr., Washington CHET EDWARDS, Texas
+MARK W. NEUMANN, Wisconsin
+RANDY ``DUKE'' CUNNINGHAM, California
+TODD TIAHRT, Kansas
+ZACH WAMP, Tennessee
+TOM LATHAM, Iowa
+ANNE M. NORTHUP, Kentucky
+ROBERT B. ADERHOLT, Alabama
+
+ James W. Dyer, Clerk and Staff Director
+
+
+
+
+
+
+
+
+
+DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT, AND
+ INDEPENDENT AGENCIES APPROPRIATIONS FOR 1998
+
+ ----------
+
+ Tuesday, March 4, 1997.
+
+ SELECTIVE SERVICE SYSTEM
+
+ WITNESSES
+
+GIL CORONADO, DIRECTOR
+WILLIE L. BLANDING, JR., EXECUTIVE DIRECTOR
+LEWIS C. BRODSKY, DIRECTOR FOR PUBLIC AND CONGRESSIONAL AFFAIRS
+
+ Opening Remarks
+
+ Mr. Lewis. Today we will take testimony on the fiscal year
+1998 budget request with the Selective Service System as well
+as Neighborhood Reinvestment Corporation. Our schedule
+originally called for the NRC to be up first. However, because
+the Selective Service in some way managed to get themselves
+scheduled at the same time in the other body, there is a
+conflict and so we readjusted that schedule.
+ But we are pleased to accommodate Mr. Coronado and
+appreciate your being here.
+ As we begin with the Selective Service System, I would like
+to note that their 1998 budget request of $23,919,000 was an
+increase of some $989,000 over their 1997 funding level. This
+increase is spread throughout their budget, although more than
+half was in Service to America. We will discuss this plan in
+greater detail in just a few moments.
+ Testifying before the subcommittee this year is the
+Selective Service's distinguished Director, Mr. Gil Coronado.
+ Welcome to you and your colleagues. Please introduce those
+with you this morning, including your new associate, Mr.
+Blanding, and then proceed with your oral testimony. Your
+written statement will be in the record in its entirety, and,
+to accommodate Mr. Stokes' problem, certainly I yield to Mr.
+Stokes.
+ Mr. Stokes. Thank you, Mr. Chairman.
+ Let me just personally extend to Mr. Coronado and staff a
+personal welcome for your appearance here today. As the
+chairman has already indicated, I have got a very conflicted
+schedule this morning, so if I slip out on you here, I hope you
+don't take it personally. I am just trying to be at three
+places at the same time. But I did want to say to you that I
+will submit, Mr. Chairman, some questions for the record.
+ Mr. Lewis. All right. Thank you, Mr. Stokes.
+ Mr. Coronado. As one grandfather to another, I fully
+understand.
+ Mr. Stokes. We do share that. Thank you.
+ Mr. Lewis. The grandfather business is especially a delight
+for all of us.
+ Mr. Coronado. It certainly is a blessing from God.
+ Mr. Lewis. With that, let us hear your testimony, and, as I
+indicated. It will be in the record in its entirety, then we
+will move on.
+ Mr. Coronado. Thank you, Mr. Chairman. And I do have seated
+with me at the table two key members of the Selective Service
+team. On my right is Mr. Willie L. Blanding, the new Executive
+Director who just joined our agency last July; and to my left
+is Lew Brodsky, Director of Public Congressional Affairs.
+
+ greetings from the lewises
+
+ Mr. Chairman I convey warm greetings from those other Jerry
+Lewises of Rankin, Texas, whom you met last year. Young Jerry,
+Jr., the 35-millionth young man to register with Selective
+Service, is doing well back home. He continues to support the
+Selective Service System. Exhibits we recently constructed show
+Jerry, his high school friends, and his registration card. Yes,
+Jerry's image is now on display around America to remind young
+men to register. Mr. Chairman, we are grateful to this
+Subcommittee and the Congress for continuing to provide us with
+the funds necessary to serve as America's defense manpower
+insurance policy.
+
+ mobilization timetable
+
+ As you know, in November 1994, the Defense Department
+revised its mobilization timetables to reflect post-Cold War
+scenarios and told us that first inductees would hereafter be
+required 193 days after mobilization for a national emergency.
+ We had anticipated the new timetables and began downsizing
+a few years ago. We reduced several programs and streamlined
+the organization. On the other hand, the shift to new
+mobilization timetables for inductees increased our operational
+work load by adding new planning and training requirements. We
+must revise our procedures, regulations, and documentation to
+reflect a new, graduated, or ``time-phased response'' to
+deliver pre-examined draftees for induction 193 days after
+Mobilization Day.
+
+ automation modernization
+
+ At the same time, we are moving forward with modernization
+of our automation capabilities, making hardware and software
+improvements to increase efficiency and enhance service.
+ As you consider our fiscal year 1998 appropriation, I know
+that to function in an era of Government downsizing, the
+Selective Service System cannot merely dwell on its proud past
+nor depend exclusively on the threat of a future crisis; the
+Agency must demonstrate that America benefits from its work
+each and every day. So in the spirit of the National
+Performance Review, we are broadening this Agency's direction.
+
+ service to america initiative
+
+ We have enthusiastically embarked on a new initiative which
+we call Service to America, while continuing to meet our
+statutory responsibilities.
+ President Clinton recently acknowledged it as--and I
+quote--a noble and worthwhile effort sure to increase civic-
+mindedness and opportunities in our country. End quote.
+ The idea is simple. With your support, our registration
+process will serve dual functions in American society. In our
+routine communication with all new registrants in America, we
+encourage them to serve America today. In close cooperation
+with the Department of Defense and the Corporation for National
+Service, we are informing young men about service opportunities
+today in the U.S. Armed Forces and in the Nation's communities.
+ With Service to America, this Agency proudly continues to
+fulfill its time-honored purpose in a new way. We historically
+focused the attention of America's young men on meeting
+society's wartime needs, and now we also remind them about
+civic opportunities in peacetime.
+ We want to fully implement the Service to America
+initiative. Our FY 1998 budget submission requests $23.9
+million, a slight increase for the first time in 4 years. About
+half of the increase would fund the increased costs of
+printing, mailing, processing, and staffing associated with the
+Service to America initiative. The balance of the funding
+increase would offset pay raise costs. The Service to America
+initiative is a solid example of Federal agencies working
+together to achieve common goals and provide better, more
+efficient service to the public. It is also relevant to our
+Nation's new bipartisan emphasis on volunteerism.
+ We have been in touch with General Colin Powell as he
+spearheads, with former President Bush, the ``President's
+Summit for America's Future.'' We suggested ways this Agency's
+capabilities can be adapted to support programs and initiatives
+sparked by the upcoming Philadelphia summit. The General
+responded recently. He was happy to receive our suggestions,
+and his staff is now considering our proposals. I strongly urge
+that you fully fund this innovative and modest adjustment to
+our acknowledgment program. With your support for this 4
+percent increase in the Agency's budget, we can move forward
+with an endeavor that has great benefits for America and
+coincides with our Nation's new, bipartisan emphasis on
+volunteerism.
+ Mr. Chairman, I am proud of what Selective Service does for
+America. I hope you share in this pride, as I answer your
+questions about our FY 1998 budget request.
+ Thank you.
+ [The prepared statement of Mr. Coronado follows:]
+
+[Pages 4 - 29--The official Committee record contains additional material here.]
+
+
+ subcommittee position
+
+ Mr. Lewis. Thank you, Mr. Coronado.
+ As I indicated, the statement will be included in its
+entirety and questions may be submitted by Mr. Stokes, and
+initially I will have some budget-related questions, but we may
+or may not get to them this morning in view of the schedule. So
+I will be submitting questions as well, for the record, as my
+other colleagues will as well.
+ It seems to me that in light of the limitation on time that
+we are dealing with, it might be most worthwhile to explore in
+more detail your new initiative, Service to America.
+ By way of background, Mr. Coronado, while such matters as
+budget limitations, forced readiness requirements, available
+training space, and the like cause me to have continued
+misgivings as to the need for a Selective Service System at
+this time, I am nevertheless quite capable of reading the
+political tea leaves. We have had that discussion on the Floor
+more than once, as you know.
+ I expect your agency to be around well into the foreseeable
+future, and I should note by all accounts, Mr. Director, you
+and your crew had performed admirably in carrying out your
+mission while heeding this budget line. You are to be sincerely
+congratulated for the good work that you do.
+ In this context, I notice with utmost sincerity and
+integrity that you proposed your Service to America initiative.
+There is no question that your system makes it relatively easy
+for you to put together lists of young men specifically
+interested in military service, the AmeriCorps's program, or
+any other in-service type activity you could squeeze on a
+return postcard that your program would suggest.
+ The real question is whether, from a policy standpoint, it
+makes any sense to provide lists of names to a military
+establishment which is now and will continue for at least 2
+more fiscal years going through a manpower downsizing exercise.
+ Similarly, from a policy standpoint, does it make any sense
+to recruit more paid volunteers on an AmeriCorps program which
+costs not only more than what many in Congress think we can
+afford in the first place but has yet to be adequately reviewed
+to determine if it is indeed successful in performing the
+mission for which it was established? There are a number of
+Members that have very serious questions in connection with
+AmeriCorps and some of its work.
+ Mr. Coronado, would you like to comment on the first of
+those policy questions, and we will go on from there.
+
+ service to america initiative
+
+ Mr. Coronado. Absolutely, Mr. Chairman, and thank you for
+the opportunity to do so.
+ Service to America is basically an opportunity, using the
+established infrastructure, for Selective Service to serve the
+youth of America, pure and simple. I have, in my visits across
+the country, determined that there is one common problem with
+American youth, and that is that there is a disconnect between
+society and our youth. Here is an example of how we can touch
+them and reach them and communicate with them and offer them an
+opportunity to serve America today.
+ The volunteer force needs support. Even though it is
+shrinking in size, the Army is failing to meet its quotas. The
+all-volunteer force is delighted we have such an initiative
+where we ask the young person of today, the males we
+communicate with, the question about serving America today. The
+all-volunteer force is working very hard at meeting its quotas.
+I was recently told that, in fiscal year 1996, as an example,
+they had high standards for the military. They have a screening
+process by which they talk to and test would-be recruits, even
+after all that, when they reach what is called the MEPS, the
+Military Entrance and Processing Stations, 22 percent of them
+never reach day one of training. That equates to about 150,000
+individuals in fiscal year 1996. Here is an opportunity to be
+able to tell the youth of America, you can serve your country
+even if you fail to serve in one area, perhaps you may be used
+in another.
+
+ agency's technical ability
+
+ Mr. Lewis. Well, Mr. Coronado, acknowledging that you have
+the technical ability to provide lists of registered men to any
+agency of Government, it is frankly rather interesting to me
+that, according to your comments made to me last week, neither
+the military nor the AmeriCorps leadership have contacted you
+to let you know how much your service is worth to them.
+ Federal agencies are more than capable of acting much as
+any individual citizen would. If you offer them something for
+free, they will take it. On the other hand, it is often a much
+different level of interest expressed when the service is
+offered but only at a price.
+ Put rather bluntly, why should Congress be asked to provide
+funds for something which the Federal beneficiary itself
+apparently is not willing to pay for? If these Federal agencies
+are not willing to pay for this service now, when would we
+expect that they will?
+ Further, given the way this town operates, you know when
+you create something for an opportunity in Washington, D.C., it
+never disappears. Is it fair to assume that once you start
+providing this, quote, recruitment service, it not only would
+be very difficult to quit but also would it be difficult to
+stop paying for?
+ Mr. Coronado. Mr. Chairman, it would not be a recruiting
+service, it would simply be a service to the youth of America,
+to ask them to participate in the future of our country to
+serve America today. Whether their feeling is for the military,
+or service in some other capacity, we have no way of knowing.
+ I can assure you that the Department of Defense is elated
+with this initiative. They helped us design this little card.
+We cleared that through them. They are the reason we went into
+an expanded proposal for the three-part registration card, with
+a business reply.
+ It was all really at the direction of the Department of
+Defense. They felt, and feel today, that this would be a very
+effective way of gauging responses. The cards come back to us,
+then Defense communicates with the men. It is an adjunct to
+everything they do. They do have a very high budget. We feel
+this would really serve the youth of America by having someone
+else ask them if they want to participate in today's
+opportunities.
+
+ recruitment service
+
+ Mr. Lewis. Let's go back to the fundamental part of my
+question, if you would.
+ Mr. Brodsky. I was going to ask you, sir, this was never
+designed to be a replacement for ongoing recruiting initiatives
+at the Department of Defense. It was always meant and presented
+to be an adjunct to ongoing initiatives. We don't know what the
+eventual scope of a program like this might encompass,
+especially if things work out. There may be other agencies that
+can benefit from our ability to communicate with young people
+telling them to serve America today.
+ Right now, you are only seeing two agencies listed on our
+form. Down the road, there could be other agencies that we
+include, especially on a broader, larger three-part card. This
+initiative has such popularity that we are a victim of our own
+success. In fact, what has happened here is that the
+Administration feels so strongly about this, they feel it
+merits a very slight increase in budget so we can do this for
+the benefit of other agencies throughout the Government, if
+that is the direction this takes.
+ There was no additional cost in Phase I, which is what we
+are doing now. What we are talking about is an expansion of
+this program to allow it to be of even more service in fiscal
+year 1998. And, to answer your question specifically, the
+$500,000 requested for fiscal year 1998 includes the start-up
+costs of going to a broader program.
+ We would expect that in the out-years--future years--there
+would be no additional costs. After start-up, continuing costs
+would be mainly postage, so we are looking at more or less
+$350,000 to $400,000, per year after FY 1998.
+
+ department of defense help
+
+ Mr. Lewis. If I didn't have the serious reservations I have
+about this start-up in the first place, I would be tempted to
+go forward just to really see if you would come in next year
+with a reduced budget. I have never seen that in any agency
+that has come before me. But having said that, if the
+Department of Defense is so excited about this and helped
+design this card, they do have a very, very sizable budget.
+This is just a fraction, a drop in an ocean, relative to--I
+would think they would absolutely be willing to pay for this
+service if it is so desirable.
+ And it strikes me that it creates a very unusual
+circumstance when we are asking, out of some 22 agencies
+commissioned before our committee, we are asking them all to
+tighten their belt. We have one admittedly relatively small
+budget item, your agency, but the increase requested here is
+very significant, especially when you are talking social
+programs that affect people's housing needs, et cetera, et
+cetera, and asking them to be serious about reducing that. So
+the precedent is of serious concern to me.
+ Mr. Coronado. We do not feel that it is unrealistic to
+follow what was originally suggested in 1993 by the Congress.
+It is evident to the general public that we must get our youth
+involved in the future of our country, to offer them
+opportunities from another source, not just somebody in uniform
+knocking at the doors or visiting their high schools. Our
+program is an adjunct to everything that is going on.
+ The Department of Defense is truly excited about this. But
+they have their own programs. They have no flexibility to add
+money or take money away from their current programs and be
+able to provide extra resources to us. We are hopeful that in
+the future we would be able to measure the success or the
+failure of this effort with DoD, who is our primary customer,
+and any other agency that may benefit from America's
+rejuvenated spirit of volunteerism.
+ Mr. Lewis. Have you gotten some indication that if, indeed,
+it is successful, then they would be willing to pay their share
+of the cost?
+ Mr. Brodsky. Yes, there is an indication in the future we
+might be able to go on a cost-sharing basis, if the pilot is
+successful. What we are looking for here is seed money,
+obviously, because we don't know for certain how successful
+this initiative is going to be. But, we feel it is a good idea
+and it will work.
+ However, as was pointed out, the Department of Defense is
+fully committing its own monies to its recruiting efforts. The
+Department itself does not have control over the whole budget
+that we think of as the ``Defense recruiting budget.'' The
+individual services have the lion's share of the money.
+ We are not working with the individual services on this. We
+are working with the Department of Defense's Accessions Policy
+office. That office does not have a large budget, and all of
+its funding is dedicated to their direct mail campaigns. There
+is no extra money in that portion of the DoD budget to pick up
+the costs of this initiative. What we are saying here is that
+this initiative is an adjunct program to what DoD is doing. It
+is not meant to replace anything that they are doing. They
+cannot free up money at this point.
+
+ proposed expenses
+
+ Mr. Lewis. I think you may know that in another area of
+responsibility in the Appropriations Committee, I serve on the
+subcommittee that deals with defense funding. We had the
+Secretary before us the other day. I must admit, I didn't ask
+him this question.
+ In the meantime, in the interest of time this morning, I
+would ask you to provide for the record a detailed and specific
+accounting of all proposed expenses for this program, which I
+noted earlier amounts to some $506,000 for fiscal year 1998.
+And it would be unfair for me not to say, for the record, that
+we are very concerned about the precedent here and the impact
+it has upon other agencies whose budgets we will be discussing
+in the weeks ahead.
+
+ mobilization timetable
+
+ Mr. Director, as we have discussed in some detail over the
+past couple of years, the Selective Service operates under a
+Department of Defense mobilization timetable which suggests
+that conscripts brought into the military through your systems
+would not be needed earlier than 193 days after the start of a
+conflict. It is my understanding that your operations are thus
+geared to make names available to the military on the 194th day
+after a conflict begins. Please correct me if I am incorrect in
+this understanding.
+ Mr. Coronado. With the ongoing registration program, the
+system will kick in initially as soon as the word is given that
+we need to mobilize. The first selectees, or draftees, would
+report on day 76 for a physical, mental, and moral examination,
+then be sent back home. In this two-phase process, men would
+know if they were selected for active duty or not and could
+make proper arrangements in their personal lives. Day 193----
+ Mr. Lewis. I understand that----
+ Mr. Coronado [continuing]. Is when the first men are
+actually inducted.
+ Mr. Lewis. That was my point. The defense mobilization
+timetable suggests that those conscripts would be on the 194th
+day----
+ Mr. Brodsky. They would report to the Military Entrance
+Processing Stations on day 194.
+ Mr. Lewis. Correct.
+ Although I recognize this is more or less a ``what if''
+kind of question, I am interested as to your assessment of what
+would be necessary for your agency if this delivery date is
+ever changed. Specifically, what would be the appropriate role
+for the Selective Service System if the delivery date was
+changed to, let's say, 250 days, or let's say 400 days or even
+600 days?
+ Mr. Coronado. The delivery date dictates the composition of
+the work force, and the timetable for implementation of our
+plans, and the further out it is, the better we can execute it
+with less resources.
+ We are adequately resourced to meet the M+193 requirement
+of DoD. Our structure, as it is right now, is just suited to
+respond to the M+193 scenario. If we were to increase the
+time----
+ Mr. Lewis. Say 250 days or 400 days.
+ Mr. Coronado. Yes, sir, that would be to our benefit. Also,
+this Agency maintains the capability of going into emergency
+mode, provided we are given additional resources.
+ Mr. Lewis. In terms of your requirement for delivery at
+which point the Department of Defense has determined that the
+Selective Service should move to, say, another delivery mode
+such as deep standby or even termination.
+ Mr. Brodsky. They have not, sir. There has been no such
+determination. Their policy is, M+193. That is what is
+required, and what this Agency must meet. At this time, there
+has been no discussion we are aware of at DoD or elsewhere of a
+change to that requirement.
+
+ public service announcement
+
+ Mr. Lewis. Mr. Director, what are the costs associated with
+the development and distribution of your English and Spanish
+public service announcement?
+ Mr. Coronado. I will ask the Director for Public and
+Congressional Affairs to respond.
+ Mr. Brodsky. We have historically done a radio campaign
+each year. Last year we did a radio campaign which included
+spots in Spanish aimed specifically at the influencers of young
+Spanish males--namely, their parents--and distributed them to
+Spanish language stations around the country. We can provide a
+detailed breakout of that for the record.
+ Mr. Lewis. In connection with that, do you have any
+accurate way of determining how often those are broadcast?
+ Mr. Brodsky. We have a more accurate way of determining TV
+broadcasts because our TV spots, like many PSA's that are
+distributed these days, are encoded with an inaudible and
+invisible code. That technology is not available in radio
+campaigns. For radio, we depend on business response cards
+coming back from the stations, indicating to us in writing if
+they elected to play the spots, and when they played the spots.
+ Mr. Lewis. In connection with all of that, do you have any
+accurate way of measuring what the results are in terms of
+actually having young men registering as required by law as a
+result of those spots?
+ Mr. Brodsky. There is never a definitive connection in any
+advertising that is done to actual registrations; in our case,
+to the play of radio spots. However, we often see increases in
+the registration rates over a period of time, after those spots
+have been released.
+
+ obtaining celebrity support
+
+ Mr. Coronado. Mr. Chairman, can I add one more thing?
+Because of limited funding we have not really done all the
+things we wanted to do in public awareness. We have used our
+own resources and depended on personal friendships. I have
+stuck a mike in the face of Jimmy Smits from ``NYPD Blue''. I
+have stuck one in front of comedian Paul Rodriguez, actress
+Jennifer Lopez, a lot of other celebrities and asked them for a
+favor: Read this script, and do it for America. I have done
+that because that is the only way we can actually to get the
+job done.
+ So we are using a lot of friendships to get good public
+service announcements, and it is good for America, and we need
+your help.
+ Mr. Lewis. You remind me of a time when I was a youngster
+in my own business. It was a week and a half ago, but really
+not so long ago. I remember the physicians in my county were
+insulted at the thought there might be some reimbursement for
+the work they did at the county hospital. They believed in this
+volunteer service, and the people who needed that service at
+the county hospital received volunteer assistance, and, I might
+add, very fine care.
+ I sometimes wonder whether they--such people receive any
+better care today. Clearly, the American taxpayer is not
+receiving better care as a result of it. I congratulate you for
+seeking out that volunteer effort. I wish we could spread the
+disease around.
+
+ outsourcing
+
+ You have reported that one of the ways you have reduced
+costs and streamlined your agency is through the use of
+outsourcing some accounting, employee assistance, finance,
+health, and payroll support programs. Can you discuss in more
+detail what you are doing in this regard and give us an idea of
+the kinds of savings you have achieved by those efforts?
+ Mr. Coronado. We can provide a detailed listing of all the
+cooperation we have with other agencies that handle the things
+that you just mentioned and specifically address each one of
+those.
+ Mr. Lewis. Do you want to give me a little flavor at this
+moment?
+ Mr. Brodsky. We might call upon our financial--manager at
+Selective Service--but I think we use the Department of the
+Interior?--Yes, we use the Department of the Interior to handle
+all of our payroll and finance services.
+ Mr. Lewis. It is reaching out to, in this case, other
+agencies.
+ Mr. Brodsky. In most cases, that is what we are doing. We
+are getting help, because of our small size and funding, we are
+incapable of handling some administrative chores ourselves.
+ Mr. Lewis. So you are reaching out to other Federal
+agencies as opposed to private assistance?
+ Mr. Brodsky. Yes. We contract as well certainly, for a lot
+of the services that are provided. Our TV and radio, for
+example. Distribution is done under contract. We are, of
+course, too small to do many things in-house.
+
+ Mail-back Postcard
+
+ Mr. Lewis. One of the improvements you have made to the
+registration process is the use of this mail-back postcard. You
+have noted that the use of this system has resulted in the cost
+avoidance of approximately 70 cents per register. First, what
+is the approximate cost for registering projected to be for the
+Fiscal Years 1997 and 1998?
+ Mr. Coronado. For registration?
+ Mr. Lewis. Yes. What is the actual cost for registration?
+ Mr. Coronado. 7.4 million is the figure that we have.
+ Mr. Lewis. You are telling me you are saving 70 cents per
+registrant? What is the cost----
+ Mr. Coronado. $1.06 at the post office.
+ Mr. Lewis. And what----
+ Mr. Brodsky. We save approximately 70 cents from that
+$1.06, if the registration comes into us by mail-back card
+rather than through the post office. I think what you are
+asking is, what is the average cost per registration, all
+things considered. We would have to do the math on that.
+ Mr. Coronado. Everything we do is reimbursable. We ask the
+folks at the post office to take a card, look at the ID,
+process it, and send it to us. With post office involvement, it
+is $1.06. With the reply card sent directly from the
+registrants, that saves us 70 cents.
+ Mr. Lewis. Part of what I am getting at is whether or not
+you considered the cost avoidance that is involved here a
+direct savings, or have the overall costs per registrant in
+fact increased over time? And if you would help us with that
+for the record.
+ Mr. Brodsky. I am fairly certain what they have decreased
+over time. We have found innovative ways to maintain high
+compliance with the registration program and yet do it more
+efficiently at less cost, because the budget has been
+decreasing----
+ Mr. Lewis. I know that you have got to go across the
+Capitol building, and while I do have other questions I was
+going to ask here, I think we will submit the balance of these
+for the record and let you make sure you make that schedule.
+Okay. So with that, we appreciate your being here and
+appreciate your testimony as well and look forward to working
+with you. Mr. Knight, let me indicate to you for the record
+that Mr. Stokes was with us earlier, and, as you know, we have
+all kinds of conflicts with our schedule, and he had two
+different previous commitments, and so he was here briefly and
+he will submit questions for the record. And we will move
+forward from there.
+ [Additional subcommittee questions follow; see budget
+justification at end of volume.]
+
+[Pages 38 - 40--The official Committee record contains additional material here.]
+
+
+ Tuesday, March 4, 1997.
+
+ NEIGHBORHOOD REINVESTMENT CORPORATION
+
+ WITNESSES
+
+GEORGE KNIGHT, EXECUTIVE DIRECTOR
+HUBERT E. GUEST, DEPUTY EXECUTIVE DIRECTOR/TREASURER
+ROY T. DAVIS, CPA, DIRECTOR, FINANCE, ADMINISTRATION, TRAINING, HUMAN
+ RESOURCES AND RESEARCH
+MARGARET H. KELLY, DIRECTOR, FIELD OPERATIONS
+JULIA HUNTER GALDO, DIRECTOR, COMMUNICATIONS AND INFORMATION SERVICES
+JEFFREY T. BRYSON, GENERAL COUNSEL/SECRETARY
+CARLOS B. PORRATA, DIRECTOR, INFORMATION TECHNOLOGY, PROGRAM REVIEW AND
+ INTERNAL CONSULTING
+MARY LEE WIDENER, PRESIDENT AND CHIEF EXECUTIVE OFFICER, NEIGHBORHOOD
+ HOUSING SERVICES OF AMERICA, INC.
+
+ Opening Remarks
+
+ Mr. Lewis. The announcement over the weekend that we are
+not going to have any votes today kind of radically impacted
+the Members' schedules across the country. If you bear with me
+we will now turn to the Neighborhood Reinvestment Corporation,
+whose fiscal year 1998 budget request of $50,000,000 represents
+an increase of $100,000 above the 1997 appropriated level.
+ Representing the NRC again this year is its very able
+executive director, Mr. George Knight.
+ Mr. Knight, welcome back to the subcommittee for I expect
+this to be both an informative but also a relatively brief
+affair. Please introduce your colleagues who have joined you
+this morning, then proceed with your oral statement as you see
+fit. The entire statement will be included in the record.
+ Mr. Knight. Thank you very much. It is indeed good to be
+here.
+ To my far right is Margo Kelly, who is our director of
+field operations; and to my right is Roy Davis, who is our
+director of finance and training. He picked up that
+responsibility this year. To my left is Hugh Guest, who is
+Deputy Executive Director; and further over is Julia Galdo, who
+is our Director of Communications; and to her left is Jeff
+Bryson, our General Counsel. And he is not sitting at table,
+Carlos Porrada, who is the Director of Program Review and our
+Technology Chief. Mary Lee Widener will be here. She hadthe
+hearing scheduled at 11:00, and so she will be a few minutes late.
+
+ results of fy 1996 appropriation
+
+ Well, I want to thank you for your appropriation in 1996 of
+$38 million. We were able to parlay that to $420 million. That
+helped 16,000 families; 4,400 of those families were new
+homeowners, and it gave them a stake not only in their home but
+in the neighborhood. As you know, we believe that is the best
+and soundest way to change a neighborhood from distress to one
+of pride.
+
+ examples of tax base increases
+
+ We have been concerned to see what the impact would be of
+the kinds of investments we do beyond the homeowner and lender
+and insurer. By strengthening real estate markets, the
+revitalization of the tax base also changes, and the result, of
+course, is a positive one for the city, for the taxpayer.
+ We looked in Savannah at an intensive intervention that had
+occurred there: 7 of the 23 properties on the block were
+totally dilapidated and vacant. By purchasing them, renovating
+them, and selling them to lower-income families, within a year
+the tax assessment on that block rose over 100 percent. More
+importantly, the surrounding area had significantly begun to
+improve.
+ We think that the immediate buildup of these family assets
+helps the next generation. I have put a couple of children
+through college and understand the generational asset transfer
+mechanism of a home equity loan to pay for tuition. We think
+that these kinds of things will stabilize families and their
+educational obtainment, and that is probably the promise for
+the long run.
+
+ what has been learned
+
+ What have we learned that could be replicated and passed
+on? I think first at the national level, the secondary market
+mechanism that has been invented and worked for 20 years works.
+Raising the 20 to 40 million dollars a year is certainly a
+challenge, one that Mary Lee enjoys and her Board has taken up
+and done a commendable job.
+ Second, the lower-income families can and want to be
+homeowners. A little more than 4 years ago, I mentioned that a
+small group--at that time 20 programs--wanted to create 10,000
+new homeowners in 5 years. At the end of the 4-year mark, just
+past the turn of this year, more than 10,000 families already
+had been made homeowners. We had aimed at $650 million in
+investment, and it looks like it will be about $625 million,
+which is basically good news, because that means the homes came
+in a little less expensive than we had thought.
+ Third, I think what we learn and continue to demonstrate
+is, beyond these extensions of credit and creating homeowners,
+the local organization has to be engaged in other kinds of
+social service activities, if you will--cleanups, fix-up
+campaigns, working with voluntary groups, Christmas in April,
+Habitat for Humanity, focuses on crime, graffiti, or youth.
+Those kinds of locally set agendas joined with the credit
+extension activities, really make a difference.
+ Fourth, training is in demand. Three years ago, I told the
+subcommittee that we had 1,300 participants in our four
+training institutes. This last year, we had 2,600. Two weeks
+ago in Atlanta we had 750 at a week-long training institute.
+Training is tremendously effective and in tremendous demand.
+
+ measures of impact
+
+ Finally, I included a few pages from our report that we
+sent to our board. They asked me if we had been efficient with
+the increased resources that you were kind enough to give us?
+We looked at three major tests. The first was a mission test:
+Are we able to reach the same kinds of families? You can
+sometimes be more efficient by changing your mission. And the
+answer to that was, yes, we are still serving families around
+60 to 62 percent of median income.
+ Second, were we able to use the money more impactfully? And
+the answer again was yes. The appropriation has stretched
+further than just counting the units of investment. We have
+stretched it further on training and other things.
+ And third, they asked about the secondary market. Were we
+able to manage more resources, more assets, or more loan for
+each dollar of our administrative grant? Since 1990 to 1995,
+the years for which we have data, we were able to double the
+loans handled for each dollar that we gave them.
+ So with that, I look forward to your questions.
+ [The statement of Mr. Knight follows:]
+
+[Pages 44 - 52--The official Committee record contains additional material here.]
+
+
+ Mr. Lewis. Thank you, Mr. Knight.
+ As I indicated, your entire statement will be included in
+the record. But to begin with, Mr. Knight, I am going to be
+asking questions this morning that are designed just slightly
+to put you and maybe some of your staff somewhat on a hot seat.
+
+ defining critical mass
+
+ As you might recall, one of the questions I asked for the
+record at last year's hearing had to do with what you believed
+the, quote, critical mass was for the NRC. That is, at what
+level of funding can you essentially optimize growth of your
+various organizations and avoid the dysfunction that so often
+comes from putting more money into an organization than that
+organization can responsibly control?
+ Your response suggested that the NeighborWorks network
+could sustain growth of about 10 percent a year or 12 to 18 new
+organizations and that the Neighborhood Housing Services of
+America, NHSA, activities have and can continue to grow by
+about 65 percent per year.
+ You further concluded that Neighborhood Reinvestment could
+grow to a maximum of about $100 million, or twice what you have
+requested this year, before the odds of dysfunction threaten
+the effectiveness of your organization.
+ Mr. Knight, would I be correct in assuming that these
+figures are still reasonably accurate?
+ Mr. Knight. I would say reasonably accurate. Yes.
+ Mr. Lewis. That is--frankly, a short answer that I think is
+probably appropriate, and I think we both understand that.
+Presuming that, I would then like to bring to your attention
+the short line found in the second full paragraph of page 10 of
+your budget justification.
+ By the way, we appreciate receiving your budget
+justification. Not all of our agencies even send them up. At
+any rate, it says in part--and I quote--the $50 million
+appropriations recommended for the corporation by the Office of
+Management and Budget will enable the network to continue--
+continue its work.
+ You will note that I have added emphasis in connection with
+that statement. And then it provides a brief synopsis of what
+you do.
+ My question, Mr. Knight: Is this your budget or is this
+OMB's budget?
+
+ EXPLAINING BUDGET REQUEST FIGURE
+
+ Mr. Knight. The budget is ours. The amount is OMB's.
+ Mr. Lewis. Please explain the difference.
+ Mr. Knight. We prepare and submit to OMB every year several
+budget levels at which we feel we can operate. One is a level
+that I would describe as a challenge level, a level that we
+think we can responsibly operate at, that is above what we
+currently receive.
+ We submit a level that is at our current level, and then
+they usually ask us for some other levels. They then pass back
+to us a number that they want to include in the President's
+submission. And that sentence probably should have said the
+President's budget. And we then----
+ Mr. Lewis. If I really thought the President knew about and
+understood your program, I would sincerely question whether
+that would have been the budget amount, so I would suggest that
+it is OMB's budget.
+ Mr. Knight. We then construct a budget that we feel is
+responsible in the use of the funds.
+ As you know from prior years, we put a great deal of
+emphasis on putting funds into the local revolving loan funds
+and the local operations. We think that is the first and best
+use of those funds, and then we put funds into our operations
+and technical assistance staff.
+ Mr. Lewis. Because this subcommittee generally, and I think
+you know I personally, support the work of the NRC and the way
+you go about performing that work, let me be a bit more direct.
+What was the specific appropriations amount for fiscal year
+1998 you requested in your original budget to OMB?
+ Mr. Knight. I believe the maximum level we requested was
+$71 million, most of that increment would have been used for
+the local revolving loan funds.
+ As you undoubtedly are aware, even in the Campaign for Home
+Ownership, even with the standard bank product, the
+availability of second mortgages was critical to getting many
+of those families into the homes. The revolving loan fund's
+ability to work with a family for that extra 3, 5, 10, 15
+thousand dollars makes the first mortgage possible. Without it,
+in many cases, you don't get the first mortgage, so the
+revolving loan funds are critical.
+
+ QUESTIONING OMB'S RECOMMENDATION
+
+ Mr. Lewis. Presuming that is the $71 million that was
+submitted, could you give me a clear understanding of what OMB
+had to say or what they suggested were the reasons for not
+approaching the budget as submitted and instead coming back
+with a $50 million amount? In fact, it is a net loss if you
+take any reasonable expectation of an increase in cost of doing
+business.
+ Mr. Knight. They haven't let me know that.
+ Mr. Lewis. Training hasn't gotten cheaper, has it?
+ Mr. Davis. No, it hasn't.
+ Mr. Knight. We haven't had an extensive conversation. I
+think it related to the tightness of the budget overall.
+ Mr. Lewis. I should note for the understanding of all the
+members on my committee and otherwise, I am pursuing this line
+of questioning not because I want to pick a fight with OMB or
+because somehow we are flush with money to allow these agencies
+like NRC or otherwise, but, rather, I am trying to make the
+point that we have in the Neighborhood Reinvestment Corporation
+a Federal agency with one of the best track records of any that
+I am aware of. The NRC represents in every respect what
+government can and should be doing for people: Providing first-
+rate service at rock-bottom prices.
+
+ ACKNOWLEDGING THE IMPORTANCE AND SUCCESS OF NRC
+
+ Mr. Knight, I just returned from a weekend in New Orleans
+examining housing programs in New Orleans, and I can tell you
+that there is great emphasis upon that statement, especially
+since my experience over the weekend. Every dime we provide NRC
+gets many times over. Yet Mr. Knight has managed to do this
+without loading up his staff or bloating his administrative
+budget. NRC's total administrative cost runs to just 10 percent
+as opposed to 50 percent or higher in EPA's Superfund program,
+for example. And this year's budget request, if approved as is,
+in fact will result in a reduction of five full-time equivalent
+NRC employees.
+ Yet while we are asked by the President to accept a level
+budget for a success story like NRC, he demands huge increases
+for unproved programs like the Corporation for National
+Community Service and Community--and the Community Development
+Financial Institution, CDFI, and for marginal performers like
+EPA's Superfund program. The Director in that instance
+continually tells us, you know, Superfund is broke, yet we have
+yet to see any significant plan for fixing it.
+ This President's 1998 budget clearly represents too much of
+business as usual or pure politics rather than an honest
+attempt to make available to the citizens of this country
+programs such as NRC which have been proven to work and which
+we can, in the final analysis, afford.
+ Perhaps my biggest frustration is that this lack of vision
+could very possibly result in the members of this subcommittee
+being divided by inevitable partisan battles, that battles like
+this can cost, even when they all know there is a meaningful
+middle ground that could be reached.
+ For now I am going to step down from that soap box, and I
+am not sure, Mr. Knight, if you want to enter into the fray at
+this point or not. I would certainly entertain my colleagues by
+discussion with them individually. They expressed their views
+as well for the record, so that you will see it and the record
+will be complete.
+ Mr. Knight. I certainly thank you for your vote of
+confidence that you have in us, and we will work very hard to
+earn it.
+
+ THE CHAIRMAN'S TRIP TO NEW ORLEANS
+
+ Mr. Lewis. I think I really should say for the record that
+my trip to New Orleans, among other things, was a part of an
+ongoing concern. In urban American city after city, while
+sizable dollars flows, that we purport to want to deliver to
+the poorest of the poor in terms of housingassistance places
+that are decent, in which people can live. All too seldom it seems to
+get real results. And a little bit more of that kind of government, I
+would suggest, will eventually cause that revolution out there. Very
+disconcerting circumstances experienced by this weekend but evidenced
+elsewhere as well.
+ Mr. Knight. You probably didn't have time to be in the
+neighborhood where the Neighborhood Housing Services is
+working. But Lauren Anderson and Richard Ainsworth, who is
+vice-president of Whitney National Bank, have done a marvelous
+job providing home ownership counseling. They have helped
+hundreds of families into new homes. They operate a revolving
+loan fund.
+ As you know from your trip, the housing stock in New
+Orleans is one of the most challenging ones--below sea level
+and wood. The NHS continues to provide a marvelous service in
+New Orleans. They in the last year have worked hard with the
+major property casualty insurance companies as partners. It is
+very challenging.
+ Mr. Lewis. During what was a very brief trip, we spent time
+talking with people who are residents of existing facilities,
+community kinds of meetings where you could feel, as well as
+have communicated to you, the frustration and anger that is
+there.
+ We met with other community groups such as the banks. I
+spent a good deal of time with one of the representatives of
+Whitney, for example. I knew of your work with them only as a
+result of that, but, to say the least, this tour which was
+outlined by the local authority didn't include your work. We
+wouldn't want to eschew a success story there, I say in jest.
+
+ the network's focus on diversity
+
+ Mr. Knight, as you have noted in the past, the strength of
+the NeighborWorks network system serving the revitalization
+needs of America's lower-income communities lies in its ability
+to serve all of those diverse communities.
+ A good example of what you are doing in communities can be
+seen through the various revolving loan fund programs, where 74
+percent of the clients served in 1995 were very low or low
+income, 61 percent were of an ethnic or racial minority, 47
+percent were female, and 23 percent were older than 55.
+ When the NeighborWorks organizations go into a community,
+are they always looking for this type of diversity?
+ Mr. Knight. I think they are always looking for the
+neighborhood under stress. The neighborhood is being
+disinvested, if you will, and, sadly, too often sadly, that is
+also a neighborhood that contains a high percentage of racial
+or ethnic minorities. So if you will, we arrived at it
+secondhand. We seek to work in the neighborhoods that are
+distressed, and when those neighborhoods turn out to be largely
+minority, then you see the kind of pattern that we have.
+ We think that Americans of all backgrounds deserve the
+opportunity to live in a neighborhood in which they can raise
+their children as a place of choice. When we work in a
+neighborhood, we don't seek to change the racial or ethnic or
+income characteristics of the neighborhood but to reengage the
+private sector mechanisms in that neighborhood so people have
+access to credit on a day-to-day basis.
+ Mr. Lewis. So to answer a variety of questions relative to
+whether your program works, if you don't have this kind of
+diversity, etcetera, etcetera, your answer is very likely no,
+but, rather, we look to a distressed neighborhood and what the
+population mix is; that is what it is.
+ Mr. Knight. That is what it is.
+
+ engaging the private sector
+
+ Mr. Lewis. One of the reasons NRC has been a success is, of
+course, because of its unique relationship with the private
+sector in this regard.
+ During fiscal year 1995, contributions made directly to the
+NeighborWorks organizations from banks, businesses,
+foundations, insurance companies, thrifts, utilities, and other
+supporters totaled more than $72 million. This is up from just
+over $44 million in 1990.
+ Mr. Knight, what is the equivalent number for fiscal year
+1996, and what do you anticipate for 1997, 1998?
+ Mr. Knight. It will be above the 72, growing, and certainly
+we will know as time tells. Last year we signed the single
+largest investment with State Farm Insurance Company, a $25
+million investment in the secondary market, which brings their
+total investment close to $50 million--a very exciting moment.
+ With USAA, a large regional, increasingly national,
+insurance company, we recently signed a very interesting $7
+million commitment to the secondary market coupled with a
+commitment to nine cities where they would invest in, if you
+will, staff on the local board level and operating dollars so
+that the local program had the ability to hire that extra loan
+counselor. This is a very exciting partnership with them.
+ We shortly will sign an agreement with a large regional
+bank in New England, with Fleet, that will involve 20-plus
+local programs and a significant investment in both NHSA and at
+the local level. So, again, a very exciting partnership. I am
+confident we will be over the $72 million in 1996 and 1997.
+
+ the campaign for home ownership
+
+ Mr. Lewis. Recognizing home ownership as a critical
+component of the neighborhood revitalization, you began in 1993
+a program called Campaign for Home Ownership. Now in the fourth
+of its 5-year plan, this program has assisted over 8,000 new
+homeowners to purchase over 9,500 units of housing with a total
+$547 million. The cost per unit is less than $68,000 compared
+with the national average of about $139,000 per unit.
+ Is it safe to assume you will more than meet your 5-year
+goal of creating 10,000 new homeowners and stimulating $650
+million in reinvestment in communities?
+ First, Mr. Knight, please give us an update as to where we
+are today with this program, then please speculate as to where
+we will be at the end of the 5-year campaign.
+ Mr. Knight. I believe when the final numbers are in--and I
+hope that will be another couple of weeks; as of December 31--
+we will exceed our goal. Now we are well over 10,000 new
+homeowners at the end of 4 years; we have achieved the goal.
+The homes are coming in a little less costly than we
+anticipated, so the investment goal will be met at the end of
+this year but not met at the end of last year (1996).
+ The delinquency rates on these mortgages are well
+withinnormal bounds, a little bit higher than conventional, but then we
+are lending to a distinctly lower income population and about a percent
+or 2 below FHA rates, and, hopefully on the delinquency side, this will
+be a sustained home ownership.
+ All my staff knows I hate to speculate on numbers, but I
+think we will easily be over 12,000 to 12,500 homeowners by the
+end of the year. And let me be the first to invite you to join
+us on September 22 to celebrate and wrap up this campaign. We
+will be holding a training institute in Alexandria. That is the
+closest we could get to Washington and afford it. And we would
+very much appreciate it if you were available on September 22
+to speak to the campaign leadership.
+ Mr. Lewis. Let's look closely at my calendar and see what
+we can do about that.
+ Well, congratulations on the record to date. And just one
+more time, there is no reason to repeat those lines of
+adulation that were expressed for the record earlier, but, in
+the meantime, success is very important here.
+
+ Comparison with Bangladesh Program
+
+ I was in a session yesterday with a cross-section of people
+who call themselves housers, both public and private
+individuals, and I asked in the middle of that whether anyone
+had read ``The Price of a Dream'' by a fellow named Bernstein.
+And you are shaking your head.
+ I assume you know about the Grameen Bank. Your story is a
+fascinating extension almost in this country of what they began
+in Bangladesh. And I must say that as I have an opportunity to
+visit these projects at various places in the country, and more
+and more I become convinced, when you see that bright shiny
+look in the eyes of a new homeowner given some chance of a new
+opportunity, it is a very, very exciting result that we
+potentially have for government's work.
+ I think I will say it for the record, it is a very, very
+healthy development that your organization, one way or another,
+stayed out of HUD rather than on the side of HUD.
+ Mr. Knight. Thank you.
+ One of the things I don't talk about here because it is a
+fairly minor but important activity is the economic development
+loans made from the revolving loans.
+
+ Economic Development
+
+ As you know, each board has the authority to decide to whom
+they are going to lend. As it turned out, about $3 million was
+lent last year for what might be called economic development
+loans. Among these was Pasadena, California, where the
+NeighborWorks organization is working with a group of low-
+income families, very much a Grameen Bank peer-lending process.
+They have also begun what they are calling now the African
+market.
+ Once a month in Pasadena, there is a marketplace for small
+entrepreneurs to display their wares. It has been enormously
+successful. In Anchorage, Alaska, the very large NHS in
+Anchorage, Alaska, when a local business was failing that has
+supplied a large number of jobs, Neighborhood Housing Services
+of Anchorage stepped up and said, ``We have enough confidence
+that you can manage this business to lend to you. It turned out
+to be the Harley-Davidson dealership, and they are now the
+second largest Harley dealership west of the Mississippi.
+ So when you start with this----
+ Mr. Lewis. The largest is probably in my district.
+ Mr. Knight. So many revolving loan funds don't see economic
+development loans as a primary activity, but it is a critical
+piece to their neighborhood. When they do lend it can be very
+important. It is the principles of flexibility, local decision
+making, and the access to that flexible capital.
+
+ Developing a New Campaign
+
+ Mr. Lewis. Your latest testimony here is kind of a
+reflection of where I was going to go next. I would like to
+have you give the subcommittee a little broader look at NRC's
+plans, if any, to begin a new or similar campaign in years
+ahead beyond the campaign we talked about a moment ago.
+ Mr. Knight. Okay, I will. I certainly will.
+ Mr. Lewis. Do you have any plans?
+ Mr. Knight. Not in the economic development area. We are
+thinking of beyond the next campaign, and we--that we
+definitely will be doing.
+ Mr. Lewis. If we reach the goal of 12,000 homes. Goals are
+important.
+ Mr. Knight. Goals are very important; what you measure
+counts. On the economic and development side, we----
+ Mr. Lewis. Excuse me. Let me go back just a moment. You
+said, what you measure counts?
+ Mr. Knight. Yes.
+ Mr. Lewis. I wonder if we can repeat that for the record
+again. What you measure counts. If we say that in every one of
+our hearings, we might be pleased.
+ Mr. Knight. On the economic development side, as important
+as the microlending is, in this country except for one group we
+are aware of Axxion groups in Texas, most do not charge the
+Grameen bank's high interest charges. They tend to have a
+modest interest charge.
+ As you know, Grameen charges very high interest, 15 to 30
+percent. That is not often done here, and, as a result, peer
+lending programs here are very expensive to do. They are very
+valuable but very expensive because the transaction cost has to
+be raised separately from lending and capital. That is one of
+the reasons many of our local affiliates have not done more
+than experiment with it. They do continue to use the revolving
+loan fund as needed.
+
+ Reduction in Grant Request
+
+ Mr. Lewis. For 1998, your budget plan calls for the
+distribution of grants of all types totalling $27,952,000. This
+funding level is, in fact, a reduction of over $3 million from
+the 1997 level of $31,159,000. Even though your total budget
+request is virtually identical to last year, this proposed
+reduction is the first you have proposed since at least fiscal
+year 1993.
+ Mr. Knight. I am hoisted on my unwillingness to speculate
+forward. You will notice that our total sources of revenue are
+also down by about $3 million. The detail I think it is on page
+82. We work very aggressively to raise grant funds from other
+sources and become, in effect, a pass-through organization.
+ I have not speculated on those for the 1998 budget, and so
+what you see is, what I am quite confident we have in hand
+already.
+ As we raise additional funds, they will flow through to the
+grant budget. So you will see a corresponding drop in both
+revenue and expenses of about $3 million. It is one I am very
+sensitive about, obviously defensive about, because I feel very
+strongly that that is a critical component of our work.
+ Mr. Lewis. Following up on that explanation then of that
+reduced level relative to what the market provides inleveraged
+dollars, what would the optimal level of funding be for your grant
+activity?
+ Mr. Knight. I would go back to your earlier line of
+questions and say that of what we submitted to OMB, we could
+probably handle on the grant side another $15 million-plus in
+terms of revolving loan funds.
+ Mr. Lewis. I am tempted to dwell on this a bit, but your
+1998 budget request similarly will allow the development of two
+NeighborWorks organizations and affiliation with 10 existing
+nonprofit entities. This plan is identical to what you spoke
+about doing in fiscal year 1997.
+ Again, is the optimal amount of growth--or could you
+successfully do more with more communities with a different
+level of funding? What is the optimal level?
+ Mr. Knight. We could probably do a little bit more. This is
+where the 1-year plan gets relatively difficult. Most of those
+12 programs for 1998 have already begun with initial visits. So
+even with an enormous--which isn't going to happen and I
+wouldn't urge to happen--funding, we couldn't increase the 12
+very much this year, because it takes time to get an
+organization built and it takes time to get an existing
+organization--to meet the standards that we set.
+ So, yes, we could increase it. If the committee is
+interested in increasing it, I would propose a small increase
+in 1998 and a larger increase in 1999.
+ Mr. Lewis. Thank you.
+
+ preserving affordable housing
+
+ In reviewing the program activities, I could not help but
+be impressed by what you accomplished in the area of preserving
+affordable housing. For an investment of approximately $13
+million in Federal appropriations, you have been able to
+generate nearly $450 million in investment to rehabilitate,
+repair, and build new homes, nearly 18,000 total housing units
+in 1997.
+ Can you take a moment to explain how this program works,
+including the use of revolving loans and other direct
+investments--how many units and at what average cost you expect
+such preservation efforts will cost in 1998? And, finally, how
+you believe the program--your program specifically differs from
+the preservation program operated by the Department of Housing
+and Urban Development.
+ Mr. Knight. I will respond to that last one. The $13
+million are the funds that specifically are going into those
+capital revolving loan funds. They are, of course, supplemented
+by the training assistance and the funds that are building
+capacity so it is closer to, say--25 or 30 million to 420
+million.
+ The preservation program that is managed by the Department,
+which I am not an expert on by any means, relates to, I
+believe, large multifamily properties that were financed
+through a combination of grant, tax and insurance incentives
+over the last 15 to 20 years and are really quite different
+kinds of properties than the properties that our folks are
+focused on.
+ The NeighborWorks organization focuses on owning
+multifamily in a market-based manner. They do assume there is a
+steady flow of public funds coming in. Because their sources of
+financing are largely private sources, and private lenders look
+principally to see what your reasonable cash flow is over time;
+I really couldn't answer you too much on the Department's
+preservation program because I am not really an expert on it.
+ Mr. Lewis. That is a fair response, and we may discuss this
+further with you for some elaboration or evaluation on the
+record.
+
+ mutual housing
+
+ Mr. Knight. The mutual housing, of which there are about
+4,000 units, is a mixed-income approach, and we feel that is a
+very sound approach. About 40 percent of the occupants are
+below 50 percent of the median, and about 40 percent are
+between 50 and 80, and the rest are above 80. In almost every
+case they also have a social service activity, whether it is a
+day-care center or, in the case of Denver, helping people move
+into home ownership, conducting home-ownership classes. In the
+case of Sacramento, they are working extensively with children
+in after-school kinds of activities.
+ In almost every case, the mutual housing association has
+been able to stabilize families. One piece of it that hasn't
+worked as expected is that, frankly, the turnover rate is much
+lower than we anticipated. People want to stay there.
+ In Stamford, Connecticut, a very high-cost area, the units
+have very, very little turnover. Drug dealers have been driven
+out of the neighborhood because the families want to stay
+there. They also run an after-school program. So we think mixed
+income, long-term financing promotes long-term social
+stability, and financial stability.
+ Mr. Lewis. Strengthening neighborhoods, strengthening
+communities.
+ Mr. Knight. Yes, and it allows the organization to own the
+property for a long period of time. I mentioned Anchorage. They
+own almost a thousand units and added their first SRO--single
+room occupancy property--to the mix, principally because they
+have strong cash flow from some of their other family units.
+
+ program reviews and audit
+
+ Mr. Lewis. Mr. Knight, for 1998, NRC plans to spend just
+over $2 million to conduct 92 program reviews and review 165
+audits. These numbers are comparable to what was accomplished
+in fiscal years 1996 and 1997. What criteria are used to
+determine which activities will be either reviewed or audited,
+and who specifically takes part in these reviews?
+ Mr. Knight. The criteria are twofold. We have an internal
+committee that is chaired by Roy, on which Carlos and Margo and
+I sit, along with a representative from the secondary market.
+Quarterly risk analyses rank the programs. We have a Board of
+financial regulators. We risk rank each program for its
+performance and any kind of activity that may be endangering
+its financial and programmatic health. That is one criterion
+for targeting our reviews.
+ Second is what I would say is longevity. We would like to
+get around at least every 2 years to a program. Even though a
+program may be operating on a very sound basis, we schedule
+them for a review.
+ Nevertheless, our biggest challenge has been, as the
+complexity of programs has grown now, to do a more tailored or
+focused review without having to review everything. We are
+working very hard this year to see what--if we can we go in and
+just look at certain critical aspects of the program and
+satisfy ourselves that, yes, they [the oganizations] are on a
+sound basis. The nonprofit community has no monitoring or
+regulatory agency similar to the banking world.
+ Mr. Lewis. Who typically does the audits?
+ Mr. Knight. The audits, by our grant agreement, must be an
+external auditor.
+ Mr. Lewis. It is on a contract basis.
+ Mr. Knight. It is on a contract basis. We receive the
+audits.
+ Frankly, our quarterly reviews, the risk ranking, is
+probably more sensitive to the issues than the audits, because
+audits come in months and months afterwards. If we catch the
+trouble in the audit, we are not doing our job; we have missed
+something.
+ Ms. Kelly. The audit already confirms what we already knew.
+
+ training institutes
+
+ Mr. Lewis. During fiscal year 1998, you had plans to
+conduct four major training institutes provided to the
+subcommittee. Each institute was attended by more than 600
+individuals. Who typically attends these events?
+ Mr. Knight. About 38 percent come from the nonprofit
+community development industry, and the other 15 percent from
+local government and the private sector. The courses range from
+how to manage multifamily property to creating a neighborhood
+plan to how to originate a mortgage, how to service mortgages.
+It is a wide range.
+ This is what is coming in Chicago, and these are the
+courses this institute will have a special emphasis on:
+property casualty insurance, which is an important issue in
+neighborhoods. Many of these are taught in conjunction with
+other industry leaders. The Institute for Real Estate
+Management runs the property management classes; Habitat for
+Humanity has taught. We work with a number of organizations
+that have expertise in these areas. Obviously, members of the
+insurance industry will teach about property casualty
+insurance.
+ Mr. Lewis. Have you done an analysis to determine what
+percentage of the attendees are new and what percentage may be
+repeats?
+ Mr. Knight. We have not done that specific analysis, and I
+would be delighted to do one.
+ Mr. Lewis. It might be interesting to know.
+ Mr. Knight. We know that the organizations repeat, that
+they send their new staff people. And we know that in the
+property management area we get repeats, because the Institute
+for Real Estate Management has a sequence of certifications,
+and since we offer the two levels of that sequence, we are
+seeing in our second level now many people who came through our
+first level.
+
+ Question. Have you done an analysis to determine what
+percentage of these attendees are new and what percentage are
+returning?
+ Answer. From October 1, 1994, to March 1, 1997, we
+conducted 10 training institutes, attended by 6,002
+participants from network and non-network organizations. During
+this period, repeat participation was 24.9 percent.
+ Additionally, a breakdown of the non-
+NeighborWorks' participants showed that 19 percent
+were from the private sector, 26 percent from the public sector
+and 55 percent from the nonprofit community development sector.
+
+ Mr. Lewis. Give us a feel for what it costs to attend the
+institute and what is offset by appropriate fees.
+ Mr. Knight. I will provide that. It is $135 a day to
+attend, and that offsets our marginal costs. We have not put in
+more appropriated money. In the last several years, we have, by
+expanding the participants and seeking scholarship funds,
+offset costs.
+ I would have to say that hats are off to Roy and the
+training staff and to many, many individual trainers,
+individuals who come from their institutions to train for free.
+ One gentleman, Warren Smith, who is an officer with Fleet
+is one of the nation's leading commercial neighborhood
+lenders--he has come time and time again to teach. And we do
+not reimburse him for his costs. Jim Carr, who is the Director
+of Research for Fannie Mae, has come time and time again to
+teach at the institute, and, again, we don't offset the cost.
+The private sector has been enormously supportive of this
+effort.
+
+ training institute courses
+
+ Mr. Lewis. Would you provide for the record similar
+information regarding some 300 other training courses that you
+have offered?
+ Mr. Knight. Yes.
+ [The information follows:]
+
+[Pages 64 - 90--The official Committee record contains additional material here.]
+
+
+ nhsa's secondary market
+
+ Mr. Lewis. For fiscal year 1996, NHSA secondary market
+activity included $17.7 million in loan purchases and $12.9
+million in loans committed. These actual figures were lower
+than what was accomplished in 1995 and are nearly half of what
+is expected to occur in 1997 and 1998.
+ First, what factors came into play which resulted in this
+reduced 1996 program?
+ Mr. Knight. In 1995, we experienced runaway and
+unsustainable submissions, Mary Lee, I see has just joined us.
+ The nightmare we were faced with, accepting the
+overwhelming demand as it came and not turning people away
+because we didn't want to discourage it. It was a new
+experience for us to slow demand down and eventually stop it in
+1995 because it was unsustainable, given the reserve level that
+the NHSA board had set.
+ So 1995 was a record year, $52 million, but we ran our
+reserve levels down to what we consider dangerously low; 1996
+was a rebuilding year. We have rebuilt the reserve levels.
+ I believe it is now safe to say you are at 8 percent?
+ Ms. Widener. Yes.
+ Mr. Knight. Which makes their board comfortable and me
+comfortable, and so it was a case of restrained demand. We had
+to control it to get back up.
+ We, as you know, cover administrative costs. We don't have
+another way because we don't charge the local programs. We want
+the program to lend on a sound basis. We don't want them making
+loans at some magic interest rate or some magic set of terms
+that puts the family in trouble. Our only way to meet demand
+was to raise reserve funds. Part of our grant and part of Mary
+Lee's fundraising is to raise the reserves.
+ Mr. Lewis. Would you make projections for us for 1997 and
+1998? I would be interested in your commentary.
+ Mr. Knight. Yes.
+ Mr. Lewis. Would you like to comment on that?
+ Ms. Widener. Yes. I think another factor is, it will turn
+on the degree to which we can sell loans to Fannie Mae or
+Freddie Mac, which is another strategy to reduce the balance
+sheet, keep activity up and therefore relieve pressure on the
+reserves. And we have entered into a contract with Freddie Mac
+for the first round of sales and have completed a pilot sale
+with them, so we think that approach is going to help. But we
+need to be sure of what we can do is based on reserves and
+being able to control the balance sheet before we can know how
+far we can go.
+ Mr. Knight. I had previously mentioned the closing of the
+$25 million agreement with State Farm and USAA.
+ Ms. Widener. I actually got here before 11:00, so I
+actually heard all of your testimony.
+ Mr. Lewis. You were intent.
+ I watched her come in.
+ If you would provide answers to these questions for the
+record, we want to know a bit about personnel, the number of
+employees, etcetera, etcetera.
+ But with that, I think we have spent more time on your
+agency than I planned to largely because this is one of the
+more delightful experiences that we have during the year.
+ And, Mary Lee, before you leave, if I can mention something
+to you privately.
+ Thank you, Mr. Knight. Thank you all for terrific work.
+ [See budget justification at end of volume.]
+ Wednesday, March 12, 1997.
+
+ COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS FUND
+
+ WITNESSES
+
+KIRSTEN S. MOY, DIRECTOR
+HON. ROBERT E. RUBIN, SECRETARY OF THE TREASURY
+
+ Introductory Remarks
+
+ Mr. Lewis. The meeting will come to order.
+ This morning it's a pleasure to welcome Secretary Robert
+Rubin and Ms. Kirsten Moy. Ms. Moy is Director of the Community
+Development Financial Institutions Fund, CDFI.
+ Secretary Rubin, as you indicated earlier, this is not the
+normal venue for the Secretary of the Treasury, but, on the
+other hand, this committee covers almost the gamut in terms of
+needs and interests, and the future potential of CDFI is very
+important to us. Because of that, it is really very significant
+that you would come and join Ms. Moy in our discussions this
+morning.
+ The budget for CDFI for fiscal 1998 is $125 million in
+their request, an increase of $75 million from fiscal year
+1997--that which came out of the conference process at any
+rate. We're interested in hearing from you how such a large
+increase in resources would be put to productive use. Frankly,
+we will dwell a good deal upon how you have used the $50
+million and what you see as the long-range potential here.
+ I might mention to both of you that within this
+subcommittee are such Federal responsibilities as all the
+veterans' programs. In an appropriations sense, veterans'
+medical care is an almost untouchable area, so it is the big
+competitor on the block. Then, from there, we have the multiple
+mix of public housing programs, NASA, EPA, the National Science
+Foundation, and almost all want more money, and yet, all of us
+are committed to the impact that an imbalanced budget might
+have upon our country long term. So that's the struggle that we
+have.
+ I look at CDFI as an agency with a good deal of potential.
+I'm interested in kind of positive views. I don't know what the
+prospect will be as we go forward, but nonetheless, it is an
+agency that falls within that whole group of Federal activities
+that I like to point to.
+ While we move towards a balanced budget, that means we're
+going to have to reduce the rate of growth in government
+overall. That doesn't necessarily mean a machete. It also
+involves a serious responsibility to try to measure those
+commissions and agencies that have potential. Where good work
+has been done, and where we can demonstrate that excellent work
+has been done, maybe those deserve some special attention and
+assistance, while others, goodness, we might even close down an
+agency sometimes. But all that's a problem of Washington and
+the mix of our responsibility.
+ You should know further that, of all of the 13
+subcommittees, separate from Defense, this has the largest pool
+of discretionary dollars. Both Defense and our subcommittee on
+Labor HSS are under great pressure to reduce those spending
+patterns, because that's where the discretionary money is,
+before you discuss a question such as entitlements, which is
+also not in this committee's responsibility--and I'm not sure
+the Secretary wants to discuss that today.
+ This is a subcommittee where the action is if, indeed,
+we're going to stay on that pathway that leads towards making
+sense out of the implications of ongoing imbalanced budgets and
+our national economy.
+ So you are very welcome. We will be looking forward to your
+testimony.
+ Let me call on my friend and colleague, Louis Stokes, for
+any comments he might have.
+ Mr. Stokes. Thank you very much, Mr. Chairman.
+ Let me join with the Chairman in welcoming Secretary Rubin
+and Ms. Moy before our subcommittee this morning.
+ As one who has sat on this Appropriations Committee for
+many, many years, I am accustomed to having the Secretary of
+the Treasury appear before the full Appropriations Committee.
+But this is historic this morning, to have the Secretary of the
+Treasury before our VA, HUD Subcommittee. It is, indeed, a
+pleasure. I think it points to the significance and the
+importance of the matter which you will be testifying to here
+this morning.
+ As one who is actively involved in urban problems, I see
+CDFI as being another one of the tools that we can utilize to
+try and solve some of the major urban problems, while we
+utilize other tools such as empowerment zones and neighborhood
+reinvestment, things of that sort. So I will anxiously await
+your testimony.
+ Let me also say, Secretary Rubin, as we have watched your
+tenure in office at Treasury, it has been a real pleasure to
+see the manner in which you have conducted the business of our
+government and the manner in which you have acquired the kind
+of respect you have in this office. I am sincere when I say to
+you it's a real honor to have you here this morning.
+ Secretary Rubin. Thank you very much, Mr Stokes. And thank
+you, Mr. Chairman.
+ Mr. Lewis. As we begin this meeting, before we have some
+questions, I would like both of you to know that you're welcome
+to present your statement, and your entire statement will be
+included in the record. So you can use the time available as
+you see fit. I know the Secretary may not be able to stay
+through the entire process. So we will call upon Secretary
+Rubin first and, at your leave, Ms. Moy, and then we'll go from
+there.
+ Mr. Secretary, welcome. We're pleased to have you with us.
+
+ Opening Remarks of Secretary Rubin
+
+ Secretary Rubin. Thank you.
+ Let me start by saying I appreciate being here. I am going
+to make a few comments and, if I may, I do have to leave. We
+have an 9:30 appointment here on the Hill.
+ The reason I wanted to be here is that this is a program I
+have cared enormously about from the very beginning. And, much
+more importantly, it's a program that the President has cared
+enormously about.
+ When he campaigned in 1992, he had a vision of a nationwide
+network of community development banks around the country. From
+the day he walked in the Oval Office, and I was in the White
+House at the time, he was talking about things that he most
+wanted to get done of the things he had talked about. The CDFI
+Fund was very much on the top of that list of priorities.
+ The reason was that he had the view, which I very much
+identified with for a long time, that if our country is going
+to realize its full potential for all of us. We're going to
+have to find ways to effectively bring the residents of the
+inner cities into the economic mainstream. It was his view that
+we have to do that through work, not through transfer payments,
+and that we have to involve the private sector as much as
+possible.
+ The CDFI Fund, that's really what it's all about. It is
+designed to help create opportunities for people in the inner
+cities and other depressed areas to find work, and it is
+designed to leverage Federal dollars with private sector
+dollars and to bring the private sector to focus on the issues
+of the inner city.
+ I think we made enormous progress, Mr. Chairman. We were
+fortunate in getting an enormously effective person to head our
+CDFI Fund. As I mentioned inside to you earlier, we knew who we
+wanted. Then the question was, how do we get her? We finally
+got the President to call and the President persuaded Kirsten
+to join us. She has done a remarkably good job.
+ I don't think there's any question that we have a
+tremendous opportunity in this country, economically, and I
+think we're extraordinarily well positioned. I agree with what
+you said, that to get there, we have got to continue on the
+road of fiscal responsibility and get in balance, but within
+that, we have got to make the right choices.
+ When we meet with the finance ministers of other countries,
+it's very interesting, because they talk about the same
+problems that we do. One is fiscal responsibility and the other
+thing is what Mr. Stokes briefly mentioned, which is they all
+have problems and all have groups of people in their countries
+who are economically disenfranchised. That has created enormous
+social problems and economic problems. They all focus on the
+question of how they move those people into the economic
+mainstream.
+ For us, we think basically of three categories or programs.
+One I call investment in human capital, Head Start and various
+other education programs, which I think is probably the single
+most important. Second is public safety.
+
+ capital access and economic activity
+
+ Third is the whole question of capital access and creating
+economic activity in the inner cities and other depressed
+areas.
+ While there are many aspects of that program that I think
+are very important, in many ways I think the one that is the
+most promising over the long term, once it's brought to scale,
+is CDFI. Kirsten will tell you about the specifics of some of
+the programs that are underway.
+ But the reception it has received, I think there has been
+ten times as many applicants in the first round as we had money
+to give out. It gives you a sense of the receptivity for this
+program in the private sector and the community generally.
+ Secondly, the President and, even more, the First Lady, had
+a vision of microenterprise and the potential that had for
+dealing with people in depressed areas. As you may know, in
+many developing countries these microenterprise lending
+programs of very small amounts--$500, $1,000, whatever it may
+be, to buy a piece of machinery, to buy something that will
+enable somebody to become economically self-sufficient--have
+been remarkably effective, sort of a ``people's capitalism'',
+if you will.
+ The First Lady particularly has energized our effort in
+that respect. Our notion is to provide sources of capital for
+these very small loans, with a combination of technical
+assistance, so that the people know how to use the capital and
+be able to function effectively in the economy.
+ While little pieces of this are being done around the
+administration, the President directed that this be centered in
+the CDFI Fund. In our CDFI Fund now, we are making loans that
+will promote microenterprise activity, and then also out of
+Treasury, through Kirsten, coordinating the microenterprise
+activity around the administration.
+ I think it has the potential--one can never tell what's
+going to happen, but I really think the combination of CDFI
+generally--that is to say, community development, a financial
+institution of one sort or another--plus microenterprise
+lending, has the potential of having a really significant
+impact in an area where an awful lot of programs have been
+tried in the inner cities and so many have been found wanting,
+although some are successful and I give them credit for that.
+ I think we have something here that is very promising. As
+you say, Mr. Chairman, we're going to have to allocate scarce
+resources very carefully, and it was our view that this is a
+program that is very much worth the allocation of those
+resources. It is also something that we can judge as we go
+along. We're asking for $125 million this year, and our hope
+over a five-year period is to scale up over that time to a
+billion dollars. You can tell as we go along, you and this
+committee, you can watch and see what's happening to see if
+this thing is working the way we think it has the opportunity
+to work.
+ So, with that, let me just say I am very pleased to be
+here. As Mr. Stokes said, I suspect you haven't had a Treasury
+Secretary here before, and I appreciate the opportunity to come
+in. The reason I wanted to be here is because we believe very
+deeply in this program.
+ Mr. Lewis. I will ask similar questions of Ms. Moy, but let
+me extend a few questions to you, Mr. Secretary, if I may.
+ I'm not sure whether either of you had the opportunity to
+read ``The Price of a Dream'', which is a book that was written
+and focused around the Grameen Bank, the Bangladesh experience.
+In fact, I gave a copy of that book to each of my children, but
+also to Secretary Kemp. Indeed, it tells a very interesting
+story.
+ I was reminded, though, in thinking about the fact that
+President Reagan was once heard to say, ``You know, these Latin
+countries, they're all different.'' Washington kind of laughed
+at that, you know, as though it was obvious, as though we, in
+this isolated United States, really do understand that there
+are differences between people. And Bangladesh, of course, was
+much, much different than our country.
+ But the impact of that experiment, of essentially
+stimulating enterprise, was rather phenomenal. The results have
+been rather phenomenal in that country, not as clear as in
+other countries. But there are people across the country, and
+now the First Lady indeed paying attention to the potential of
+that sort of stimulus for enterprise in communities where
+credit not normally available.
+ The experience in Bangladesh, largely because of
+enterprising women, the percentages are way, way up there
+towards the 90 percentile, maybe above that, with women. The
+return rates are very much commercial rates, a reflection in
+terms of the percentage of actual loans repaid, but also the
+rates of interest are market rates, which is not something our
+government normally wants to do in these social programs.
+``Market rates? Goodness sakes. We'll have to do something
+about that.''
+ I would commend, first, the book to you, but we want to be
+in the real world here. It is an experiment that has worked
+elsewhere. It is one of the reasons I'm willing to look at--
+Last year you asked for $125 million as well, but in the
+conference the amount was $50 million. So it's a question of
+competition and also being willing to look again. That's kind
+of where I'm coming from on this.
+ I would commend not only that book to you, but also a
+measurement of what we have seen in this country already, in
+terms of some of these mutual efforts.
+
+ microenterprise activity
+
+ Secretary Rubin. Kirsten, I'm sure, will comment on the
+microenterprise activity, but let me give you a view, for
+whatever it's worth, Mr. Chairman.
+ As you say, every country is different and every culture is
+different, and you can never tell whether something that works
+in one place will work in another.
+ When I was in New York, before I came to the White House, I
+had something in excess of ten years experience with respect to
+the inner city issues. Something that caught me rather early
+on, it seemed to me it was everybody's problem, not just the
+problem of the people who live there. So I have a little bit of
+background in it, although I don't profess expertise.
+ I think it's a very promising idea, if we can combine it
+with technical and practical education assistance. That's very
+much what we're trying to do. Very often you're dealing with
+people--One thing that struck me when I was back in New York,
+when I was part of a community organization in central Harlem,
+was how many people who really wanted to work and wanted to be
+a part of the economy.
+ Here we can give them the opportunity. Now the question is,
+can we also give them the training and the technical assistance
+they need to be successful. I think that it's something that is
+enormously worth trying, because if it works, it could be
+tremendously powerful.
+ Mr. Lewis. One of the keys of that initial experiment, as I
+understand it, was that eventually much of the authority and
+responsibility was passed on to small committees at the village
+level, and indeed, those committees were very tough on people.
+If people didn't make their loans, not only did they not get
+loans in the future, but they essentially lost the opportunity.
+That became a message.
+ But we don't have a pattern in history of being that tough
+in the government.
+ Secretary Rubin. Kirsten can tell you--she knows the
+specifics. I can only recollect what Kirsten told me. But there
+are organizations around the country now that are sort of the
+analog, in a way----
+ Ms. Moy. The legacy of toughness is very much in our
+lending institutions.
+ Mr. Lewis. We'll be interested in getting that.
+ Secretary Rubin. Her point is correct--and Kirsten can
+address herself to this--that you're starting to see the
+analog. I have met with some of these organizations that
+Kirsten developed around the country.
+ Mr. Lewis. I commend you for--the Secretary is, to say the
+least, busy, but I commend you for getting him interested
+enough to raise it to this level. It's helpful to all of us.
+ Mr. Stokes, do you have some questions? I'm not sure how
+long Secretary Rubin can stay, but I thought maybe----
+ Secretary Rubin. I have to leave in about two or three
+minutes.
+ Mr. Lewis. Let's go through that now, then.
+
+ self-sufficiency
+
+ Mr. Stokes. Some of the things I am sure Ms. Moy can
+answer, but I know the commitment that the President has for
+this particular initiative. I have heard him speak of it often.
+As I said in my remarks, I see it tying into some of the other
+things that the administration is trying to do in our cities--
+the empowerment zones and neighborhood reinvestment and that
+type of thing.
+ I guess in that sense what we're talking about is an
+institution that has a social mission, in the sense that you're
+trying to help us bring back our cities, particularly our inner
+cities, and you're trying to help some of the disadvantaged be
+able to get into the mainstream of life. I think we have to get
+away from this concept of handouts and welfare. We have to
+enable people to become self-sufficient. This appears to be one
+of the means of doing that.
+ In terms of the $50 million that was granted last year,
+have you seen that type of mission coming out of it, Mr.
+Secretary?
+ Secretary Rubin. Well, Kirsten can comment on it with much
+greater specificity, but again, I have had an opportunity,
+through Kirsten, to meet some of the people and be at some of
+these meetings with the people who have been getting this
+money.
+ It's very impressive. What you see is a group of highly
+energized people around the country who come to these meetings.
+They seem to care enormously about what they're doing, and they
+very much share our vision, which is the one you just
+mentioned, which is not transfer payments but work. That's
+really what this is about.
+ I have been very impressed by the people I've met. I just
+don't remember what the group was that we had that roundtable
+of--I have forgotten. I think they were micro-enterprise
+organizations from around the country.
+ It was the one where I was supposed to speak, and I said
+I'm not going to speak and I'll just talk with these people,
+wherever it was. It was a very impressive----
+ Ms. Moy. Oh, yes. It was our advisory board.
+ Secretary Rubin. Yes, the advisory board.
+ It was very impressive. These people were remarkably
+knowledgeable and cared about what they were doing. They were
+committed to the idea of work and not transfer payments. It
+gave me a very hopeful feeling that this thing is rooted in the
+communities and really has a good potential for working.
+ Mr. Stokes. Thank you.
+ Mr. Chairman, I know the Secretary has other engagements,
+so I won't pose any further questions to him. I will reserve
+them for Ms. Moy.
+ Mr. Lewis. Mr. Secretary, in appropriations time there are
+all kinds of conflicts with committees. Because of the mix of
+our agencies, our members have lots of interest here but they
+are forced to be elsewhere.
+ Roger Wicker is a new member of our committee but is a
+member who has a great interest in the subject before us, and I
+appreciate him being here. I would yield to you.
+ Mr. Wicker. Thank you very much. I do appreciate you coming
+before our subcommittee. I look forward to questioning Ms. Moy
+more about the specifics.
+ Let me just say and, I guess, echo what Mr. Stokes said.
+This is the type of program that really interests me. It is for
+that reason, maybe for the same reason, that I support the
+Appalachian Regional Commission, the Economic Development
+Administration, all of those programs that some people
+criticize. But I would much rather spend a small amount of
+money creating jobs in the private sector than to continue with
+writing a check from the government to an individual. I would
+much rather that check come from the private sector. So I am
+very, very interested in hearing the specifics later on.
+ As the Chairman said, I'm a new member of this
+subcommittee. This is a program that I know very little about.
+But to the extent that I can work with the administration to
+move people off of the transfer payment into a private sector
+job, I am all for that.
+ You mentioned that you didn't much want to talk about
+entitlements this morning. I'll just say that, boy, we need to
+talk about entitlements.
+ Secretary Rubin. I don't disagree with that. I spend so
+much of my time talking about it, it's such a relief not to----
+ [Laughter.]
+
+ entitlement programs
+
+ Mr. Wicker. If we can somehow find a way to keep those huge
+growing entitlement programs from squeezing out the small
+amount of discretionary dollars that we do have, that we will
+have like another $75 million to create jobs that last.
+ Secretary Rubin. You're right. The answer to the
+discretionary side of the budget, one of the answers is to
+certainly get the entitlements under control. I absolutely
+agree with that.
+ If I could make a suggestion, you might find it
+interesting, sometime when these people come around, to meet
+with some of the people who are the recipients of these grants.
+Really, if you're interested in the program, it really gives
+you a much better sense of the potential, at least, that exists
+here.
+ Mr. Wicker. Wonderful.
+ I notice that Mr. Stokes' ears perk up when he hears
+``urban'', and when I see the word ``rural'', it catches my
+imagination.
+ Secretary Rubin. We're in favor of both. So I think that
+pretty well captures it.
+ Mr. Stokes. If the gentleman would yield, I think it is
+very important for us to consider both rural and urban needs
+and concerns simultaneously, not to the exclusion of one over
+the other.
+
+ national credit union administration
+
+ Mr. Lewis. Mr. Secretary, I know you have to leave us. But
+in just the short time you have with us, the National Credit
+Union Administration--and you know there is some controversy
+going on now about their community of interest, where they can
+seek their membership and so on. That is now before the courts.
+ Some members are suggesting that we ought to consider
+legislation to push that and maybe define what their community
+constituency can be, their field of membership.
+ Secretary Rubin. Credit unions. We have a study on that, I
+believe.
+ Mr. Lewis. I would be interested in input regarding what
+your Department would say relative to legislative activity at
+this point. While they're in the courts, the tendency is to say
+``Oh, no'', especially those with a legal background, there is
+a tendency to say ``Oh, no.''
+ Secretary Rubin. We would be happy to get back to you on
+that, Mr. Chairman. I actually have not kept up with this
+probably as well as I should have. But I know we have
+recommended a study underway.
+ I understand the question you're raising.
+ Mr. Lewis. Yes. The question really involves, you know, if
+you're going to compete in the marketplace, do you want to
+compete equally, should you maintain your protections, all
+those questions.
+ Secretary Rubin. Yes. I guess you're saying, while it's
+pending in the courts, should there be legislation.
+ Mr. Lewis. That's right.
+ Secretary Rubin. Let us get back to you on that.
+ Mr. Lewis. Okay. I appreciate your being here.
+ Secretary Rubin. Mr. Chairman, Mr. Stokes and Mr. Wicker,
+thank you very much.
+ [The statement of Secretary Rubin follows:]
+
+[Pages 102 - 105--The official Committee record contains additional material here.]
+
+
+ Mr. Lewis. It is our pleasure to welcome one more time Ms.
+Kirsten Moy, who is the Director of CDFI. As we have already
+indicated, there is a good deal of interest in our subcommittee
+regarding the potential of this agency, but you're here not at
+a time when almost every budget operates with a style that says
+``what did you get last year and how much more can you get next
+year.'' Rather, it is perhaps competing to be one of those
+agencies that will get some special attention, in contrast to
+those who will be reducing the rate of growth, of necessity, if
+we're going to meet those targets that all of us have committed
+to.
+ With that, Ms. Moy, your entire statement will be included
+in the record, as I have indicated, and if you would proceed
+from there, we will have questions. And Mr. Stokes is tough.
+
+ Opening Remarks of Director Moy
+
+ Ms. Moy. I am very gratified by the level of questions that
+have arisen already. I think what I will do, since you have the
+statement and can read it, I would like to depart from the
+formal statement and try to address some of the questions you
+may have.
+ Mr. Lewis. Ofttimes that's very helpful.
+ Ms. Moy. I assume you will ask me other questions as you
+think of them.
+ First of all, let me remind the subcommittee that we run
+two programs, and I will be talking about both of them. One is
+the Community Development Financial Institutions Program, where
+the bulk of our money goes, and that provides loans, grants and
+equity investments and some measure of technical assistance to
+these CDFIs, Community Development Financial Institutions, all
+around the country.
+ In the first round of funding--and again, this is in your
+materials--let me remind the subcommittee that we made $37.2
+million in awards to Community Development Financial
+Institutions, to 32 organizations around the country, and about
+$20 million of that amount was in grants. But about $16 million
+was in the forms of loans and equity investments upon which we
+expect to realize some financial return.
+ We achieved tremendous diversity in that first round. Our
+CDFIs are based in 20 States and the District of Columbia, but
+they're actually serving communities in 46 States and the
+District, so we got excellent geographic coverage.
+ About half serve predominantly urban areas, 25 percent
+serve predominantly rural areas, and the other 25 percent
+actually serve a combination of both. So I believe that means
+we might be slightly overrepresented in the rural category
+because I think the rural population is approximately 25
+percent. So I think we did well in that category.
+ We believe in working with other programs. At least 24 of
+our CDFIs also serve Empowerment Zones and enterprise
+communities, so there the activities are really reinforcing
+each other.
+ In terms of type, you will see we funded everything from
+community development banks to community development credit
+unions, loan funds, some microlending organizations, one Native
+American housing organization, and three community development
+venture capital groups. So institution type alone doesn't
+determine whether you are a CDFI. It's that you have a primary
+mission of community development among other things.
+ The second program we run, which works in concert with the
+CDFI program, is the Bank Enterprise Award Program. That is the
+program to which, by statute, we must allocate one-third of our
+program monies. Last year, we awarded $13.1 million to 38 banks
+and thrifts for doing more, increasing the level of their
+lending and investing in distressed communities, and for
+supporting CDFIs. So the programs are viewed as working hand in
+glove.
+ We have some good diversity in that program as well. We had
+banks ranging in total asset size from $21 million, which is
+quite small, to over $320 billion. In the case of the CDFI and
+BEA Programs--both--I'm going to be talking about leverage in a
+moment, we achieved tremendous leverage on those monies.
+ One thing we are repeatedly asked is how are our programs
+different from those of other Federal agencies. You know, is
+this duplicative? Are we doing things that other organizations
+would do? I would argue, as the Secretary does, that what we're
+really about is not a giveaway program. It's about a program to
+incentivize the private sector to do more. All our award
+winners are private institutions. The idea is to use a small
+amount of public money to leverage much larger amounts of
+private money.
+ We are here to help make the financial services industry
+work better, in those distressed communities and low-income
+populations, that perhaps traditional financial institutions
+have not always been so good in serving. We do this partly by
+helping with the creation of new institutions specifically
+targeted to serving those communities, and by making
+traditional financial institutions work harder and better.
+ I would say that the hallmarks of our programs are
+tremendous leverage, forging linkages with banks and thrifts
+and other entities in the financial services industry, and
+creating viable, self-sustaining institutions. Our institutions
+all have to make it on their own at some point. We're not here
+to be providing the money forever.
+ We're about expanding access to the economic mainstream and
+trying to restore healthy market activity in these communities
+so that the Federal Government doesn't need to be there
+forever.
+ We're also about catalyzing new activity and jump starting
+it, as opposed to subsidizing it on a permanent level, and
+we're a lot about promoting performance. That's sort of clear
+from the way we did the selection and the way we will continue
+to make awards.
+ I would like to just give a few examples which will
+possibly help make it real. In terms of leveraging of private
+resources, you may recall that every dollar we give out has to
+be matched one-to-one by non-Federal money. That's just for
+starters, so we don't even give anybody money unless they bring
+another dollar to the table from a non-Federal source.
+ We did a calculation of the various amounts of fund-raising
+that those 32 organizations are doing in the next two to three
+years as a result of getting money from us.
+ Mr. Wicker. Ms. Moy, is that one-to-one in both programs?
+ Ms. Moy. No, the CDFI program. Actually, we got a lot more
+than that in the bank program, in terms of the way the program
+works. The two programs work differently.
+
+ leveraging other money
+
+ In the next two to three years, we think that the $37.2
+million that we are awarding will provide three to four times
+that amount in terms of leveraging other money. That's in the
+short term.
+ In the long term, which one might define to be ten years or
+so, we think that these groups will be able to do lending and
+investing of 10 to 20 times the amount of money that we are
+awarding them.
+ Now, these are real numbers, and that's because financial
+institutions are all about leverage. I mean, people get a
+certain amount of capital and they are able with that capital
+base to do a lot more lending and investing. That's the idea.
+ In a regulated financial institution, for instance, if a
+bank has capital of, say, eight to ten percent--we're talking
+about leverage there of ten to one or twelve to one. So this is
+not unusual in this type of institution. We are actually
+getting more than that in some cases because of the particular
+way these institutions are working.
+ One very real example is self-help of North Carolina. It's
+a national leader in community development finance. It's
+probably one of the oldest CDFIs around. We recently disbursed
+a $3 million grant to self-help. Over the next five years, they
+and we conservatively estimate that our grant and matching
+funds will enable them to provide more than $100 million to
+finance affordable housing and small business loans over and
+above what they could have done without our assistance. In
+fact, they have already closed a $22 million transaction based
+on the award that we made to them.
+ We have a really good story to tell in terms of forging
+linkages with the financial services industry. The $13.1
+million that we put out in bank enterprise awards generated
+nearly $66 million in equity investments and other financial
+support, to Community Development Financial Institutions. In
+addition, the program leveraged about $60 million in direct
+lending and financial services in some of the Nation's most
+distressed neighborhoods. So that's the leverage we think of:
+$126 million of activity relative to our $13.1 million in
+awards.
+ As one example, Republic National Bank in New York got a
+sizeable award, just over $500,000. But that catalyzed nearly
+ten times that amount, $5.2 million, in financial support
+they're providing to 20 CDFIs in the greater New York
+metropolitan area. In that case, it was actually a 10 to 1
+ratio.
+ Among the organization supported in New York is a CDFI, the
+Non-Profit Facilities Fund, which we are actually making an
+award to. That institution serves low-income people by
+financing among other things health care facilities, child care
+facilities, community service facilities and so forth. To date,
+this CDFI has made about $11 million in loans and has attracted
+investors from the banking, insurance, foundation, and local
+government sectors. Of course, they made a lot of those loans
+before they had our money, but they have plans to do a whole
+lot more with it.
+
+ self-sustaining institutions
+
+ The third thing that I mentioned that we're very focused on
+creating viable, self-sustaining institutions. This is
+critically important. These institutions have to be able to
+operate in the private marketplace while serving these very
+needy communities.
+ The Delaware Valley Community Reinvestment Fund, which
+serves some of the most distressed communities of Philadelphia
+and Chester, PA and Camden, NJ, has a very strong track record
+in terms of financing affordable housing and assisting small
+businesses. Over time, they have attracted 700 investors from
+the private and not-for-profit public sectors. Now, some of
+these are very small investors; some are individual investors
+and some are religious organizations. But still, it's 700
+investors. And their asset base has grown 25 percent within the
+past year, partly as a result of our award. We're providing a
+$2 million grant, which represents a 10 percent increase in
+their asset base. With that, they should be able to expand
+their lending and investment activities many times over in
+those communities.
+
+ rural areas
+
+ We talked about rural areas earlier. Expanding access to
+the economic mainstream is especially challenging in rural
+areas. Appalbanc is a multi-faceted community development
+financial institution that serves 85 really distressed
+communities in West Virginia, Kentucky, Tennessee and Virginia.
+They are focused right now on a strategy to promote housing
+development and home ownership in very distressed rural areas.
+This, of course, will expand access to the economic mainstream
+by providing low income people, that otherwise could not afford
+a home, with a means of owning their own homes. To date
+(they're a longstanding CDFI). They have actually developed or
+rehabed more than 20,000 homes, so we know they can do this.
+The $1.33 million we are providing in assistance will greatly
+expand their ability to continue this activity in a very needy
+region.
+ Congressman, I know you're familiar with ShoreBridge
+Capital in Cleveland, and----
+ Mr. Stokes. They were in to see me yesterday, yes.
+
+ shorebridge strategy
+
+ Ms. Moy. Charlie Rial happened to be in Washington.
+ But what they're a lot about is restoring healthy market
+activity by forging linkages between labor force development
+initiatives and actual business development and expansion.
+Sometimes, unfortunately, even when there's new economic
+activity in a community, the jobs don't necessarily go to the
+people who need them most. That takes a lot of extra work,
+commitment and planning. That is the ShoreBridge strategy. You
+probably know far more about them than I do. But we're
+providing them with an investment of $1.5 million, which will
+be used, along with capital from many other private investors,
+to retain and expand manufacturing companies that employ low-
+income residents of the Cleveland Supplemental Empowerment
+Zone.
+
+ santa cruz community credit union
+
+ Finally, let me mention in terms of jump starting new
+activity, we are providing a $1 million grant to the Santa Cruz
+Community Credit Union, which provides access to credit for
+small and start-up businesses and basic financial services to
+low-income residents in Santa Cruz, CA. Our $1 million grant is
+actually going to be used to expand the credit union's
+operations to enable them to open a new branch in Watsonville,
+CA, which was devastated by an earthquake some years ago.
+ They don't yet have our money. They probably will in the
+next couple of weeks. But they have already raised $2.5 million
+of additional deposits for the credit union based on the
+proposed $1 million award.
+ Mr. Wicker. What kind of businesses do they lend to?
+ Ms. Moy. They're an interesting credit union. They provide
+financial services, as all credit unions do, but they are
+primarily small business lenders. They have a sensational track
+record in lending to small business, which is not something
+that actually many credit unions do. In fact, several of their
+companies have actually gone public (to Chairman Lewis) I know
+you're familiar with them. It's an incredible story. They're at
+an asset size of $20 million, one of the largest community
+development credit unions around.
+ These are examples of the sort of initiatives that the Fund
+can support.
+
+ performance agreements
+
+ Let me conclude by mentioning something that I think we all
+care about dearly, which is performance. When people come to
+apply for your money, they always tell you a lot of stories
+about all the wonderful things they're going to do. And I'm in
+that same position with you here right now.
+ I think what is very important is that, over time, we
+demonstrate there actually is performance. The Fund's statute
+requires that we execute an assistance agreement, a formal
+agreement with each award recipient, that details performance
+goals and provides sanctions to the Fund if the organizations
+do not perform.
+ We are in the process right now of actually negotiating
+performance agreements with all 32 organizations. Not quite,
+but almost half of these organizations have now largely
+developed their performance goals, have raised their matching
+money, and are in position to close, so that we will actually
+have monies disbursed to them in the next four to five weeks.
+ The other half are still working on it. It is taking some
+time because, frankly, this is a new experience for many of
+them. Aside from the fact that this is the first time many of
+them are receiving Federal money, very few funders have ever
+asked them about what they plan to do with the money and for
+goals at the level of detail that we are. This is taking a lot
+of time. We think it's absolutely critical that we do it.
+ It is important to the Fund that, over the long term, these
+organizations actually show the community development impact
+that they propose, and that we would like to see, based on the
+use of scarce Federal dollars. We are also at the present time
+putting in place systems and procedures to make sure that we
+can effectively monitor and evaluate all these awards going
+forward.
+ I would be happy to answer any questions that you have.
+ [The information follows:]
+
+[Pages 112 - 120--The official Committee record contains additional material here.]
+
+
+ Mr. Lewis. Thank you very much, Ms. Moy.
+ Before we start the questioning, it was refreshing to have
+one speak with both enthusiasm and knowledge from off the top.
+In the meantime, some of us--I'm an exception--some of us learn
+to read in high school and so you're recognizing that is a
+helpful item.
+ It is, as you suggest, one thing to leverage dollars, and
+it's another thing to actually measure the results, to insist
+upon goals and measure the results. Some have suggested that
+you get very little for that which you cannot measure. That
+emphasis is very important, at least to me.
+ Ms. Moy. It is critical.
+
+ one-to-one ratio
+
+ Mr. Lewis. The one-to-one ratio that you mentioned of
+dollars, beyond five dollars, those are dollars that come from
+other government programs, like State and local government,
+and/or the private sector?
+ Ms. Moy. They come, I think, most largely from the private
+sector, but local government is also a contributor in some
+cases.
+ Actually, certain States have started CDFI programs--though
+not many. Delaware Valley, I believe, received a sizeable grant
+from the State of New Jersey, Governor Whitman's office, as
+matching money. Actually, through the Bank Enterprise Program,
+it seems that one of the larger and most frequent sources of
+match are the banks. There are wonderful partnerships between
+the CDFIs and the banks.
+
+ public housing programs
+
+ Mr. Lewis. One of the responsibilities of this subcommittee
+involves public housing programs. Frankly, I have learned much
+more about those programs since taking on this responsibility
+than I learned before. An area that is of great concern to me
+is what appears to be a growing body of information that would
+suggest that there's a factual foundation for suggesting that
+in many an urban center in America we have been delivering
+money for many, many a year, and because we have failed to very
+seriously measure results, an awful lot of that money doesn't
+lead to results.
+ A recent trip to New Orleans is perhaps an extreme
+illustration of that.
+ I won't dwell upon the negative, for we've been sending
+$50-$70 million a year to that local authority for some time
+now, and when you look at the condition in which most of those
+we purport to want to serve are asked to live, you just have to
+shake your head. It certainly shakes my faith in government's
+ability to follow through on the results side.
+ There were exceptions to that experience. On both sides of
+the main drag, the main street, the one that all the tourists
+visit--I think it's St. Charles Street in New Orleans, if I'm
+remembering right--within two blocks there are projects that
+involve largely the work of neighborhood reinvestment, which is
+not a housing program but, rather, it provides housing
+assistance in a fashion that seems to work. It involves a
+combination of Federal money investment, banks making
+investments locally, a partnership of public/private and
+otherwise, where there actually are products being developed
+that provide subsidized housing that is in direct contrast to
+places like Desire Homes. Habitat for Humanity is a story
+that's worth looking at.
+ It's strange, isn't it, that we've been spending $50-$70
+million there, and yet this relatively new idea outside of
+housing seems to be having an impact.
+ Above and beyond that, there's a CAP program that is
+attempting to put together an effective coalition between
+Xavier College, New Orleans, as well as Tulane. Within that,
+there was a session, a presentation, in which they were
+discussing a program that is designed to go out into the
+communities that surround the projects, find people of
+enterprise, and see if they are willing to make the kind of
+commitments to goals, et cetera, et cetera, the kind of thing
+that you were discussing.
+ We haven't measured that yet, but at least there is a great
+spark of interest in creating jobs within the community that
+involves the projects. The solution to these community problems
+involves education, jobs, and living conditions, housing that
+is livable. There are at least some elements there that are
+encouraging to me.
+ But the vast reflection is very, very discouraging. The
+Nation's capital reflects much of the same.
+ Let me ask a few specific questions. We have a number of
+questions we would ask you to respond to for the record as
+well, and then I will turn to Mr. Stokes.
+
+ cdfi fund staffing plan
+
+ Last July, your office provided the committee with a
+staffing plan for CDFI. Out of 33 positions in the office, two
+positions are designated for portfolio/program monitors within
+the Office of Policy and Programs.
+ Will these two individuals be responsible for ensuring all
+aspects of the programs, that all of them are executed
+according to plan?
+ Ms. Moy. I'm glad you asked that question, because we're in
+the process of revising our staffing plan.
+ I made, I hope not an overly facetious, remark last year
+that it was my first job in the Federal Government and
+everything seemed to take more time and people than it did in
+the private sector. We need far more than two people to do
+this. In fact, we brought in Ernst & Young, a reputable
+accounting firm, early on to help us, to advise us on
+appropriate ways to set up our systems and procedures,
+especially for the monitoring function. We are going to be
+hiring substantially more than two people, and at higher
+levels.
+ I don't need to bore you with it, and we can certainly
+provide you with a revised staffing plan. But we will have a
+high-level grants manager. There will be a comptroller and an
+accountant that will be working on all these issues.
+ But yes, those people will be there to ensure that our
+loans and grants are in compliance, that if there are loans and
+investments, people are repaying the loans. But we're
+evaluating and monitoring not only the financial impact, but
+the programmatic impact, the program side. Did they, indeed,
+meet their performance requirement, their performance goals? I
+think that's very important. We're getting quarterly reports on
+a number of financial and other issues and a full annual report
+from these folks about what they have actually accomplished.
+
+ default rates and performance goals
+
+ Mr. Lewis. Can you give us an indication of what you see--
+you have been doing this measuring and CDFI has been making
+these grants and there are preliminary indications. What's
+happening out there in terms of default rates and other thing,
+performance goals?
+ Ms. Moy. First of all, we're still in the process of
+disbursing money now, and so----
+ Mr. Lewis. I understand. When did you make your first
+disbursement?
+ Ms. Moy. When did self-help close, do you recall? Okay, the
+24th of February.
+ Mr. Lewis. The first disbursement?
+ Ms. Moy. Well, in Bank Enterprise, three-quarters of the
+money is out. On the CDFI program, the first one was on the
+24th. We have----
+ Mr. Lewis. What I'm really asking is in the early stages of
+this. Maybe these are questions for next year and the year
+after.
+ Ms. Moy. What we can tell you is that, in selecting the
+award winners, we took a detailed look at the defaults and
+delinquencies. Many people actually said we were too tough. But
+I would venture to say that the performance record of those
+that received funding on the first round are excellent and they
+would compare favorably with any mainstream financial
+institutions out there.
+ Santa Cruz, for instance, has I think a loss rate less than
+one percent on small business loans, maybe less than half a
+percent. It's phenomenal, given the people that they're lending
+to.
+ The industry, in the area of housing, it is less than half
+a percent. I mean, there were organizations that have actually
+gotten Federal money, who came in with substantially higher
+default rates, they were unbelievable, well over 10 or 20
+percent. We just didn't feel, given what they were doing, that
+that was acceptable. We expect such good performance going
+forward.
+ There is no way that our money can continue to work in
+these organizations if there is such a level of losses that the
+money dissipates.
+ Mr. Lewis. That's correct.
+ There is a presumption, of course, in the standard
+financial institution circuit, that unless there is significant
+equity, there is bound to be a pattern of default and an
+irresponsible use that is much higher than the traditional.
+ What you're suggesting in many ways is that maybe that
+original premise needs to be reexamined and it may be full of
+holes for----
+
+ repayment capacity
+
+ Ms. Moy. I think it's true in certain cases. I think it's
+modified in others. Bankers used to talk about the importance
+of character and capacity in repayment. I think what some of
+our CDFIs do is pick the right people to lend to, because they
+know the communities imtimately.
+ You also never structure a loan for someone that they can't
+repay. You know, some of these loans may bear lower interest
+rates, but they represent realistic repayment schedules.
+ Mr. Lewis. You indicated you need more than two. Will other
+organizations, such as the Department of Treasury, their IG, be
+called upon to help monitor the program execution?
+ Ms. Moy. Actually, the IG has been assisting us. I sought
+from the beginning to make sure we were--This is a new program
+within Treasury. Treasury doesn't run many programs and it is
+important to be in sync with the IG. They have actually been
+providing us with technical assistance since we started, with
+recommendations regarding our award selection and award
+monitoring process, and they have done two reports for us. So
+we're working very closely with them. It has actually been a
+very rewarding experience.
+ Mr. Lewis. I understand the Treasury Inspector General, in
+May of 1996, issued a report outlining CDFI award monitoring
+procedures. Included was a suggestion for quarterly status
+reports which are to be thoroughly reviewed for accuracy and
+completeness.
+ Do you plan to have these people who will be working within
+your office to----
+ Ms. Moy. Absolutely, absolutely. They will be looking at
+the financials and the programmatic performance, absolutely.
+
+ training initiative
+
+ Mr. Lewis. Ms. Moy, in your statement there is mention of
+your intention to launch an important training initiative to
+provide the full range of training and technical assistance to
+CDFI institutions, those to whom you provide grants.
+ What areas of training deficiency have been identified and
+were they identified through detailed surveys, or are they
+based upon, I suppose, anecdotal information?
+ Ms. Moy. Well, actually, one of our best sources of
+information was the 268 applications. We have a tremendous
+reservoir of information. The training and technical assistance
+needs were very clear upon review of those 268 applications.
+ We have all kinds of CDFIs, from start-up organizations to
+groups that are growing rapidly, sort of in midstream, to
+seasoned, 20 year old organizations. They have very different
+technical assistance needs. Some of the young ones just need
+help about how do I start up, how do I put together a good
+board, how do I start raising money, how do I organize, how do
+I underwrite loans?
+ We have organizations that are rapidly expanding that need
+to get much more sophisticated about the type of lending they
+do. They may have some simple bookkeeping or simple computer
+systems in terms of monitoring their loans. They now need full-
+fledged portfolio monitoring systems. That's a totally
+different type of technical assistance.
+ Mr. Lewis. I have to go make a phone call. Mr. Stokes, I
+will yield the time to you, and then Mr. Wicker.
+
+ performance agreements
+
+ Mr. Stokes. Thank you, Mr. Chairman.
+ Ms. Moy, let me start with a question about your
+performance agreements that you require to be signed. Tell us
+what sort of things you require to be put into that performance
+agreement.
+ Ms. Moy. Let me divide that into two pieces. There is what
+we call the boilerplate. It's a standard agreement and has a
+lot of the usual Federal compliance and other requirements in
+it, the whole body of Federal law that applies to grants, which
+we have had to adapt for the variety of institutions that we're
+funding. Some of them are regulated and some are unregulated.
+So we had to do seven versions of these boilerplates.
+ But the most interesting part, I think, are the performance
+goals themselves. So, depending upon what type of institution
+they are, they look very different. For instance, for a
+community development credit union--and Faith community was one
+of our winners--it may have to do with expanding membership so
+they can serve more individuals. It may have to do with
+providing additional services. Many credit unions, for example,
+haven't been able to offer checking to their individuals, and
+people have had to go to local pawn shops or other places to
+cash checks.
+ In an institution that is primarily, for instance, a
+housing lender, the goals have to do with how many housing
+loans you want to make, are they going to expand from single
+family to multifamily, one way or another, how many units are
+they going to be creating over time, which income level of
+population are they going to be serving?
+ For a small business lender, again, it's different. It's
+perhaps how many businesses are you going to help start out;
+what is the volume of small business loans you're going to be
+putting out there. How long are some of those businesses going
+to be in operation and what type of job potential do they have
+over time. So it varies from entity to entity.
+
+ matching fund
+
+ Mr. Stokes. Let's talk about the matching fund situation a
+little bit. What do you require in terms of the amount of
+commitments or cash in hand with reference to an application
+for a grant?
+ Ms. Moy. Well, when they come in, they don't actually have
+to have matching money in hand, but they have to have fairly
+good prospects for getting money. You know, there is some ``pie
+in the sky'' about raising money, but we would like to see,
+either the money in hand or a credible plan for fundraising
+from some realistic sources.
+ For instance, in the first round, most of the people that
+came in, while not having money in hand, had submitted
+applications to leading foundations, for instance, had already
+gotten indications that they were likely to be funded.
+ Mr. Stokes. What's the general source of their funding, the
+matching funds?
+ Ms. Moy. It's actually very interesting. In the first
+round, there was some major funding from a variety of
+foundations, like the Ford Foundation, for instance, the
+MacArthur Foundation and so forth. Much of the money is from
+banks, because the Bank Enterprise Award Program is clearly
+incentivizing that activity.
+ There is matching from religious organizations. Many of the
+Catholic religious orders, some of the Protestant
+organizations, are putting money into this. There is some
+matching from individuals.
+ Actually, the sector we haven't really been able to tap
+much is the corporate sector. There have been a few instances
+of corporate donations from community to community, but we have
+not really been able to fully access that community. Actually,
+among the proposals in the President's budget is actually a
+proposal for tax credits to incentivize equity investments in
+CDFIs, something that would apply largely to corporations.
+ Mr. Stokes. In your first round of grants, I'm assuming
+that you received a larger number of applications than you did
+in terms of the grants.
+ Ms. Moy. Yes.
+ Mr. Stokes. What percentage of your applications were you
+able to fund?
+ Ms. Moy. We funded--We had 268 applications asking for over
+$300 million. We initially, if you remember, had only $31
+million available. We were able to put in a little more money
+later on and were funding $37.2 million.
+ We were funding about one in ten, a little over one in ten,
+when we started. We were way oversubscribed. Then we, in
+addition, had to cut people back about 40 percent on the
+funding, because there just wasn't enough money.
+ Mr. Stokes. As I understand it, you are now in the process
+of actually disbursing the funds?
+ Ms. Moy. Yes, on both programs. That's correct.
+ For BEA, as I mentioned, about three-quarters of the money
+is out, based on what the banks have already accomplished, and
+for CDFI, in the last few weeks we have closed three
+transactions. We have another 29 to go.
+ Mr. Stokes. Obviously, between July and March of this year,
+you've had a considerable lag time, right?
+ Ms. Moy. Yes, that's correct.
+
+ disbursing funds
+
+ Mr. Stokes. Tell us why it has taken so long to get the
+funding out.
+ Ms. Moy. Part of it speaks to the need to set up systems
+and procedures to monitor the money. Awarding is one thing, but
+once you put money out, it is a totally different story. Some
+of that has been spent in building the legal, financial and
+administrative infrastructure that we need.
+ The problem with crafting these assistance agreements has
+also taken some period of time. I think only two or three of
+our organizations have ever received Federal money. I have to
+tell you, a number of them were in shock, when they first got
+our legal documents. There is a palpable difference between
+those who have previously seen Federal money, in terms of being
+familiar with the sort of issues raised, and those who have
+not. I think it will take some time to do some education.
+ In articulating the performance goals, that is not
+something that an organization does overnight. It is frequently
+done in consultation with the board, who may have to pass on
+it. So that has taken some time.
+ But I think we're in a position now where we have got a lot
+of the infrastructure in place, in terms of the infrastructure
+internally to monitor these, and we have basically all the
+boilerplate, if you will, all the model legal documents we need
+for all these varieties of institutions. I think we're in
+position now to close these things as organizations are ready
+to--about half of the organizations are ready to, and we think
+over the next four or five weeks, we should close a sizeable
+number of them.
+
+ Staffing
+
+ Mr. Stokes. Let me pursue a question posed to you by the
+Chairman relative to staff. I'm not quite sure I understood
+your answer.
+ Ultimately, how much staffing do you plan to have?
+ Ms. Moy. At the $125 million level, we were talking about a
+staff of approximately 35. When I came last year, I think I had
+seven or eight people on staff, and a large number of
+contractors. We now have 13 people on staff, and almost an
+equal number of contractors. They do things that come up from
+time to time, for instance, where our programs are cyclical,
+when we go out for a round and start taking applications, we
+need to bring extra contractors on board. We don't need them
+all year; we need them part of the time. So we have, for
+instance, two or three people that are helping us with the Bank
+Enterprise Awards Program, closing out the first round.
+ We have someone who helps us with the microenterprise
+initiative. Also, since Ernst & Young are helping us with our
+systems and procedures, they are helping us with a revised
+staffing plan to handle the administrative monitoring side.
+Right now we have two or three slots that we have filled with
+contract employees, just to see whether what they're proposing
+works out or not before we make a commitment to hire these
+people on a permanent basis.
+ Mr. Stokes. Do I have time for one further question, Mr.
+Chairman?
+ Mr. Lewis. Certainly.
+
+ administrative costs
+
+ Mr. Stokes. With an agency of this sort, there is always
+the concern about the money getting to the recipients, the
+people for whom the program was designated.
+ How much of your budget do you anticipate, or what
+percentage will be devoted to administrative costs?
+ Ms. Moy. Well, we have an administrative cap of $5.5
+million. In the last year, we spent, out of $50 million, about
+$2.7 or $2.8 million for administration.
+ Mr. Stokes. You're under the cap.
+ Ms. Moy. Yes, we're under the cap.
+ We are proposing in the President's budget that if we get
+the $125 million, there will be slightly over $5 million for
+administrative, and the rest of it is $40 million for the Bank
+Enterprise Awards Program, which is what is required by
+statute, and $80 million, the bulk of it, for the CDFI program.
+ Mr. Stokes. Thank you very much, Ms. Moy.
+ Thank you, Mr. Chairman.
+ Mr. Lewis. Thank you, Mr. Stokes.
+ Mr. Wicker.
+
+ eligibility
+
+ Mr. Wicker. Thank you, Mr. Chairman.
+ Ms. Moy, let me just ask about eligibility. In the summary
+justification, the language mentions distressed urban and rural
+communities. How do you determine who is even eligible to apply
+in the first place?
+ Ms. Moy. The CDFIs can serve either these distressed
+communities, or a targeted population, like a low income
+population. I just wanted to mention that we do have CDFIs
+serving low income populations, not necessarily a particular
+distressed community.
+ If you go through our regs or statute, you will see that
+there are several criteria on which a CDFI can establish its
+basis for working in a distressed community. They parallel some
+of the CDBG criteria, but there is not just one criteria. For
+instance, poverty at a 20 percent level, or higher. For rural
+areas, a certain level of out-migration that has occurred over
+a period of time. Unemployment at least one and one-half times
+the national average. But there are several indicators, because
+we know the communities are all different. If you have only one
+criteria, it may be that you truly have a distressed area that
+doesn't happen to meet that particular criteria.
+ Mr. Wicker. You've got two types of funding, one for the
+CDFIs, and then this Bank Enterprise. Those are traditional----
+ Ms. Moy. Those are traditional banks, correct.
+ Mr. Wicker. Do you have a pot of money for one type of
+funding and another for the other, or do you just----
+ Ms. Moy. There are two pots. By statute, we are required to
+put one-third of our program moneys in Bank Enterprise.
+
+ housing
+
+ Mr. Wicker. And then I noticed that a lot of the specific
+examples that you gave--and I'm glad you gave specific
+examples--I notice a lot of them dealt with housing.
+ How much of the $50 million from last year went to
+affordable housing? Can you quantify that?
+ Ms. Moy. I can't tell you exactly, but let me try the
+question one other way, and I can also provide you with backup.
+ Of the $37 million that went to the CDFIs, the 32
+organizations, I would say the activity among those
+organizations was probably split fairly evenly between housing
+and small business lending and other forms of economic
+development.
+ We funded four community development banks. They all do
+both housing and economic development, small business. The
+community credit unions usually do a mixture of both. Among the
+loan funds, the unregulated institutions, they are fairly
+evenly split between the two.
+ I don't know that I will be able to tell you in dollar
+amounts. I can try. But I can tell you that, as an amount of
+activity, it is a fairly even break between the two.
+ Mr. Wicker. Then within the housing area, how much is
+single family and how much is multifamily?
+ Ms. Moy. It is much more multifamily.
+ Now, rural areas are a little different. I would say much
+of our single family activity is probably in rural communities.
+I think it's whatever is appropriate for that community. In the
+case of self-help, the $22 million transaction that just closed
+was all for the purchase of nonconforming, single family
+mortgages for low income individuals.
+ If you want more, we can certainly go back and I'll see
+what I can pull out from the examples.
+
+ multifamily housing
+
+ Ms. Wicker. In multifamily, who is going to own that?
+ Ms. Moy. The multifamily ownership, some of them are
+private developers, private for-profit developers. Many of them
+represent----
+ Mr. Wicker. They would then rent the----
+ Ms. Moy. The predominant part are affordable, so they're
+low income, or in many cases, mixed income. There is mixed
+income housing in urban areas.
+ But the bulk of the projects are affordable housing
+projects. But there is some attempt, in many distressed urban
+communities----
+ Mr. Wicker. Some of which is rental?
+ Ms. Moy. The multifamily is all rental, it's all rental,
+correct.
+ There are attempts in urban areas to not create ghettos,
+and therefore, mixed income housing is promoted in many of
+these cases.
+
+ small businesses
+
+ Mr. Wicker. Then I would be curious if you could just give
+me some examples of the types of small businesses.
+ Ms. Moy. Oh, they're all over the place. They range from
+home-based businesses in some cases, to--we probably don't have
+as much manufacturing, but some small retail and service
+businesses, for example, delivery businesses. I can think of
+one organization that has financed a desktop publishing
+business, another one that financed a computer-related
+business. It's virtually every type of small business.
+ I just visited some folks in Chicago. There is a woman
+making jewelry out of her house. In California, the Santa Cruz
+Community Credit Union has funded many agriculturally-related
+businesses. The Cascadia Revolving Fund in the Northwest
+finances wood products-related businesses among other types of
+businesses.
+ The businesses reflect the local economy. All I can tell
+you is they are basically very small businesses, by and large,
+and sometimes they grow.
+ Mr. Wicker. Very small.
+ Ms. Moy. Yes. And when they grow, they often graduate to
+get regular bank financing, which is part of what it's all
+about.
+ Mr. Wicker. But you said in a couple of instances these
+types of businesses have gone public? Did I hear you say that?
+ Ms. Moy. Santa Cruz is a phenomenon. They are so good at
+doing this. The Chairman is well acquainted with one of these
+institutions. I would not say that's a common thing that
+happens. It's very rare anywhere. But in the case of Santa
+Cruz, I think they have financed at least one business that has
+gone public over time. And that was an organization that
+couldn't get financing from anywhere else originally. But I
+would not say that's a common thing.
+ I believe Kentucky Highlands, which has been doing venture
+capital, has also had some companies go public.
+
+ disbursing loans and grants
+
+ Mr. Wicker. It seems that last year your awards were mostly
+grants rather than loans; is that correct?
+ Ms. Moy. $20 million out of the $37 million was for grants.
+ Mr. Wicker. How do you make that decision?
+ Ms. Moy. Aside from what's appropriate for an institution,
+when people come to us with their matching money, what we give
+them and what they bring us has to be comparable in form and
+value. So if they raise grant money, we are able to give them
+grant money. If they raise loan money, all we can give them is
+actual loan money. That's in our statute.
+ So I guess Congress, in its wisdom, wanted to be sure that
+this was something that other investors felt was worthwhile
+investing in, in the same way, before they put Federal dollars
+out.
+ Mr. Wicker. I would appreciate it if you could--Is this
+your second year? You were created in 1994, so that's two years
+of history?
+ Ms. Moy. No, we didn't go operational until October of '95,
+the rescissions bill.
+ Mr. Wicker. If your staff could provide me with a list of
+the awardees, I would very much appreciate it.
+ Ms. Moy. There actually is something in the--Let me make
+sure you have this.
+ Mr. Lewis. I think we have some of that material, but we'll
+make sure it's in the record.
+ Ms. Moy. Okay, awardees and the profiles.
+ Mr. Wicker. Right. That would be most helpful.
+ [The information follows:]
+
+[Pages 131 - 153--The official Committee record contains additional material here.]
+
+
+ Mr. Wicker. I thank you, Mr. Chairman.
+ Mr. Lewis. Thank you very much, Mr. Wicker.
+ Ms. Moy, we have a number of questions for the record. We
+have covered a number of them, but the microenterprise
+questions that I had, I want to get more specific for the
+record relative to the way those local panels may be operating
+and the kind of review authority they have and so forth.
+ I would once again commend that book to you that I
+mentioned earlier.
+ Ms. Moy. Is this the David Bornstein book?
+ Mr. Lewis. That's right.
+ Ms. Moy. You know, he called us.
+
+ application review
+
+ Mr. Lewis. It's very, very interesting, in terms of the
+work that you're about, and your mentioning the Santa Cruz
+experience is something I am very much aware of. But how you
+select the participants, establish the goals, measure the
+results, is awfully, awfully important.
+ But one more time, as Mr. Wicker is suggesting, we have an
+illustration of an avenue of funding flows that may very well
+produce results that are measurable in housing, when over here
+in another category we have 150 accounts that are housing
+accounts to which we appropriate money, and an awful lot of
+them have not ever been reviewed, the results are not required,
+and we just send money. If you're worried about poor people, it
+just seems to me there's a disconnect there that's
+unacceptable.
+ The first round of applicants included 268 applicants for
+the CDFI program, and 50 applicants for the bank enterprise
+award program. Awards were made to 32 CDFIs and 38 to the BEAs.
+ Were all of the applicants qualified, or did you review
+results in a number of applications being rejected for
+technical or substantive reasons?
+ Ms. Moy. Of the 268?
+ Mr. Lewis. Yes.
+ Ms. Moy. Let me see. Some of those, almost 30 of those 268
+applicants, were determined early on to have failed certain
+completeness tests on their applications. They didn't submit a
+full application, something like that.
+ We reviewed the remaining close to 240 applications, going
+into great detail. It was a very competitive process because we
+were about 10 to 1, so the bar was set very high. But I would
+say there were organizations that were not nearly competitive,
+that had serious deficiencies in their applications. Part of it
+may have been the result of the organizations applying for the
+first time for this program, which requires a full business
+plan, which is very unusual for the Federal Government. And
+some of these simply weren't ready. Perhaps this is not a
+program for them at this time.
+ We had other applicants, though, who I think we could have
+funded had we more money, and some that were very close. We
+debriefed virtually every applicant. Anyone that wanted a
+debriefing got a debriefing from us. Between that and certain
+amounts of technical assistance, many of them will be there. So
+I would say the applications were all the way along the
+spectrum.
+ Mr. Lewis. Ms. Moy, in very difficult times, as we are
+trying to measure our own results, I am forced to talk about my
+staff around here being very, very tough people with scalpels,
+but with bleeding hearts. That's difficult for all of us.
+ Nonetheless, if we're going to even consider expanding
+funding for existing programs, we have to look at results. This
+is the first hearing in the process that takes you through the
+other body, and come back to conference, et cetera. As much
+acceleration that you can establish as it relates to a
+demonstration of real results, that is clear-eyed, that isn't a
+``wish list''--you know, the illustration that you and I have
+discussed that relates to Santa Cruz, CA was pre-CDFI, really--
+--
+ Ms. Moy. Yes, that's right.
+ Mr. Lewis [continuing]. But that credit union was showing
+some imagination and there are results out there that we need
+to be able to measure that justify.
+ Frankly, I am not nearly so inclined in a direction of
+grants as I am inclined in the direction of loans that involve
+the marketplace, that involve commitment. If you read ``The
+Price of a Dream'', one of the things about those women who
+received those loans is they placed the loan repayment above
+feeding their family almost. Grants don't really reflect
+often--I'm not sure; I'm open to that. But, nonetheless----
+ Ms. Moy. Perhaps we could discuss it.
+ Mr. Lewis. That's correct.
+ But, nonetheless, there are sparks here that are of
+interest to us, and certainly your own leadership and
+experience is helpful. One of the things that is very helpful
+is that you're small.
+ Ms. Moy. I agree.
+ Mr. Lewis. I'm not sure if Mr. Stokes has additional
+questions, but we're going to have to move on.
+ Ms. Moy. I thank you for the committee's time.
+ Mr. Lewis. I appreciate your time very much. From there,
+both Lou and I have conflicting meetings that are waiting down
+the hall for us.
+ Mr. Stokes will have some additional questions for the
+record, and others will as well.
+ As you can tell, we are interested in a dialogue here that
+will take us through the conference process. So it's one step
+at a time.
+ Ms. Moy. I am very grateful for the time.
+ Mr. Lewis. We appreciate your being here, Ms. Moy. It was
+nice to be with you.
+ For now the meeting is adjourned until 11:00 o'clock.
+
+[Pages 156 - 175--The official Committee record contains additional material here.]
+
+
+ Wednesday, March 12, 1997.
+
+ NATIONAL CREDIT UNION ADMINISTRATION
+
+ WITNESSES
+
+NORMAN E. D'AMOURS, CHAIRMAN
+HERBERT S. YOLLES, PRESIDENT, CLF
+ROBERT M. FENNER, GENERAL COUNSEL
+
+ Introductory Remarks
+
+ Mr. Lewis. The meeting will come to order.
+ This morning it is my pleasure to welcome our friend and
+former colleague, Norman D'Amours, Chairman of the National
+Credit Administration.
+ I am going to take an aside, Mr. D'Amours, to let my
+colleagues know that in the audience today is a long-term
+friend of mine from beautiful downtown San Bernardino County,
+Redlands, California, and surrounds, who is a part of the
+Arrowhead Credit Union, Mr. Maurice Calderon. Maurice is
+accompanied by Chris Kerecman, who is with the California
+Credit Union League. Welcome, gentlemen. It is a pleasure to
+have someone from home here. It is just maybe once or twice in
+a whole generation we actually have constituents in the
+audience here.
+ Mr. D'Amours, the budget request for the National Credit
+Union Administration consists of only a limitation on new loans
+to $6 million and a limit on administrative expenses of
+$203,000. The amount of new loan authority requested is the
+same as provided in fiscal year 1997. The limit on
+administrative expenses is a reduction of $347,000 from the
+1997 level of $560,000.
+ As you know, per usual, Mr. D'Amours, we will be including
+your entire statement in the record, so you can summarize it if
+you wish, proceed as you wish. But preceding that, I will call
+upon my colleague, Mr. Stokes.
+ Mr. Stokes. Mr. Chairman, I don't have any opening
+statement as such. I would take this opportunity to welcome
+once again back before our subcommittee our former colleague, a
+distinguished member of this body, Mr. Norm D'Amours. It is
+always a pleasure, Norm, to have you appear here, and I look
+forward to your testimony this morning.
+ Thank you, Mr. Chairman.
+ Mr. Lewis. Thank you, Mr. Stokes.
+ Mr. D'Amours, I must mention for you and your associates,
+early on in the appropriations process, there were major
+conflicts and meetings, and while there are a number of
+colleagues who wanted to be here not only just to say hello but
+to provide questions, they are in other meetings, and so they
+may be submitting questions for the record, and I would
+appreciate your responding.
+ Mr. D'Amours. Of course.
+
+ Opening Remarks
+
+ Mr. Lewis. In the meantime, as you proceed with your own
+comments, if you would like to introduce your colleagues for
+the record, that would be appreciated.
+ Mr. D'Amours. I will, Mr. Chairman. Thank you very much.
+ Thanks for this opportunity to present our request for
+funding limits on the NCUA Central Liquidity Facility, the CLF.
+Appearing with me today are Herb Yolles, who is the president
+of the Central Liquidity Facility, seated to my right, and
+Robert Fenner, the Agency General Counsel.
+ I am going to skip and give a very brief statement. You
+have mentioned in your opening many of the points I was going
+to make. I will not reiterate--or I will not iterate, more
+properly.
+ In our estimation, Mr. Chairman, the $600 million loan
+limit is adequate to address unexpected liquidity needs for
+credit unions. The request is less than 3.55 percent of the
+limit set by statute, which is 12 times paid-in and on-call
+capital, or approximately $17 billion. The borrowing authority
+is not used to build up loan volumes at credit unions because
+the statute requires that proceeds from the CLF cannot be used
+to expand credit union loan portfolios. Rather, the funds are
+advanced almost exclusively to support liquidity needs of
+natural person credit unions.
+ Over the past years, there has been a wide variance in the
+fluctuation of outstanding CLF loan balances. The relatively
+low utilization of our total authority can be viewed as a
+positive sign of credit unions' present financial condition. By
+the end of 1996, all loans were repaid, and no direct loans
+were outstanding. However, because of a liquidity shortage
+involving one of the corporate credit unions, the CLF did
+become an active liquidity lender from December 1994 through
+about February 1995. In that time, the CLF made 601 loans
+totaling $389 million; the majority, 509 of those, were
+overnight loans.
+ So, as intended, as Congress intended, the CLF acted
+successfully to provide liquidity and maintain financial
+stability during a temporary liquidity shortage. Mr. Chairman,
+we respectfully--my notes here say ``respectively.'' But we
+respectfully request that you support our authorization request
+in order to continue the NCUA's and the CLF's ability to
+respond rapidly to such adverse liquidity situations.
+ In closing, I would like to thank you, Mr. Chairman, and
+this subcommittee for having included $1 million into the
+community development revolving loan program last year. And I
+want to assure you that we made very good use of it.
+ [The information follows:]
+
+[Pages 179 - 188--The official Committee record contains additional material here.]
+
+
+ Field of Membership
+
+ Mr. Lewis. Mr. D'Amours, I have a number of questions that
+we have prepared. Not all of those I will go through, but I
+will provide them for you to respond for the record for those
+that we do not get to.
+ Mr. D'Amours. Yes.
+ Mr. Lewis. I wanted to just shift gears away from my
+original intent here. There is a good deal of discussion around
+the House relative to the court case that has been moving to
+the Supreme Court that involves credit unions and what makes up
+their membership base. The Court is on the verge of at least
+consideration and some decision.
+ It has been suggested around the House that there may very
+well be legislation introduced soon. In journals available to
+us, we have an indication that at least within the committee
+there is great hesitancy about introducing legislation.
+Nonetheless, there is a great deal of interest about that. It
+is the whole separate question.
+ I am sure you must be somewhat familiar with it. Can you
+bring us up to do on what you do know, what your rumor mill is
+telling you about those prospects, and give us some reaction?
+ Mr. D'Amours. Well, your guess is as good as mine, Mr.
+Chairman. In fact, your guess is better than mine, being an
+active member of the body, and Mr. Stokes and other members of
+the committee. But it would appear that legislation is going to
+be introduced, and I would hope that it was introduced and I
+would hope that the Congress would begin to act to hold
+hearings, at least to hold hearings on that legislation.
+ The Court is likely to hear arguments on this case in
+October and to reach a judgment sometime next year, probably in
+the earlier part of the year. The fact that the Court took this
+case under certiorari indicates at least some questions in some
+people's minds about the validity of the judgment of the
+Circuit Court of Appeals of D.C. as to the NCUA's actions
+interpreting common bond.
+ The problem would be if the Court were to rule against us,
+were to rule against NCUA, and, therefore, against the ability
+of credit unions to continue reaching out and providing
+services to people who are underserved. It would be late in the
+day. The harm, depending on the injunctive results that may
+follow such a decision, could be devastating. And I would like
+to think that at the very least the Congress would have had a
+bill introduced, had hearings on that bill, and, therefore, be
+in a position, if it did not seek to act earlier, to act very
+expeditiously from that point on. Depending upon the injunctive
+fallout of a Supreme Court decision that would go against
+credit unions, we do not expect that to be the case, but it is
+always a possibility, there could be terrific harm caused to
+the credit union industry, and the legislative fix would need
+to be quick.
+
+ court injunction
+
+ Mr. Lewis. Mr. D'Amours, you and I have personally talked a
+bit about the field of membership and the significance of this
+question as it relates to the current service provided by
+credit unions and the future of those services being available.
+ Mr. D'Amours. Yes.
+
+ low-income credit unions
+
+ Mr. Lewis. In particular, I am interested in your reaction
+as to what might be the effect of a negative decision upon low-
+income credit unions.
+ Mr. D'Amours. Well, until the Washington, D.C., District
+Court injunction was stayed, there was a cutoff of the ability
+of credit unions to serve many low-income residents. For
+instance, there is a credit union in Texas, in Polytechnic
+Heights, which is a suburb of Fort Worth. A credit union had
+opened a branch in that area. This is an area that Martin Frost
+is very concerned about. It is a very low-income area. There
+was not a bank within 5 miles of that credit union branch.
+These people had no access to fairly priced credit union
+services. They were subject to loan sharks, pawnshops, rent-to-
+own stores and all the number of people who move in to take
+advantage of these communities when fairly priced financial
+services are not available.
+ This credit union opened up a branch, spent $2.5 million
+doing that, and was beginning to sign these people up in
+droves. Not only were people joining the credit union, but
+there was a rejuvenation of the community. You could see places
+being rebuilt, refurbished, fixed up. It was bringing new life
+into that low-income area.
+ Well, the injunction following the Circuit Court of Appeals
+ruling, stopped that process in its tracks. The credit union
+could no longer sign up any new members from that branch. At
+that date, they had only signed up 200 members. You cannot
+operate a branch of any financial institution with 200 members,
+or customers, should it be a bank.
+ That is just one illustration of the harm that was being
+done to inner-city people and low-income people, and you could
+multiply that by a factor of several, a large-number factor
+nationwide.
+ This is only one illustration. I could give many different
+applications of it.
+
+ field of membership legislation
+
+ Mr. Lewis. Yes, sure.
+ Mr. D'Amours, it has come to the committee's attention that
+while there is discussion out there trying to figure out who
+the phantom author might be. The relative value of having an
+author who comes from the committee original authority and
+policymaking jurisdiction, it is my understanding that at least
+there is a very strong likelihood that Steve LaTourette of
+Ohio, a member of the committee, could very well be planning to
+introduce such a bill. I just mention that for the edification
+of those who might be interested.
+ Mr. D'Amours. I am sure his phone will be ringing quite a
+bit before this day is out.
+ Mr. Lewis. By way of information, as I suggest.
+ The use of the Central Liquidity Fund is a subject I would
+like to discuss a little. The CLF loan limitation request for
+fiscal year 1998 is $600 million.
+ Mr. D'Amours. Yes, sir.
+ Mr. Lewis. An amount which has been constant for the last
+17 years.
+ Mr. D'Amours. Yes, sir.
+
+ maximum clf loan authority
+
+ Mr. Lewis. What is the maximum amount of loan authority you
+have ever used in one year? And has there been concern that the
+loan limitation amount is inadequate?
+ Mr. D'Amours. Answering your questions in inverse order,
+Mr. Chairman, there has been no concern that the authority is
+inadequate. I do not know exactly what the highest number is. I
+would guess $300-some-odd million, but I do not know.
+ Do we have that information with us?
+ That would have been--then my guess was pretty good. The
+$389.8 million was the largest amount we have ever used.
+
+ community development revolving loan program
+
+ Mr. Lewis. Your statement indicates there is--in it there
+is mention of the community development revolving loan program
+which had a $2 million authorization for fiscal year 1998.
+ Mr. D'Amours. Yes, sir.
+ Mr. Lewis. A series of questions, briefly. What is the
+purpose of the loan program, and how did the $2 million for
+this loan program help low-income community development credit
+unions?
+ Mr. D'Amours. Well, it is a revolving loan program made
+only to credit unions which are considered low-income credit
+unions. Most of these are serving people who are below the
+average median family income line, within 80 percent of it. It
+goes directly to credit unions, and they are able to use it to
+make loans or otherwise provide services, financial services to
+these people who do not have access to fairly priced financial
+services.
+ Originally, we were granted $6 million when the program was
+created. You added $1 million to that last year under the 1984
+legislation, I believe it was. 1994, excuse me. I have to get
+my decades straight. Under the 1994 Riegle bill, another $10
+million was authorized. Only $1 million of that was
+appropriated, and that was thanks to the good graces of this
+subcommittee last year. There are $2 million that could be
+appropriated this year.
+ Last year we were unable to fund $3.6 million in requests
+for such lending.
+
+ program performance
+
+ Mr. Lewis. Would you provide us for the record information
+relative to the experience that we have had out there with this
+stimulus of lending program, loss ratios, what kind of success
+you would attribute to the program and the like?
+ Mr. D'Amours. Yes, sir. I will be delighted to. May I just
+say that, quite frankly, Mr. Chairman and Mr. Stokes and
+members of the committee, I do not know, and we will send you
+documentation for this, I do not know that there is a better,
+more efficient, clean, more cost-effective way to get these
+kinds of funds directly to the people who mostly need them, and
+on a lending basis where these loans are repaid. And the
+profit, if you will, being made on these loans is recycled back
+to these very same people with very little cost.
+ Mr. Lewis. As a result of the $1 million, and speaking to
+the fund in general, I am interested in knowing how many loans
+we have been able to make with this new authority and how many
+community development credit unions exist today, items like
+that, the growth patterns over the last 3 or 4 years.
+ Mr. D'Amours. We will get that to you. Yes, sir.
+ Mr. Lewis. All right. For the record would be fine.
+ Mr. D'Amours. I will get that for the record.
+ [The information follows:]
+
+[Pages 193 - 196--The official Committee record contains additional material here.]
+
+
+ Mr. Lewis. Mr. Stokes.
+
+ personal bankruptcies
+
+ Mr. Stokes. Thank you, Mr. Chairman.
+ Mr. D'Amours, let me refer first to your formal statement
+on page 2 where you say, ``By instilling habits of thrift and
+teaching the value and workings of financial discipline, credit
+unions are still fulfilling the mandate Congress gave them over
+60 years ago.''
+ How do you answer the statement that when we look at the
+increase in personal bankruptcies, probably now up to about 1
+million last year, when we look at the significant rise in
+consumer debt, much of it on high-interest credit cards, many
+of them issued by our Nation's credit unions, it sort of raises
+the question of whether our credit unions are doing all they
+can to instill habits of thrift and savings.
+ Tell us how big an issue you think this is and if the
+Credit Union Administration is doing anything about it.
+ Mr. D'Amours. Well, I do not have the specific numbers,
+Congressman Stokes, but I know that in terms of bankruptcy,
+failures, the numbers of credit unions compare very favorably
+with those of other financial institutions, meaning that we do
+not have that experience nearly to the extent that other
+financial institutions do.
+ Credit unions, because they are member-owned and member-
+operated financial institutions, there tends to be a closer
+relationship between the member owner and the institution than
+there would be between a customer and other institutions. There
+tends to be better communication. There tends to be better peer
+pressure in terms of repayment of obligations and the like.
+ What we do at NCUA is to encourage credit unions to reach
+out to inner-city communities as the act mandates, to take the
+actions that the act mandates to not only deal with people as
+customers, but as members, as brothers and sisters, and owners
+of the institution, and to teach them and help them to learn
+the responsibilities of borrowing, of borrowers, and the
+benefits of establishing a nest egg.
+ We cannot do that directly as a Federal agency, but because
+the statute defines credit unions in that way, we have never
+shied away from our responsibility of asking credit unions,
+when we go examine them and see them, to focus on this
+responsibility, and we think they have responded quite well.
+
+ common bond issue
+
+ Mr. Stokes. Let me ask you this: The chairman explored with
+you the problems related to the common bond issue. It is my
+understanding that the administration actually favors some type
+of legislative approach in this area. Is that your
+understanding?
+ Mr. D'Amours. That is not my understanding. I do not know.
+I have not spoken with the administration on this.
+ I know that the administration is defending us in the
+lawsuit, so I would have to presume from the fact that they
+defended us in the lawsuit, that they petitioned for certiorari
+in the Supreme Court, that they have argued that our
+interpretation of common bond is correct, that they certainly
+would not be hostile to a legislative solution since they are
+pursuing a judicial solution to the question. But I have not
+specifically discussed with the administration whether or not
+they are actively pursuing legislation.
+ We at NCUA believe legislation is appropriate, and I would
+have to believe and I would surmise, given their position in
+courts, that they do, too, as just another way of solving what
+we think is the misapplication of law by the Circuit Court of
+Appeals.
+
+ bank opposition
+
+ Mr. Stokes. Can you tell us why the banking industry is so
+opposed?
+ Mr. D'Amours. Well, I think that, first of all, I don't
+believe the entire banking industry is opposed. I think there
+are a group of community banks out there who are very upset by
+the fact that the banking industry is shrinking, that
+institutions are merging.
+ I was reading in the American Banker just yesterday that
+community bankers are taking out advertisements critical of and
+hostile to regional banks. So apparently they do not like what
+they see happening in the marketplace, and they have identified
+credit unions as a likely, maybe an easy target. I would say
+they are making a major mistake if they believe that. And so
+they are venting their ire and their frustrations at credit
+unions, perhaps. But I know many bankers who are doing good
+work, fulfilling the financial mission that they serve in the
+American economic system, that they have served well for a
+number of years.
+ I think this issue may be being driven by a segment of the
+banking community. I do not know that any banker would say he
+doesn't support it because of the national cohesiveness of any
+group, but I know personally that many bankers do not care.
+ What it is being driven by, I think, is a misunderstanding
+of banks, of what credit unions are, what their function is,
+what their limits are. Banks ought to be able to compete well
+with credit unions. They have powers of investment that credit
+unions do not have. They have any number of advantages that
+credit unions do not have. They are free from very many
+limitations that we have put on credit unions. Rather than
+compete, they seem to think that the best tactic is to destroy
+the credit union movement by attacking it. I think that is a
+mistake.
+
+ cooperation among community organizations
+
+ Mr. Stokes. Just one last question, Mr. Chairman.
+ This morning we had testimony from Secretary Rubin and Ms.
+Moy relative to community development financial institutions.
+And, of course, we also have testimony in this subcommittee
+from the Neighborhood Reinvestment Corporation, which is
+similarly involved in urban communities and rural communities
+in terms of helping bring back revitalization of our urban and
+rural communities.
+ Do you see ways in which the Credit Union Administration
+can build on what these other two agencies are doing?
+ Mr. D'Amours. Well, I do not know that I would say build on
+because we certainly can work in a complementary way. Credit
+unions have been doing this for 60 years. Credit unions have
+been doing this before some of these other people began doing
+what they are doing. What they are doing is very vital, but
+credit unions have a very special function. We get into rural
+areas. You know, one thinks of Self-Help Credit Union, North
+Carolina. I personally visited any number of credit unions in
+South Texas, the Brownsville-McAllen area of Texas, very rural
+areas where people are building houses with credit union funds.
+Farmers, migrant farmers, are using credit unions to build
+houses out in the countryside. They have no other access to
+loans, fair access to loans, other than credit unions.
+ Credit unions have been doing this for a long time. I think
+one of the mistakes credit unions have made over the years, if
+I may say, is that they have been tending to their knitting
+very well, but they have not been bragging very much about what
+they do. I think bankers and the general public do not
+understand enough about what credit unions do and what they
+have been doing for years and how they could be maybe doing it
+better. But certainly everything that these other groups are
+doing, credit unions are and have been doing from the early
+1900s, from 1909 in this country.
+ So, sure, we complement one another. The credit union
+industry and these other efforts you have mentioned work--can
+work in concert, maybe could better work in concert. But credit
+unions do all of this, anyway. These are just different
+applications of what credit unions are already doing.
+ Mr. Stokes. Thank you.
+ Thank you, Mr. Chairman.
+ Mr. Lewis. Thank you, Mr. Chairman.
+ Mrs. Meek.
+
+ community development credit unions
+
+ Mrs. Meek. I am a little late coming in from another
+meeting. I am very interested in the credit union movement. I
+have been a member of one for many, many years.
+ I really missed the microlending presentation that was made
+when I was on another subcommittee. Anytime--and this is a
+little off the record, but anytime I see a lot of--my major
+district is low-income, very low-income, very high poverty.
+Anytime I see banks start coming into my neighborhood, I know
+there is some significant reason for doing so.
+ I need to meet with a member of your staff. I need to find
+out where the credit unions are in my district, District 17 in
+Dade County, Florida. And that could be done if I could meet
+with someone from your shop to sit down with me.
+ Mr. Lewis. I think there is a possibility, Mrs. Meek, that
+that could occur.
+ Mrs. Meek. All right. Thank you.
+ Mr. D'Amours. As a matter of fact, I would be delighted to
+meet with you at any time and bring whatever staff is necessary
+to help you.
+
+ how credit unions can help
+
+ Mrs. Meek. I am interested in something I see in your
+testimony here regarding how low-income communities and areas
+can benefit from other credit unions; that is, if they do not
+have the know-how of the money to begin their own shop, the way
+I am reading this they do have a chance to perhaps connect or
+hook up with another larger credit union. Am I correct?
+ Mr. D'Amours. That is exactly right. I mentioned that
+earlier, I think before you got here, Congresswoman Meek. There
+are two ways that low-income communities can be served. They
+can start their own credit unions--and they do. We started 12
+such credit unions last year nationally, 12 start-up low-income
+credit unions where people got together and, from scratch,
+built their own financial institution, which is a beautiful
+thing to behold. That does not always work. That is not always
+possible.
+ The other way is that an existing credit union will, under
+regulations we passed in 1994, open up a branch in such an
+area. We allow them to do that. By the way, the court order
+prohibits that. The court order would prohibit that. It is
+being stayed for the moment, but before it was stayed, they
+could not do that.
+ So those are the two ways in which it occurs.
+
+ capital in low-income communities
+
+ Mrs. Meek. I do not think the financial community realizes
+the amount of money that is in some of these low-income areas.
+They loan money to churches, but very seldom do they have the
+knowledge or the know-how to see people in those communities
+that own homes and can afford a low-cost home. I think the
+credit union movement could look closer at that as an
+opportunity to develop more in low-income communities.
+ Mr. D'Amours. Yes, ma'am.
+ Mrs. Meek. Because once they get a home, they pay for the
+home, and the failure rate or the foreclosure rate is perhaps
+similar or no more higher than would happen in the regular
+marketplace. So I guess what I am saying, the credit unions
+should perhaps take some leadership to model after what the
+banks are doing. They are coming in, and when they come in,
+there is always a reason. So I do hope that you and your credit
+union leadership will look at the propensity that these
+communities have, particularly for home building.
+ Mr. D'Amours. We are doing that, and we have been doing
+that. After taking this job, I have done this job for 3 years,
+Congresswoman, and when I went out into isolated rural areas
+and inner cities, I learned for the first time how much money
+there is in these areas. You drive through these streets, you
+drive through these cities, and you see boarded-up windows, and
+you see litter in the street, and you see signs of poverty
+everywhere. But you see loan sharks, you do not see loan sharks
+most of the time, but some of these check-cashing operations--
+--
+
+ predatory institutions
+
+ Mrs. Meek. There is a check-cashing place on every block.
+ Mr. D'Amours. Some are legitimate, but some are really loan
+shark-type operations. You see pawnshops, you see rent-to-own
+stores. You see all kinds of these things, and they are
+everywhere.
+ I had it explained to me when I visited these communities
+that you may see signs of poverty, but the truth is there are
+many low-income workers in that community that are bringing
+home a paycheck. There are retired military veterans in those
+communities. There are Social Security benefits going into
+those communities. There are all kinds of hundreds of millions
+of dollars pouring into those communities. Unfortunately, the
+kinds of people who provide them financial services, you do not
+see many banks, if any, but the kinds of people that are
+providing them financial services are taking that money and
+dissipating it.
+ Credit unions are targeting those communities and have
+been. A credit union goes into that community. The money stays
+in the community because the members, credit unions do not have
+customers, they have members, control it. It stays there.
+ Credit unions are exactly doing that, and we at NCUA have
+been encouraging them to expand those efforts. That regulation,
+IRPS 94-1, that I mentioned earlier was along those lines, and
+we are making other efforts at the agency to see to it that
+credit unions expand those efforts. I could not agree with you
+more, with your statement more.
+
+ working capital
+
+ Mrs. Meek. Thank you. The major problem is working capital.
+You know, the businesses cannot survive because they cannot get
+the working capital they need from traditional financial
+resources, and I would just like to know how to put the puzzle
+together, Mr. Chairman. It is a puzzle that needs to be worked,
+and I would like to know how from members of your staff how we
+can take advantage of the credit union movement to do
+something.
+ Mr. D'Amours. Well, this committee has been very
+supportive. Last year, even though we did not request it, it
+allocated, appropriated $1 million for the Riegle bill funds
+which we made good use of, and there are $2 million subject to
+appropriation this year. But, again, we are not making a
+request for those funds.
+ Mr. Lewis. Thank you very much, Mrs. Meek.
+ Mr. D'Amours, we have several new members on our
+subcommittee who are aggressively displaying interest in policy
+issues like this, especially those that are designed to
+stimulate the economy and opportunity in the private sector.
+Mrs. Meek's questions very much flow along those lines. It is a
+long time between now and the time we get to conference, and I
+understand that you have to deal with OMB and the
+administration in a special way. But in the meantime, we also
+understand and have a feeling for your needs.
+ Mr. D'Amours. Thank you, sir.
+ Mr. Lewis. Your remarks will be included entirely in the
+record, and any additional remarks would be acceptable. Beyond
+that, members who are not present, and those present, may have
+additional questions as well. So we appreciate your being here,
+and we look forward to continuing to work with you.
+ Mr. D'Amours. Thank you, Mr. Chairman. I appreciate your
+courtesy, and Mr. Stokes. Congresswoman, nice to meet you.
+ Mr. Lewis. The meeting is adjourned.
+ [See budget justification at end of volume.]
+
+
+[Pages 202 - 203--The official Committee record contains additional material here.]
+
+
+
+
+ Wednesday, March 5, 1997.
+
+ COUNCIL ON ENVIRONMENTAL QUALITY, EXECUTIVE OFFICE OF THE PRESIDENT
+
+ WITNESS
+
+KATHLEEN A. McGINTY, CHAIR, COUNCIL ON ENVIRONMENTAL QUALITY
+ Mr. Lewis. We will call the meeting to order.
+ Let me indicate to those who are here that, because of
+changes in our schedule, with no votes on Monday and Tuesday, a
+lot of Members are coming back from their districts today, and
+a lot of people also have conflicting hearings. Mr. Stokes and
+I were together earlier this morning and he indicated to me
+that he has two other meetings, and especially there's an
+Ethics Committee hearing that he has to participate in. So if
+you will bear with us, we will be developing the formal record
+here and, beyond my questions, I will have questions for the
+record. But other Members will as well.
+ Welcome, Ms. McGinty. We very much appreciate your being
+with us.
+ Ms. McGinty. Thank you.
+
+ Welcoming Remarks by Chairman Lewis
+
+ Mr. Lewis. We will be taking testimony on fiscal year 1998
+budget request for two offices this morning that are within the
+Executive Branch of the President, and are both, of course,
+under this subcommittee's jurisdiction: The Council on
+Environmental Quality, which includes the Office of
+Environmental Quality, and the Office of Science and Technology
+Policy.
+ We will begin this morning with the CEQ. I am delighted to
+welcome CEQ's very able chairman, Kathleen A. McGinty.
+ At this time, Ms. McGinty, I would like to invite you to
+introduce any of your colleagues who are with you that you
+wish. And, with that, we will proceed with your oral testimony.
+Your entire statement will be included in the record.
+
+ Introductory Remarks
+
+ Ms. McGinty. Thank you, Mr. Chairman.
+ I do have with me today Shelley Fidler, my Chief of Staff;
+Michelle Denton, my Associate Director for Congressional
+Relations; Wesley Warren, my Deputy Chief of Staff; and my
+General Counsel, Dinah Bear.
+ Mr. Lewis. Thank you very much.
+ Ms. McGinty. That's a big portion of the team.
+ Mr. Lewis. Proceed as you wish. We will both include your
+entire statement in the record, and revise and extend to some
+extent. Go right ahead.
+
+ Opening Statement
+
+ Ms. McGinty. Thank you very much.
+ Thank you, Mr. Chairman. It's a pleasure to appear before
+you today to present the President's request for CEQ for fiscal
+year 1998. I also want to thank your staff, who has been very
+helpful to us, both in preparation for this hearing and
+throughout the course of the year in the work that we do.
+ I wanted to focus this morning briefly on three things:
+first, the level of the request that we have presented; second,
+our work over the past year; and third, I would like to turn to
+what is really our top priority, which is our initiative to
+comprehensively reinvent the National Environmental Policy Act.
+ First the level of our request. As you know, Mr. Chairman,
+CEQ currently operates at a staff level of 19 FTEs and a budget
+of $2.4 million. Our request today is for 23 FTEs and a
+corresponding budget of $3,020,000.
+ In percentage terms, as we have discussed, this is a
+significant increase for CEQ. However, I would like to
+emphasize to the committee that, even at 23 FTE, CEQ is still
+significantly below the average in the Bush administration,
+which was 31 FTE, and very significantly below CEQ's peak level
+of 70 FTE in the Nixon administration.
+ The resources that we are requesting, Mr. Chairman, are
+critically necessary if CEQ is to take on what I will describe
+in a moment as our very first priority, which is the
+comprehensive reinvention of NEPA. Many, including the Western
+Governors Association, industry, nongovernmental organizations,
+certainly Members of Congress, have both praised NEPA's intent,
+the purpose of NEPA to be a comprehensive integrating statute
+that brings environmental, economic and social considerations
+together in a coherent whole, and also its call to afford
+citizens an opportunity to participate in agency decision
+making.
+ Having recognized those important purposes, these groups,
+though, have all recognized that the implementation of NEPAcan
+and should be improved. I agree with that and I would like to take on
+as a top priority the reinvention of NEPA to that end.
+ But I do need resources that can be taken out of the daily
+firefights to get that job done. People who are senior
+professional and dedicated to the specific mission.
+ As noted, I will return to the substance of this endeavor
+in a moment.
+
+ ceq's oversight role
+
+ Before that, I want to share briefly some of CEQ's work
+over the past year. As the committee is aware, CEQ has
+responsibility both for immediate oversight of the
+environmental assessment process that every agency of the
+Federal Government is called on to comply with, as well as
+responsibilities in serving as the President's senior advisor
+on environmental policy. In that capacity, we coordinate policy
+among the agencies and settle disputes that may arise among and
+in the context of those issues.
+
+ environmental assessments
+
+ First, to turn to environmental assessments, the first part
+of our portfolio. We have worked very hard over the last year
+to use NEPA as we believe it was intended to be used, and that
+is, not just as a document-production exercise, but really to
+improve agency decision making. For example, we use NEPA to
+design a process through which we will complete even the most
+complex habitat conservation plans. These are the plans that
+allow us both to protect critical habitat and to offer
+landowners certainty that they have met their Endangered
+Species Act obligations. Through NEPA, we will get even the
+most complex of those done in ten months.
+ I just returned from Washington State, where I signed an
+agreement with the Governor there that will both meet all
+Federal obligations and give the State a 70-100 year guarantee
+that they have met all their Endangered Species Act
+obligations. NEPA allows us to do that.
+ In addition, CEQ responded to the request of Governor Tony
+Knowles and the Alaska delegation to launch a process to
+identify lands for possible oil production and environmental
+protection in the National Petroleum Reserve in Alaska.
+ Because NEPA acts as an integrating statute, we will be
+able to see that process through to completion in 18 months or
+less. This also builds on our effort, which we were able to
+conclude in six months, to allow for the export of oil from
+Alaska's North Slope.
+ Through NEPA again, we worked this year to cut processing
+times for timber salvage sales from three years to less than
+one year. We resolved a longstanding dispute between the FAA
+and the Air Force, that finally allows the Air Force to
+undertake military training activities in Alaska.
+ We provided for the transfer of the Homestead Air Force
+Base in Florida, but in a way that will protect our restoration
+activities we have underway in the Everglades.
+ NEPA is the statute that allows us to do that, because it
+calls on us to get all of the parties together to understand
+all the obligations and to move forward in one coherent and
+efficient way. So we are using NEPA to that end.
+
+ ceq's role on policy
+
+ On the policy front, as opposed to the environmental
+assessment front, we have been working hard to coordinate the
+agencies and to resolve disputes among them. CEQ developed, for
+example, targeted reforms to the Resource Conservation and
+Recovery Act that were passed into law in the last Congress.
+These reforms eliminate duplication between RCRA and the Clean
+Water Act and Safe Drinking Water Act, and we believe it will
+result in tens of millions of dollars in avoided costs to
+industry.
+ CEQ hammered out an agreement that will provide for the
+financial health of the Bonneville Power Administration, while
+also providing resources for salmon recovery efforts.
+ We reached out to the National Association of State
+Attorneys General and to the International Association of
+Police Chiefs and crafted an environmental crimes bill that now
+has been introduced in the House and Senate that will, among
+other things, provide additional resources for State and local
+law enforcement officials to combat environmental crime.
+ Finally, CEQ worked to implement and craft significant
+reforms in the wetlands programs and now, with OMB, are working
+to ensure that flood victims are offered a series of
+alternatives in responding to the floods, including
+nonstructural options, for preparing themselves and hopefully
+avoiding flood damage in the future.
+
+ nepa implementation and improvement
+
+ Mr. Chairman, CEQ has worked hard to use NEPA to ensure
+coordination, coherence and efficiency in environmental policy
+matters.
+ To turn now to what really is our top priority for this
+year, we hope to build on the kind of progress we've been able
+to make in these individual instances over the last year. We
+want to build on the insights we also gained as a result of the
+comprehensive review we undertook of NEPA, our NEPA
+effectiveness study, which we shared with the committee at the
+end of last year.
+ We are already underway. I have launched a series of three
+working groups, frankly trying to address what has seemed to be
+the most troubling aspects of NEPA implementation, and that is
+in the grazing area, oil and gas area, and timber area. We are
+working very closely with the Western Governors Association on
+this. Governor Knowles, Governor Geringer, Governor Kitzhaber
+and many others are involved. We hope to reach out to the
+academic institutions. The University of Wyoming and the
+University of Montana in particular have resources that we
+think could veryeffectively help us to use NEPA again as it was
+intended, as a tool to improve and enhance agency decision making.
+ That, Mr. Chairman, is our top priority. We have those
+three working groups launched. But as you know, NEPA reaches
+every Federal agency and every major Federal action and
+decision. So I would like to be able, with the additional
+resources we are requesting, to step back from the firefights,
+take a comprehensive look at how NEPA has been implemented, and
+work towards its improvement.
+ Thank you very much.
+ Mr. Lewis. Thank you very much, Ms. McGinty. I appreciate
+your testimony, and I certainly have always appreciated both
+the confidence and style with which you present your testimony.
+
+ utah's desert wilderness
+
+ I must confess that if we were conducting this hearing like
+last fall, as I indicated in our personal conversation in my
+office, it would have been very difficult to control no small
+amount of emotion or anger that I felt with regard to the
+President's actions that involved Utah's desert wilderness. As
+a legislator representing a large portion of the desert, who
+has also experienced the pain of having my desert carved up by
+environmental extremists, with almost no communication to the
+people who either represent the people in the area or the
+people themselves, watching what took place just last fall for
+me was kind of like Yogi Berra's old line, ``deja vu all over
+again.''
+ Although my anger is not, and probably will not, totally
+evade, I nevertheless understand how pointless it is probably
+to revisit the past, and especially that specific decision.
+Instead, I want to take a moment, if you will, to visit the
+future.
+ On page 1 of your justification you comment--and I quote--
+``CEQ is mandated to develop policies which bring into
+productive harmony social, economic, and environmental
+priorities, with the goal of improving the quality of Federal
+decision making.''
+ If I'm not mistaken, that statement is taken directly from
+the language set forth in the National Environmental Policy
+Act, and you alluded to that very language.
+ In a similar vein, you comment on page 9 of the executive
+summary of your recently published report, titled ``The
+National Environmental Policy Act, a Study of its Effectiveness
+after 25 Years'', that the study participants felt that NEPA's
+most enduring legacy is a framework for collaboration between
+Federal agencies and those who will bear the environmental,
+social and economic impacts of agency decisions.
+ It seems to me that if statements like these are truly what
+your organization is all about, then the Utah decision sets
+NEPA directly on its ear, to do what was done in Utah, let
+alone the way it was done. By that I refer to the reality that
+the U.S. Senators, the Representative from Utah, were not
+consulted regarding this. To say the citizens of Utah were
+consulted and/or even began to approve of this suggestion, if
+it didn't hurt so much we would laugh about it. Indeed, it just
+flies in the face of what I sense really is your style of doing
+business.
+ Now, I wouldn't suggest that CEQ, having the
+responsibility, although you review these things, had nothing
+to do with it, but in my heart of hearts, I find it impossible
+to imagine that you would be--that it really does seem to me
+that that takes us to the heart of our relationship.
+ You know of my past interest in environmental questions.
+Early in my own governmental career I received lots and lots of
+heat because of ``extremism'' relative to air quality matters
+that led to the development of the air quality management
+district, that nonetheless, all of our efforts to strengthen
+those who would change the environment are threatened, I
+believe, are undermined if we allow extreme voices to dominate,
+and especially extreme styles.
+ So how can I help but ask, ``who's next?''
+ Ms. McGinty. Mr. Chairman, if the point of that part of
+your question is whether or not there are other national
+monuments that are currently under consideration, the answer to
+that is no.
+ To step back to the larger point that you made in the
+question, yes, additional consultation would have been very
+much welcomed and recommended and would have improved the
+process that was undertaken in establishing the national
+monument in Utah. I do think, however, it's important to keep
+in mind what the national monument designation does do and what
+it doesn't do, and where NEPA certainly will have a role in
+this whole process.
+ The monument designation itself is a recognition that there
+are artifacts of historical archeological or scientific import,
+so the President, in designating the national monument, has
+recognized that, in fact, those things exist in this
+geographical area.
+
+ nepa and public participation
+
+ The question is, what then are the management formulas and
+prescriptions that follow from such a designation. None of that
+has been decided. When it comes to deciding how this land
+should be managed, we will, in fact, use NEPA to its fullest
+extent. We envision a three-year, intensive process through
+which the public will participate and have a very strong role
+in deciding exactly how those lands will be managed. So there
+is much room, and we will use NEPA to that effect.
+ Mr. Lewis. Well, Miss McGinty, I can't help but say I am
+reminded of another discussion that's going on. I happened to
+get home early enough last night to where I actually watched C-
+Span. One of my colleagues was holding a hearing that had to do
+with the Immigration Service, with questions about what may or
+may not have happened across the country, encouraging people
+who are here, who are not citizens, to be naturalized in order
+to vote, et cetera. You know, I considered the franchise to be
+more important than the questions that we're involved in here.
+ But a fundamental point was being made. It was that you're
+asking us to change the law to facilitate thisprocess, and
+underlying that, the very administration that's asking for it, at least
+if we can interpret what the Vice President said, may very well have
+violated the law that exists presently as it relates to the
+administration, in terms of CEQ, in which you presented your highest
+priority to change.
+ I must say that I am reminded of that discussion last
+night, for at least in terms of the spirit of your testimony,
+the statements in the existing Act, et cetera, we fundamentally
+violated one of the basic foundation stones; that is, bringing
+people together.
+ In my own territory in the desert, we had two monuments--
+Joshua Tree National Monument and the Desert Valley National
+Monument. That territory operated pretty well for many, many a
+decade. Indeed, I don't see any change at all in terms of the
+quality of preservation or otherwise of the territory by park
+designation. But at least, if you're going to have one or the
+other, the people involved before the fact, before designation,
+ought to be consulted, participate and et cetera. You're
+suggesting they will have a chance to participate, but after
+the designation is made.
+ Indeed, if there is a basic job for CEQ, it ought to be to
+advise the administration that that's a pretty dumb way of
+dealing with people.
+ If you would like to respond further, go ahead.
+
+ nepa: integration of environmental, economic and social objectives
+
+ Ms. McGinty. I just want to underscore and reiterate our
+commitment to the principles outlined in NEPA. The various
+examples of the work that CEQ has undertaken in the past year
+that I shared with you earlier I think demonstrates very
+clearly that we have taken very seriously the notion that NEPA
+is not a statute that is solely about protecting the
+environment, really. It is a statute that much more
+comprehensively talks about that integration of environmental,
+economic and social objectives.
+ When we talk about things like, for example, this dredging
+issue that CEQ has taken on in the New York and New Jersey
+Harbor, there was a clash of wills that persisted over the last
+decade that very much threatened both the economic viability of
+the port and the environmental integrity of the bay and the
+ocean. We worked very hard to craft an agreement that I feel
+strongly will both ensure the economic viability of that harbor
+but will do no harm to the water quality in those waters off of
+New York and New Jersey.
+ Everything that we delve into is an effort to live up to
+what I think is exactly the right mission, and that's the
+mission that is outlined in the National Environmental Policy
+Act. So I guess I do want to underscore that the initiatives we
+have taken on have been very faithful to that spirit and our
+desire now to reinvent NEPA is really a desire to capture what
+I think Congress had written 26 years ago and make sure that it
+is, in fact, implemented.
+ Mr. Lewis. I believe you when you say you really do want to
+implement that spirit. I am very concerned about the
+implementation of that other spirit, which is to bring people
+together and consult them, not presume that just because we
+happen to be on this side of the Potomac that we can walk
+across it without getting wet.
+ I must say that it does raise fundamental questions about
+the way the administration is dealing in environmental areas.
+Environmental programs are fundamental people programs. Way
+beyond the endangered species are people problems and
+challenges, and to not include them in the process is very,
+very disconcerting. Maybe it's just convenient to take a place
+like a little rural state in the West and roll right over them,
+and we can consult people in a larger state where there happens
+to be water problems. The politics of that are interesting in
+and of themselves. But it really is perhaps the best
+illustration of the extremes of Uncle Sam having all the
+answers and being willing to exercise it at will in almost
+whatever fashion those people who are not elected would choose.
+ Ms. McGinty. Mr. Chairman, I certainly understand and hear
+and respect your concern with regard to the Utah decision. But
+I really did want to underscore that in everything else we have
+done--indeed, now in the implementation of the Utah decision--
+but in everything else we have done, to go back to this
+dredging example, that was not just a prescription that came
+out of Washington. The labor unions were engaged in that
+decision, industry was engaged in that decision, and many
+Members of Congress, the New York and New Jersey delegations,
+were involved in that. We worked very closely with Governor
+Whitman and Governor Pataki in reaching that decision.
+Environmental groups were involved in it.
+ The habitat conservation plans that I mentioned, that was
+not prescribed from Washington. That involved local
+environmental groups, the State of Washington, the timber
+industry in Washington State.
+ I often think that the meetings that I chair in the White
+House are often the hottest ticket in town, because no matter
+what the subject, there are at least 30 people in the room. It
+is because I really do insist that all the voices are heard
+from. It means that we have laborious processes to reach
+conclusions. That means that I chair long meetings, and it's
+not just because of the gift of the Irish. It is because we
+really do take seriously that notion that all the voices need
+to be heard from.
+ I appreciate your indulgence to underscore that point, that
+I do believe strongly in that and work hard to make sure that
+that's involved in all the decisions we come to and thepolicies
+that CEQ promulgates and puts together.
+ Mr. Lewis. May I remind you that my mother's name was
+O'Farrell. [Laughter.]
+ This discussion does bring up a point. Senator Bennett last
+week introduced a bill to codify in law what the President
+promised management in the area would look like. Currently,
+many of those people who I would suggest may be on the fringes
+of the environmental community are strongly opposing the
+Senator's suggestion.
+ Is this an item that CEQ could endorse as a reflection of
+our good faith in this effort?
+ Ms. McGinty. We are aware of the legislation that has been
+introduced. We certainly will be looking closely and carefully
+at it. It absolutely is the President's intention, as he
+articulated in declaring the national monument, that valid
+existing property rights in the monument area would be
+respected, that current grazing activities, hunting and
+fishing, the multiple uses that were existing in the monument
+area, would continue, that he did not want to see those things
+change.
+ So, with that in mind, we certainly will look at the
+legislation and see if there isn't some agreement we could
+reach.
+ Mr. Lewis. Might we look forward to next year's session in
+examining that discussion, and maybe I will have one question
+to bring to light what CEQ actually advised and what the
+process was like?
+ Ms. McGinty. Certainly.
+ Mr. Lewis. I will have further questions about your
+thoughts as it relates to rethinking CEQ.
+
+ budgetary increase request
+
+ But moving along in terms of the pattern I have here
+regarding your budget request, as indicated, CEQ's budget
+request for $3,020,000 for fiscal year 1998 represents an
+increase of some $584,000, or about 20 percent over the 1997
+level of $2,436,000. Similarly, the 1997 funding level
+represented an increase of nearly $300,000 over the 1996 level.
+ While the dollar level we're talking about is certainly low
+compared to most other agencies we deal with, we are
+nevertheless faced with the perception that while other
+agencies are asked to cut back on funding, you desire to go the
+other way. Rather than shifting priorities, backing away from
+items like the Utah wilderness and working on reform, you
+prefer to expand budgets, it would appear. Again, even though
+the amounts are small, you have asked for an increase in every
+object class category, personnel levels, salaries and benefits,
+travel, rent, supplies, equipment. Every one would get an
+increase.
+ On a percentage basis, your request increase is second only
+to the Corporation for National and Community Service, which I
+am told is among the President's favorite programs, and is on
+par with the Department of Housing and Urban Development, which
+has asked for a $5.6 billion increase just to renew existing,
+not new, Section 8 assisted housing contracts. That increase,
+which is pretty sizeable, is a required increase because of
+past mistakes over the years of Congress as well as
+administrations as it relates to housing policy. There's no
+choice there but to put people out in the street.
+ So you are out there among the leaders, without any
+question, percentage-wise and dollar-wise. Of course, while I
+will give you the opportunity to defend and make the best case
+possible for your 1998 request, you must agree that it's
+difficult to take seriously the administration's statements
+desiring a balanced budget, when a part of the President's own
+office asks for such an increase.
+ Would you like to comment?
+ Ms. McGinty. Certainly, Mr. Chairman.
+ First, the requested increase for CEQ, as you know, on a
+percentage basis is significant, but to underscore again, in
+terms of the staffing levels over the history of CEQ, we still
+are significantly below where the institution has been
+throughout most of its history. Again----
+ Mr. Lewis. You made that point earlier, and I would like to
+interject that the thought occurred to me that you're
+absolutely correct, that during the Bush administration and
+previous administrations there were more personnel. They were
+personnel given by the Congress which increased every budget,
+every year, with almost no review. You know what Washington is
+like. You give somebody something for nothing, even if they
+didn't ask for it, and they're going to take it and they're
+going to spend it. So I'm not sure that that argument really
+helps us a lot.
+ Ms. McGinty. Well, the President's request is in the
+context of his balanced budget. In addition to being part of a
+balanced budget plan, it also is part of his commitment which
+he has undertaken and fulfilled, to reduce the White House
+staff by 25 percent. So any increase that CEQ has been able to
+realize in the President's request has been offset in other
+parts of the Executive Office of the President. So overall, the
+President's request for the Executive Office of the President
+will still reflect and maintain his commitment to a 25 percent
+staff cut.
+ In referring to the Department of Housing and Urban
+Development, you noted that mistakes--dare I say that mistakes
+have been made in the past with regard to some of HUD's
+programs. To lay it right out there, mistakes were made with
+regard to CEQ in the beginning of the President's first term.
+We are still climbing back up from what we realized had been an
+incorrect decision to so dramaticallyreduce CEQ's resources in
+the beginning of the administration.
+ So as may have been the case with regard to HUD, where cuts
+were made too severely, we certainly made that mistake in the
+beginning of the administration. Now, as part of the
+President's balanced budget and 25 percent staff cut in the
+White House, he has realized that this should be more of a
+priority in the overall scheme of the Executive Office of the
+President.
+ Mr. Lewis. I must say that I hope I didn't mislead you. It
+wasn't my point that HUD's programs have been cut too severely
+in the past but, rather, they grew like Topsy without any
+thought of the way the formula actually operated. In this case
+we created circumstances in housing programs with 40-year
+mortgages and 20-year contracts, and suddenly in shrinking
+budget times contracts were being renewed and poor people could
+be put out on the street because Congress just plain doesn't
+choose to look very far down the line. I would suggest that's a
+problem of Washington in general. It is honestly one of the few
+arguments I would make that suggests maybe, from time to time,
+shifts in the majority is good around here. Forty years may be
+too long.
+ As indicated in the budget justification and your
+statements, $482,000 of the proposed increase would be used to
+hire four new professionals.
+ Ms. McGinty. Yes.
+ Mr. Lewis. Simple division tells me that each of the four
+would receive an average of just over $120,000 in salary and
+benefits--and I will give you a chance to respond. These are
+people who obviously would have significant experience, doing
+whatever it is you have in mind for them.
+
+ staffing increase
+
+ Can you explain in some detail what your plans are for
+these additional people and indicate the type of experience
+you're looking for to fill these positions?
+ Ms. McGinty. Yes, sir. Again, the activity toward which
+these staff would be applied would be this effort
+comprehensively to improve the implementation of the National
+Environmental Policy Act.
+ In terms of the kind of staff and the qualifications that I
+would be looking for, I will look for these staff where I have
+looked for the staff I currently have. Most, if not all, of my
+staff come from Capitol Hill. Many have had experience----
+ Mr. Lewis. None from Utah, right?
+ Ms. McGinty. No, not from Utah, I don't believe, no.
+[Laughter.]
+ Mr. Lewis. Idaho maybe?
+ Ms. McGinty. Not Idaho, either.
+ Many also come from the agencies where they've had years of
+experience in the agency. Some of CEQ's current staff have been
+part of CEQ since the Reagan administration, and I have kept
+them as part of the team, with all of their years of
+experience. So I will be looking in those same directions as we
+build this new part of the team if, indeed, we have the
+opportunity to do that.
+ In terms of the figures that you have just mentioned, I
+will need to respond on the record in more detail. But the
+numbers would reflect--First of all, I guess I should say that,
+in terms of CEQ's overall budget request, $2.3 million of the
+$3 million request represents simply salary and attendant
+expenses. With regard to these new staff, the increase would
+reflect both salary and the need for additional space and the
+rent we would need to pay there, equipment, and the money that
+would be needed to buy that equipment and to support it.
+ I would not envision that any single member of that group
+of four additional staff would earn $120,000 a year. In fact, I
+wouldn't envision that they would earn $100,000. My senior
+policy staff, with the exception of two people in the office--
+we do not have support staff at all. So all of my staff are
+senior policy staff. But the highest salary is on the order of
+$98,000, I believe, in terms of my policy staff.
+ Mr. Lewis. Do you expect to advertise the four jobs through
+the Office of Personnel Management or elsewhere, or have you,
+in fact, determined in advance who you think you probably want
+to hire?
+ Ms. McGinty. I have not determined in advance who we would
+hire. We will follow the normal set of procedures, I assume,
+through the Office of Personnel Management.
+ Mr. Lewis. Is CEQ subject to the Executive Order of last
+fall requiring that employees who have been RIF-ed be given
+priority for hiring?
+ Ms. McGinty. I need to determine that.
+ Ms. Fidler. No, we're not required to do that.
+ Mr. Lewis. Okay. So it is within the purview of the
+administration and separate from those limitations on the
+tapping of the RIF pools.
+ I must say that, in connection with a relatively small
+staff and high policy level people, I understand your response
+and would appreciate a response for the record. The point we're
+attempting to make here is that I am of the view that it may be
+that CEQ is coming from a frame of reference that is so slanted
+in one direction. Any environmental effort is a good effort.
+The tradition that almost assumes that economic considerations,
+in spite of what the language in the charge might suggest, is
+let's go forward with regulation, period. A little mix of
+flavor in a new staff that maybe isn't of traditional form
+might be helpful. I think any agency benefits from a different
+kindof blood, not just new blood.
+ Ms. McGinty. Mr. Chairman, I would certainly be open to any
+suggestions you might have, in terms of places we might look
+for additional staff or, indeed, individuals we might talk to.
+ Without taking too much of the committee's time now, I
+would appreciate the opportunity to expand on some of the
+examples I have cited today, because CEQ really has undertaken
+many initiatives. I would say everything that we do is in the
+spirit of not just looking at environmental protection but
+achieving that integration that we have spoken about, these
+RCRA ``rifleshots'' that we call them that are now signed into
+law. It was CEQ's leadership that put that bill together, with
+tens of millions of dollars saved to the business community.
+ CEQ also led the effort that again was signed into law to
+establish clarification on lender liability under the Superfund
+program. There again, a very significant savings to the
+business sector. These habitat conservation plans, when we're
+stepping up to the plate and giving private sector timber
+companies or, in the last case, the State of Washington, a 100-
+year guarantee that they have met all their Endangered Species
+Act obligations, this is not something that the
+environmentalists, in particular, take too kindly to. But I
+think it's the right thing to do, economically, socially, and
+environmentally. But it is the next generation of what we need
+to think about on the environment.
+ Mr. Lewis. I will be looking forward to your revising the
+record.
+
+ nepa as a policy tool
+
+ Your stated reason for specifically needing more personnel
+is, of course, related to your launching of a major effort to
+reinvent the way in which NEPA is being used currently as a
+policy tool. Your goals for this effort are to improve decision
+making by the Federal Government and promote greater efficiency
+in the performance of NEPA reviews.
+ I suppose many people, especially some living today in
+Utah, suspect that NEPA has been broken since the day it was
+enacted. They tell me that, anyway. They have that concern or
+thought. I can certainly attest that many times NEPA has been
+abused when we've tried to make sensible land use decisions in
+my own district. Nevertheless, for better or for worse, NEPA
+has become what many consider to be the very foundation of a
+myriad of environmental statutes. To change it, or even
+reinvent it, whatever that means, will at least certainly raise
+eyebrows, if not ire. Even for a few westerners, I suspect that
+they would say ``the devil you know is better than the devil
+you don't know.''
+ Can you tell us in some specific ways how you believe NEPA
+is broken?
+
+ shortcomings in nepa implementation
+
+ Ms. McGinty. Well, I think there are instances in which
+NEPA works better than in other instances. Some of the
+shortcomings in NEPA implementation currently involve too much
+of an emphasis on document production. Documents are generated
+for the sake, as far as I can tell, in many instances, for the
+sake of generating documents. They are also generated at the
+end of a process, so they don't even effectively inform the
+decision making itself.
+ Tied to that, constituencies, citizens, state and local
+governments, are brought in far too late in the process, many
+times, frankly, after a decision for all practical purposes has
+been made. The agency is simply going about the job of checking
+the boxes of what it thinks it needs to do.
+ What we need to do is make sure that process gets
+inverted----
+
+ reinventing nepa
+
+ Mr. Lewis. That's a very interesting point.
+ Ms. McGinty [continuing]. So that the studies, the analysis
+that is done, is done in a way that genuinely informs the
+decision making process, so that citizens are genuinely given a
+chance to influence the final decisions that are made.
+ Mr. Lewis. Maybe you could elaborate a little bit more on
+the points you have made, but giving us some better idea of how
+you plan to go about reinventing NEPA. Tell us what are some of
+the specific things you believe will be accomplished by doing
+that.
+ Ms. McGinty. I would be happy to, Mr. Chairman.
+ Mr. Lewis. Do you want to do it now?
+ Ms. McGinty. Oh, I would be happy to.
+ We envision a three-step process. We are currently engaged
+in the first step, which is to look at a sector-specific basis,
+starting with the oil and gas sector, grazing, and the timber
+industry, timber production.
+ In these areas, the agencies are already at work and coming
+forward with specific recommendations as to how the process can
+be improved. To take one example, in the grazing area right
+now, often you have contiguous pieces of Federal property. One
+piece is owned and operated by the Forest Service; the other
+piece is owned and operated by the Bureau of Land Management.
+ The Forest Service may have categorical exclusions from
+NEPA for certain low-impact or no-impact activities. The Bureau
+of Land Management, on exactly the same piece of land
+continuous with the Forest Service's piece of land, will have
+contradictory categorical exclusions. So one of the
+recommendations that has come from the group already is to look
+at those exclusions and see if we can't find more, but at the
+very minimum to harmonize them, so that individuals who are
+operating both on the Forest Service land and the contiguous
+BLM land have one consistent message from the Federal agencies.
+ That's the first part of this effort. I think it will be
+ongoing for the next several months, until we can put together
+a draft set of recommendations. That draft we want to then
+share very broadly. In fact, right now we're talking to the
+University of Wyoming, who may host for us a session in May,
+where we will just put the document out there, having the
+varied interest groups at the table, including the Governor's
+offices, and have at it in terms of seeing whether those
+recommendations we come up with can be elaborated upon or
+improved.
+ The second phase will be to reach out from the learning
+we've had in those three sectors and look at additional sectors
+across the government. One that has been suggested to us is the
+mining sector, where improvements could be made in the NEPA
+process.
+ Then, finally, after we have done our sectoral approaches,
+the third phase would involve going back out of specific
+sectors and just looking comprehensively across the board at
+some general governing principles that we could put in place to
+better effectuate NEPA's purposes. So it's a three-stage
+process that we envision.
+ Mr. Lewis. As I understand it, much of the reinvention of
+NEPA will take place by way of administrative rather than
+legislative reforms, and you have mentioned in several ways,
+your focus upon oil and gas, timber and grazing. At least for
+the West and the Southwest, I can't imagine three hotter
+buttons.
+ I'm just wondering, how do you really anticipate developing
+a meaningful dialogue, let alone hopefully increasing trusting
+relationships, when you start the process with the hottest of
+issues.
+ Ms. McGinty. Well, we wanted to be responsive to those
+things that seemed to be most troubling and concerning to
+people. We did talk about this internally, whether we would
+start with the general principles and then in an extended
+period of time get to some of the specifics and try to solve
+some problems as applied, or if we would do the process
+inductively--start with the specifics and then build the
+general principles from what we know works on the ground.
+ Mr. Lewis. Congressman Hansen and Senator Bennett would be
+concerned about which people you're talking about.
+ Ms. McGinty. Well, this process has been informed most by
+the Western Governors Association and the Western States
+Foundation, which as you might know is a coalition of
+extractive industries for the most part. We just wanted to roll
+up our sleeves and work with those groups, because I do believe
+that, while there certainly will be issues on which we differ
+with some of those parties, there is more than a kernel of
+truth to their complaint that the process is unwieldy, that
+they do not get effective or crisp or clear decision making. I
+know there are improvements that can be made.
+ I am very encouraged by the willingness of the governors to
+help on this project. They are genuinely interested in
+participating and seeing if we can't figure some things out
+here.
+ We also have the very good fortune again of universities
+pitching in. The University of Montana has something called the
+Center for the Rocky Mountain West, which is dedicated to
+trying to find these more collaborative approaches to decision
+making. And the University of Wyoming has a special board that
+it has created, with people from all around the country, to
+focus on natural resource issues. Both of them have made
+themselves available to help us in this project.
+ Mr. Lewis. In your discussions as you went forward with
+this and examining these areas of possible use in the process
+of reinvention, did you consider maybe taking just one of the
+areas, maybe one of the lesser controversial ones? It's hard to
+see which one it might be. But while working on lesser
+controversial ones, experimenting to see how you really build
+this positive relationship and the level of credibility, I
+think is necessary, at the same time using the rest of your
+troops for things like the reinvention, internally doing the
+nuts and bolts as a part of all that?
+ For example, the grazing item, while very important to the
+grazers, doesn't involve quite as many people. Did you think
+about that?
+ Ms. McGinty. Well, we have built up to the specific focus
+we have in these sectors now. For example, in the timber
+sector, we are trying to build on the rapport we have already
+built over the last four years with specific members of the
+timber industry, through things like our ecosystem approaches
+and our habitat conservation plans which we do through NEPA. So
+there is a base of support that has been built and an honest
+dialogue that has been built in that sector.
+ Similarly, in grazing, as I believe I shared with the
+committee last year, we undertook 18 months ago or so a pilot
+project to improve grazing practices and the NEPA
+implementation there. We are now at the stage where we have
+some learning from the pilot project that I think has helped to
+build the bridges for us to take this on as a whole sector.
+ Mr. Lewis. It still boggles my mind that we're going to
+take up all three of these items at once. No matter what
+constituencies one has built, there still is a pretty
+significant level of people who are wondering if we can trust
+each other.
+ For example, all is not sweetness and light in timber
+country. It might be helpful if one used--let's say you
+usedgrazing to demonstrate to somebody that we actually can bring
+interests together, and maybe make some question marks that are now
+exclamation points after them.
+ I would like to welcome Mrs. Meek. We appreciate your being
+with us. I understand your schedule----
+ Mrs. Meek. I would like to protest because this Committee
+meets at the same time as the other subcommittee on Treasury
+and Postal.
+ Mr. Lewis. Mr. Stokes has the same problem this morning,
+and my National Security meeting is around the corner.
+ Mrs. Meek. I just want you to know I am committed, but I
+have to shuttle to get back and forth.
+ Mr. Lewis. I'm not sure if you've worked with Kathleen
+McGinty before, but she is a very delightful person and she can
+sell an Eskimo an icebox, so be careful. [Laughter.]
+ Mrs. Meek. Her reputation precedes her, Mr. Chairman.
+
+ mining law proposal
+
+ Mr. Lewis. While we are on the subject of reinventing oil,
+gas, timber and grazing, what role have you specifically and
+your office generally played in the Secretary of Interior's
+recently announced policy to change mining law administratively
+because of the failure to do so legislatively?
+ Ms. McGinty. I haven't been involved, Mr. Chairman, in the
+details of the approaches that the Secretary has put forward. I
+was aware that he was going to work on administrative reforms.
+I was involved, however, in the proposal on mining that is
+incorporated in the President's budget. That proposal would
+establish a five percent net smelter return royalty on hard
+rock mining, as well as set up a specially dedicated
+reclamation fund into which those monies would be put. Those
+monies would then be used in the communities that have had acid
+mine drainage damages and things like that, so the money would
+be used to clean up those sites.
+ There we have had positive response from the National
+Mining Association, as well as an environmental group or two. I
+was involved in that part of the proposal.
+ Mr. Lewis. Could you give me a feel for what Secretary
+Babbitt wants to do with mining law as it fits into your short-
+term or long-term reinvention goals? It's pretty clear from
+what you just said that there would appear to be some
+differences between your direction and what Babbitt may be
+suggesting.
+ Ms. McGinty. To be clear, Mr. Chairman, I don't know that
+there are differences. I'm just not versed right now in terms
+of the details, administratively, of what he will put forward.
+Indeed, I think he is in some respects in the early stages of
+putting those proposals forward.
+ But the way that NEPA will work with whatever changes he
+puts in place is to bring about the integration of what the
+mining law under the Secretary's regulations may require, with
+things like what are the Clean Water Act requirements, what are
+the Clean Air Act requirements, what about RCRA. All of these
+laws impact the mining industry.
+ The only place that we have to go to make sure those varied
+requirements are integrated in one coherent whole is NEPA. NEPA
+is the structure that tells agencies that they need to use a
+scoping process. They need to look at all the requirements that
+are out there, and they are supposed to present them to the
+public as one coherent whole as to what the requirements will
+be.
+ Mr. Lewis. I think you have heard that line, Ms. McGinty,
+that is usually used somewhere around the beltway, that
+``legislators come and go, and we'll be here forever.'' That
+is, the bureaucracy suggests that. I know that such a statement
+wouldn't bother Mrs. Meek, but it bothers the devil out of me.
+[Laughter.]
+ I guess my point is that, in a fundamental way, we have the
+Judiciary that has a very specific role; an administration, at
+least as the Founding Fathers looked at it, was supposed to be
+in the business of administering laws, going forward with
+programs that are put together and sent to them by way of
+elected policymakers. The legislature is in the policy
+business.
+ And yet, it seems to me there has been an excessive pattern
+of administrations, particularly at the second and third level
+of permanency, that uses that statement that I introduced this
+commentary with, that ``legislators come and go and we'll be
+here forever.''
+ With that backdrop, do you think it's the proper role for
+the Executive branch to make such extensive regulatory
+administrative changes as we're talking about here when it
+wasn't able to accomplish many of those same changes in a
+legislative context?
+ Ms. McGinty. I think it is my responsibility certainly to
+execute the National Environmental Policy Act as it was written
+by the Congress----
+ Mr. Lewis. As those third levels interpreted it being
+written by the Congress?
+ Ms. McGinty. Well, I feel an obligation myself to read and
+interpret the obligations there. Most compellingly, I believe
+there are two obligations. One, again, is to achieve this
+integration of the various economic, social and environmental
+objectives, and two is to do that in a way that the public has
+a chance to participate in agency decision making.
+ I believe that we've made progress in moving towards that
+very clearly stated directive in the National
+EnvironmentalPolicy Act, in the kinds of programs that I've discussed
+earlier today. But I do believe that we are still far away from
+actually implementing Congress' intent, in that we've been very good at
+document production, we've been very good at making sure we're not
+going to get sued, or if we do get sued, we've checked all of the boxes
+and so we're safe. But we have not been very good at living up to what
+is a very simple but I think a very important directive that is the
+heart of the National Environmental Policy Act itself.
+ Mr. Lewis. A final question regarding the Secretary, and
+then I will be pleased to recognize my colleague, Mrs. Meek.
+ What is the time frame that you believe is necessary to
+accomplish a reinvention of NEPA and how much would you expect
+this reinvention to cost?
+
+ nepa reinvention time frame
+
+ Ms. McGinty. I believe, sir, in terms of the overall
+reinvention of NEPA that I outlined, which would involve at
+least these three phases, I think that would take on the order
+of several years to finish that entire job. But in terms of
+these individual pieces of this that we can put together, I
+would hope, again in May, to be able to take advantage of the
+opportunity that the University of Wyoming has presented, to
+present the initial recommendations on the oil and gas and
+timber and mining sectors, just to open those up to public
+comment. I think there is real progress and benchmarks we can
+make along the way.
+ Mr. Lewis. Thank you.
+ Welcome, Mr. Hobson, and my colleague, Mr. Stokes.
+ Mr. Stokes, I was just about ready to call on Mrs. Meek,
+and I wondered maybe I shouldn't do that because my ranking
+member came in. I'm going to give you the option.
+ Mrs. Meek. I will yield to the ranking member. [Laughter.]
+ Mr. Stokes. Let me say this, Mr. Chairman. I would prefer
+that you recognize Mrs. Meek at this time. I have three
+subcommittees working today. I will yield to her and then you
+can come back to me.
+ Mrs. Meek. Thank you so much.
+
+ homestead air force base
+
+ Ms. McGinty, I understand that at the beginning of your
+testimony you mentioned Homestead Air Force Base, which as you
+know is sort of attached by my left arm. I get teased a lot
+about it here in the Congress.
+ My question to you is, you are going to see that that
+situation is worked out?
+ Ms. McGinty. Yes.
+ Mrs. Meek. According to the rules and regulations and all
+of that?
+ Ms. McGinty. Yes.
+ Mrs. Meek. I need to know whether or not, being that that's
+a very important facility for south Florida, if there are any
+immediate plans to do so.
+ Ms. McGinty. Yes. Thank you.
+ As you may well be aware, there has been some controversy
+with regard to Homestead Air Force Base. There were some
+especially from the environmental community who were very much
+opposed to the transfer to Dade County of the Air Force Base on
+the premise that that would be incompatible with restoration of
+the Everglades.
+ CEQ got involved I think in the fall of last year to see if
+we couldn't say there is a way for both of these objectives to
+be met; namely, the economic development opportunity for Dade
+County, as well as preservation and rehabilitation of the
+Everglades.
+ The agreement that we have reached among the Federal
+agencies and also with the mayor there, and the county
+officials, is a process that would involve two stages. One,
+which is currently underway, and we anticipate will take
+roughly four months--potentially four months to a year--which
+will enable actually the transfer of the base to be
+effectuated.
+ The analysis that is underway right now will simply look to
+whether there is additional environmental concerns that should
+be reviewed. But we are confident in this first process in four
+months to a year that the base will be transferred.
+ The second part of the agreement depends on the county's
+plans for the Air Force base, which then will become a
+commercial air strip. If the county wishes to expand the
+current footprint of the air strip and potentially put a second
+or third runway in, at that point we would reengage the
+environmental analysis process and look at the issues then. But
+we didn't want that larger picture, which is quite speculative
+right now, to impede the economic opportunity for Dade County.
+So that's the agreement we put in place. It will allow for the
+transfer of that Air Force base, and we think it will allow for
+that to happen without any genuine concern with regards to
+Everglades restoration.
+ Mrs. Meek. I'm glad to hear that, in that the community
+college in the air base conversion, they were awarded a part of
+that space that you've talked about. But they're being held up
+by all of these--I don't call them peripheral, but the
+political impasses that have been reached because of the air
+strip and all of that. That is holding up the college's
+project. The money that the Congress awarded them is in
+jeopardy as well.
+ So do you have any idea as to when----
+ Ms. McGinty. I could look into that specific issue, but
+overall, I think we now have the blueprint for having this move
+forward. We have figured out a way that this does not need to
+be an impasse we can't surmount. We will be able to transfer
+the Air Force base.
+ As I said, it may take on the order of four months or more
+to do that, but we are on the way towards that objective.
+ Mrs. Meek. Thank you, Mr. Chairman.
+ Mr. Lewis. Thank you very much.
+ Now, if you would yield the balance of your time to my
+ranking member, Mr. Stokes.
+ Mr. Stokes. Thank you, Mrs. Meek, and thank you, Mr.
+Chairman. Ms. McGinty, it's nice to see you again.
+ I understand that you've had an extensive discussion this
+morning regarding your efforts relative to undertaking this
+major effort to reinvent the way Federal agencies implement the
+National Environmental Policy Act.
+
+ epa's rule on ozone and particulate matter
+
+ Let me ask you this. One proposed set of environmental
+regulations now generating a great deal of comment and activity
+this year is the Environmental Protection Agency's rules on
+ozone and particulate matter. Can you comment on CEQ's
+involvement to date in these regulations?
+ Ms. McGinty. Yes, sir.
+ This is a pending rulemaking, so in terms of the details of
+the substance of the proposals, there is still comment coming
+in that will be reviewed on those proposals.
+ But CEQ's role has been and will continue to be, as this
+rule moves towards its final versions--which I believe is in
+June or July of this year--we will work with the Office of
+Management and Budget to make sure that there is a
+comprehensive review of the proposed standards.
+ That will involve making sure that the comments that come
+in from the public on the record to the Environmental
+Protection Agency are made available to the other agencies that
+have an interest in this issue. Second of all, in the next two
+weeks, we will engage a series of meetings where we will invite
+in state and local governments, the environmental community,
+and representatives of industry, to hear directly from them
+what their perspective is on that.
+ So the short answer to your question is that CEQ will be
+very much involved in terms of the White House review of these
+rules, and in undertaking that, we will make sure especially
+that we have a public outreach process to hear comments on the
+rules.
+ Mr. Stokes. In this regard, there appears to be a great
+deal of discussion and difference of opinion within the
+scientific community itself as to whether the data support the
+proposed rules. Of course, Congress is now getting in the
+picture and having some congressional hearings on the matter to
+add more confusion to the picture.
+ Do you have any comments in that regard?
+ Ms. McGinty. Well, sir, again, the rules are pending, so we
+will see the comments that come in. I guess I would also note
+that my colleague, Dr. Gibbons, will be here soon and certainly
+can speak to the science.
+ I would just say that it's my understanding that some of
+the confusion pertains I think more to the ozone standards than
+the particulate matter. There the confusion so to speak is, I
+think, relevant not to whether or not there is a health problem
+and whether or not a change in the current standards is
+necessary. The EPA's advisory group I think has spoken to that.
+ But because ozone is an area where there is not a clear
+bright line, where we know that on this side of the line it's
+unhealthy and on that side of the line you've achieved perfect
+health protection, it's more of a sliding scale. Therefore, in
+the end, science won't be able to tell us exactly, directly,
+definitively, where the right point is. There will need to be a
+policy judgment as to what that right point might be.
+
+ proposed asset exchanges
+
+ Mr. Stokes. If Mrs. Meek still has some time, let me try to
+get in another question or two.
+ One of the administration's methods of dealing with certain
+difficult environmental issues in an era of extremely tight
+budgets has been to propose asset exchanges. Probably the two
+more noteworthy examples of this approach are the proposed land
+and asset swaps for the New World Mine near Yellowstone
+National Park and for the headwaters old growth timber in
+Northern California.
+ Concerns for this approach prompted the Chairman of the
+House Appropriations Committee to write to the President
+expressing his reservations.
+ What has CEQ's role been in these proposed asset exchanges?
+ Ms. McGinty. We have been very much involved in these asset
+exchanges because they involve a plethora of agencies. Each one
+of them involves a broad array of agencies who have a piece of
+those issues.
+ To put these initiatives in context, pursuant to the
+Federal Land Management Policy Act and several other statutes,
+the agencies do engage on the order of 200 land exchanges every
+year. The purpose of them is to protect and preserve
+particularly valuable resources or to achieve better coherence
+and coordination in management responsibilities. So it is
+pursuant to those laws that these exchanges have been
+undertaken.
+ Now, the magnitude of these two exchanges is larger than
+most of the exchanges that have happened in the past. So what
+we are undertaking to do is to find the assets that could be
+offered in exchange.
+ We have visited with Mr. Livingston, as well as Mr. Regula,
+who had signed and sent the letter to the President that you
+referred to. We have briefed their staffs and certainly we will
+stay in very close coordination and contactwith the Congress as
+these things move forward.
+ Mr. Stokes. Is it your opinion that the administration has
+the legal authority to engage in these swaps?
+ Ms. McGinty. Yes, sir. Again, this is pursuant to the
+Federal Land Management Policy Act, I think called the Weeks
+Act. There are a series of land management statutes that
+proscribe and authorize the exchange of assets. Again, on the
+order of 200 of these exchanges are done every year by the
+various land management agencies.
+ Mr. Stokes. Thank you, Mr. Chairman. You have been very
+generous with Mrs. Meek's time and I thank you.
+ Mr. Lewis. Thank you, Mr. Stokes. I appreciate both of you
+participating.
+ Mr. Hobson, the same with you.
+ Mr. Hobson. Thank you. I had another hearing, too, and I'm
+supposed to be over there.
+ I'm going to ask a series of questions, and you can answer
+whichever ones you want.
+ Ms. McGinty. OK. [Laughter.]
+ Mr. Hobson. I'm sure she'll get to all of them.
+ On air quality, I want to make a statement on EPA's
+proposed air quality standards for ozone and particulate
+matter. This is very important to Ohio. We had a delegation
+meeting and we had more Members attend that delegation meeting
+than we've ever had since the six years I have been here. We
+had more state legislators in on that issue than I have ever
+seen before.
+ I might tell you that Senator Glenn actually took the lead
+on that issue for our state. So this is a bipartisan problem as
+our state looks at it. I don't think anybody is locked into
+anything. We're told the cost is two billion dollars a year on
+our state, on something that the science is not really there.
+So we're searching for an answer. I will tell you that it's an
+issue of concern.
+ I'm also really concerned about the Everglades. I think
+anybody who has ever been to Florida is really interested in
+the preservation of the Everglades. I'm concerned about the
+proposal that was defeated in Florida that would have helped in
+the Everglades, and I don't know what you're going to do about
+that.
+ The third issue is on this new generation of vehicles. I'm
+going to be a little parochial for just a moment. Wright-
+Patterson Air Force Base is working with the private sector in
+the transfer of technology for new types of materials, and I
+would hope you would look at that technology.
+ I would also tell you that I know we're only doing this
+with Ford, Chrysler and GM, but I heard last night from a
+company in my district that is going to produce a natural gas
+vehicle that will be the most efficient natural gas vehicle on
+the market in California. It will be produced in Ohio and
+shipped to California. I might tell you that it's not a company
+on that list.
+ I think we're missing an opportunity if we limit our
+technology to not include some of these companies. They're
+going to have a natural gas vehicle on the market that's going
+to have a 200 mile range and I think it's going to sell like
+hot cakes in that area. So somebody ought to look at that.
+ The last issue is something I ask everybody when they come
+before us, so people need to get prepared if they're not. It's
+about your rent. I notice a jump in your GSA rent. You say it's
+nonnegotiable. That troubles me. GSA should not dictate to you
+and you should have the ability to negotiate. If they don't,
+you need to come and see me.
+ GSA met with me last year when I started asking about
+rents. The Consumer Product Safety Commission took on this
+issue with GSA and the Commission was able to move their labs
+and make some changes. I think you need to look at your rent. I
+want you to take on GSA, and if they're not being responsive,
+then you need to come to our committee and we need to follow
+up.
+
+ agency rent cost
+
+ If you look at these agencies across the board, the
+percentage of money they're spending on rent is not right. It's
+an arcane system and we need to take a look at that, Mr.
+Chairman.
+ If you want to respond to the rent question, the rest of it
+you can answer later if you wish.
+ Ms. McGinty. I'll start with that one and say that we
+accept and we'll call to follow up and have an appointment with
+you.
+ Mr. Lewis. You can reduce that rent across the street from
+the White House, right?
+ Ms. McGinty. Right.
+ Mr. Lewis. That would be interesting.
+ Ms. McGinty. It would be wonderful. We would love to have a
+reduced rent, so we would love to follow up with you on that.
+
+ air quality standards
+
+ On the other matters that you raised, on the airstandards,
+one of the roles that again CEQ will play is to provide a forum for
+various stakeholders, including especially state and local governments,
+to come in and make presentations to us on the specific concerns they
+have with regard to the rules.
+ As you might know, the rules are still pending. The comment
+period is still open. The final rules have not been
+promulgated. Starting, I believe, on March 10th, we will begin
+to hold that series of meetings, together with OMB and the
+White House, and we look forward to hearing from the state
+governments on those specific issues.
+ Mr. Hobson. Have they been notified yet to get ready?
+ Ms. McGinty. They may well have yesterday. The requests for
+folks to come in may have gone out yesterday. But, in any
+event, they will be issued very soon.
+
+ florida everglades
+
+ On your second point with regard to the Everglades, I am
+very optimistic in terms of the progress we have made with the
+bipartisan support of the Congress in beginning to turn the
+tides on Everglades restoration, and I think in a way that
+achieves the environmental objective but underscores the
+economic importance of the Everglades in terms of water quality
+and drinking water supplies in south Florida.
+ In terms of the specific issue of the funds that are needed
+to continue the restoration job, the President has again built
+on what the Congress did last year in providing $200 million
+for some of the restoration work, to increase the budgets of
+the agencies that are involved here so that we can get the job
+done. We do need to work in a bipartisan way, I think, to try
+to secure the resources that really are necessary.
+ While we have made a lot of progress, the overall tab for
+Everglades restoration is on the order of $3-4 billion. So the
+$200 million down payment that the Congress provided last year
+is very much a help but only a beginning.
+ Mr. Hobson. If I may, Mr. Chairman, one of the real
+problems is there are two or three companies down there that
+are getting off, in my opinion, scot free that have been major
+polluters in that situation. They went out and spent a lot of
+money on a campaign to tell people that it was all wrong. I
+watched that campaign and it was very troublesome. I know we
+have problems everywhere, but that is a natural resource in
+this country that should be protected and people shouldn't get
+away with what happened there.
+ I'm going to leave it to Congresswoman Meek. But there is
+bipartisan support I think for the Everglades.
+ Ms. McGinty. I would just note on that particular point
+that the President has reproposed in his budget that the sugar
+industry be asked to contribute a penny per pound of sugar
+produced towards the restoration of the Everglades. So we are
+hoping we can secure that piece of the budget as well.
+ Mr. Lewis. Can you do that by regulatory adjustment or do
+you have to have legislation?
+ Ms. McGinty. We need legislation, yes.
+ Mr. Lewis. I just thought I would ask the question.
+[Laughter.]
+ As you can kind of sense from this committee, at least from
+the questions here on both sides of the aisle, we really do--
+especially on environmental considerations--do hope to have as
+nonpartisan an environment as possible, for the environment is
+for all of us to be concerned about. The credibility question
+very much applies and underlines all the thrust of our
+direction today.
+ You know, whether Secretary Babbitt likes it or not, the
+mining law of 1872 is pretty clear on what it means and what it
+does. I mean, even a nonlawyer like me can read it and kind of
+make a reasonable, narrow adjustment.
+ To change the administration of the law through executive
+action, using conflicting statutes as cover, is a clear
+violation of congressional and statutory intent. That comment
+takes us right to kind of the heart of there really needs to be
+a partnership here rather than presumption. I make that point
+even though I intended to be through with CEQ.
+ Ms. McGinty. I would be happy to follow up on that point. I
+do know that the basis for the Secretary's action was a report
+developed by the Bush administration, in terms of regulations
+that had not been promulgated or had not been updated that are
+called for in the statute. They have to do, I guess, with the
+environmental management provisions envisioned in the statute.
+ Mr. Lewis. I note with interest that you often refer to a
+former administration that happens to be Republican. I
+understand that. But the reality is that that goes back to the
+point: ``Legislators come and go and we'll be here forever.''
+ I hope to end on a positive note. You mentioned Northern
+California and some of the problems that were up there.
+Frankly, it's a long ways from my district, but it's where the
+flooding was horrendous.
+ My friend, John Garamendi, wants FEMA to give the USGS some
+$2 million for levee mapping. The problem is there are 4-6,000
+miles of levees and we don't know how high they are, what their
+condition is, a lot of things. People at the California
+conservation agencies suggest that FEMA mapping might well be a
+waste of money and that there are technologies that perhaps can
+better do the job.
+ Because these problems were not so long ago in the
+black,and I've been familiar with them for a while, I might bring to
+the attention of your people programs like GEOSAR and I-Star, which is
+a mapping process using airplanes like 737's with technology that can
+do it very rapidly and very effectively. I would suggest maybe, if two
+million is the right amount, that we go in another direction and get
+the job done quickly, especially as the weather ahead of us gets to be
+better. That's something I would urge you to look at.
+ Ms. McGinty. Thank you very much. We are very closely in
+contact with Doug Wheeler, the secretary of the resource agency
+in California, to undertake this effort.
+ Mr. Lewis. I'm not sure that Doug of GEOSAR, for example,
+as a potential. It is an item that--through another venue I
+have been in contact with it. That stuff is now no longer in
+the black and portends really some fabulous things for
+environmental and agricultural considerations and so on.
+ As you know, the Corps of Engineers can issue Section 404
+permits. If it's all right with the Members, it's approaching
+the time when we move to our next series, but I want to go
+through just this item and maybe ask you to respond for the
+record, except for those questions that Members have pressing
+on their current agenda.
+ The Corps of Engineers can issue Section 404 permits based
+on wetland objectives identified in a special management plan,
+called SMP. Local governments and land owners in many parts of
+southern California and other states are interested in
+conducting such comprehensive plans similar to the habitat
+conservation plans that have been approved and are currently
+being developed.
+ Upon completion of the SMP, a comprehensive, long-term
+permit could be issued for the area, replacing the needs for
+applicants to seek a permit for each individual proposed
+action. This concept has the dual benefit of protecting
+wetlands and allowing for development under a thorough yet
+economical and streamlined permitting process.
+ Does CEQ support this concept, and if so, what and can will
+you do to help facilitate its implementation?
+ Ms. McGinty. I am not aware of that particular program, but
+certainly the concept of it is very consonant with what we've
+done with the habitat conservation plans and some other areas.
+So I would be very happy to look into it and see if we have a
+program there or if we could build one.
+ Mr. Lewis. I'm constrained, because my colleagues are so
+kind to be with me, to ask you to look at the balance of my
+questions for the record and see if either of my colleagues
+have questions they want to pursue here.
+ Mrs. Meek.
+ Mrs. Meek. I don't know, Mr. Chairman, whether my question
+is relevant, but allow me to ask it and perhaps I can get the
+proper reference.
+
+ brown fields sites
+
+ What is the situation regarding the brown fields situation?
+Does that come within your purview?
+ Ms. McGinty. I do work on that very closely. I believe it's
+a perfect example of where we have an environmental, economic,
+and social objective brought together in a very good program,
+yes.
+ The situation is that there are several proposals that are
+pending. First of all, administratively, we have established a
+hundred brown field sites around the country where we have been
+able to provide seed money to local communities to restore
+blighted urban areas and bring them back into productive use.
+ The President's budget calls for, I believe, a doubling of
+that number, so that we could get on the order of 200 sites,
+and I think moving towards a goal of 300 sites eventually.
+ Bills have also been introduced in the Congress that would
+go a step further and specify technical assistance that could
+be provided in developing brownfields proposals. And finally,
+the President's budget also includes a new tax incentive that
+is a $2 billion tax incentive that encourages private industry
+to invest in brownfields areas.
+ And the Council on Economic Advisors estimates that that $2
+billion if we can get the Congress' support for it, will
+leverage on the order of $10 billion of private sector
+investment in these abandoned areas.
+ And I would be happy to get you additional information on
+the program itself.
+ Mrs. Meek. It will certainly help us in the welfare or the
+work programs that we are all trying to do.
+ Ms. McGinty. Exactly.
+ Mrs. Meek. And I would like to talk with you about it
+further.
+ Ms. McGinty. Exactly. It is a very good source of job
+opportunities and it is where the environment can help create
+jobs.
+ Mrs. Meek. That is right.
+ Thank you.
+ Ms. McGinty. Thank you.
+ Mr. Lewis. Thank you, Mrs. Meek.
+ Following up just a little bit on the flooding question I
+was talking about earlier. As you know, normally we think about
+floods in a State like California or elsewhere in the country
+and now all over the country. We think of FEMA in terms of the
+immediate response.
+ Ms. McGinty. Right.
+ Mr. Lewis. But many of the problems relative to those kinds
+of challenges are not FEMA responsibilities. In fact, a number
+or a key problem with government response has to do with
+environmental organizations using NEPA and other statutes and/
+or regulations that seem to slow down or hold up river channel
+restoration, and dike repair replacement.
+
+ flood plains
+
+ Southern California is the country's largest area flood
+plain unprotected with maybe a billion and a half dollar
+project altogether because of a past history of dumb policy
+making. Again, there are tens of thousands of homes in the
+flood plain in Orange County south of an area way up north.
+There are billions of dollars of property involved and yet,
+much of the work moving forward is, in many ways, being
+hindered by almost excessive use of NEPA and other laws by
+environmental groups who want to see no channeling whatsoever.
+ Are you familiar with what is going on, especially in the
+west in that regard?
+ Ms. McGinty. This issue was raised to me as a concern by
+Congressman Fazio and also Senator Feinstein. And I visited
+with both of them and immediately within 24 hours, we issued a
+statement that made it very clear that none of these laws would
+impede operation and maintenance repair of these levies and
+flood, the various hardware that is in place to prevent
+flooding.
+ The concern I think was as much one of confusion about what
+are we or are we not allowed to do and, so, we tried to put out
+a statement that would clarify that as much as possible.
+ What we are hoping to do in the flood work that we have
+undertaken is to provide communities and some of the
+individuals you have talked about with options. Previously
+folks were not offered any options in terms of how they could
+respond to a flood. The only option was to rebuild the levy and
+be in jeopardy of being flooded again the next year or the next
+several years.
+ The options that we will provide will enable people to move
+levy structures back to increase the flood plain and the
+absorptive capacity of the river, to relocate if they would
+like to get out of the flood plain. These are options that
+previously were not available but the Congress passed new
+authorizing legislation last year that gives us the ability to
+do that and we are trying to make sure that, in fact, those
+things are executed.
+ Mr. Lewis. I appreciate that response and as I indicated,
+all the members have questions they would ask for the record.
+ We very much appreciate your being with us today and for
+now, we will thank you and this part of our session is
+adjourned.
+ Ms. McGinty. Thank you, Mr. Chairman, I appreciate it.
+ [Questions for the record follow; see budget justification
+at end of volume.]
+
+[Pages 231 - 390--The official Committee record contains additional material here.]
+
+
+
+ Wednesday, April 9, 1997
+
+ AMERICAN BATTLE MONUMENTS COMMISSION
+
+ WITNESSES
+
+GEN. FRED. F. WOERNER, USA [RETIRED], CHAIRMAN, AMERICAN BATTLE
+ MONUMENTS COMMISSION
+MAJ. GEN. JOHN P. HERRLING, USA [RETIRED] SECRETARY
+KENNETH S. POND, EXECUTIVE DIRECTOR
+COL. ANTHONY N. COREA, USAF, DIRECTOR OF OPERATIONS AND FINANCE
+COL. DALE F. MEANS, USA, DIRECTOR OF ENGINEERING AND MAINTENANCE
+COL. KEVIN C. KELLY, USA, WW II MEMORIAL PROJECT OFFICER
+
+ Introductory Remarks
+
+ Mr. Lewis. The meeting will come to order.
+ Our hearing this morning relates to the budget for the
+American Battle Monuments Commission, and it is my pleasure to
+welcome General Fred Woerner. I don't have any formal comments,
+per se, but I would call upon Mrs. Meek, who was kind enough to
+be here with us this morning, if she has any comments she would
+like to make.
+ Mrs. Meek. No, Mr. Chairman.
+ Mr. Lewis. Presuming that our schedule is to move forward
+today and to try to get our work done in a reasonable time, we
+have three groups before us. I would appreciate it very much,
+General Woerner, if you would introduce your guests and present
+your testimony, and then we'll have questions.
+ General Woerner. Thank you very much, Mr. Chairman.
+ To my right is the Secretary, Major General John Herrling,
+USA-retired, and to my left is Mr. Ken Pond, Executive
+Director.
+ I will be very brief. I have submitted a full statement for
+the record.
+ Mr. Lewis. And it will be included in the record. Thank you
+very much, General.
+ General Woerner. Thank you, sir.
+ On behalf of the American Battle Monuments Commission, I am
+pleased to appear before you today. I do thank you, Mr.
+Chairman, and members of this committee, for the fine support
+that you have provided us in years past.
+ The very special nature of the American Battle Monuments
+Commission places it in a unique an dhighly responsible
+position with the American people. The manner in which we care
+for our Honored War Dead is, and should remain, a reflection of
+the high regard in which we, as a Nation, memorialize their
+service and their sacrifices.
+ As you are well aware, the American Battle Monuments
+Commission was established by Congress in 1923. It is a small,
+one-of-a-kind organization, responsible for commemorating the
+services of the Armed Forces where they have served since 1917.
+We do this through the construction of memorials and memorial
+burial grounds on foreign soil. The American Battle Monuments
+Commission administers, operates and maintains 24 permanent
+memorial cemeteries and 28 monuments, memorials and markers in
+15 countries around the world.
+ We have eight World War I and 14 World War II cemeteries
+located in Europe, the Mediterranean, North Africa, and the
+Philippines. In addition, we are responsible for cemeteries in
+Mexico City and Panama. Interred in these cemeteries are a
+total of 125,000 War Dead. We also care for 5,000 more
+Americans buried in Panama, and we honor, in addition, 94,000
+of those who are missing in action or were lost or buried at
+sea.
+ The care of these cemeteries and memorials requires a
+significant annual program of maintenance and repair of
+facilities, equipment and grounds. It is important to note that
+this maintenance requirement is extraordinarily labor-
+intensive. Therefore, in our budget, 72 percent is committed to
+salaries, leaving us only the 28 percent balance to provide for
+our operations, including engineering maintenance, our
+utilities, our horticultural supplies, equipment, and
+administrative costs.
+ Furthermore, in our uniqueness, we do not have the option
+of closing or consolidating cemeteries or memorials. We must
+achieve any improvements through greater efficiency, and we are
+attempting to do that precisely through automation in both the
+operational and financial management areas.
+ Complementing these missions, we have been mandated by
+Congress to construct two new memorials in Washington, D.C. In
+1995, President Clinton and President Kim Young Sam of the
+Republic of Korea dedicated the Korean War Veterans Memorial,
+and in February of this year, we opened the Korean War Veterans
+Memorial's information kiosk. This kiosk houses an automated
+honor roll, which allows friends and relatives to query a data
+base containing the names and information about those who died
+during the Korean War. With the opening of the kiosk, that
+memorial is now complete.
+ In May of 1993, Congress authorized the American Battle
+Monuments Commission to build a national World War II Memorial.
+The Rainbow Pool site on the mall was dedicated on November 11
+of 1995 by President Clinton. Since that time, a national
+design competition for the memorial was held, with over 400
+preliminary designs submitted. Six finalists were selected for
+the final stage of competition, and this past January, the
+President announced the winner of the design competition. As
+directed by Congress, the project will be funded through
+private donations.
+ Our greatest challenge, Mr. Chairman, for fiscal year 1998,
+will be dealing with aging facilities and equipment. Our
+cemeteries and memorials range in age from approximately 50 to
+80 years, and our Mexico City cemetery is over 140 years of
+age. The permanent structures and plantings, which make our
+facilities clearly among the most beautiful memorials in the
+world, are aging and require prioritized funding to maintain
+them at current standards.
+
+ fy 1998 budgetary requests
+
+ Therefore, we are requesting $242,000 more in fiscal year
+1998 for maintenance and minor construction. In addition, much
+of our equipment is old and rapidly reaching the end of its
+useful life. In order to resolve this problem, we are
+requesting an additional $201,000 to fund our equipment repair
+and replacement program.
+ We also have small increases of $207,000 for supplies,
+$300,000 to integrate our financial system in compliance with
+OMB, GAO, and the recent congressional directions. And finally,
+$214,000 for the rental of office space that, up until this
+year, was provided at no cost.
+ In summary, since 1923, the American Battle Monuments
+Commission's cemeteries and memorials have been held to the
+highest standard in order to reflect America's continuing
+commitment to its Honored War Dead, their families, and the
+U.S. national image. The Commission intends to continue to
+fulfill this noble trust.
+ Our appropriation request for fiscal year 1998 is
+$23,897,000.
+ Mr. Chairman, this concludes my remarks. I am at your
+pleasure, sir.
+ [The statement of General Woerner follows:]
+
+[Pages 394 - 397--The official Committee record contains additional material here.]
+
+
+ Mr. Lewis. Thank you very much, General Woerner.
+
+ foreign currency fluctuation
+
+ As you know, last year the committee expressed its concern
+about the Nation's cemeteries and war memorials relative to
+their general condition, and wanting to make sure we were
+attempting to at least be responsive to some of the problems
+there, we added $2 million above and beyond the President's
+request, that funding essentially going to that account dealing
+with foreign currency fluctuations. The budget justifications
+indicate that the entire $2 million will be utilized. I had
+some questions in connection with that, and those questions
+obviously apply to similar considerations in the 1998 proposal.
+ What is the currency fluctuation loss, for example, for the
+most recent month?
+ General Woerner. Yes, sir. Tony, you have the specific
+numbers.
+ Colonel Corea. The most recent month, March 1997, the loss
+was $113,000.
+ Mr. Lewis. I understand the monthly estimates in the
+justifications for January through September averages in the
+$170,000 range.
+ Colonel Corea. Yes, sir.
+ Mr. Lewis. Is it your estimate now that the entire $2
+million will actually be used?
+ Colonel Corea. Our original estimate, was that the $2
+million would be used. That was based on where we were last
+year.
+ As you know, the dollar has been exceptionally strong this
+year in the overseas foreign currency markets. For instance,
+today the French franc is at 5.77 francs to the dollar, which
+is higher than what we had estimated. Our guesstimate--and I
+just say it's a guesstimate because we don't know what will
+happen with the foreign currency markets--is that we will use
+about $1.4 million this year, as opposed to the $2 million that
+we estimated last year. But that's strictly, as I said, a
+guesstimate, based on where we're sitting today.
+ Mr. Lewis. The problem with our budgetary process is that
+we don't have to guesstimate about the reality that we've got a
+huge deficit out there and there is not much fluctuation,
+except it seems to keep going up. There was some adjustment
+downward in the annual amount recently, but the 1998 request
+does include projections that assume fluctuation problems, and
+it is a guesstimate as well, I assume.
+ Colonel Corea. Yes, sir. 1998 is our best estimate.
+However, 1998 does include a repricing of the foreign currency
+budget rate, which we have not done since the account was
+established in 1988--
+ Mr. Lewis. Repricing of the budget rate, what is that?
+ Colonel Corea. Repricing is to bring the budget rate closer
+to the actual market rate. For instance, the rate that we've
+been using since 1988 has been six francs, actually 6.01
+francs, to the dollar. However the actual rate hasn't been
+there in years. OMB has come back to us and we've looked at the
+rates, and we're repricing using the DOD rates because they
+have the experience and the staff to be able to estimate the
+rates more precisely than we could. So we're going to be using
+a 5.28 rate for francs in the future. And this will be closer
+to where the actual dollar is versus the foreign currency
+budget rate.
+ General Woerner. Of course, it is well known that we should
+neither lose nor profit from the currency exchange. Certainly
+we have never profited. However, we have lost, and in fiscal
+year 1996 we had to take $.7 million out of our operating
+funds--actually take it right back from the field--thus
+increasing our backlog of maintenance.
+ So at the end of this year, if the foreign currency market
+stays exactly the same, we might have $.6 million left in the
+account, that will remain purely for future currency exchange
+issues. We would add an additional $2.1 and hopefully start to
+re-establish a balance in the account, rather than be in the
+negative and have to take foreign currency costs out of our
+operating funds, as we have done.
+ Mr. Lewis. I'm interested in that, and I hear what you're
+saying. But essentially what you're saying is we're going to
+build that reserve account because of the impact of
+fluctuations, that it may very well cause us to delay upkeep
+and repairs that are really the reason for our existence in the
+first place. Those kinds of decisions are delicate decisions.
+Indeed, if the Congress gets the view that maybe you're more
+concerned about fluctuation than you are taking care of
+memorials, we could have a problem.
+ General Woerner. Yes, which we are clearly not.
+Nevertheless, having been through the experience of taking $.7
+million out of very limited operating accounts, which are only
+28 percent of our budget. We would like to have at least a
+point or two margin in there, rather than gamble on the zero,
+given the capriciousness of the currency exchange market.
+ Mr. Lewis. Well, we handled similar problems with other
+much larger accounts by way of supplementals, but some
+supplementals are relatively easy in debate and others are more
+difficult.
+
+ pay raises
+
+ The budget requests $12,250,000 for salaries in 1998, a 2.9
+percent increase above 1997. Given that the majority of ABMC's
+employees are foreign nationals, where cost-of-living increases
+are determined by their foreign country and, thus, not subject
+to your control, is that 2.9 percent realistic?
+ Mr. Lewis. Tony?
+ Colonel Corea. Well, we expect that it's not. We were
+limited to the 2.8 percent because it was the standard rate.\1\
+We expect that we could have pay raises higher than 2.8----
+---------------------------------------------------------------------------
+ \1\ Permitted for personnel cost increases.
+---------------------------------------------------------------------------
+ Mr. Lewis. The standard rate?
+ Colonel Corea. It is the rate that OMB allowed us to apply
+in this year's budget request.
+ Mr. Lewis. I understand. Okay.
+ Colonel Corea. So it should be adequate for U.S. employees,
+GS employees and U.S. miliary, but it may very well not be
+adequate for our foreign national employees, who may receive
+pay raises higher than the 2.9 or 2.8 percent. So we could have
+to take funding from other accounts in order to pay our foreign
+nationals' pay raises.
+ Mr. Lewis. Okay. Any further comment?
+ General Herrling. No, I don't think so, Mr. Chairman.
+
+ fte
+
+ Mr. Lewis. The justifications indicate that the 1998
+request will support 363 FTEs, a decrease of one FTE below the
+1997 level. Last year, you estimated 367 FTE in 1997.
+ What causes the number of FTEs in 1997 to decrease by
+three? You estimated it was 367, so it was a reduction of
+three, with the current estimate of 364. The Congress provided
+your full 1997 budget request--in fact, we added that $2
+million that I mentioned.
+ What FTE level does ABMC need to maintain its cemeteries
+and memorials at the current high standard? I presume you're
+going to tell me it's the amount you're requesting.
+ General Herrling. Mr. Chairman, the 363 is about the right
+level to maintain the cemeteries at the current standard.
+ As I go around and talk to superintendents, there is
+concern that their workforce is being cut back to a point where
+they can no longer maintain these cemeteries at the standard
+that we expect. They are very concerned about future cuts in
+the workforce.
+ I have gone into headquarters and taken as much out of the
+headquarters and the European region as I can. But I think we
+have reached a point now where it would be very detrimental to
+take further cuts below 363.
+
+ foreign currencies
+
+ Mr. Lewis. I'm assuming that you're using the French franc
+as the measuring tool compared to the dollar, because so much
+of the work is in France?
+ Colonel Corea. Yes, we actually use each of the currencies.
+We used the French franc here strictly as an example.
+ General Herrling. We use seven different currencies in
+Europe: French francs, Belgium francs, Netherland gilders,
+British pounds, Luxemborg francs, Italian lira and Tunisian
+dinar.
+
+ maintenance backlog
+
+ Mr. Lewis. Let's talk about that backlog in maintenance and
+repair projects. The justification indicates that the backlog
+will total $8.4 million at the end of 1998. Last year, you
+estimated a backlog of $5,844,000 at the beginning of 1997, and
+that same level at the beginning of 1998.
+ What happened?
+ General Woerner. Well, sir, the American Battle Monuments
+Commission, both at the Commissioner level and at the
+secretariat level, is under new management, and we threw out
+the old list. We lost confidence in it. We also got aboard a
+new engineer, replacing an individual who had been with the
+Commission for 22 years.
+ So, with a clean sheet of paper, we went out and did a
+thorough scrub of our entire holdings and came up with a new
+prioritized list in which we now have total confidence. We feel
+that the approximate $10 million engineering project list is an
+accurate statement of all the projects we need to complete.
+After completing the fiscal years 1997 and 1998 projects, those
+remaining on the list constitute our backlog.
+ Mr. Lewis. I would say at the very least that's a
+significant adjustment, percentage-wise and, indeed, in your
+budget, dollar-wise.
+ General Woerner. Yes, it is. Very significant.
+ Mr. Lewis. You have replaced somebody who had been there 22
+years, so suddenly the scrub shows that the condition is
+considerably less than you might wish it to be and thereby we
+have a backlog that's considerably higher than we originally
+estimated, just by replacing a person who had been there 22
+years, if that's the case.
+ General Woerner. Also, this scrub was made and--this new
+list was built on clearly articulated and established
+standards, against which we can measure the condition of our
+buildings and grounds.
+ Mr. Lewis. Is that a new thing? You didn't have clear
+standards before?
+ General Woerner. Certainly not to the degree that we have
+now. We were not satisfied that the list had been built against
+hard criteria.
+
+ management headquarters
+
+ Mr. Lewis. General, this line of questioning has taken me
+right to the heart of some of our fundamental budget concerns.
+You said that a very high percentage of your budget involves
+personnel who are required to actually do the maintenance. What
+percentage of your personnel base is in management here in
+Washington?
+ Colonel Corea. I think it's three percent.
+ General Herrling. Three percent of our total personnel, of
+those 363.
+ Mr. Lewis. Which means about 90 or 100 people, right?
+ General Herrling. No, sir.
+ Mr. Lewis. Oh, that's a third.
+ General Herrling. We have 14 people.
+ Mr. Lewis. You have 14. Has the total volume of 364, 367,
+been reasonably close to the number of employees you've had for
+an extended period of time?
+ General Woerner. Reasonably close, and coming down. We have
+drawn down, and with this one coming out in fiscal year 1998,
+we will have drawn down the directed eight spaces. So it's been
+in the----
+
+ maintenance backlog analysis
+
+ Mr. Lewis. What I want to push for, for the record here at
+least, I would like to get an idea of the process you went
+through in terms of this scrubbing, establishing new standards
+and maintenance, et cetera, and then looking again, why that
+led to a sizeable readjustment, when was the last time we did a
+scrub like that and set standards, et cetera.
+ General Herrling. Let me try that, Mr. Chairman.
+ When I came in a little over a year ago--I've been on the
+job 18 months--and in preparation for this hearing a year ago,
+I sat down with my then engineer and went over the list of
+priorities and what the backlog of maintenance was in dollar
+figures. I wasn't happy with the answers. The detail wasn't
+there and the justification wasn't there.
+ So when he retired, after spending 22 years in this
+organization, and with a total of 50 years of military service,
+I brought in a new engineer. He's sitting behind me, Colonel
+Dale Means. The charter I gave Dale was, go out and visit every
+cemetery we own, and as many monuments as you can, and make an
+assessment on what our real hard projects are, as far as
+construction and repair.
+ I also hired a new engineer in the Paris office. The fellow
+who we had over there was not an American. The superintendents
+complained that he wasn't responsive to their needs in the
+cemeteries, so I hired an American engineer and put him in the
+Paris office.
+ Between these two engineers, they visited our cemeteries,
+they have consolidated the master engineering projects last,
+and I am confident that we now have a list that I can bring to
+anybody and justify. In fact, I think----
+ Mr. Lewis. Let me tread on dangerous ground by making a
+comment for the record. I hope it's not a reflection of what
+you just described as the process you went through.
+ There is a major project in my district of no significance
+to the entire county. It happens to relate to a military
+circumstance. But that project is going forward with some
+policy discussions by elected officials who don't necessarily
+know a lot about long-range planning or how you create jobs, et
+cetera, et cetera. But the project is being run by a retired
+person from the military. Every time we have a problem in my
+region, we seem to hire a former military person, and the
+project seems to not work very well.
+ You suggest we've got a guy here who--I don't want to be
+overly critical, but 50 years with the military and, after 22
+years in this operation, we have some concerns about maybe the
+standards. That would suggest to me serious questions about a
+process whereby we review not only what our responsibility is
+but how it's getting done. I would really like to have some
+more elaboration and discussion, at least with my staff, as we
+develop this record.
+ General Herrling. I think I have tried to do exactly that
+since I came on board as Secretary; to really take a new look
+at how we're doing business, the personnel situation, our
+project listing and how we finance projects to see if we can't
+apply some real hard management principles to the processes.
+ I am looking to the future. We're trying to come up with a
+long-range plan, a plan for the next five or ten years for
+those cemeteries, and a lot of this has just been started in
+the last year, Mr. Chairman.
+
+ abmc management and leadershipI21General Woerner. May I add to that,
+ Mr. Chairman?
+
+ Mr. Lewis. Sure.
+ General Woerner. The organization has always been very
+committed, but some of the people had an unusually long tenure
+and hadn't grown with new managerial techniques and skills. So
+while the heart was there, some of the talent was in short
+measure.
+ There have been significant changes in the managerial side
+of the organization, not only with the Secretary but also with
+the Paris office, a new region director there, a new deputy
+region director, new engineer, and in our Washington office, a
+new executive director as well as a complete change over in our
+directors for finance, engineering and personnel/
+administration. In addition we changed the director in our
+Mediterranean office and the superintendent at our Manila
+cemetery. So what I'm saying, sir, we now have the leadership
+aboard that are products of modern management techniques,
+rather than the dedicated men who learned their skills 30 or 40
+years ago.
+ Mr. Lewis. I must say, General Woerner, and General
+Herrling as well, I appreciate your candor in connection with
+this discussion. But I have been on this committee for a number
+of years and this is the first time I have heard a discussion
+like this. It would appear to me that maybe there has been a
+need for this discussion some time ago. Even though your budget
+is a small budget, $20 million is a lot of money, and it is
+designed for a very important purpose. But if, one way or
+another, because of a lack of oversight on our part, there has
+been a lack of management skill to deliver the product at the
+other end, it deserves some questioning.
+ Mrs. Meek.
+ Mrs. Meek. Mr. Chairman, I have here questions that were
+submitted to me by your ranking member, and I would like to ask
+maybe two of them and comment on one.
+ Mr. Lewis. You go right ahead and take all the time you
+want.
+
+ world war ii memorial
+
+ Mrs. Meek. I will submit the rest for the record.
+ First of all, I want to commend the staff of the Commission
+for being here. This being my first time, I didn't even know
+you existed until I became a member of this Committee. I am
+happy to know you and know that you're doing good work.
+ I have been reading some of the material regarding the
+battle, regarding the World War II monument, and it has stirred
+a lot of controversy in terms of not so much the structure of
+it, the way it looks, and the rationale of it--it obviously has
+been very well received. But, on the other hand, the location
+of it has caused a big public outcry. I have been reading where
+even a member of the Senate has commented on it.
+ I'm a community-based person and I would like to know what
+kind of process did you use to come about doing this. Was the
+public really involved in your decision making? Just what
+happened? Tell me a little bit about what happened in this
+process.
+ General Woerner. I'll lead off, Mrs. Meek, and then turn it
+over to John.
+ First, the short answer is it was a very public process,
+that we believe addressed it within the context of the best
+interest of the American people. Specifically, the procedure
+requires that we come up with a recommendation and process it
+through three Washington commissions: the Commission on Fine
+Arts, the Washington Planning Commission, and, in effect, the
+National Park Service.
+ All of those three commissions, speaking for the American
+people, concurred that the selected site that has been
+dedicated by the President, is the most appropriate site in
+Washington, D.C. for this memorial.
+ Furthermore, the opposition, in our analysis of the
+opposition, suggests that it is not widespread. Quite to the
+contrary, it is focused, specifically in Senator Kerrey's
+office, and in one particular editor of an architectural
+magazine. So it's from those two primary sources--and there's
+been others picking it up. But our sense is that we have an
+approved site, having worked it through the three wickets in
+Washington, that the American people say they want for this
+seminal monument in American history.
+ John.
+ General Herrling. It goes back to the Commemorative Works
+Act, Mrs. Meek, of 1986, which the Congress passed. It gave
+three bodies the responsibility to take a look at Washington
+and what was built here, particularly on the Mall. General
+Woerner just mentioned those three bodies.
+ But they are entrusted to act in the public interest for
+anything that's built here in the City of Washington or on the
+Mall. So we had to seek their approval for the site that was
+finally selected. They gave us nine sites to look at. We looked
+at all nine and they were all evaluated based on their
+location, their prominence, their historical significance of
+World War II and other things. Those three commissions all
+agreed and approved the Rainbow Pool site as the right site.
+ Now, we have received some controversy in the paper, but I
+would say we have also received considerable favorable reviews
+through personal correspondence to our office and through other
+means. I think what is printed in the Washington Post and other
+media tends to get the headlines, but it may not reflect the
+common view.
+ Mrs. Meek. I asked that question, not so much as to how
+negative or positive your response has been, but in terms of
+the process, to be sure you did get public involvement. I've
+been in government a long time, so I know what ``public
+involvement'' means. So I just wanted to ask you that question
+to be sure you're also looking at reviewing that process
+whenever you do this, so that the process will sort of be
+ironclad. Because the American public probably goes much
+broader than those three commissions you spoke about. I mean,
+that Mall belongs to the people of this country. I don't have
+that strong a feeling about where it's located. It looks all
+right to me.
+ But the General spoke about the American public, and that's
+a very vague term. I wish it was so that we meant the real
+public that enjoys that Mall and could have some involvement.
+ Of course, the people----
+ Mr. Lewis. Would you yield, Mrs. Meek?
+ Mrs. Meek. Yes.
+ Mr. Lewis. I think the point you're making is an important
+one. You and I both probably don't remember the controversy
+that swirled around--this was long before I had this kind of
+responsibility--swirled around the Vietnam Memorial, which was
+very, very controversial. Now it is the memorial that
+everybody, everybody wants to visit. Indeed, I hope we learned
+from that process, and I'm sure that we did.
+ General Herrling. I think we did.
+ General Woerner. Very definitely.
+ Mrs. Meek. Because, man to man veterans were concerned at
+the time about that. So that's what I'm talking about, General,
+the process.
+
+ rental funding
+
+ The second question I have is a budget question. It's
+something that the ranking member, Mr. Stokes, wanted asked. It
+has to do with budget decisions--I'm looking on page 13 of your
+Monument Commission. It's line item 23, rent, communications
+and utilities.
+ First of all, you need $214,000 to pay for office space
+more than you had for last year, and you mention that it was
+free. His question is, what is this based on? Why did you get
+it at no cost at the beginning and why is it no longer
+available to you at no cost? He's looking for ``freebies'',
+General.
+ General Herrling. We were, too. We were living on
+``freebies'' for many, many years. But we were under the wing
+of the U.S. Army Corps of Engineers. We are a tenant in the
+Corps of Engineers building at 20 Massachusetts Avenue. For
+years we were allowed to maintain our offices there at no cost.
+Then a review by the DOD and the Department of the Army lease
+noted this and they said no. It's time that you anted up and
+paid your fair share of the lease for that building. So that's
+why we are asking for the money this year for the first time.
+ Mrs. Meek. So you're sort of looking at some other spaces?
+ General Herrling. Yes, we are.
+ Mrs. Meek. And that's why you're estimating $214,000?
+ General Herrling. It is.
+
+ individual cemetery funding
+
+ Mrs. Meek. The second question. You have a comparison of
+individual budgets for cemeteries on page 16. You have quite a
+few increases and decreases throughout this entire thing. The
+question is, can you tell us why the budget for Cambridge,
+which is the fifth item down, increases by 22 percent, and the
+budget for Epinal--and I may be mispronouncing that--increased
+by 28 percent, and why the budget for Argonne increased by 45
+percent? Can you sort of elaborate on those?
+ Colonel Corea. I can say something on that.
+ The reasons for the basic increases by cemetery are based
+on the projects that we're planning for 1998 in those
+particular cemeteries. The standard costs for a cemetery, from
+the labor to utilities and supplies and equipment, are fairly
+flat on a year-to-year basis.
+ What you're seeing there shows the funding for projects,
+which end up being a part of the cost of a cemetery for that
+year. So that's why the numbers jump, and you'll see other
+numbers that go down proportionately because they don't have
+the same level of projects next year.
+ Mrs. Meek. Explain to me what you mean by ``projects''?
+ Colonel Corea. Engineering maintenance projects and
+construction projects----
+ General Woerner. That's this new list, the revised list,
+which gives us the priority in which we want to address our
+backlog of maintenance and repairs. We can't do it all at once,
+so certain cemeteries, those most in critical need, are
+reflective in the pluses, and those that can be delayed further
+are reflected in the minuses.
+ Mrs. Meek. Mr. Chairman, do I have time for one more?
+ Mr. Lewis. Go right ahead.
+
+ world war ii memorial fund raising and cost
+
+ Mrs. Meek. You mentioned that all this will be private
+monies which you will have to raise. Is it going to be raised
+before site preparation and construction can begin? If it is,
+is there some kind of schedule that you're relying upon, and
+have you allowed for cost overruns which inevitably happen? If
+so, will you come back to this committee and ask for more
+money?
+ I'm not the Chairman, so I can ask all these questions
+[Laughter.]
+ Will you come back and ask for some more money if things
+don't work out the way you planned?
+ General Woerner. Our best estimate is the $100 million mark
+that we now have. Congress told us that this is to be done by
+private contributions. So the Congress has not addressed cost
+overruns that we could come back on. We have to manage this
+memorial construction within the funds that we are able to
+raise.
+ Mr. Lewis. Mrs. Meek, one more time, if you would yield on
+that, I understand that Senator Dole has agreed to take on this
+project, leading the effort. We know he will give his best
+effort. But it still is a lot of money.
+ General Woerner. Yes, it is.
+
+ world war ii memorial--dedication date
+
+ Mr. Lewis. Presuming they're successful, how long will it
+take you to build this memorial?
+ General Woerner. Our mark on the wall, sir--and it's an
+ambitious one--is to dedicate the memorial in the year 2000.
+Very ambitious.
+ Mr. Lewis. Thank you, Mrs. Meek.
+ Mrs. Meek. Thank you.
+ May I say something?
+ Mr. Lewis. Sure.
+
+ world war ii memorial funding
+
+ Mrs. Meek. Having been around in World War II, I would be
+very happy if the Chairman were benevolent enough to say today
+that he would see to it, if there's a cost overrun--and I'm
+saying this without tongue in cheek--that we would be willing
+in our minds to commit something to this.
+ Mr. Lewis. I certainly hope that we wouldn't discuss that
+for the record at this point in time. [Laughter.]
+ I would be happy to chat with you about it at some other
+time.
+ Mrs. Meek. I had to do something to shake the Chairman up.
+[Laughter.]
+ General Woerner. Mrs. Meek, thank you very, very much.
+[Laughter.]
+ We have just made you an honorary member of the Commission.
+ Mr. Lewis. Mr. Wicker.
+
+ world war ii memorial
+
+ Mr. Wicker. Thank you, Mr. Chairman.
+ Let me just say that Mr. Lewis and Mrs. Meek have been very
+thorough in the questions that they have asked, and I don't
+have many more. But let me comment about the World War II
+Memorial.
+ I'm looking at the proposed design, and it really looks
+wonderful.
+ General Woerner. Thank you, sir.
+ Mr. Wicker. I notice in your testimony that you're actually
+hoping to have a dedication by Veterans' Day in the year 2000.
+ My father is a World War II veteran. He just turned 73 on
+Monday, and he will be 76 on the proposed date of this
+dedication. I sure hope to have him there. Also, I appreciate
+the fact that Senator Dole has taken on this fundraising
+responsibility.
+ You know, these men and women that fought for us in World
+War II are among a group of people who we owe a great debt to.
+By the same token, this country has been very, very good to
+them, including my father. I just don't think you're going to
+have too much trouble raising this $100 million from private
+sources. I think, once the word gets out, that generation of
+Americans will respond as they always have to a challenge. I
+think it will be a wonderful thing.
+
+ world war ii memorial--design approval process
+
+ Let me just ask a question about whether this design is a
+done deal. We've got the design jury that passed on this, and
+Miss Meek talked about the process. It has gone before the
+Commission, and the World War II Advisory Board made
+suggestions. But I note in an article from the Los Angeles
+Times that there are still a couple of hurdles. Am I correct
+there--
+ General Herrling. Correct.
+ Mr. Wicker. It's the Commission on Fine Arts and the
+National Capital Planning Commission. Where are we on that,
+General?
+ General Woerner. In terms of the approval process, this
+design was recommended to the American Battle Monuments
+Commission by an evaluation board and a separate design jury,
+each operating in the blind of the other, unanimously. Their
+recommendation was unanimously recommended to us by the World
+War II Memorial Advisory Board, a presidential advisory board,
+and my Commission approved it unanimously.
+ We now must run the wickets just as we did on the site;
+through the Commission of Fine Arts, the National Capital
+Planning Commission, the National Park Service--acting on
+behalf of the Secretary of the Itnerior. Each of those must----
+ Mr. Wicker. Three wickets?
+ General Woerner. Three wickets.
+ Mr. Wicker. So where are we on that, General?
+ General Woerner. Just about to start. Have the formal
+hearings been scheduled yet?
+ General Herrling. They have. Our first hearing before the
+Commission of Fine Arts, Mr. Wicker, is on 19 June, and then
+the National Capital Planning Commission meeting is the 26th of
+June.
+ Now, to go back to the question--is this design a ``done
+deal''. What we have now is a design concept. The design will
+change somewhat. But the basic design will stay the same.
+Already there's been some minor modifications to the design.
+But all these designs have to go before the three commissions,
+who will look at them in great detail, and then will probably
+tell us to go back and change this aspect of it or that aspect
+of it.
+ This approval process by those commissions will take
+probably another 10 to 12 months, because it's an iterative
+process. You go in with the preliminary design and they say it
+looks fine. You're going to have to change this and that. Then
+you go back with a more advanced design and they'll review that
+and comment on it. AT some point, you'll go back in for a final
+design review, when you've got it all put together, and then
+they'll make a final judgment on the design. So the entire
+process takes nine, ten, sometimes twelve months.
+ General Woerner. But each time one of those review
+commissions makes changes, you have to get their
+recommendations through the other two.
+ General Herrling. There's an interesting aspect to the
+process. You mentioned your father, who is 73. We received a
+letter from a World War II veteran and he said, ``General, it
+only took us three-and-a-half years to win this war. Why is it
+going to take you seven-and-a-half years to build a memorial?''
+ Mr. Wicker. How long did it take to build the Pentagon?
+ General Herrling. Eighteen months.
+ General Woerner. Eighteen months.
+
+ world war ii memorial--site
+
+ Mr. Wicker. The location, in your view, has been finally
+decided?
+ General Woerner. Yes.
+ Mr. Wicker. That issue is past.
+ General Woerner. The President has dedicated the site and
+there's a marker on it, yes, sir.
+
+ world war ii memorial--design approvals
+
+ Mr. Wicker. What are the preliminary reactions you're
+getting from the Commission of Fine Arts, the Park Service, and
+the National Capital Planning Commission about the design?
+ General Herrling. Very positive. We gave all three a
+preliminary look at the design before we had the official
+unveiling in the White House. We wanted to do that to preclude
+embarrassment later on, if one of those commissions did not
+agree with it.
+ But the National Park Service said it's a very good design.
+The Commission of Fine Arts and J. Carter Brown thought it was
+a design with great promise, as did the National Capital
+Planning Commission. Harvey Gantt also felt that it was a very
+good design.
+ Now, that doesn't mean it's going to be smooth sailing.
+There will be a lot of comments from the members of those
+commissions, and a lot of modifications, as we go through this
+process.
+ Mr. Wicker. It would seem to me that, once it all gets
+finally set, then the money will start pouring in more quickly.
+I would imagine it's hard to raise money for something that
+you're not quite sure what it's going to look like.
+
+ world war ii memorial--fund raising sources
+
+ Mr. Lewis. If the gentleman would yield, in connection with
+that, how long one can really wait to have precise detail
+before you begin selling the design is problematical. Before we
+can break ground and meet that target date that we want your
+father at, we have to raise the money. That gives us a little
+over a year, is that right?
+ General Woerner. Yes, sir. We are raising the money right
+now. We have initiated that and the first direct mail requests
+are in the mail. Senator Dole is aboard. We hope to fill out
+the volunteer organization and to pair up Senator Dole with a
+co-chairman from corporate America. In fact, John is meeting
+with the Senator this afternoon.
+ Mr. Lewis. Let me suggest, if you would continue to yield--
+ Mr. Wicker. I yield back.
+ Mr. Lewis. I would suggest to you that it's very important
+that the veterans' service organizations be plugged into this.
+ General Woerner. Sure.
+ Mr. Lewis. I'm sure they're beginning to. But there are
+ways that this committee can help with that sale, if you will,
+or the Veterans Committee--I'm sure that Bob Stump and the
+ranking member would be willing to participate.
+ General Woerner. Wonderful.
+ Mr. Lewis. Maybe starting right here in D.C. But clearly in
+places like Texas and California and otherwise, and in
+Florida--
+ Mrs. Meek. Yes.
+ General Woerner. We consider all the veterans'
+organizations absolutely crucial to the efforts. I appreciate
+the offer.
+ Mr. Lewis. The sooner they're motivated to be out there,
+the better. I presume they may be doing that.
+ General Woerner. Yes, sir. They are.
+ Mr. Lewis. It's possible that members of both bodies might
+be willing to participate in helping promote their interests.
+ General Woerner. Thank you, sir.
+ Colonel Kelley. Let me mention, sir, that tomorrow I'm
+going to meet with the American Legion leadership--
+ Mr. Lewis. You have to identify yourself.
+ Colonel Kelley. I am Colonel Kelley. I'm the project
+officer for the World War II Memorial.
+ We have a meeting tomorrow in Indianapolis with the
+leadership of the American Legion, who is backing us. They have
+agreed, at least tentatively, and we're working out the details
+of how they will help, and we're doing the same thing with the
+VFW. We will get to the other organizations as we go along,
+yes, sir.
+ Mr. Lewis. Thank you.
+ Mrs. Meek.
+ Mrs. Meek. This question is for Colonel Kelley.
+ In my community we have very large Memorial Day
+celebrations and that kind of thing. You haven't come to that
+stage yet where you're asking for public contributions, have
+you? If so, a rendering of this entire thing would help, if it
+were big enough, on Memorial Day. Like North Miami has a very
+large one, in which I participate, and a rendering of this
+later on, if you can get started, would help in that particular
+area for fund-raising.
+ I know you're thinking about that. But always remember that
+you have congressional offices that are very much interested,
+particularly when you have someone who was around in World War
+II. We're trying to help as best we can. So you can utilize us,
+and I'm sure all the other Congresspeople would be interested
+in this as well. You would be surprised at how anxious we are
+to help in these kinds of things.
+
+ world war ii memorial--program management
+
+ My second question is, who is running this project? Is that
+you, Colonel Kelley?
+ Colonel Kelley. General Woerner is running this.
+[Laughter.]
+ Mrs. Meek. Okay. General, not being in the service, let me
+ask this question. Do you think you can manage a project this
+big?
+ General Woerner. Without a doubt.
+ Mrs. Meek. With your resources?
+ General Woerner. Without a doubt.
+ Mrs. Meek. Without a doubt.
+ General Woerner. That's right. We have, in addition to the
+gentlemen sitting at this table, augmented our staff that is to
+address the issue of fundraising. We are confident that we have
+the professionals, the paid staff aboard. What we haven't
+completely put together yet is the voluntary network. That's
+the subject of this afternoon's conversation.
+ Mrs. Meek. Thank you.
+ General Herrling. Mrs. Meek, I would add that we are in
+preparation of a book that we will send to each Congressman and
+Congresswoman and Senator on the World War II Memorial project.
+I am hoping to have those books signed by Representative Marcy
+Kaptur, who introduced the legislation, and Senator Stevens.
+But it will provide you with a little more detail on the World
+War II Memorial.
+ Mrs. Meek. Thank you.
+
+ Accounting Systems
+
+ Mr. Lewis. A couple more questions briefly. This can really
+be answered for the record, but I want you to know that I'm
+interested and the fact that your budget request of $300,000 to
+fund a new comprehensive accounting system has come to our
+attention.
+ There are other agencies of government that have requested
+funding for redoing their computer accounting systems that
+haven't done so well. I hope that your review and development
+of a system will be better than the IRS has proven to be. You
+might want to respond to those questions that are specific, not
+that part of it, but those questions for the record.
+
+ State Department Funding
+
+ Mr. Lewis. The administration recently sent up a budget
+amendment that proposes to transfer $210,000 to ABMC in 1998
+from State Department funds for the cost of overseas operations
+at embassies. In subsequent years, such cots would be included
+in ABMC's budget.
+ Do you know how this cost for ABMC's overseas operations
+was determined, and if so, explain.
+ Colonel Corea. Yes, sir. It was determined by the levels of
+support that the State Department provides us in Rome, Paris,
+Mexico City, Bangkok, and a number of places.
+ The new State Department system is called ICASS which
+stands for ``International Cooperative Administrative Support
+Services. It's where state is supporting our administrative
+functions, payroll functions and those kinds of requirements.
+ The idea with all of this is that a lot of costs in the
+past have been borne by the State Department.
+ Mr. Lewis. Kind of like the rental costs.
+ Colonel Corea. Yes. But this is throughout the government.
+As you know, we're just one small agency on a list of many
+agencies that are overseas, where the State Department provides
+support.
+ So that $210,000 will come to us and then we will end up
+paying it back to the State Department for their services.
+ Mr. Lewis. The question, really, though, is have you
+evaluated how they determined that $210,000?
+ Colonel Corea. Yes, sir. There has been long meetings with
+our staff in both our regional offices, as well as in Manila.
+They have gone through all the pieces of it, and there has been
+a lot of discussion as to what is provided us, what is not
+provided us, how it's factored, and how they're counting the
+support provided to ABMC. We're satisfied that the $210,000,
+after all of that, is going to be appropriate.
+ Mr. Lewis. Okay. I think you may know that funding for the
+State Department generally, from time to time, becomes
+controversial around here. If it is suggested on the floor
+that, one way or another, they're increasing their budget by
+the back dooring of all kinds of other activities, including
+your own, it could become controversial.
+ You're satisfied, though, that this is----
+ Colonel Corea. We're satisfied with the $210,000. The idea
+is that that money is going to come from their--
+ Mr. Lewis. I understand.
+ At any rate, we very much appreciate your presence today,
+and we do appreciate the work that you're about. Indeed, the
+Committee does want to be of assistance in the project we have
+discussed in some detail today. Thank you.
+ General Woerner. Thank you very much, Mr. Chairman.
+ [The information follows; see budget justification at end
+of volume.]
+
+[Pages 412 - 414--The official Committee record contains additional material here.]
+
+
+ Wednesday, April 10, 1997.
+
+ CEMETERIAL EXPENSES, ARMY
+
+ WITNESS
+
+ H. MARTIN LANCASTER, ASSISTANT SECRETARY OF THE ARMY, CIVIL WORKS
+STEVEN DOLA, DEPUTY ASSISTANT SECRETARY, OFFICE OF MANAGEMENT AND
+ BUDGET, OFFICE OF THE ASSISTANT SECRETARY OF THE ARMY
+JOHN C. METZLER, JR., SUPERINTENDENT, ARLINGTON NATIONAL CEMETERY
+RORY SMITH, BUDGET OFFICER, ARLINGTON NATIONAL CEMETERY
+
+ Introduction
+
+ Mr. Lewis. It is my pleasure to welcome to discuss with us
+the Army cemetery expenses, Mr. Martin Lancaster, our colleague
+and friend. Welcome
+ Mr. Lancaster. Thank you, Mr. Chairman and Congresswoman
+Meek.
+ Mrs. Meek. Good to see you.
+ Mr. Lewis. Your entire statement, as you are familiar, will
+be included in the record, and you can proceed as you like.
+While we will have a limited number of questions, we may have
+others for the record as well.
+ Mr. Lancaster. I will summarize my remarks and would
+request that the full statement be included, and I do
+appreciate the opportunity to testify this morning in support
+of the 1998 fiscal year budget for Arlington National Cemetery
+and the Soldiers and Airmen's Home National Cemetery.
+ The superintendent, Mr. Metzler, and Mr. Rory Smith, who is
+budget officer, are with me from Arlington, as well as my
+deputy, Steve Dola. They will be available to respond to
+questions that I may not be able to answer myself.
+
+ Fiscal Year 1998 Request
+
+ The request for fiscal year 1998 is $11,815,000. This
+amount will finance operations at both of the cemeteries and
+supports the work force, will assure maintenance of the
+buildings and grounds, and will permit the superintendent to
+acquire necessary supplies and equipment.
+
+ Construction Projects
+
+ Major new construction projects proposed for 1998 include
+replacement of the historic Custis Walk which is approximately
+2,500-feet long and is about 75 percent affected by heaving and
+cracking, which requires visitors to exercise additional care
+and represents a true safety hazard on the grounds of the
+cemetery.
+ Also, access roads at the Columbarium complex will be
+constructed which will allow full use of the new courts
+currently under construction.
+
+ Government-Wide Streamlining
+
+ Additionally, $200,000 is being applied to further expand
+contracts that enhance the appearance of the cemetery while
+implementing Government-wide streamlining plans and staff
+reductions.
+ Our total personnel strength is declining from 128
+authorized in fiscal year 1996 to 121 in 1997 to 117 for 1998.
+However, at the same time, we plan to perform the same work
+contractually that was previously performed by civil service
+personnel, and we have directed those contractors to take on
+additional tasks that need to be accomplished.
+ Ground maintenance, tree and shrub maintenance, custodial
+services, guide services and informational receptions, and
+headstone setting, realignment, and cleaning are all major
+functions now performed by contract personnel.
+
+ Three Programs
+
+ The $11,815,000 requested are divided into three programs,
+operations and maintenance, administration, and construction.
+The O&M program, totalling $8,779,000, will provide for the
+cost of daily operations necessary to support an average of 20
+inurnments or interments per day and for maintenance of
+approximately 628 acres. This program supports 111 of the 117
+full-time permanent positions.
+ The administration program, $599,000, provides for
+essential maintenance and administrative functions to include
+staff supervision of Arlington and Soldiers and Airmen's Home
+National Cemeteries.
+ The construction program, $2,437,000, provides $1,175,000
+to replace the Custis Walk, $810,000 to construct the access
+roads to the Columbarium, both of which I mentioned earlier,
+and $350,000 to continue the grave-liner program and other
+minor items.
+ In fiscal year 1996, there were 3,325 interments, 1,733
+inurnments. 3,500 interments and 1,900 inurnments are estimated
+for both fiscal years 1997 and 1998.
+
+ Columbarium
+
+ The 11,286 niche capacity of the Columbarium Phase III
+currently under construction will bring the total niches in the
+Columbarium complex to 31,286. Phase I, completed in 1984, and
+Phase II, completed in 1991, each provided 10,000 niches.
+ The North Court will be completed in October of this year,
+and the South Court will be completed in June of next year. At
+this time, there remain only about 2,000 niches in Phase II. So
+we are right on schedule to complete the new construction as
+they exist and capacity is completed.
+ We appreciate your support for the Columbarium effort
+because the inurnment of remains is increasingly popular at the
+National Cemetery and has taken up much of the slack that would
+be otherwise existent as we run out of space for interments.
+ Arlington National Cemetery is the Nation's principal
+shrine to honor the men and women who served in the armed
+forces. In addition to the thousands of funerals with military
+honors held there each year, hundreds of other ceremonies are
+conducted to honor those who rest in the cemetery and those who
+served, and we appreciate the strong support that this
+Committee has given through the years in maintaining the
+Arlington Cemetery as the premiere place in the country where
+we honor those who served and, more importantly, those who paid
+the supreme sacrifice.
+ That completes my testimony, Mr. Chairman, but we will be
+happy to respond to questions.
+ [The statement of Mr. Lancaster follows:]
+
+[Pages 418 - 440--The official Committee record contains additional material here.]
+
+
+ Contracts
+
+ Mr. Lewis. Thank you, Mr. Lancaster. You state very clearly
+and very well the importance of the Arlington National Cemetery
+and the way it is, if you will, used by the Congress as well as
+the public-at-large.
+ Your statement indicates an increase of $200,000 being
+requested for contracts to enhance the appearance at Arlington.
+Does that increase totally offset the proposed reduction for
+FTE 1998?
+ Mr. Lancaster. If you don't mind, I will yield to Mr.
+Metzler to answer that kind of specific question.
+ Mr. Metzler. Yes, Mr. Chairman, it does, and it also
+provides us an opportunity to do some more work in the Cemetery
+and enhance the appearance of the Cemetery.
+ We are undertaking some new contracts in fiscal year 1997,
+headstone cleaning, and we are also undertaking an increase in
+that number in 1998. So that is going to be a benefit to us.
+ Mr. Lewis. Extending that a little bit, Mr. Metzler, that
+would suggest that you still believe that contracting out for
+these services is less expensive than having the work done by
+civil servants?
+ Mr. Metzler. In the repetitive work area, yes, it is, and
+it is working to our advantage at this point, and we are happy
+with the results we get.
+
+ Response Time
+
+ Mr. Lewis. As I understand it, in some instances, it takes
+more than one week, sometimes more than a month from the
+notification of the desire for burial at Arlington until the
+actual interment. Is that right?
+ Mr. Metzler. It depends on what the family is requesting
+and the availability of the services at the cemetery. It is a
+difficult question to answer in each case, but I could give you
+a couple of examples.
+ The military who provides us honors at the Cemetery are not
+always available each day. As an example, this morning, we had
+the Prime Minister of Canada visiting the cemetery in an
+official capacity. When that happens, then the Air Force and
+the Navy ceremonial troops are tied up for that period of time.
+Often times, we have other elements that are not available. The
+chaplains, the Chapel Service itself has been committed for
+from someone else.
+ So, if someone is asking for a specific date, a specific
+time, and a specific military support, it may not be available
+for a week, and sometimes it may take 2 weeks to get that
+available.
+ Mr. Lewis. The Committee is interested in knowing how often
+this kind of difficulty occurs where you may have as much as a
+month delay, and that which you describe kind of touches on the
+edges of the difficulties you have with such scheduling. So we
+would like to have you elaborate on some of that for the
+record.
+ Mr. Metzler. I would be more than happy to provide you with
+some more information.
+
+ Scheduling Delays
+
+ Arlington National Cemetery currently averages 20 funeral
+services daily, Monday through Friday. Each service involves
+staff members of Arlington National Cemetery and the Chaplain's
+Office. Some services may involve military personnel from one
+or all branches of service, some may require the scheduling of
+the Fort Myer Chapel, and some may require the use of a
+caisson. Scheduling a funeral service requires consideration of
+the date and time the family requests a service, the level of
+honors authorized the deceased, the availability of military
+personnel, the religious denomination of the deceased and
+availability of a chaplain of the same denomination or the Fort
+Myer Chapel. To prevent one funeral service from interfering
+with another while coordinating all the above potential
+participants creates delays in scheduling, especially if the
+family insists on specific honors or two of day that the
+service is to be conducted, or there is a conflict in the
+availability of military support staff. The military support
+staff all have other ceremonial obligations outside of
+Arlington National Cemetery, there are only two caissons
+available and the Fort Myer Chapel is limited to six services a
+day. A one week delay in scheduling funerals, therefore, is not
+an uncommon occurrence. A one month delay, on the other hand,
+does not occur.
+
+ columbarium cost
+
+ Mr. Lewis. Last year, Mr. Lancaster, it was estimated that
+the cost of the Columbarium project would be $7.7 million. You
+recently awarded the construction contract, the second part of
+the project. Is $7.7 million still the estimated cost of the
+project?
+ Mr. Lancaster. Actually, the total estimated cost of the
+project is currently $7.4 million, as I recall. So it actually
+is under the estimate, which we were pleased to have happen.
+ Mr. Lewis. Does that dollar amount include the $810,000
+requested?
+ Mr. Lancaster. No, sir, it does not.
+ Mr. Lewis. It does not.
+ Mr. Lancaster. The construction of the two Columbarium
+courts and the associated roads make up the $7.4 million
+estimate; however, the $810,000 for roads is part of the fiscal
+year 1998 request.
+ Mr. Lewis. What would happen with that roughly $400,000 of
+savings?
+ Mr. Metzler. We have several areas that we are looking at
+with potential use of that savings. One is to reimburse a
+settlement claim that we had with the contractor, $98,000, and
+the others----
+ Mr. Lewis. Excuse me. I hope that contractor is not the
+same one that was just awarded this more recent contract.
+ Mr. Lancaster. This was the maintenance contract.
+ Mr. Metzler. This was the grounds maintenance contract, and
+he is long gone.
+ Another part of it would be to pay for repair of a broken
+storm sewer line in Section 33, and another possible use would
+be to fund the completion of the new master plan.
+
+ master plan
+
+ Mr. Lewis. I understand the new master plan is currently
+under review. When will that master plan be available? Two
+years ago, we had an estimate of January 1996.
+ Mr. Lancaster. We are prepared--in fact, you should have
+received by now a letter from me, Mr. Chairman, offering to
+come over and brief you on the master plan, and we are
+available to do that at your convenience either collectively as
+a Subcommittee or one by one to the members who are interested.
+ We hope that by mid-summer, having completed the briefings
+and completed the incorporation into the master plan of the
+comments that we are hearing during the comment period, to have
+completed that master plan.
+ Mr. Lewis. It is my understanding you have that letter,
+Martin. So we will be communicating.
+ Mr. Lancaster. That is right.
+
+ project management
+
+ Mr. Lewis. In the area of cost overruns, it is suggested
+that the Corps of Engineers--where we are talking about cost
+overruns on some construction project, it is suggested that the
+Corps of Engineers district manager. It was suggested that the
+Corps might manage some of those projects.
+ The recently completed McClellan Gate Restoration Project
+was managed by the Seattle District.
+ Mr. Lancaster. Yes, sir, that is correct.
+ Mr. Lewis. What is your view about having the Corps manage
+these projects?
+ Mr. Lancaster. We have traditionally managed the contracts
+for Arlington. So I don't think that is a change.
+ What is a change is going to the Corps district that has
+the expertise for doing the project instead of simply depending
+on the Baltimore District in which Arlington Cemetery finds
+itself physically located.
+ The historic preservation expertise is in the Portland
+District--I mean, the Seattle District, which did the McClellan
+Gate Restoration.
+ The Custis Walk, we are actually using the Norfolk District
+instead of Baltimore.
+ So it really is our trying to manage the expertise of the
+Corps to get the best service available to Arlington that they
+can possibly have. I don't believe, but I will let Mr. Metzler
+speak to this--I don't believe the fact that the district was
+in Seattle created any management problems in the completion of
+that work, nor has the design work for the Custis Walk being in
+Norfolk created any problems, but I will let Mr. Metzler speak
+to that.
+ Mr. Lewis. Was it right below, for example, the $660,000?
+ Mr. Metzler. The project was, and as a matter of fact, I
+think one of the advantages we had is it offered some
+competition within the Corps of Engineers, as we offered these
+projects out to the different districts, and we have been
+satisfied with the results that we have had at this point.
+ Mr. Lancaster. The McClellan Gate came in, I think, under
+significantly and, in fact, allowed us to do some things with
+that restoration that would not have been otherwise possible.
+
+ grave liners
+
+ Mr. Lewis. We may have some additional questions in
+connection with that, the Norfolk area that you mentioned, the
+Curtis Walk question.
+ The justification indicates that the cost of grave liners
+in 1998 will increase by $40,000 to $350,000.
+ Mr. Lancaster. I believe, but again, I will let Mr. Metzler
+amplify on this--I believe that that is not an increase in the
+cost of grave liners, but rather, an increase in the use of
+grave liners by families.
+ In the past, families were buying vaults at their own
+expense, but the trend in recent years has been that these
+concrete grave liners are every bit as effective, and they are
+provided free of charge. So families are increasingly using
+that which is made available as opposed to purchasing upgrades,
+as it were. As a result, that has increased our cost because
+this is a service that has always been offered free of charge
+to the veteran.
+ Mr. Lewis. You have provided me a new understanding of
+grave liners.
+ Mr. Lancaster. Yes.
+ Mr. Lewis. Mrs. Meek?
+ Mrs. Meek. Mr. Chairman, I have some questions to submit to
+the record for Mr. Stokes, but first of all, I would like to
+welcome Martin Lancaster. I am happy to see you and your staff
+here today.
+ Mr. Lancaster. Thank you.
+
+ visitor study
+
+ Mrs. Meek. According to your report here, you mentioned
+that during the fiscal year 1996, you accommodated
+approximately 4 million visitors, but you also asked for
+$35,000 for a study which you want to develop a procedure,
+which you would normally continue to use after that.
+ My question is, what procedure are you using now? You were
+able to predict or to show that you had 4,000,000 or more
+visitors there. What procedure are you using now? If you do get
+the $35,000, what kind of changes do you envision as a result
+of this way of estimating this? Do you think it will have any
+impact on your operations there?
+ Mr. Metzler. The procedure that we are using right now is
+we are counting the number of visitors who enter the cemetery
+either by the Metro system, through the Tour Mobile system, the
+number of funerals that we do per year, and then we are using a
+multiplier and then the same thing for the people who pay or
+park in our pay parking lot.
+ The number of 4 million visitors is an estimate. What this
+study hopes to do is to validate the number and give us a more
+factual accounting of the number of visitors that we have at
+the cemetery. Since we provide this number not only to this
+Committee, but to other Committees and other people who ask
+that question, we want to have a more accurate count.
+ Mrs. Meek. So what will $35,000 do?
+ Mr. Metzler. It will have an independent study performed at
+Arlington Cemetery to validate how many visitors are touring
+the grounds each year.
+ Mrs. Meek. All right. Thank you.
+ Mr. Metzler. Yes, ma'am.
+ Mr. Lewis. Mr. Price?
+ Mrs. Meek. I have others, but there are more people here.
+Let's give them a chance.
+
+ non-funeral events
+
+ Mr. Price. Thank you, Mr. Chairman. I also want to add my
+welcome to our good friend, Martin Lancaster, and his
+colleagues here today.
+ I think the budget justifications really cover most of the
+ground. I am struck by the number of events, though, that you
+are hosting and the kind of requirements that that presents in
+terms of personnel operations. You estimate 2,700 non-funeral
+events in these national cemeteries. Now, is that Arlington
+plus----
+ Mr. Lancaster. It is primarily Arlington. I think very
+seldom are there ceremonies at the Soldiers' and Airmen's Home
+Cemetery.
+ Mr. Price. What is the nature of these 2,700 events? What
+kind of range of ceremonies are we talking about?
+ Mr. Lancaster. Well, everything from events such as today
+when the Prime Minister of Canada visited, and generally, we
+will lay a wreath at the Tomb of the Unknown, to military units
+that may have a memorial site on the cemetery that will come
+back on the anniversary of some event. It is a wide range of
+events that are unrelated to funeral services, but generally
+commemorate some military-related event in history or a
+ceremonial visit by a distinguished visitor.
+ Mr. Price. You are hosting an average of six or seven such
+events a day.
+ Mr. Metzler. This time of year, we are doing more like 15
+or 20 a day. The children or the school groups that are in the
+halls here at the Capitol also work their way over to the
+cemetery, and part of their tour of the grounds of the cemetery
+is to lay a wreath at the Tomb of the Unknown Soldier in most
+cases.
+ A lot of those 2,700 events are the school groups in town.
+We probably do another 100 to 300 events that are more intense
+with military units and heads-of-state visits and things of
+this nature.
+
+ international visitors
+
+ Mr. Price. Do you have any way of estimating your level of
+international, numbers of international visitors, and what kind
+of special efforts to you make to accommodate international
+visitors? For example, how many languages are your brochures
+printed in? Are foreign languages accommodated in your tours,
+that sort of thing?
+ Mr. Metzler. They are not. We do not have the means right
+now to provide any multi-language services to our international
+visitors. To answer the first part of your question, I really
+don't have a handle on how many foreign visitors and the
+different languages they represent come to the cemetery.
+ Within the book store that is co-located at our Visitors
+Center, we do offer some materials in multiple languages that
+are the more popular, Japanese, Spanish, languages that will
+sell, but beyond that, the signage, the people that are doing
+the tours in the cemetery, it is strictly done in English.
+ Mr. Price. Thank you very much.
+ Mr. Lewis. Thank you, Mr. Price.
+ It is my privilege to recognize my colleague, Mr. Hobson.
+He came just to say hello, Martin.
+ Mr. Hobson. Yes, I did. Nice to see you, Martin.
+ Mr. Lancaster. Nice to see you.
+
+ rents
+
+ Mr. Hobson. Glad to have you back.
+ I have two questions which I will submit for the record.
+One of them I ask everybody, and that is about rents.
+ Mr. Lancaster. Rents?
+ Mr. Hobson. You have some rents, and they have gone down,
+and then they are going back up. So, at some point, could you
+respond?
+ Mr. Lewis. Please respond for the record, not now.
+ Mr. Hobson. Not now, not now. So I won't hold you up, but
+welcome and good luck.
+ Mr. Lancaster. Thank you. Thank you.
+
+ closing
+
+ Mr. Lewis. Mr. Lancaster, let me mention that Mr. Stokes
+did want to be here. He has a conflict with another Committee
+that relates to the Ethics Committee work. I would like with
+the Committee's permission to include that explanation at the
+beginning of each of our other two hearings, which I meant to
+do earlier as well, but in the meantime, we appreciate your
+appearance, look forward to working with you, and our meeting
+is adjourned.
+
+[Page 447--The official Committee record contains additional material here.]
+
+
+ Wednesday, May 7, 1997.
+
+ CONSUMER INFORMATION CENTER
+
+ WITNESSES
+
+TERESA NASIF, DIRECTOR, CONSUMER INFORMATION CENTER
+BETH NEWBURGER, ASSOCIATE ADMINISTRATOR FOR PUBLIC AFFAIRS, U.S.
+ GENERAL SERVICES ADMINISTRATION
+
+ Welcome to Consumer Information Center
+
+ Mr. Lewis. Our next witness I am pleased to welcome is
+Teresa Nasif, Director of the Consumer Information Center.
+ Ms. Nasif, welcome back to the Committee.
+ Ms. Nasif. Thank you.
+ Mr. Lewis. If you'd like to summarize your statement, we
+will include your entire prepared statement in the record, and
+in the meantime the agency's 1997 appropriations involve 21
+FTEs, a total of $2.26 million. The request for 1998 is an
+identical number of FTEs, and $2.119 million of budget
+authority requested.
+ So if you'll proceed as you like, we'll go on with
+questions from there.
+ Ms. Nasif. Thank you very much, Mr. Chairman, and Members
+of the Subcommittee. Thank you for the opportunity to present
+the fiscal year 1998 budget for the Consumer Information
+Center.
+ With me today is Beth Newburger, Associate Administrator
+for Public Affairs, U.S. General Services Administration.
+ Mr. Lewis. Welcome, Ms. Newburger.
+ Ms. Newburger. Thank you very much, Mr. Chairman.
+
+ Opening Statement
+
+ Ms. Nasif. Established more than a quarter of a century
+ago, the Consumer Information Center successfully continues to
+carry out its vital mission mandate of helping Federal
+departments and agencies inform the public about health and
+safety issues, developments in Federal programs, and the impact
+and effects of Federal research and regulatory actions.
+ Today many elements of the CIC program remain the same: an
+essential mission mandate, a commitment to serve the American
+public, and the firm support of the Administration and this
+Committee.
+ However, the CIC program is going through a time of change
+that reflects a new environment in government and in customer
+behavior. Overall, Federal agencies have reduced the scope of
+their publishing activities due to budget constraints, and the
+American public is placing fewer orders for merchandise,
+including information, by mail.
+ CIC is meeting these challenges in two ways: first, we have
+redoubled efforts to identify private sector partners who share
+Federal information goals, and who can provide resources to
+stretch limited Federal dollars. And, second, CIC has set up
+telephone ordering systems for both the Consumer Information
+Catalog and its list of publications.
+ In partnership with GSA's Federal Information Center
+program, we have implemented a toll-free number, 1-888-PUEBLO,
+for citizens to call to receive a free copy of the catalog.
+ Also I'm pleased to report that beginning with the Spring
+1997 edition, all copies of our catalog will include a
+telephone number for placing publication orders at the Pueblo
+facility.
+ Citizens pay for these calls, thereby sharing in the
+expense of the program. Making access easier and quicker will
+encourage more Americans to take advantage of the wealth of
+information available from the Federal Government.
+ CIC remains in the forefront of Federal electronic
+dissemination, as more and more schools, libraries, and
+families are accessing information through the Internet. The
+public will access the CIC Website more than 3 million times in
+fiscal year 1997, a threefold increase since its inception in
+fiscal year 1995.
+ While Americans can now access CIC either electronically or
+by ordering by phone, our address, Pueblo, Colorado, 81009,
+remains one of the best known addresses in the country, where
+Americans order millions of publications published by more than
+40 Federal departments and agencies.
+ The Government Printing Office facility in Pueblo provides
+order fulfillment services for tens of thousands of orders
+received weekly as a result of the promotions done by the CIC.
+During fiscal year 1996, consumers ordered 7 million
+publications from Pueblo. In the years ahead, we will continue
+to make helpful information available to all citizens, whether
+they are seeking it by computer or by mail.
+ We're very committed to maintaining a vigorous publication
+distribution program in recognition of the fact that most
+Americans still continue to receive their information through
+traditional print channels.
+ Our ongoing efforts to identify and obtain valuable Federal
+information, our media and marketing programs, our centralized
+distribution system, and our widely acclaimed electronic
+information activities all combine to make CIC an essential
+source for citizens needing vital consumer information from
+their Federal Government.
+ Mr. Chairman, we trust the committee will agree that CIC is
+a valuable Federal program, and that it will look favorably
+upon our request. I'd be pleased to answer any questions you
+have at this time.
+ [The statement of Ms. Nasif follows:]
+
+[Pages 451 - 454--The official Committee record contains additional material here.]
+
+
+ questions from mr. stokes
+
+ Mr. Lewis. Thank you very much. Mr. Stokes, do you have any
+introductory comments or questions?
+ Mr. Stokes. Yes, thank you, Mr. Chairman. I have a couple
+of questions here.
+
+ internet access
+
+ Ms. Nasif, during last year's hearing we discussed the
+expanding use of the Internet and the Center's activities, as
+well as the fact that a majority of the population, and my
+guess is it's a considerable majority of the people, contacting
+the Consumer Information Center do not have access to the
+Internet.
+ You alluded that it is a problem, but also CIC is
+maintaining the print distribution network, even as electronic
+dissemination becomes more prevalent.
+ With another year's experience on the Internet, tell us how
+your operations have changed? For instance, how many hits do
+you get on your Website? How has the number of print
+publications changed?
+ Ms. Nasif. This year we have seen progress in both the
+print publication area and in our electronic dissemination
+activities. On the Internet side, we are expanding. When we
+started the site in 1995, we had 1 million accesses that first
+year.
+ Then in 1996, that increased to more than 2 million
+accesses. In 1997 we probably will exceed 3 million.
+ We think that the Internet is getting more popular for a
+variety of reasons. We have a very good site. It has valuable
+information not easily available anywhere, it's user friendly,
+it's easy to navigate, and it's possible to search by topic.
+ But the other thing that is happening is that the number of
+American homes with computers is increasing. In one study, the
+number of American homes having access to the internet in 1996
+increased from 4 million to 11 million.
+ It's the administration's goal to see that every school in
+our country has Internet access, and I know it's expanding in
+libraries across the country, as well.
+ Now, with the advent of the ability of consumers to buy a
+Web Box, you don't even need a computer to access the Internet.
+It's possible through a purchase of one of these devices to
+also be part of the information highway.
+
+ distribution of publications
+
+ But we see the Internet as something that will continue to
+be an enhancement, and complementary to our print program which
+is still the main part of the Consumer Information Center.
+ As I mentioned, during last year we distributed 7 million
+publications, and we're continually trying to get the message
+out that the information is available from Pueblo by print or
+by computer, and we have instituted some innovations like the
+telephone ordering systems, because we're finding that for
+whatever reason, Americans are more attuned to picking up the
+phone and ordering something by phone than they are to sending
+away for the information by mail.
+ Mr. Stokes. You're committed to continue the print
+dissemination process?
+ Ms. Nasif. Absolutely. We absolutely are committed to it,
+and we do everything we can to keep ahead of the curve in terms
+of motivating the public, informing them that the information
+is available, and encouraging Federal agencies not to give up
+on their print program.
+ It's a tough decision for Federal agencies. Because of the
+budget constraints that they're facing, they're tempted to go
+all electronic and not to bother printing the product.
+ And the point we make to them is that you must have the
+printed product, because that's what enables you to promote it
+to the media, and for those people who don't have access--which
+is still a large percentage, a major percentage of Americans in
+this country--it's important to have a print product available.
+
+ a two-tiered system
+
+ Mr. Stokes. Let me ask you this: Although some print
+publications of the CIC are distributed without charge, there's
+a fee associated with many of the publications.
+ Alternatively, most people with access to the Internet can
+download printed copies at little or no cost to themselves.
+Aren't we at risk of creating a two-tiered system here, where
+in general those most able to pay for the information wind up
+not paying, and those possibly most in need and less able to
+pay wind up paying more? Does this disturb you?
+ Ms. Nasif. It's a difficult question. We initially looked
+at the Internet site as possibly a method of generating revenue
+for the program, and what we realized is that, number one,
+there is no Federal site that charges for its use at this time.
+ And it would probably serve to countermand our mission
+mandate of getting information to the public by our trying to
+put a charge for consumers using this site and coming on to the
+site. So it's a difficult question.
+ But right now, it's true, that you can download any of the
+information from our Website at no charge. But I would like to
+point out that as far as the publications that we offer in
+print form, about 50 percent are free, and a good number of the
+sales publications are only 50 cents, so that more than 80
+percent of the titles are either free or 50 cents.
+ So the publications are available at very moderate cost.
+Also, because of our marketing and our media activities, a lot
+of the information is put out through the media. So someone
+doesn't really have to order a book from Pueblo, or even get on
+our Website. We have a very aggressive program to get
+information out through newspapers and magazines. And we do
+press releases, and keep in touch with the media to make sure
+that they highlight and disseminate that information to the
+public.
+
+ cost for publications
+
+ Mr. Stokes. What is the highest cost of your publications?
+ Ms. Nasif. With the exception of a couple of subscriptions,
+the highest cost one listed in the spring catalog is $3.25. And
+that is one from the Department of Veterans Affairs on benefit
+programs.
+ GPO sets the prices for the sales publications. But more
+than 80 percent are free or 50 cents.
+ Mr. Stokes. Thank you, Mr. Chairman.
+
+ questions for the record
+
+ Mr. Lewis. Thank you, Mr. Stokes. Just a couple of
+questions, and then we have a number of questions for the
+record as well, Ms. Nasif.
+ [Questions and answers follow:]
+
+[Pages 458 - 461--The official Committee record contains additional material here.]
+
+
+ gift authority for consumer's resource handbook
+
+ Mr. Lewis. The fiscal year 1997 regular appropriations bill
+transferred responsibility for publication of the Consumer's
+Resource Handbook from the Office of Consumer Affairs to the
+Consumer Information Center.
+ In addition to the responsibility, the Congress provided
+$200,000 and gift fund authority to enable you to accomplish
+that task.
+ First, what resources have you been able to generate
+through the gift fund to help offset the cost of publishing the
+Handbook?
+ Ms. Nasif. The gift authority was given to us primarily to
+support the development and the printing and the distribution
+of the Consumer's Resource Handbook. However, through the
+Committee's generosity, by the fact that you provided $200,000,
+that is the money that we are using to pay the distribution
+costs of the edition that was actually put together by the U.S.
+Office of Consumer Affairs at the end of fiscal year 1996.
+ They had completely revised and printed and reissued the
+Consumer's Resource Handbook at the end of 1996. So we are now
+using the $200,000 to pay the distribution costs out of the
+Pueblo facility.
+ The gift fund authority would have been used had we
+retained responsibility for the Handbook. But, of course, the
+President's budget transfers back the responsibility for the
+Consumer's Resource Handbook to OCA beginning in fiscal year
+1998.
+ So in fact we have not used the gift authority this year.
+
+ resources for updating the handbook
+
+ Mr. Lewis. Does the Consumer Information Center have the
+personnel and resources necessary to update and publish the
+Handbook? You just indicated you were not going to be doing
+that as a result of the President's direction.
+ Ms. Nasif. In fiscal year 1998?
+ Mr. Lewis. Yes.
+ Ms. Nasif. It is the President's plan that it would revert
+back to the Office of Consumer Affairs, and we support that
+transfer back to OCA.
+
+ transferring responsibility for handbook
+
+ Mr. Lewis. Is there some reason why you support that
+transfer back?
+ Ms. Nasif. They've done a very good job through the years.
+It's been by the of U.S. Office of Consumer Affairs since 1979,
+and it has consistently been one of the most popular Federal
+documents available to the public. And I think they've done an
+excellent job of compiling it, and they have the expertise to
+continue putting it together.
+ So therefore we support it going back to the rightful
+owners, you might say.
+ Mr. Lewis. So, you are really suggesting that if you had
+the responsibility going forward, you might not have been able
+to do it as well?
+ Ms. Nasif. We would have done a good job also, of course.
+But I think that in part we would have done a good job because
+of the excellent track record that OCA had set down for us.
+ Mr. Lewis. Could you explain to the Committee from your
+perspective what the logic of the Congress you work with was to
+transfer that authority in the first place?
+ Ms. Nasif. I believe that there was the plan that the U.S.
+Office of Consumer Affairs would be terminated for fiscal year
+1997. The belief was that here was one very valuable
+publication that should continue, and so therefore it was
+transferred to the Consumer Information Center.
+ Mr. Lewis. The Government has great difficulty even
+considering closing one small agency, and consolidating
+operations, don't we?
+ Ms. Nasif. Yes, I think it's hard to close down an
+operation that has a good track record.
+ Mr. Lewis. Even if you're giving it to another agency that
+has a good track record?
+ Ms. Nasif. I think we would do a fine job as well, but it's
+based on the decade or more of OCA perfecting the formula for
+the fund raising, and the systems for gathering the
+information. I think they do a great job, but I'm sure we would
+do a great job, too.
+ So I think you're fortunate to have two capable consumer
+agencies appearing before this committee.
+
+ questions from mrs. meek
+
+ Mr. Lewis. Thank you very much. Mrs. Meek.
+ Mrs. Meek. Thank you very much, Mr. Chairman. We are happy
+to have you here this morning.
+ Ms. Nasif. Thank you, Mrs. Meek.
+ Mrs. Meek. I have utilized your Pueblo publications a lot
+in my area. And I find there's a paucity of information that's
+simple for people to understand.
+ And I distribute it at my town hall meetings, and, of
+course, I have Diahann Carroll's picture--that's me.
+[Laughter.]
+ I do this, and it sort of individualizes this booklet. And
+you would be surprised: I get more feedback, positive, from
+this than when I talk about the policies and the new laws and
+the new regulations that are made in Washington.
+ The consumers are very, very interested in what's coming
+before them and what's good and what's bad. And this book has
+been very helpful in that regard.
+ Ms. Nasif. I'm so glad. Thank you for the kind words.
+ Mrs. Meek. I would recommend this to any member because
+there so many things. At this point in the new Federalism, and
+that's the only word I can give it, there is very little help
+you can give your constituents when it comes to roads,
+buildings, post offices, or those kinds of things.
+ But now you can give them information. You can provide them
+information; you can provide them help. I find that to be very,
+very useful, particularly for people who are information poor.
+And I would commend this to the other members as well.
+ Ms. Nasif. Thank you very much, and thank you for the
+endorsement.
+ We are fortunate that we've had six of our committee
+members actually take advantage of our imprinting service.
+
+ cost of consumer information center service
+
+ Mrs. Meek. It does cost money.
+ Ms. Nasif. Yes.
+ Mrs. Meek. To me, to get it.
+ Ms. Nasif. It's $200, that's true. Because it covers the
+plate change at the time we go for the printing. But we think
+it's a wonderful consumer value, of course.
+
+ change in zip code
+
+ Mrs. Meek. Now, your zip code has changed? It was 81009 and
+is now 81002?
+ Ms. Nasif. 81009 is still the zip code. It's very astute of
+you to notice that. Very few people notice that.
+ Mrs. Meek. I'm a woman. [Laughter.]
+ Mr. Lewis. And a grandmother, too. An astute grandmother.
+ Ms. Nasif. 81009 is actually the number that we promote
+through the media. The reason we put 81002 on the catalog
+itself is that way we can track the performance of the various
+editions of the catalog, We can track catalogue order blanks
+and how they perform.
+ We do a lot of counting in the Pueblo facility. Every
+promotion that we do has a different coded address, so that we
+know exactly how many people respond as a result of an IRS mail
+back card versus a print out, versus a radio spot. And we keep
+counts on all of it in order to figure out what we're doing
+well and what we're not doing well, and how to improve what
+we're doing.
+ It's the same place, even though it has a different zip
+code. One is the Pueblo Post Office, and the other is actually
+our facility.
+ Mrs. Meek. So we can keep that.
+ Ms. Nasif. Yes.
+
+ publishing the catalog
+
+ Mrs. Meek. My next question has to do with your publishing
+dates. When do you propose publishing this booklet again, and
+how much will it cost?
+ Ms. Nasif. We publish it every three months. And that
+enables us to drop publications that we've run out of stock on,
+and we can put in new publications coming out from the Federal
+agencies. And the publishing budget is in the neighborhood of
+about $370,000.
+ We print 12 million copies total each year of the catalog,
+and then we distribute it in a variety of ways. About half the
+catalogs go out through a bulk mailing list to educators,
+librarians, community leaders who have requested to be on the
+list, who then distribute copies of the catalog to their
+constituents.
+ We also distribute through members of Congress through the
+program that you participate in.
+ Mrs. Meek. Thank you.
+ Mr. Lewis. Thank you, Mrs. Meek. We appreciate it. Mr.
+Hobson.
+
+ drop in rent
+
+ Mr. Hobson. I have a couple of questions. First of all I
+would like to comment that your rent does go down a little bit.
+How did you accomplish that, do you know?
+ Ms. Nasif. The $99,000 rent?
+ Mr. Hobson. Yes. It dropped from $102,000. So it's going in
+the right direction, anyway.
+ Ms. Nasif. We are assessed rent by GSA just as GSA assesses
+rent for all Federal agencies. They take into consideration
+what the prevailing rates are.
+ Mr. Hobson. I wish they did. You need to look at that,
+because they really don't very well. But that's another point.
+You need to watch them on their rent.
+ But you are going down, which is better than most of them.
+ Ms. Nasif. Yes.
+ Mr. Lewis. But with a GSA assessment, at any rate.
+ Ms. Nasif. Actually we are right in the GSA building, and
+it's good space, and we think it's worth $102,000. We were
+delighted when our programmed amounts went down to $99,000.
+ Mr. Hobson. Just remember, we're watching that.
+ Ms. Nasif. Okay.
+
+ other services
+
+ Mr. Hobson. The other thing is, three other quick
+questions. I don't understand the ``other services.'' Are you
+getting reimbursed for all that money from other agencies? Or
+how does that work?
+ Ms. Nasif. Yes. The ``other services''--are you referring
+to other income on page six?
+ Mr. Hobson. No, I'm looking at page eight, where you have
+an item that says ``other services.'' And what I'm concerned
+about is that is a way of increasing the agency's expenses by
+passing--one of the ways that people work statements is to get
+other people to reimburse them for it, and gradually then
+suddenly they won't do it any more and then you'll come in and
+say well, we've got to have this.
+ So suddenly we're hit with the cost.
+ Ms. Nasif. Agencies participating in our program, who wish
+to offer their publications without charge to the public
+actually are billed for the postage and the handling and the
+distribution services that are incurred by the Government
+Printing Office facility in Pueblo, Colorado.
+ So if you are an agency--you're the Social Security
+Administration for example--and you would like the CIC to offer
+your booklets without charge, as the booklets get mailed out,
+GPO charges us, CIC. We will in turn assess you, as the
+sponsoring agency, for those postage costs. That's what that
+represents.
+ Mr. Hobson. That's what I'm worried about. What I'm worried
+about is this could eventually become a way of gaming the
+system, because they will then come back and say to you some
+day, because this has jumped from $2.7 million to $3.8 million
+and it's going up.
+ Ms. Nasif. Yes.
+ Mr. Hobson. They'll come back and say, oh, we don't have it
+in our budget any more. Now, you've got to come back in here
+and ask us to do it. And I just want to forewarn you. Be
+careful that somebody doesn't game you on that.
+
+ average salary
+
+ The other thing is the average salary in your agency will
+be--it is $56,000 and will be $58,000? Is that what you're
+proposing?
+ Ms. Nasif. Yes. That's correct. And that reflects increases
+in pay including the locality pay adjustment. So there is some
+increase due to that.
+ Mr. Hobson. There's an increased locality adjustment for
+Pueblo, Colorado?
+ Ms. Nasif. No. We are actually located here in Washington,
+D.C.
+ Mr. Hobson. So it's for D.C.
+ Ms. Nasif. Yes, we get it for D.C. The 50 or so people in
+Pueblo, Colorado are actually GPO employees.
+
+ average grade
+
+ Mr. Hobson. Ours hasn't been changed for about 30 years, on
+the location thing. The other thing is, I think this is the
+littlest thing--it may be technically correct. But you have--if
+I read this correctly--you have 18 people that are nines or
+above, and three people that are below nine. Is that correct?
+ Ms. Nasif. Yes. That's correct, and I can explain.
+ Mr. Hobson. Well, that's what it says here. But down here
+it says that your average grade is 11.86. I think that's a
+little misleading, if 18 of them were above nine. It may be
+technically correct. Of course, the other three are very low,
+and that affects the overall average.
+ But the real average in here--I mean, the real thing is
+it's weighted to nines and above. Because there are only three
+people below nine.
+ Ms. Nasif. Yes. Mathematically that is the average, but I
+will be glad to go back and double check on that.
+ Mr. Hobson. No, no. But it may be technically correct,
+because those three are way below, and they pull the average
+down, but the real bulk of people in this agency--and I'm not
+arguing with you about it. I'm just saying we should
+understand--that the number of people in this agency are
+really--they are 12's and above. Because there are nine people
+at 12, there are five people at 13s.
+ No, I'm sorry. There are nine at 12. There are five at 13.
+There are three at 14. And there's one at 15.
+ So that's out of the 21 people.
+ Mr. Lewis. Ms. Nasif, we do expect that Mr. Hobson will
+have another series of very detailed questions for the record.
+[Laughter.]
+ Mr. Hobson. I just want you to know that somebody does look
+at these things.
+ Ms. Nasif. I appreciate it, because it takes a lot of work
+to put this together.
+ Mr. Hobson. I used to read financial statements a long time
+ago, and government statements drive me nuts.
+ Ms. Nasif. Well, I appreciate the attention.
+ Mr. Lewis. Mr. Frelinghuysen.
+
+ no questions from mr. frelinghuysen
+
+ Mr. Frelinghuysen. Mr. Chairman, Mr. Hobson's attention to
+detail is so profound that I'm going to resist asking any
+questions.
+ Mr. Lewis. He's just overwhelmed you. [Laughter.]
+ He has covered the territory in such detail. Thank you.
+ Mr. Hobson. Let me tell you, the previous agency did change
+their rent, because of----
+ Mr. Lewis. GSA. Even though they thought the space was
+worth every dime they paid for it.
+ Mr. Stokes.
+
+ cic income application chart
+
+ Mr. Stokes. Thank you, Mr. Chairman. I'll be very brief. I
+noted that you have not included a CIC income application chart
+in this year's justifications. Why is that?
+ Ms. Nasif. There was no particular reason, Mr. Stokes. We'd
+be happy to provide it for the record.
+ We were trying to streamline our package, but the chart
+would be pretty similar, to last year's. We actually created
+it, and then we were going through the justification to see any
+way to make this easier to look through. And we just
+arbitrarily decided to take it out.
+ Mr. Stokes. Would you provide it?
+ Ms. Nasif. Certainly. We felt that perhaps page six did the
+job. But I'm with you. I think a picture is worth a thousand
+words, so we will be happy to provide it.
+ Mr. Stokes. Thank you.
+
+[Page 468--The official Committee record contains additional material here.]
+
+
+ Mr. Stokes. Thank you, Mr. Chairman.
+ Mr. Lewis. Thank you, Mr. Stokes.
+
+ EXPENSES VERSUS REIMBURSEMENTS
+
+ Last question, very briefly, a large portion of your
+publications are reimbursed. So that leads to a question
+regarding expenses versus actual reimbursement. In 1996, the
+difference between reimbursement and expenses was about
+$250,000. But in 1997 and 1998, your budget indicates a
+difference of over $850,000, an increase of differential on the
+negative side.
+ Can you explain what appears to be a trend of expenses
+outpacing reimbursements?
+ Ms. Nasif. The amounts to be collected are increasing?
+ Mr. Lewis. I'm saying that the actual reimbursements show a
+pattern whereby your expenses are outpacing those
+reimbursements, a pattern from $250,000 in 1996, and then 1997
+and 1998 being something over $850,000.
+ Ms. Nasif. I can explain that. The publication distribution
+figure, $3.008 million, actually is collected from two sources
+of funding. It's collected from reimbursements from agencies
+which will be $2.151 million. But also from private sector
+organizations under other income, which in 1998 will be
+$857,000.
+ We collect money not just from Federal agencies, but from
+our private sector partners. And so we will be collecting
+money, for example, in the actual 1996 column, it was $1.9
+million from Federal agencies, but then an additional $215,000
+from private sector partners.
+ So we do collect enough to pay the GPO bills, and that
+money is really like pass-through money that comes through the
+CIC fund. GPO bills us and then we turn around and send the
+bills off to the Federal agencies or the private sector
+partners who have agreed to cover distribution.
+ Mr. Lewis. Okay.
+ Ms. Nasif. So we are not spending more than we collect. We
+stay within our budget.
+ Mr. Lewis. Well, thank you for that clarification. And if
+we have further questions, we will ask them for the record, and
+other members are welcome to extend questions as well for the
+record.
+ In the meantime, Ms. Nasif, thank you very much for being
+with us.
+ Ms. Nasif. Thank you, Mr. Lewis.
+ Mr. Lewis. It's a pleasure to meet you.
+
+[Pages 470 - 502--The official Committee record contains additional material here.]
+
+
+ Wednesday, May 7, 1997.
+
+ U.S. CONSUMER PRODUCT SAFETY COMMISSION
+
+ WITNESSES
+
+HON. ANN BROWN, CHAIRMAN
+HON. MARY SHEILA GALL, COMMISSIONER
+
+ Mr. Lewis. Ms. Brown, you'll have to be patient with our
+members, since we have all kinds of overlapping meetings. You
+understand this process. But in the meantime, we want to
+welcome you, and we're very interested in hearing your
+discussion of the Consumer Product Safety Commission's 1998
+suggestions, and the administration's request.
+ If you'd like to summarize your statement, you know the
+entire statement will be included in the record. We'd like to
+get to questions, and facilitate the process as easily as
+possible.
+ Ms. Brown. Good. Well, I'll summarize briefly. I think
+Commissioner Gall who is with me has already submitted her
+statement for the record, and I'd like to submit Commissioner
+Moore's statement for the record.
+ [The statements of Ms. Gall and Mr. Moore follow:]
+
+[Pages 504 - 507--The official Committee record contains additional material here.]
+
+
+ Ms. Brown. Commissioner Gall is with me today, and I will
+be brief. I am pleased to have this opportunity to testify in
+support of our fiscal year 1998 appropriations request.
+ Mr. Lewis. Fine.
+
+ summary statement
+
+ Ms. Brown. At the outset, I want to express our
+appreciation for our fiscal year 1997 appropriation of $42.5
+million, the full amount requested in the President's budget.
+ I want to assure you that these funds are being used
+effectively to protect the American people against unreasonable
+risk of injury or death from dangerous or defective consumer
+products.
+ I'll give you just one example, which is recall roundup.
+When we do our recalls, which is very often very serious, for
+products that cause injuries and death, we get the word out.
+But oftentimes we can't get all of those products out of
+people's homes.
+ So we did a recall roundup, which was a spring cleaning,
+for people to go into their attics and basements to recheck to
+see if they had any of these products.
+ It was extremely successful. We worked with the States, and
+every State in the United States, all 50 States, worked with
+us. Many States did more than one program; in fact, the great
+State of California did five different programs with us.
+ And I just want to tell you what the whole effort cost. It
+cost $1,700 in printing costs, and $8,500 for video news
+release. But everything was seen by millions across the Nation.
+ So that's the effective way I think we work.
+ In fiscal year 1998 we are requesting an appropriation
+increase to $45 million, an increase of $2.5 million to
+continue and to expand our vital work.
+ And I feel that we have worked with you, and I appreciate
+it, very closely and very, very well. That you have been
+extremely cooperative with us. I don't think that every agency
+has the same fine relationship that we have had with you, and
+that also the same bipartisan relationship.
+ I think this is what the American people want to see the
+bipartisan spirit in the Government. And so I thank you, Mr.
+Chairman and members of the Committee.
+ In preparing our budget, we carefully reviewed the needs
+and contributions of our three operating divisions, Hazard
+Identification and Reduction, Compliance, and Information and
+Education.
+ As a result, we are proposing important investments above
+current service levels in most of these areas to enhance our
+ability to prevent and reduce the deaths and injuries related
+to consumer products.
+ The modest program increases requested for fiscal year 1998
+are more than justified by our record of accomplishment. CPSC
+has made vital contributions to the 20 percent decline in
+annual deaths and injuries related to consumer products that
+have occurred between 1980 and 1993.
+ Past agency work in electrocutions, children's poisonings,
+children's cribs, power mowers and fire safety helped save the
+Nation almost $7 billion annually in health care, property
+damage and other societal costs--more than 100 times CPSC's
+annual budget, or about $155 million in savings, for each
+million of the agency's 1998 request.
+ The agency expects its 1993 standard to make cigarette
+lighters child resistant to save over $400 million in societal
+costs, and to prevent up to 100 deaths annually.
+ Similarly the agency expects its work in carbon monoxide
+poisoning to reduce societal costs by $1 billion annually.
+ CPSC removal of dangerous fireworks from the marketplace
+prevents about 14,000 injuries each year.
+ As you know, in a concurrent submission to this
+subcommittee and the OMB in September, 1996, the Commission
+requested a budget of $49.7 million for fiscal year 1998. The
+OMB reduced our budget request to $45 million. Although this
+reduction of $4.7 million seems small, it will have a negative
+impact on our efforts to protect the health and safety of
+American's children and families.
+ An additional investment of $1 million would allow us to
+respond faster and better to product hazards, saving more
+lives, and preventing more injuries, and would help us to
+implement the FOIA law.
+ CPSC is a data driven agency. It carries out its mission
+with a sense of urgency, since quick action by the agency saves
+lives. To provide even greater benefits to the American
+consumer, we would like to establish an integrated information
+system at the agency, that would give the staff access to a
+much larger universe of product safety data, and would improve
+the speed with which staff could gain access to that data.
+ Mr. Chairman, the CPSC is of great value to the American
+people. By every rational, cost/benefit measure, we save the
+taxpayer many times our budget in deaths, injury and property
+damage prevented.
+ Accordingly, we urge you to appropriate not only the full
+amount we requested. We also hope you can find an additional $1
+million within the subcommittee's budget allocation, and within
+the framework of the balanced budget agreement announced last
+week for necessary enhancement of our information technology.
+ Thank you.
+ [The statement of Ms. Brown follows:]
+
+[Pages 510 - 523--The official Committee record contains additional material here.]
+
+
+ Mr. Lewis. Thank you, Ms. Brown, Ms. Gall. Mr. Stokes, I
+believe I heard Mrs. Brown suggest that they had asked for
+$49.9 million as the budget went to OMB, and OMB suggested they
+could do well with $45 million. But Ms. Brown is suggesting
+that even $1 million more would be very, very important.
+ This is the first time--I'm not surprised that there's some
+disagreement, but it's the first time, I think, I've heard
+somebody actually suggest their original request was the right
+request.
+ At any rate, I yield to you for comments or questions, if
+you like. I think Ms. Brown feels secure in her responsibility.
+
+ cpsc budget
+
+ Mr. Stokes. I must say it's unusual.
+ Thank you, Mr. Chairman. Let me pick up right where the
+Chairman commented, Ms. Brown. First let me welcome you back
+before our subcommittee, and say it's always a pleasure to have
+you here.
+ We remain very, very proud of the work you do in this
+capacity. I noted that the budget that the Consumer Product
+Safety Commission submitted to the Office of Management and
+Budget requested $49.775 million for your operations for 1998.
+ The President's budget was rather generous with the
+Commission, including a request to Congress for $45 million, an
+increase of nearly six percent above the enacted amount for
+1997.
+ First of all, why do you think the CPSC fared relatively
+better than so many other agencies and Department's this year?
+ Mr. Lewis. This is the hard part. [Laughter.]
+ The easier ones are coming.
+ Ms. Brown. I am delighted to answer you. [Laughter.]
+ Quite honestly, Congressman Stokes, I do believe that this
+is a vote of confidence in the work that we are doing, not just
+the work that we are doing to prevent deaths and injuries and
+huge costs, but I think in the way that we are doing our work.
+ And that is when I came into the agency, well before the
+104th Congress, I said that we had to bring all of the parties
+in, in order to make full progress. And I think that we have
+worked with industry very well.
+ Also I think that you must realize that over the past
+decade, in the 1980s, while our mission has grown
+substantially, we have, in fact, been cut. If you compare it
+with EPA's budgets from 1981 to 1996, EPA increased 25 percent;
+FDA's budget from 1981 to 1996 increased 56 percent; while
+CPSC's budget, over those years, over all declined by 45
+percent.
+ So one, it's a vote of confidence, and, two, it is helping
+us to make up some of the loss over those years.
+ Mr. Stokes. Okay. Now, although the budget includes this
+relatively health, increase, even the Administration's number
+is nearly $5 million less than the amount you say you need.
+ Ms. Brown. Yes.
+
+ effect of budget reduction
+
+ Mr. Stokes. What are the principal activities you would
+like to undertake and will not be able to at the
+Administration's request level?
+ Ms. Brown. I would like to have Pamela Gilbert, our
+Executive Director, speak to that.
+ Ms. Gilbert. Thank you very much. We have, as the Chairman
+noted, asked for an additional $1 million, and that would be
+for information technology increases that are very, very badly
+needed to upgrade our current network system, to obtain a new
+Internet server that is going to help us comply with new FOIA
+requirements, and to update very old equipment and technology
+that doesn't even let us keep up with the current technologies
+that are available now, such as Windows 95, that are fairly
+common for many others but are right now beyond our
+capabilities at the Agency.
+ In addition, we had a number of programmatic requests and
+initiatives that we had asked for in our original budget
+submission, that have been significantly reduced in our new
+submission, as a result of the President's request.
+ This includes twice as big an investment in fire
+initiatives than we have now planned in our 1998 budget. It
+includes an entire update of children's anthropometric data,
+which is very important and critical to our work in keeping
+children safe.
+ It also includes additional funding to contract out product
+testing of the more sophisticated and complex hazards that we
+face.
+ So what we indeed have had to do in our budget request
+right now is scale back significantly the product safety
+initiatives and the information technology initiatives that we
+originally put in the budget request to the President.
+ Ms. Gall. And if I could just add to that, it also
+addresses some of the concerns we have about the year 2000
+technology changes. And anthropometric data that Pamela has
+mentioned are beneficial to a lot of agencies, because we're
+the ones who obtain that data for NIH, for the Department of
+Transportation and their concerns about air bags, seat belts
+and children.
+ All those kinds of things are very important and wrapped up
+in the anthropometric data that we are trying to improve. It
+means updating it. It's quite a few years old.
+
+ special investigations unit
+
+ Mr. Stokes. Okay. Ms. Brown, your statement and the
+justifications indicate that a major initiative in 1998 will be
+the proposed expansion of the Special Investigations Unit
+within the Office of Compliance, for which you are seeking a
+$580,000 increase.
+ You say this unit will be involved in investigations of
+technically complex issues and new applications of existing
+technologies.
+ What level of funding, and how many staff years are you
+devoting to this effort in 1997?
+ Ms. Brown. Well, in 1997, let me ask my staff if they have
+the funding for 1997. While they get that for me--or else I can
+get it to you--what we are asking for in 1998 is $580,000.
+ And really the SIU is not meant to be a ``gotcha'' effort.
+What is clearly meant is to handle the very complicated
+technical kinds of problems that we have to deal with now, to
+find new sources of data, and also to deal with important
+technical problems.
+ We really don't want to waste our resources worrying about
+the very minor problems. But we want to come up with the most
+different ones.
+ And so the work of this group already has resulted in a
+number of significant investigations, including an
+investigation of a technically complex horizontal furnace that
+may pose a serious risk of fire or carbon monoxide poisoning,
+and anelectric heater whose design may contribute to potential
+fire hazard.
+ And we have been working, and developed information sharing
+relationships with insurance companies a number of independent
+engineering consultants, and fire investigators. And we have an
+excellent relationship now with the International Association
+of Arson Investigators. So this has potential to be very
+valuable to the Agency.
+ In the year 1997 the SIU had small funding of $50,000 and
+no additional staff. We now have four full time staff who have
+their major work at the SIU, but we have not added staff for
+that purpose.
+ Mr. Stokes. Okay. I have a number of other questions, Mr.
+Chairman, but I'll yield at this time. And thank you very much.
+
+ composition of commission staff
+
+ Mr. Lewis. Mr. Stokes, since you have asked a number of the
+questions I was going to ask initially, let me shift a moment
+and ask some questions that you and I have asked together in
+the past.
+ Ms. Brown, one of the efforts that Mr. Stokes and I have
+been about since we've worked together on this Committee over
+some years now is to recognize that within each of our agencies
+and commissions there is an established personnel base carrying
+on very important functions.
+ In your budget request, if the $45 million were granted and
+no more, there would be 480 FTEs, as Mr. Stokes outlined. We
+would hope that within that mix, as all of our agencies mature,
+that they would look a good deal like America, that is, reflect
+the mix of the country, its strengths, the mix of its race and
+otherwise.
+ And I would like to have you, if you would, outline for the
+Committee efforts you have made in connection with that.
+ Ms. Brown. I'd be delighted to. Since I've been
+Chairperson, 58 percent of the hires have been women, and women
+presently comprise 48 percent of the CPSC's work force. That's
+approximately the same percentage found government-wide
+according to the most recent statistics available from the
+EEOC.
+ Since coming to the Consumer Product Safety Commission I
+have increased the number of women in the Agency's overall work
+force by four percent.
+ Since I've been Chairperson, 38 percent of the hires have
+been minorities. Minorities comprise 32 percent of CPSC's work
+force. That is four percent higher than the government-wide
+figure of 28 percent.
+ And since coming the Consumer Product Safety Commission, I
+have increased the number of minorities in the Agency's overall
+work force by two percent.
+ Now, in the upper grade levels, which I think is also
+important besides the overall figures, I want to share with you
+some figures regarding women and minorities.
+ Fifty-six percent of the promotions have gone to women, in
+the upper levels. That would be grade 13 and above. And for
+minorities, 44 percent of the promotions have gone to
+minorities.
+ Mr. Lewis. In Southern California we are experiencing a
+rather phenomenal adjustment in our population, and there are
+similar impacts in States like Florida and Texas, a very
+rapidly growing Hispanic population. Can you tell me what may
+have happened to your personnel base as it relates to Hispanics
+and Hispanic speaking personnel?
+ Ms. Brown. I don't have the exact figures. We will provide
+that for you.
+ Ms. Brown. In personnel, we are doing some very active work
+in outreach to the Hispanic community. We've had a meeting
+where we had important people in the Hispanic community come in
+and give us some advice about how to improve our outreach.
+ We have had many of our publications translated into
+Spanish. We have two Spanish-speaking operators on our hotline
+now. We are doing a pilot program that we're starting work on
+in California to see how we can get our messages out to the
+Hispanic population.
+ In Texas, our outreach person down there, the person who
+works in the field, is a Spanish-speaking person of Hispanic
+descent, and he has been very active in working on this with
+us.
+ Mr. Lewis. I'd appreciate your following up on that.
+ Ms. Brown. We'll certainly get that.
+ Mr. Lewis. Mr. Frelinghuysen.
+
+ baby safety showers
+
+ Mr. Frelinghuysen. Thank you, Mr. Chairman.
+ Good morning, Chairman Brown. I'd like to thank you first
+for agreeing to come to my District to host a baby safety
+shower. I learned from being on this committee earlier from Mr.
+Hobson how successful your visit to his District was.
+ Would you be good enough to comment on your success in this
+area, what you've been able to highlight, what sort of demand
+there is out there, and what sort of private businesses have
+been helpful to you?
+ Ms. Brown. I look forward, first of all, to going to New
+Jersey, where two of my children are residents.
+ Mr. Frelinghuysen. It's a good reason to come.
+ Ms. Brown. And my great-grandchildren, in addition to
+working with you, as I said, in a bipartisan manner.
+ The baby safety showers is a grass roots effort. The CPSC,
+in conjunction with Gerber Products, who have funded this for
+us, a private/public partnership, to get the word out in an
+innovative, fun way to parents and expectant parents across the
+country about how to keep their baby safe in the home.
+ And we have promoted local ownership in the baby safety
+showers by community organizations doing this, such as
+hospitals, health departments, churches, social service
+organizations, day care centers, too numerous to mention.
+ The program cost the Consumer Product Safety Commission
+next to nothing, postage to send out documents, and minimal
+staff time. But Gerber has been very generous with us.
+ And we don't know how many showers have been held around
+the country, because this is a grass roots program with no
+intrusive government oversight or reporting requirements.
+ However, we do get reports back from people throughout the
+country that they have been holding these showers very, very
+successfully. There's a huge demand for our baby safety
+documents, a ``how to'' kit.
+ And the other thing that we have is the material has gone
+out in Spanish, as well. And, for instance, local organizations
+are incorporating baby safety showers into their ongoing health
+programs. The State of Maine has recently incorporated it into
+its entire program.
+ This is one of the ways that government should work,
+helping people to have the knowledge to help themselves.
+ Mr. Lewis. Could you yield on that point for a moment?
+ Mr. Frelinghuysen. Certainly.
+ Mr. Lewis. It just occurred to me that my colleague Mr.
+Stokes is recently a relatively new grandfather, and his
+daughter is a somewhat noted broadcaster. I wonder if a shower
+might not be appropriate. Jane might be interested. [Laughter.]
+ Jane being the grandmother.
+ Ms. Brown. I think you've pulled ahead of me in
+grandchildren.
+ Mr. Stokes. You're much younger.
+ Mr. Lewis. We're taking up Mr. Frelinghuysen's time.
+ Mrs. Meek. This is not a question.
+ Mr. Lewis. Okay.
+ Mrs. Meek. I just wanted to ask you for some equal time. My
+son just had a 9.6 pound baby boy.
+ Mr. Lewis. Congratulations.
+ Mr. Stokes. Congratulations.
+ Ms. Brown. We will send you a packet of all our baby safety
+material. [Laughter.]
+ Mr. Lewis. Mr. Frelinghuysen.
+ Mr. Frelinghuysen. Mr. Chairman, those are two tough acts
+to follow. [Laughter.]
+
+ anthropometric data
+
+ Mr. Frelinghuysen. But thank you for your leadership, for
+your willingness to come into my District. I have a general
+question relative to data collection.
+ There's a lot of adjectives in here I'm not exactly
+familiar with, but maybe you could sort of pull it all
+together.
+ You have discrete data collection, and you have integrated
+data collection, and then there is some term here that I have
+never heard of--anthropometric, which I can probably figure out
+what that is.
+ Ms. Brown. Nobody can figure out what that is. That's a
+trick word in the agency.
+ Mr. Frelinghuysen. How do all these things come together,
+and what's it all mean?
+ Ms. Brown. Well, I can tell you what anthropometric
+measurement is. I just learned that. It took me three years.
+ But, in fact, these are measurements of a child's size. And
+these are used by many other agencies as well. We are the
+agency that has this kind of data.
+ It's very important, for instance, if you're going to help
+a company decide what the space should be in something, or if
+we have to do a regulation about crib slats spacing, what are
+the sizes that babies can get through or not get through? It's
+a very serious science.
+ And we are looking for some additional funding, because we
+think this measurement needs to be updated, this data, because
+the American children are becoming larger.
+ So therefore we only have the money to do a pilot project,
+and it's very, very important. Now, somebody is going to help
+me with discrete data. I'm going to call on the professionals.
+This is Ron Medford.
+ Mr. Frelinghuysen. Thank you for response. But a 9.6 pound
+baby. That sounds like rather a discrete figure. [Laughter.]
+ Ms. Brown. Ron is Director of Hazard Identification.
+ Mr. Medford. The discrete database that is referenced in
+the budget document really deals with those finite bodies of
+data collection systems that we have--the National Electronic
+Injury Surveillance System, which is our hospital emergency
+room data system that fits into that category.
+ The death certificate collection program that we do with
+the States is a discrete program. The medical examiners/
+coroners alert program is a discrete program.
+ Mr. Frelinghuysen. Discrete in the sense that it's limited?
+ Mr. Medford. Discrete in the sense that it is a program
+that we collect every year, and it's definitive in terms of the
+universe of products that we're trying to collect information
+on.
+ The integrated part was actually referred to in the
+information technology area, where we're trying to put into the
+computer system a way in which someone can sit at the terminal
+and pull all of that information together from one place, and
+integrate those databases.
+ So you have all those discrete databases with that data in
+it today that aren't integrated. You go from one computer file
+to the next. The effort that we're talking about is actually
+integrating those, and that's where the word integration comes
+from.
+ Mr. Frelinghuysen. It's fascinating.
+ Ms. Brown. So our entire staff can have access to a single
+database quickly.
+ Mr. Frelinghuysen. That's fascinating. Thank you very much
+for shedding some light on that. Thank you, Mr. Chairman.
+
+ telecommuting
+
+ Mr. Lewis. Thank you, Mr. Frelinghuysen. Mr. Price?
+ Mr. Price. Thank you, Mr. Chairman. I'd like, to add my
+thanks to our guests this morning, and probe a bit on a couple
+of items in your testimony. You talk about the efforts you've
+made to save funds through using telecommuting, page six of
+your testimony, I'm referring to.
+ The field telecommuting effort, under which staff use
+computers to work out of their homes. That's an interesting
+trend in the work place in general.
+ It sounds like you've gone quite far with it. I'd like to
+know how this works. With over half of the field staff
+telecommuting--that sounds like a pretty extensive trend. I
+wonder, how does this work? How does it save money? How does it
+change the face of your field operations?
+ Ms. Brown. Well, I think telecommuting is an excellent
+example of how we work smart at CPSC. It means that in the
+right conditions, employees may work from their homes using
+computers and other information technology.
+ So technology has certainly made an advance in this. We did
+a pilot test late in 1995 that showed that working from homes
+could be productive. And with the success of the pilot, we
+offered the option to all our field offices to do this on a
+voluntary basis.
+ The person had the right to accept it. Those who are new
+hires are hired with the idea that they will work from their
+homes, but people who were there could choose to or not.
+ Now, the results have been very, very good. We have reduced
+field space rent by 50 percent, saving about $500,000 annually.
+And that's a big chunk of change for the Consumer Product
+Safety Commission with our small budget.
+ We've released GSA space in 18 cities, and significantly
+reduced office space in 13 cities. Over 50 percent of our field
+staff telecommute. Now, that's 69 employees out of 128. So you
+know when we're talking about--this is not a huge amount of
+people. We only have 128 field staff.
+ We expect additional savings in the future, as non-
+participating employees leave, and we have found, most
+important, that telecommuting, with less commuting time and
+better automation tools, has improved both employee morale and
+productivity.
+ Mr. Price. Now, these telecommuters, are they typically
+working out of their homes entirely? Or for part of their work?
+ Ms. Brown. They are typically working out of their homes
+entirely.
+ Ms. Gall. They are also working in the field, doing
+investigations, and that's another reason that technology
+integration is so important, because that way our field people,
+if they're on site doing an investigation, can tap inwith a
+laptop computer to some of the technology information we have in
+Washington, in the area here, pull up additional data about that
+particular issue, and send in their investigation report and so on with
+the technology.
+ That's why it's such an important investment for us. And
+they also go into their various regional offices for meetings,
+and have an ongoing relationship with the heads of those
+offices.
+ Mr. Price. They would have an ongoing relationship with the
+regional offices.
+ Ms. Gall. Of course.
+ Mr. Price. Does this pose any problems in terms of
+supervision and communication?
+ Ms. Gilbert. It has actually improved communication,
+because what we often had in the past were many layers of
+supervision that the field investigator, the line staff person,
+had to go through before the information filtered to
+headquarters where we need it, and need it as quickly as we can
+get it.
+ And what our field staff is now learning to do more and
+more, because of the telecommuting effort, is to deal directly
+with the compliance officer in headquarters who is conducting
+the overall review of the product.
+ And so we're getting quicker input, and quicker information
+back and forth from the field, and better information, because,
+as you know, like in the game of telephone, if too many people
+are filtering the message, you don't get as clear a message as
+you do if it goes directly from the person requesting it to the
+person actually doing the work.
+ So communication has much improved because of the
+telecommuting effort.
+ Mr. Price. So you're saying you get the best of both worlds
+from this kind of development?
+ Ms. Brown. Yes.
+ Mr. Price. You anticipate saving $500,000 annually?
+ Ms. Brown. We are saving it annually.
+ Ms. Gilbert. In 1997 we'll save $500,000. We hope to
+increase that as the years go on.
+
+ voluntary compliance
+
+ Mr. Price. Let me quickly ask you about one further aspect
+of your testimony. You stress your voluntary compliance
+efforts. You refer with some pride to negotiating 106 voluntary
+corrective actions in fiscal year 1997.
+ You also talk about the stress on cooperative, non-
+adversarial solutions as a hallmark of your Administration,
+your leadership at the Agency, pointing out that you've
+developed 17 voluntary standards, and issuing only 10 mandatory
+regulations since you became chairperson.
+ I wonder if you could fill in the record on that as well,
+and particularly the trend toward voluntary corrective actions?
+Can you give us some sense of how that 106 figure for fiscal
+year 1997 compares with previous years, and what kind of change
+in approach or policy, if any, is implied by that?
+ Ms. Brown. We have increased working with industries
+voluntarily. There are two different ways that we work. One is
+our compliance people, who do recalls. And almost all of our
+recalls of any dangerous product are arrived at voluntarily,
+negotiated with the company that has the recall.
+ The other area are voluntary standards, that's standards of
+a whole product category. And we have emphasized working with
+industry voluntarily, with industries. But there have to be
+certain caveats, of course.
+ The caveats are that we do monitoring of these voluntary
+standards to make sure that the industry is, in fact, adhering
+to a voluntary standard. It is much faster to work voluntarily.
+To do a mandatory standard, which we will not hesitate to do if
+the situation presents itself, however, that takes a very long
+time, and we very often end up in court.
+ Speed is of the essence for what we're doing, in order for
+more people not be injured. So a voluntary standard is
+preferable if it is complied with, and if it is speedily
+arrived at.
+ If that doesn't work that way, then we must turn, of
+course, to mandatory standards, as we did with our child
+resistant caps. Caps are child resistant, and have been for a
+long time, and the poisonings for young children have gone from
+284 a year to 34 a year.
+ But 34 a year is still too many children dying from
+poisonings from medications.
+ With the child safety caps, we now have found that we have
+the technology to make child resistant caps and also adult-
+friendly. We were able to negotiate with the industry, but to
+reach a regulation for that, we had to go the mandatory route.
+By the end of this year you will find that all of that
+medication that used to be only child resistant now will be
+easy for adults to open as well.
+ Mr. Price. Well, and the possibility that mandatory
+standards are an option, of course, strengthens your hand in
+negotiating these voluntary agreements.
+ Ms. Brown. That is correct.
+ Mr. Price. If there is something you could furnish for the
+record that would give us some idea of any trendlines in this,
+that would be helpful.
+ Ms. Brown. We'll come up with that for you, certainly.
+ [The information follows:]
+
+ trend in the number of voluntary corrective actions
+
+ The trend in Section 15 voluntary corrective actions has
+been increasing during Chairman Brown's tenure at CPSC. The
+chart below covering fiscal years 1994-1997 (to date) reflects
+that increase.
+
+Fiscal year: Voluntary corrective action plans
+ 1994.......................................................... 159
+ 1995.......................................................... 280
+ 1996.......................................................... 302
+ 1997 (to date)...............................................\1\ 164
+
+\1\ Thru May 15.
+
+ Ms. Brown. In fiscal year 1994, there were 36 voluntary
+standards. Fiscal year 1995, 40 voluntary standards. Fiscal
+year 1996, 51 voluntary standards. Eleven more than 1995, and
+15 more than 1994. We have found this a very successful way to
+work with industry, but as we say there must be compliance with
+the voluntary standard.
+ Mr. Price. Thank you. Thank you, Mr. Chairman.
+ Mr. Lewis. Thank you, Mr. Price. Mr. Walsh.
+
+ savings from telecommuting
+
+ Mr. Walsh. Thank you, Mr. Chairman.
+ Thank you, Chairman Brown, for your testimony today.
+ Mr. Price asked some questions about this telecommunicating
+which is something I am very interested in. Before I came here,
+I spent 15 years in the telecommunications industry. This is
+sort of what we talked about back then.
+ I am just curious, though. On these savings, you said most
+of those savings came from rental savings, so you were able to
+consolidate offices and reduce rent.
+ Ms. Brown. Or in some places eliminate an office
+altogether.
+ Mr. Walsh. Okay. Now, when you talk about savings,
+obviously there are some costs that increase to things like
+personal computers, and modems, and telephones, and telephone
+lines. Lease lines, perhaps. Faxes. Printers. And maintenance
+agreements.
+ Are all of those costs included, when you consider what
+savings you have had? Have you considered also the increased
+costs?
+ Ms. Brown. All right. Let's get the Executive Director,
+Pamela Gilbert.
+ Mr. Lewis. One more time, Ms. Gilbert.
+ Ms. Gilbert. The $500,000 is not a net cost. It is the cost
+that we are saving from our rent. However, the other costs that
+are involved in telecommuting, that you just mentioned, Mr.
+Walsh, much of that we would have had to spend anyway. We have
+to update our computers. We have to buy new computers for the
+field.
+ So we bought the portable type rather than the type of
+computer that sits on your desk. But we would have had to
+replace computers anyway, so there are just really marginal
+costs that have been involved. For example, we had to have fax
+capabilities anyway for these offices.
+ One of the things to remember with our field offices--many
+of them are one or two person offices. So the fact that those
+people went to their homes, did not mean we had to buy a lot
+more equipment for each person, because they had most of it in
+their offices.
+ But what we do not have to do anymore is pay rent for that
+office because they are now working from home.
+ Mr. Walsh. Would each of these individuals then have a PC
+or a laptop, a modem, a fax, printer?
+ Ms. Gilbert. Yes. They have all of that, all of the
+equipment that you just mentioned, at their home. But again,
+they would each have had most of that at their office anyway.
+ Mr. Walsh. Each one of them?
+ Ms. Gilbert. For the most part that is right. So that we
+did not have very many additional costs included in the
+telecommuting effort.
+ Mr. Walsh. How about with more people contacting from
+different locations your mainframe or whatever it is that you
+have at your office? Did you have to spend additional funds to
+upgrade that, so that more people could access it? More courts?
+ Ms. Gilbert. Oh, you mean as far as telecommunications at
+our headquarters?
+ Mr. Walsh. Yes. At the central location.
+ Ms. Brown. Doug may know that.
+ Ms. Gilbert. Our Information Services Director will respond
+to that. Doug Noble.
+ Mr. Walsh. I just want to make sure--you know, the savings
+sound great, but are they real savings?
+ Ms. Brown. Right. Now you must understand, of course, the
+$500,000 savings are annual, while our equipment costs of
+course are one time.
+ Mr. Walsh. Sure. Absolutely.
+ Mr. Lewis. One time, they replace it.
+ Ms. Brown. That is right.
+ Mr. Walsh. That does not mean it is charging this rental
+for the private lines or the American On Line, or whatever it
+is that you use?
+ Mr. Noble. That is correct, Congressman Walsh, and what we
+have done, regardless of telecommuting, has gradually expanded
+our telecommunitions program. We had a wide area network in
+place, and as more and more staff, got on to this network, who
+needed access, we found the load increasing on our network.
+ What we are looking for is a way to sustain our
+communications and increase the capability for staff to work
+off our headquarter's computer network.
+ Mr. Walsh. So you have a lease-line network for these folks
+that are not dialing over the network? They are not dialing
+that?
+ Mr. Noble. We do it through Federal Telecommunication
+Service lines.
+ Mr. Walsh. Okay.
+ Mr. Noble. It is basically phone lines that we have, and
+they come into our headquarters computer in Bethesda.
+ Mr. Walsh. Could you estimate the cost of establishing that
+for your field folks?
+ Mr. Noble. The wide area network itself? It was
+approximately $100,000 to establish equipment and lines, and of
+course there had to be some training involved for these
+employees to learn how to actually use the network.
+ [The information from Mr. Noble follows:]
+
+[Pages 535 - 537--The official Committee record contains additional material here.]
+
+
+ Mr. Walsh. Sure. Now, does each one of these employees have
+a maintenance contract for all the equipment that they have
+also?
+ Mr. Noble. Up till this year, we actually had equipment
+that would have been under warranty. As the equipment has aged,
+the warranties have expired, and so in 1998 we are going to
+have to develop blanket purchase arrangements for on-site
+maintenance, if our employees at our headquarters cannot help
+the employee troubleshoot it through a telephone call.
+ Mr. Walsh. If we could, perhaps next year, maybe--or maybe
+in ensuing months you could give us sort of an estimate of the
+cost of migrating your field staff from office oriented to home
+oriented.
+ Ms. Brown. Right. We will get that to you.
+ [The information from Ms. Brown follows:]
+
+[Pages 539 - 540--The official Committee record contains additional material here.]
+
+
+ productivity of telecommuters
+
+ Mr. Walsh. Because I think the application is marvelous.
+The other question I had was productivity. You said
+productivity was increased. How do you measure that?
+ Ms. Brown. How do we measure increased productivity?
+ Mr. Noble. Well, if I may just volunteer, the easy answer
+is we have saved thousands of hours in administrative time in
+terms of just improved communications. We can send messages,
+instantly, whereas before, it would have taken days, weeks, and
+hours, and that would have had a direct impact on our ability
+to react quickly to any situation we needed to address.
+ So I think that is your major answer--is thousands of hours
+of administrative time have been devoted to programmatic work.
+ Ms. Brown. Our talk with supervisors has also shown us that
+they feel that the work they are getting from their staff
+members is more productive. We have also found that people who
+have done this like it. When you have people who are working
+happily, they are usually working smarter and better.
+ Mr. Walsh. And I think you mentioned earlier about
+flattening out your organization.
+ Ms. Brown. That is the other point I wanted to make.
+ Mr. Walsh. That is, eliminating layers that really did not
+get----
+ Ms. Brown. Layers of bureaucracy is something that we
+really wanted to cut through with that commission, and this is
+a very important step forward in doing that. We have been able
+to do it, you know, quite easily at headquarters, when you
+start to do that. But when you start to do it in the field, it
+is quite important.
+ Mr. Walsh. I think your experience--and I am not sure what
+other departments of Government are doing this--could be very
+valuable to the rest of the Government, if we could quantify
+what the start-up costs are in the monthly or annual costs of
+doing it this way, and then compare that to the actual savings
+and productivity.
+ Ms. Brown. I think we must have that, because we won an
+award of reinventing Government, a Government award on this
+telecommuting program from the Vice President for reinventing
+Government. It is one of our three hammers. [Laughter.]
+ But I do think that we must have this, and we will get this
+to you, promptly.
+ Mr. Walsh. Great.
+ Mr. Lewis. Would you yield.
+ Mr. Walsh. I would be happy to yield.
+ Mr. Lewis. Mr. Walsh, you are asking a line of questions
+that is very important, but it has been suggested that that
+which you do not measure, you never know the results of. So I
+would be very interested in our next session, a year from now,
+having a full discussion of the way you measure increased
+productivity, and what it really means, in more detail, et
+cetera, so that we can get a handle on that, as that might be
+reflected in requests in other agencies.
+ There was, Ms. Brown, an item on television this morning, I
+am not sure which of the channels was involved, where they were
+talking specifically about this whole area of telecommuting,
+people doing work at home, et cetera, and reporting seemed to
+be, from whatever operation that was from the private sector,
+considerably different than that which I am hearing here.
+ I mean, you might have somebody try to figure out which
+program that was, and it is an interesting story and it relates
+to this whole subject area that has a growing interest----
+ Ms. Brown. Yes. We will find that. We can find that with a
+television monitor that we have.
+ Mr. Lewis. Okay.
+
+ airbags
+
+ Mr. Walsh. Mr. Chairman, if I could just ask several
+questions on airbags.
+ Mr. Lewis. I might mention that it is obvious that other
+committees are through with their hearings, so we have got a
+broader attendance. We tend to take up all the time that is
+available, regardless, so I might mention that----
+ Ms. Brown. Well, I am delighted and I thought it was
+excellent attendance because of the fine job that we did.
+ Mr. Walsh. Life is easier when there is only one hearing a
+day. [Laughter.]
+ Ms. Brown. Yes.
+ Mr. Walsh. On airbags for cars, I do not have in either of
+my cars, airbags, but obviously it has been a huge controversy.
+ But what has been your department's role in this, and where
+do you see this thing going?
+ Ms. Brown. Well, quite honestly, you know that airbags are
+in the jurisdiction of the National Highway Traffic Safety
+Administration. We have nothing to do with airbags.
+ Mr. Walsh. I did not know that.
+ Ms. Brown. But I can just give you a----
+ Mr. Lewis. But as a mother.
+ Ms. Brown. Well, not only as a mother, but as a short
+woman, I can tell you that other women have called me, who know
+I am in the safety business, and I have been able to tell them
+where they can get pedal extenders.
+ What we have learned for our agency, to try and look at the
+airbag experience--and I have made this very clear to our
+entire agency--any time that you do a safety innovation, you
+must look to see what will be the results of that innovation.
+ Your testing has to include more than just a 5 foot nine
+male in the testing. We are a scientific and technical agency.
+You must use the best science and technical abilities available
+to understand further repercussions of safety.
+ We do do data collection for the National Highway Traffic
+Safety Administration through our data collection system of
+emergency rules. But the airbag situation does give us a lesson
+in health and safety regulation.
+ Mr. Walsh. Thank you.
+ Mr. Lewis. Thank you, Mr. Walsh.
+ To my favorite grandmother, I want you to know that I only
+have six grandchildren. So I am behind you now.
+ One more time, Mrs. Meek.
+ Mrs. Meek. Thank you, Mr. Chairman, and to Administrator
+Brown, we are very pleased to have you here today, and knowing
+of the accomplishments of you and your agency in the past, I
+want to commend you.
+ My commendation, first of all, is based on the fact that
+you have been able to work out a reciprocal kind of
+relationship with business, where you do not come on as some
+big arbitrator in the sky, and just say we are going to change
+this, and they have to conform to everything.
+ I think that is going to add to the continuous success of
+your agency, and what you are doing.
+ I also would say in the area I represent, there are a lot
+of middle income to low income people, and they profit, and can
+profit a lot from your informational technology, and I would
+agree that this is an area you really need to enhance, and only
+through the help of this Committee can you do that.
+ But I do hope that this Committee will be favorable to
+that, because the outreach efforts, and the way you have of
+reaching out to all the public is extremely important, in that
+so many of them know very little about the consumer product
+agency. But when they hear it or see it on television or see it
+in their newspapers, or have some of the local commentators
+talk about it over the air, it is extremely important.
+ And I think a lot of this success has been due to the fact
+that you have women in the agency who have had to confront
+these kinds of things; not to say that men do not have this as
+one of their priorities. But I think that that approach has
+helped also.
+ So I do hope that the information technology--I cannot
+imagine your being able to do a good job without all aspects of
+the computer industry, particularly in this area. We would not
+dare say to NASA, to any other agency, ``We want to limit your
+capacity to reach your constituency.'' So I do hope that this
+will come over real strong with this Committee.
+ And I notice that you are doing quite a bit in fire
+prevention.
+ Ms. Brown. Yes.
+
+ fire prevention
+
+ Mrs. Meek. That is really, really a very big problem in the
+area, and the people I represent. Many of them--there are a lot
+of fatalities because of fire, because of the societal
+conditions that exist in those areas.
+ And I do hope that perhaps the Agency can set as one of its
+goals a focus on how to reach those communities, and delivery
+systems that will help make it more possible for you.
+ Ms. Brown. Fire prevention, of course, has been one of our
+major efforts, the fire prevention, and we are doing many
+things. Now, additional funds that would be used to try and see
+what we can do about the high cost of fires, both with human
+lives and also with what it does to a community--something
+burns out, and the whole economic vitality of an area will be
+damaged.
+ Increased funding would provide a mix of research and
+action items for us to further continue our fire efforts. We
+need a broader and more inclusive attack on the Nation's fire
+problems, especially in the lower income communities which bear
+the brunt, and to the elderly and children.
+ Mrs. Meek. Right. My last mention here is the fact that you
+are dealing with usually an industry that is well-established.
+I want you and your staff to think also about some of the
+linkages into that focus group you have here, in industry, that
+there are a lot of flea markets and a lot of discount places
+which people, middle income people, and lower----
+ Ms. Brown. Dollar Stores?
+ Mrs. Meek [continuing]. And middle income people like
+myself frequent. And many times they have not gone through the
+process that you have indicated. So your investigative powers,
+in that regard, would come into good help, a good consumer
+product help in those areas.
+ Ms. Brown. Our recall roundup, which I mentioned before,
+was emphasized in communities and focused on making sure that
+older products, that do not meet our safety standard were
+either repaired or destroyed.
+ Mrs. Meek. That is right.
+ Ms. Brown [continuing]. We also emphasize emergency room
+health care. Many people do not go to pediatricians. That is a
+luxury, these days.
+ Mrs. Meek. That is right.
+ Ms. Brown. They get their primary health care very often in
+emergency rooms. So we are extremely cognizant of the
+populations that we need to serve.
+ Mrs. Meek. Thank you.
+ Ms. Brown. Thank you very much.
+ Mr. Lewis. Thank you, Ms. Meek.
+ Mr. Wicker.
+ Mr. Wicker. Thank you, Mr. Chairman, and before I begin, I
+would note that we are joined by my colleague, Mr. Hobson.
+ Mr. Lewis. His questions have been asked already.
+ Mr. Wicker. Who is also a new grandfather. [Laughter.]
+ Ms. Brown. We have had all kind of reports today, Dave. How
+many pounds did yours weigh?
+ Mr. Hobson. Eight pounds, 5 ounces. I was there, but not in
+the room. That is number four. Trying to catch up. [Laughter.]
+ Mr. Wicker. Congratulations.
+ Mr. Lewis. Mr. Wicker.
+
+ upholstered furniture flammability
+
+ Mr. Wicker. Madam Chairman, I appreciate you being here,
+and I also want to say, at the outset, that I recently
+requested that your senior staff meet with mine concerning your
+commission and your mission and activities, and that briefing
+was very helpful to them and to me.
+ Ms. Brown. Thank you, sir.
+ Mr. Wicker. I want to talk, briefly, today, about
+flammability and the upholstered furniture industry.
+ As you may know, in my district in Mississippi,
+manufacturing is one of the largest sectors of the economy, and
+of that sector, upholstered furniture is overwhelming the
+largest portion, employing tens of thousands of people.
+ Ms. Brown. Yes, sir.
+ Mr. Wicker. This is a very price-sensitive industry, with
+hundreds of very, very small businesses participating in the
+manufacture of upholstered furniture. Any unnecessary
+regulatory cost which might be placed on the industry could
+have a negative effect on job creation as well as on the
+ability of consumers to afford the product.
+ It is my understanding that the commission has a number of
+furniture-related projects, which I will ask you about in just
+a moment. But also that the industry itself has been very
+proactive in assisting your agency in its work.
+ I have received a briefing about your agency's ongoing
+projects regarding upholstered furniture flammability.
+ Approximately 75 or even 80 percent of such fires are
+caused by smoldering cigarettes, as you know. The industry has
+made great strides in this area through its voluntary program
+known as the Upholstered Furniture Action Council.
+ Ms. Brown. UFAC.
+ Mr. Wicker. Or UFAC. The UFAC program on a cost-effective
+basis has established construction criteria which must be met
+by the upholstered furniture manufacturers in order to qualify
+for participation. Reflecting the success of UFAC, over 90
+percent of the dollar volume of U.S. furniture is pledged to be
+in compliance.
+ This has been a success story, according to your own
+agency's data. Since the beginning of the UFAC program in 1978,
+there has been approximately a 76 percent reduction in fires
+associated with a cigarette ignition of furniture, and this
+rate continues to fall each year.
+ My question concerns my understanding that your agency is
+now considering whether to supplant this voluntary industry
+standard with a mandatory Federal regulation.
+ I further understand that your agency is studying whether
+to move beyond cigarette ignition to require resistance to
+small open flame sources such as lighters, matches and candles.
+ This is a much more complex and a much more potentially
+expensive undertaking to make upholstered furniture resistant
+to such open flame ignition sources.
+ I note on page one of your testimony, that the mission of
+your agency is to protect the public against unreasonable risk.
+ Ms. Brown. Correct.
+ Mr. Wicker. And it is not totally clear to me that a
+reasonable consumer expects his or her couch to be totally
+impervious to open flame. I am also not sure what materials or
+constructions would yield this level of resistance to open
+flame, and at what cost to the consumer.
+ I certainly share the comments of Mrs. Meek concerning the
+need for fire prevention. In my other subcommittee on labor,
+health and education, we are funding a pilot program of smoke
+detectors for this program.
+ So, clearly, the agencies are working together, and none of
+wants to jeopardize the progress the industry has made on the
+larger question of cigarette ignition. Nor would we want to
+render furniture unaffordable to lower or middle income people.
+ So my question to you is since it has been a little over a
+month since your staff met with my staff, could you update us
+on the Commission's furniture project?
+ Ms. Brown. Yes; I certainly will. First of all, I was down
+in High Point and had a very, very successful and well-received
+visit to the furniture market. I think it is very important
+that the lines of communication are kept open in this, and for
+their work in another field--it happened to be bunk beds--they
+won an award working with us on a voluntary standard. So we
+would not turn to this just haphazardly, unless we saw cause.
+And I am going to have Ron Medford talk to you about this. This
+is a work in progress. We have not completed it, and we have
+not reached any conclusions--that is what we are doing work
+for. And Ron will talk to you further about where we are in
+this, and why we began this.
+ Mr. Medford. Just quickly, by way of background, the
+Commission was petitioned by the National Association of State
+Fire Marshals to actually promulgate three mandatory rules or
+standard.
+ One rule, a mandatory rule for smoldering ignition from
+cigarettes. The second one for a small open flame rule, the one
+you have been mentioning. The third rule is for a large open
+flame test.
+ The Commission has taken several actions. First, on the
+large open flame issue, it denied that portion of the petition,
+which is more appropriate for commercial furnishings and not
+for residential furnishings.
+ It deferred action on the cigarette part of the petition
+until it evaluated the degree of conformance by the industry
+with the voluntary program. And that work is going on right
+now. The staff has almost completed that work, and intends to
+give it to the Commission, some time in June.
+ And thirdly, the Commission granted the piece of the
+petition that dealt with small open flame ignition, because the
+Commission found that it may present--these are preliminary
+findings on the part of the Commission--an unreasonable risk of
+injury, and that there are no national standards, either
+voluntary or mandatory, that address that issue, except in the
+State of California.
+ What the staff has been doing is looking at the technical
+feasibility of developing a small open flame standard, and
+looking at the cost-benefit considerations, the one issue that
+you mentioned. All of those things are really intended to come
+to the Commission for a decision.
+ The decision the Commission will make next with respect to
+those two issues is whether to grant the petition on smoldering
+ignition, which would depend entirely on the degree to which
+the voluntary program is working and being conformed with by
+the manufacturers.
+ And secondly, the open flame issue is whether or not to go
+to the next stage of rulemaking, which is a proposed standard.
+ It will be the first time that the Commission is presented
+with a preliminary regulatory analysis which looks at the cost
+and the benefits to society of such a rule.
+ The upholstered furniture area actually represents one of
+the largest area of fire deaths in the country. There are
+something like 680 fire deaths every year, amounting to $244
+million in property losses. The latest fire statistics for
+upholstered furniture are attached. So it is one of the biggest
+fire problems that we have in the Nation, and that is why we
+are spending so much time and effort looking at it, along with
+a number of other serious fire problems in the country.
+ [The information follows:]
+
+[Page 548--The official Committee record contains additional material here.]
+
+
+ So that is where we are. The next stage for consideration
+is whether the Commission wants to propose a regulation for
+small open flame, and at the Commission we are required to use
+a three stage rulemaking process.
+ Mr. Wicker. Does Commissioner Gall want to comment?
+ Ms. Gall. I just wanted to comment that I think some of the
+figures that Ron is quoting about the number of deaths, and the
+fire incidents associated with upholstered furniture are very
+old and before the UFAC certification program came into being.
+ So that has to be remembered as well. That is a factor. I
+voted against moving the small open flame portion of that
+particular petition because I did not feel we had sufficient
+data to move forward. So I am the dissenting vote.
+ Mr. Wicker. I appreciate what everyone has had to say about
+that, and particularly keeping lines of communication open, and
+I would simply reiterate that up to 80 percent of the
+upholstered furniture fires are related to smoldering
+cigarettes, and much progress has been made and continues to be
+made to the tune of over a 75 percent reduction.
+ I would also simply mention to you, Madam Chairman, that
+the second largest furniture market in the Nation is in my
+hometown of Tupelo, Mississippi, and I would certainly welcome
+having you come down and meet with the very, very small
+furniture manufacturers who supply that second largest event,
+and I think you would astounded to see the progress we have
+made in Northeast Mississippi.
+
+ fire safe cigarette
+
+ Ms. Brown. I would love to do that, and I will look forward
+to an invitation, and of course small business is equally as
+important to me. My family background is in small business.
+ I do want to mention one other thing to you. The
+upholstered furniture industry has unfairly borne a largeburden
+of cigarette smoldering emission fires, because the cigarette industry
+has not shouldered its share.
+ We had, in 1994, a bill entered by Congressman Moakley. We
+had done some work that showed that the cigarette industry
+could work, and in fact did work with us. It was possible to
+make a more fire-resistant cigarette. That bill did die, and
+there does not appear to be anything, although we have talked
+to Congressman Moakley about that again.
+ That the cigarette industry should in fact assume its full
+share of the burden of reducing fire deaths.
+ Mr. Wicker. Thank you.
+ Mr. Lewis. Mr. Wicker, thank you very much for your
+questions, and your special interest in this subject area is
+helpful to the Committee as we review the work of the
+Commission. I might mention that I am very interested in your
+exercise of measurements by way of a cost-benefit ratio. I
+would appreciate your helping us get a better understanding for
+the record relative to how you go about making those
+measurements. The question of upholstered furniture, for
+example, that may have been put in the marketplace before
+certain standards were met is important.
+ When one talks about fires and you relate X number of fires
+to X billions of dollars of less, whether the original cause
+was a forest fire or in the home, those questions are relevant
+questions and, indeed, it is important that we be measuring in
+a way that is helpful to all of us.
+ [The information follows:]
+
+[Page 551--The official Committee record contains additional material here.]
+
+
+ Ms. Brown. We have what we call good-natured disagreement
+here, and you will get our data, and the data that we have from
+the fire services, which show how carefully we measure cost-
+benefit. Of course it is part of our regulations.
+ Mr. Lewis. I must say that we find, on this side of the
+table, that good-natured disagreement between us often
+stimulates better results and answers as well.
+ Ms. Brown. There you go. That is why we are a three member
+Commission.
+ Mr. Lewis. Mr. Hobson, I might mention to you, formally,
+for the record, that questions regarding savings and rent, and
+et cetera, have been asked, extensively, but we would love to
+have you round out that portion of the work. [Laughter.]
+ Mr. Hobson. Well, I do want to welcome the Chairman and the
+Commissioner today, and all the staff that is here.
+ Ms. Brown. Thank you.
+
+ small business ombudsman
+
+ Mr. Hobson. We have worked very closely with this Agency. I
+think it is an example of where we can do things together, and
+you can do them without heavy rules and regulations by getting
+people together, and work. And as a new grandfather, you know,
+I do not have as many as other people. They are all important,
+and we have learned a lot from what the Consumer Product Safety
+Commission has done, and Roger, we will all be happy to come
+down to Mississippi if you can arrange a trip for us down
+there.
+ Mr. Wicker. Wonderful.
+ Mr. Hobson. Rodney and I said we had not been invited. I am
+sure Ms. Meek will want to go, too, with us. Maybe we can get
+Lou to go also. But I do have a couple questions I would like
+to ask, if I could, very quickly.
+ And I understand that CPSC has established a highly
+successful small business omnibus program, and I do not know if
+any question has been asked about that, but would you tell us
+about what you have accomplished with that.
+ Ms. Brown. Yes. It so happens that Clarence Bishop, our
+small business ombudsman is here, and I would like him to give
+you the information on this, since we will get it directly from
+the source.
+ Mr. Lewis. Come on up, Clarence.
+ Why don't we have you formally identify yourself for the
+record.
+ Mr. Bishop. Good morning. I am Clarence Bishop, Deputy
+Executive Director of the Consumer Product Safety Commission.
+ CPSC has always been sensitive to the needs of small
+businesses, and particularly now with a Chairperson who has a
+family background in small business, that sensitivity has been
+increased.
+ So in June of last year, we established a small business
+ombudsman program to provide better services and to allow small
+businesses to interact easier with the Commission.
+ And since June of last year, we have handled responses from
+almost 1,000 small businesses representing 44 States and
+actually three or four other locations, Puerto Rico, England,
+and some other places like that.
+ And it is our goal that from the point that a small
+business contacts the ombudsman office, and within 48 to 72
+hours we have an answer or the information or the clarification
+regarding our rules and regulations that they are seeking.
+ And we have been about 80 percent successful in this 48 to
+72 hour turnaround time.
+ Mr. Lewis. Did you want to make a comment about that?
+Anybody else?
+ Ms. Brown. No; no.
+ Mr. Lewis. I am just happy to see that program working, Mr.
+Bishop.
+ Ms. Brown. Not only to our expectations but Clarence Bishop
+has been excellent in this, and it is working really very, very
+well. We are awfully pleased. We had a small business
+conference where we announced this, and there were many small
+business people who are scared of Government and Government
+regulation. I know that from my father's experience.
+ Mr. Lewis. We all were, when we were in business.
+[Laughter.]
+ Ms. Brown. Well, on particularly small business. And this
+has really started to bridge the gap.
+ Mr. Lewis. I think that is very important because small
+business does not have the resources a lot of times, and people
+come in and you get whacked with these things and you want to
+do the right thing but sometimes you just cannot.
+ Ms. Brown. No; no.
+ Mr. Lewis. Good. Thank you, Mr. Hobson.
+ Mr. Hobson. I have a couple other questions.
+ Mr. Lewis. Do you really?
+ Mr. Hobson. Yes. [Laughter.]
+ Mr. Lewis. We have two other agencies. Are you going to
+stay for a while?
+
+ drawstrings on childrens' clothing
+
+ Mr. Hobson. Yes. For one of them anyway.
+ I want to talk just briefly about drawstrings, because we
+worked on that, and it was a wonderfully successful program,
+but I am really concerned about an article I read the other
+day, and I am not sure whether it is correct or not. But the
+school buses in the districts are not fixing those mirrors as I
+understand it. It is like a five dollar repair to fix these
+mirrors, that the drawstrings would not get caught in it.
+ Now we have successfully gotten the clothing manufacturers
+to come forth and do their part, without any rules or
+regulations.
+ What do we need to do to get these school districts to make
+this repair so some young person does not get caught again?
+ Ms. Brown. The place that we have been able to be
+effective, as you are saying, the Consumer Product Safety
+Commission, is we now have a voluntary standard and the
+industry leapt forward to do that. Where there should be no
+more than 2 inches at the waist, where they removed the strings
+at the neck, voluntarily, and there should be only 2 inches
+allowed at the waist and it must be tacked.
+ Fortunately, that is on all new clothing and we have
+monitored the industry, monitored the stores to see that that
+is correct.
+ The other part about it could happen on school buses, since
+that is not something we can attend to except to encourage our
+sister agencies and local jurisdictions to do that, that is
+another part of it.
+ Mr. Lewis. We all need to figure out how to send out a
+message, then, because it is like $5 a bus. We are not talking
+big money and a child's life is certainly worth it.
+ Ms. Brown. I think the National Highway Traffic Safety
+Administration has been trying to work on this, and I think
+that what I will do is to, when I get back today, call Dr.
+Martinez and see where we are on this.
+ Mr. Lewis. And I will have my staff make an appointment for
+you and Mr. Porter so we can discuss it whenever HHS comes in.
+ Mr. Hobson. Okay. I would like to do that because it is
+something that should be done.
+ Quickly, on two other things. I want to continue to
+encourage you on the baby safety showers because people talked
+about we have done it, we are going to try to do it with
+another Member close to us, and I think it is a good thing for
+Members to----
+ Mr. Lewis. Near Cleveland?
+ Mr. Hobson. No, this is going to be over near Columbus.
+Cleveland is a little far for me to drive. [Laughter.]
+
+ laboratory consolidation
+
+ Mr. Hobson. And we always consider it way up north.
+ If you want to do one, I will be happy to come, if you guys
+are going to be there.
+ The other thing is, and I understand maybe you have talked
+about this already, but I use you as an example before all the
+other agencies when they come in on rent, because you did fight
+on it.
+ The GSA guy did show up and said, ``Hey, what are you
+doing?'' but he was very positive about what is happening on
+that, and I want to congratulate you. I think you have probably
+talked about this, about receiving the Hammer Award. I think
+that is pretty neat and----
+ Ms. Brown. We also are consolidating our two----
+ Mr. Lewis. You won on that. That was a big fight you had
+with GSA. That needs to be in the record, that she won, and
+fought on that. [Laughter.]
+ Ms. Brown. And we are consolidating our laboratories and it
+has worked out to be a very successful enterprise and we will
+be----
+ Mr. Hobson. Where are you consolidating?
+ Ms. Brown. Pardon me?
+ Mr. Hobson. Not in Ohio. Not in my district.
+ Ms. Brown. No; no.
+ Mr. Hobson. But the important thing is that agencies need
+to know that you can have these discussions with GSA and that
+you can work things out and get it done, and that is an
+important message to be sent to everybody, I think.
+ Because there is a tendency for agencies to say, ``Well,
+GSA said this,'' and I do not think we have to--you have to
+live with that. So thank you, keep up the good work, and thank
+you, Mr. Chairman.
+ Mr. Lewis. Thank you, Mr. Hobson.
+ With the attendance we have had today, I must mention that
+somebody, one side or the other, has asked all the questions I
+had formally prepared, which I thought might happen.
+ Ms. Brown. I have not answered one of your questions, if I
+may, about our Hispanic staff. Eight percent of CPSC's
+minorities are Hispanic. Two percent of CPSC's overall staff
+are Hispanic, and Hispanic staff has increased approximately 40
+percent in the three years since I have been here.
+ Mr. Lewis. I will be interested in following that progress,
+and frankly, we have done very well, across the board, in that
+whole area of interest.
+ But nonetheless, I do find, particularly in California,
+that Hispanic access to executive levels in Government, as well
+as other locations, seems to lag significantly, and it does not
+hurt to raise that question from time to time.
+ Ms. Brown. Absolutely.
+ Mr. Stokes. Mr. Chairman.
+ Mr. Hobson. Yes, Mr. Stokes.
+ Mr. Stokes. On that area, can I just make a request that on
+this area, as in your previous questions, that Ms. Brown be
+permitted to expand on this in the record and provide tables
+for us also.
+ Mr. Lewis. Absolutely.
+ Ms. Brown. Oh, absolutely. That will all be provided,
+Congressman.
+ Mr. Stokes. Thank you.
+ [The information follows:]
+
+[Pages 556 - 559--The official Committee record contains additional material here.]
+
+
+ housing project
+
+ Mr. Lewis. Thank you, Mr. Stokes.
+ I might mention, I was going to raise this when there were
+more Members present, but there is a good number here at this
+moment. It is separate from your subject but we are still in
+session and the thought is in my mind.
+ On June the 5th, we are going to involve ourselves with as
+many Members as possible in a thing that is now being called
+``The House That Congress Built.''
+ The Speaker and the Democratic leader have agreed to come
+together, and bring the leadership together, to go to a
+Southeast location in Washington, D.C. and complete the
+building of what actually will end up being two homes for
+people by way of Habitat For Humanity.
+ It will be an effort whereby we hope to get a broad cross-
+section of Members who are in the committees, authorizing as
+well as appropriating committees, that deal with public housing
+and housing in general, kind of the edge of the kickoff of home
+ownership week.
+ We would hope that maybe that would even lead to the
+following year, Members going back to their individual
+districts and participating in similar efforts.
+ But Mr. Stokes and I are very pleased to be a part of
+sponsoring this and want to bring it to your attention while
+you are here.
+ And with that, thank you, one more time, for very fine
+testimony, Ms. Ann Brown, and I very much appreciate
+Commissioner Gall being with us, and for your contribution as
+well.
+ With that, for now, we will see you next year.
+ Ms. Brown. Thank you very much on behalf of all of us.
+
+[Pages 561 - 624--The official Committee record contains additional material here.]
+
+
+ Wednesday, May 7, 1997.
+
+ U.S. OFFICE OF CONSUMER AFFAIRS
+
+ WITNESSES
+
+LESLIE L. BYRNE, SPECIAL ASSISTANT TO THE PRESIDENT, DIRECTOR
+
+ Opening Remarks
+
+ Mr. Lewis. It's a pleasure to welcome Ms. Leslie Byrne,
+director of the Office of Consumer Affairs.
+ Ms. Byrne. Thank you, Mr. Chairman. It's good to see you
+again.
+ Mr. Lewis. Nice seeing you.
+ Ms. Byrne. Members of the committee, how are you today.
+ Mr. Stokes. Ms. Byrne, how are you?
+ Ms. Byrne. I'm doing well. I have Howard Seltzer and Sandy
+Aguilar from our staff with us today. And I have a formal
+statement that I'll submit for the record, and just make a few
+brief comments.
+ Mr. Lewis. I would make some introductory remarks as well,
+and perhaps Mr. Stokes may want to, and then we can go from
+there, Leslie.
+ It's a pleasure to welcome you to the committee, and for
+your first appearance before the subcommittee in this capacity.
+Ms. Byrne, you have the distinction of being the subcommittee's
+last witness of our review of the fiscal 1998 budget which
+began February 26th when we had hearings on NASA's budget.
+ Thank you for being with us today, and while we welcome you
+to the committee, we wish you well. We certainly hope you're
+enjoying your work as much as we're enjoying hearing from you.
+ Ms. Byrne. Thank you, Mr. Chairman, and as I say, I'll
+submit my formal remarks, but let me just say----
+ Mr. Lewis. Let me see if Mr. Stokes would like to say
+anything. He might want to welcome you as well.
+ Mr. Stokes. Thank you, Mr. Chairman. I would like to
+welcome Ms. Byrne, as a former member and colleague, and
+someone for whom we have great respect and admiration. It's a
+pleasure to have you appear here in this new position, and I
+join with the Chairman in wishing you well.
+ Ms. Byrne. Thank you.
+ Mr. Lewis. So then you can proceed as you like, Ms. Byrne.
+ Ms. Byrne. Okay. Well, because of a letter we've received,
+the good news is that we've had a generous offer from a group
+who purport to be Nigerian officials, and we won't need an
+appropriation for 1998. [Laughter.]
+ We may be able to turn money back to the Treasury. They say
+they find themselves with an embarrassing surplus of $28.6
+million, in U.S. dollars, and because of intentionally over-
+invoicing a contract, they've graciously offered us 30 percent
+if we will bank the money for them here in the U.S. and supply
+them with several items of personal information, including our
+bank account number.
+ Their letter closes with: ``let honesty and truth be our
+watchword''. So it must be legitimate.
+ Mr. Lewis. I would suggest the Office of Consumer Affairs
+proceed with great caution. [Laughter.]
+ Mr. Hobson. I've gotten those letters.
+ Ms. Byrne. That's right. And Mr. Hobson, although this scam
+is laughable on its face, and transparent, it is a prime
+example of the type of fraud based on illegal use of personal
+information, which we have focused much of our efforts at
+USOCA.
+ We focused on consumer education and policy development,
+and coordination of various agencies, so that people will be
+aware of these kinds of frauds. As a matter of fact, when we
+testified on the other side last month, Senator Bond indicated
+that one of his friends had been taken in by this very same
+fraud I just outlined.
+ We are the only executive branch agency, by executive
+order, to coordinate and monitor Federal consumer programs
+throughout the government, to identify consumer needs, and
+educate and be advocates for consumers.
+ We are non-regulatory. We have no mixed mission, or
+restrictions on our role to represent consumers. We are
+proactive in giving people the tools they need to protect
+themselves in the marketplace.
+ Mr. Chairman, our budget request shows that we understood
+what your committee was saying last year about reducing
+government and making it more efficient.
+ We are reorganizing. We are using technology to make us
+more productive, and to help the public with fewer tax dollars.
+We've instituted, since I've been there, a database that we can
+track complaints as they come in by letter and by phone,
+sharing that information with other government agencies, so
+that they have access to what we know also.
+ We're developing Web links with the FTC and the CIC so that
+our handbook is going to be on every available Federal Consumer
+Website, so that when people click in to the Federal Trade
+Commission, or the Consumer Information Center, that they can
+pick up our publication.
+ Our emphasis is on providing people with the education and
+information they need to help themselves. Because, quite
+honestly, it costs less, and is more efficient than fixing
+problems after the fact.
+ Because of the shift of our economy to a service and
+information based economy, we are planning a White House
+Conference on Consumer Issues for 1998.
+ Consumer rights are associated with products like cars and
+air conditioners, but those rights aren't easily transferred to
+international travel packages, or on line services.
+ We need to ask questions in a borderless marketplace. Where
+do you go when something goes wrong?
+ Our long term goal is a wide acceptance of core values that
+we've come to call a fair shake marketplace. These values are
+disclosure and information, choice of products and services,
+access to the marketplace, and redress when something goes
+wrong.
+ We plan to continue to recognize entities that achieve
+these goals. That's why we have such a good relationship with
+the business community. They want to do right by their
+customers, and we want to tell the public when they do.
+ Finally, Mr. Chairman, we will continue working with
+Congress on specific consumer issues, in town meetings and
+joint seminars, and on topics of privacy and fraud, credit and
+debt management and other issues that we know you feel are
+important.
+ These are some of our goals, and with the support of this
+Committee we will also continue to have a consumer advocate in
+the Federal Government. That closes my remarks, Mr. Chairman.
+ [The statement of Ms. Byrne follows:]
+
+[Pages 628 - 645--The official Committee record contains additional material here.]
+
+
+ Mr. Lewis. Thank you, Ms. Byrne. As you might have
+anticipated, the bells have just gone off. So we're going to
+move along and see what happens in the next few minutes.
+
+ USOCA REQUEST FOR FY 1998 APPROPRIATIONS
+
+ The Office of Consumer Affairs 1997 appropriation was for
+13 FTEs and $1.5 million. The 1998 request, reflecting a slight
+adjustment, 13 FTEs, the same, and $1.8 million of budget
+authority request. Mr. Stokes, any questions?
+ Mr. Stokes. Thank you, Mr. Chairman. Ms. Byrne, I don't
+think there's any secret that over the last two or three years
+your agency has had a difficult time here in the Congress.
+Since becoming Director, tell us what you've done to address
+these concerns, and what additional actions you might take.
+ Ms. Byrne. Well, the first thing we did was sharpen our
+focus. With everything being consumer issues, it's hard to deal
+with everything. So we focused in on fraud and privacy as our
+two priorities.
+ The other thing is we have reorganized to have better lines
+of responsibility within the agency itself, so that everybody
+isn't trying to do everything. Those two things, in and of
+themselves, I think helped tremendously.
+ Externally, the role that we had played as coordinator
+among the Federal agencies had been fairly moribund before I
+got there. It hadn't been an active role. We sat down with all
+the Federal agencies on April the 24th and talked about how we
+can cut out the proliferation of 1-800 numbers.
+ There are so many 1-800 numbers now, people are getting
+confused which ones to call, and how we can help each other
+enhance our messages, and create message weeks, if you will, so
+that some time some agencies will talk about seat belts, to
+help NHTSA out with their message, and others would talk about
+how to control your debt and credit to help the Fed with their
+message.
+ So those are things that I think are very positive aspects
+of our three part mission. And that is the advocacy and policy
+arm for the White House; being a coordinator among Federal
+agencies for consumers; and the education.
+ And once you get your mission clarified, I think you do a
+much better job. I think quite honestly we had not done as good
+a job as we could have in communicating that mission.
+ Mr. Stokes. Based on these activities, do you have reason
+to hope that the 1998 appropriation process for OCA may be less
+volatile?
+ Ms. Byrne. One always has hope. [Laughter.] That's how I
+got into politics. It's a very hopeful profession.
+ But I do believe that we serve a valuable function in that
+we are proactive. We don't wait for somebody to have their
+credit card misused. We try to educate people on howto protect
+their credit card numbers. That's a cheaper way to do business, quite
+honestly. That's a better way to do business.
+ And now that I think we've clarified in our own agency's
+mind how to do what we need to do, I hope that this Committee
+understands that we're on a positive road.
+
+ USOCA'S ROLE IN GOVERNMENT
+
+ Mr. Stokes. One other question, Mr. Chairman, and then I'll
+submit the balance of my questions for the record. Ms. Byrne,
+you indicate that OCA's primary focus is on fraud prevention
+and personal privacy issues.
+ Many Federal agencies have considerable efforts under way
+in these areas. What makes your activities different and worth
+while?
+ Ms. Byrne. Well, as I stated, Congressman Stokes, we have
+an umbrella approach. For example, on the issue of privacy,
+we're working on overseas privacy, in trying to find out how we
+can encourage our businesses to be able to have no trade
+barriers overseas, because they have more stringent privacy
+protections. What we can do to help them meet those privacy
+protections, and get through those trade barriers.
+ We also have the advocacy role. The Federal Trade
+Commission, for example, which is the other agency that's
+working on privacy, gets X number of calls. Two hundred, five
+hundred.
+ What we try to do is help that person who had their
+identity taken away from them in a false way, help them on the
+spot. Where do they go to get help? Who do they talk to? What
+do they have to to make it right with the credit bureaus who
+are telling them that somebody took a loan out for $100,000 in
+their name.
+ It's very tough times for people, and we get a lot of calls
+from congressional offices where they've called us to help
+their constituents, because it is a very personal kind of
+approach.
+ So it's not a high volume business. We're not looking for
+the thousandth case to send the matter to the Justice
+Department. We're trying to help people on the spot.
+ Mr. Stokes. Thank you, Ms. Byrne. Thank you, Mr. Chairman.
+ Mr. Lewis. Ms. Byrne, I believe that Mr. Hobson has a
+couple of questions.
+ Mr. Hobson. Yes, Mr. Chairman.
+ Mr. Lewis. I'm going to run up and vote, and come right
+back down, and then we can go on with our hearing.
+ Mr. Hobson. First of all, on the rent, I see your rent is
+dropped from the 1996 level. Did you get different space?
+ Ms. Byrne. We got different space. We were in the same
+building as the drug enforcement group, the drug czar, and he
+wanted to grow, and so they found us different space, and we
+were able to negotiate a better deal.
+
+ USOCA'S CONSUMER RESOURCE HANDBOOK
+
+ Mr. Hobson. Glad to see you negotiating. I'm trying to get
+that message out to people. Now, I'm going to ask this
+question, and I hope staff will bring it to the Chairman's
+attention when he comes back.
+ The CIC publishes the Consumer Information Catalogue and
+your office publishes the Consumer's Resource Handbook. Is that
+correct?
+ Ms. Byrne. Yes. We publish the Handbook, and CIC, who just
+testified before us, does the catalogue.
+ Mr. Hobson. How does these documents differ, and if both
+CIC and the Office of Consumer Affairs have similar goals and
+purposes, should we be looking at combining these, or what
+should we be doing?
+ Ms. Byrne. Well, if you look at the catalogue, Congressman
+Hobson, you'll see that it's a compendium of all Federal
+publications. CIC is basically a distribution center for public
+information, whether it's how to worm your dog or whatever.
+ Our book is very specifically tailored to how to protect
+yourself in the marketplace, where to go on the local, State
+and Federal level to get your questions answered. So, CIC is a
+distribution center for all publications. We have a specific
+number of publications that are tailored directly to consumer
+interests.
+ They distribute our Handbook. But it's a difference between
+a policy arm and a distribution arm, if you will. This is our
+Handbook that is sent out. And while CIC distributes it for us,
+I think from Ms. Nasif's testimony today, it's apparent that
+there's a lot of work that goes into this beyond just
+distributing it.
+ It has to have a policy component. What are you going to
+emphasize? What are you going to de-emphasize? What's the
+hottest problem people are facing? We're looking at, if,
+indeed, we get the ability to go back into business with this,
+we're looking at emphasizing child care as a consumer issue.
+ How many families spend what proportion of their family
+income in child care? This is a big consumer issue. It's not
+something that's static. It's not something that's cast in
+stone.
+ Mr. Hobson. Well, I think it's important for us to know,
+because if you don't know, it looks so similar.
+ Ms. Byrne. Exactly.
+ Mr. Hobson. That's what I was trying to bring out.
+ Ms. Byrne. Exactly.
+ Mr. Lewis. Thank you, Mr. Hobson.
+ Mr. Hobson. And thanks for coming to visit with us.
+ Ms. Byrne. Thank you.
+
+ national consumers week
+
+ Mr. Lewis. One of the primary efforts, Ms. Byrne, of the
+Office of Consumers Affairs is the National Consumers Week,
+which is held each October. Can you explain the role that the
+Office of Consumer Affairs plays in National Consumer Week, and
+approximately how many events are held nationwide, and how
+critical is your office to insuring the success of this effort?
+ Ms. Byrne. Well, there again, it's a catalyst to have
+local, State and Federal agencies focus on what they're doing
+for consumers, and how to do it better.
+ It is also a time for businesses to kind of strut their
+stuff on what they've been doing to help their customers.
+ We have had over 100 events last year, all around the
+country, and we've had contests where people submit what
+they've done for consumers. And we had three winners. The
+winner of our business category was General Motors, in
+conjunction with Ford and Chrysler.
+ I think that it's a amazing that we got the big three to
+work so cooperatively together. So those are the kinds----
+ Mr. Lewis. It is amazing.
+ Ms. Byrne. It is amazing. And it goes--I think it speaks to
+our stature among the business community, quite honestly. That
+they know that we're not going to take advantage of their good
+will.
+ But we are the catalyst. We bring them together. We have
+some focuses that we're looking at. Again, privacy in the
+Internet is something that we're going to be looking at this
+National Consumers Week, because it is a hot topic.
+ How to protect your privacy in the online world. And other
+State and local and Federal agencies are going to be doing
+things to highlight their work. But I'm not sure who would take
+the lead, if we weren't there to do it. Because it is a large
+coordination effort among the various entities to make sure
+that we're all pulling in the same way.
+ Mr. Lewis. Well, I frankly feel that there is a need for a
+proactive effort in this whole subject area. There's little
+doubt that information is fundamental to consumers having a
+better idea of how to protect themselves, both their privacy,
+but also their economic well being in some instances--many
+instances.
+ And oftentimes it's that person with the least available
+capital or access who needs this information the most.
+ Your testimony notes that due to budget constraints, the
+newsletter normally distributed by your office has been
+discontinued in 1997, and will only be a semi-annual newsletter
+in 1998.
+ What was the frequency of the newsletter in the past, and
+what was the cost, and what do you expect the costs will be for
+the semi-annual?
+
+ usoca's consumer's newsletter
+
+ Ms. Byrne. Well, it was quarterly in the past, and it was
+about $80,000 a year. We're looking at a $30,000 a year cost,
+and, quite honestly, the reason for the newsletter is, again,
+that effort to coordinate those kinds of consumer protection
+areas, where we have, without the coordination, we have a lot
+of duplication. There's no question.
+ Mr. Lewis. Yes.
+ Ms. Byrne. And the Federal agencies, instead of
+complementing each other's efforts, start to compete. It's the
+nature of the beast.
+ Mr. Lewis. That's right.
+ Ms. Byrne. And so what we try very valiantly to do, and the
+newsletter is a tool to do that, is get them all singing off
+the same hymnal, to make them understand that there are ways to
+work cooperatively, that they don't have to reinvent the wheel.
+ We're working quite closely with NPR, on National
+Performance Review, in the same efforts. They see us as a
+vehicle for a lot of the things they'd like to do because of
+this consumer advisory council, in making sure that we are
+complementing and not competing with each other.
+ Mr. Lewis. Your remind me of something I mentioned at a
+meeting earlier, that the first time I ever testified before a
+Committee was in ancient times, some time in the 60s I went to
+Sacramento to testify before a health and insurance committee,
+my field being the life and health insurance business.
+ Testifying about those, what we described then, as suede
+shoe salesmen who were using large print on the front page of
+health contracts to convince elderly citizens that the
+contracts did much more than they ever were able to do.
+ It's very, very important that Government knows it has a
+responsibility here, and to coordinate those efforts in a
+positive way.
+ So I want to welcome you to the Committee. I'll have a
+number of questions for the record.
+ Ms. Byrne. Certainly.
+ [The information of Ms. Byrne follows:]
+
+[Pages 651 - 654--The official Committee record contains additional material here.]
+
+
+ Mr. Lewis. It's great to see you again.
+ Ms. Byrne. Well, it's good to see you again, Mr. Chairman.
+ Mr. Lewis. Mr. Stokes.
+
+ why usoca should be funded
+
+ Mr. Stokes. Mr. Chairman, I just have one further question
+to pose to Ms. Byrne. I would like to ask you, as a former
+member of this institution, and a good member of this
+institution I would like to add, I think you understand better
+than most the fierce competition for dollars under Federal
+appropriations.
+ Tell us what, in your opinion, or the best argument you can
+provide this Committee, why it should fund the Office of
+Consumer Affairs this year, especially at a rate that is 20
+percent above the current appropriation.
+ Ms. Byrne. Well, Mr. Stokes, you understand that our
+requested appropriation for the last fiscal year was $1.8
+million. It's the same, and it's only by the perils of Pauline
+that we survived with the $1.5 million, and I understand that.
+ We're barely hanging on with that amount, to be quite
+honest with you. We're not doing what we should be doing with
+$1.5 million. We, for example, before we came here, I did an
+interview in Fargo, North Dakota. When there's natural
+disasters, the con artists come out of the wood work.
+ We should be much more proactive in getting information to
+people who are facing these natural disasters, so they don't
+lose twice. And yet we don't have the resources to do it.
+ We're the only agency, quite honestly, because we're non-
+regulatory, that can have that fast turn around. We can use the
+education and information to get people on the right path
+quickly.
+ We're not run by lawyers. And so we're teachers. And so
+that's how we're proactive instead of reactive.
+ We don't wait for somebody to be taken in a scam. What we
+want to do is get out there in the community and give people
+the information they need to protect themselves.
+ And I think that makes us unique among most of the other
+agencies, is that we are proactive. We don't wait for a child
+to get hurt by a venetian blind cord, which is what, the
+Consumer Product Safety Commission has to wait for some
+demonstrable thing to happen, several of them, before they take
+action. The same with the Federal Trade Commission.
+ But our job is to give people the understanding that they
+are in control of their destiny, so to speak, if they know what
+to look for. And that's what we do.
+ Mr. Lewis. Ms. Byrne, you're comment in response to Mr.
+Stokes' question, your comment regarding disasters and scam
+artists coming out of the woodwork I think is an item that
+isvery worthy of our consideration.
+ I don't know if you have had communication with FEMA
+regarding this problem, but we'd like to know more about that.
+It is an item that the Committee ought to look at with some
+care.
+ Ms. Byrne. It really is. And we were trying to work--we had
+talked to FEMA, and they are up to their ears in rebuilding
+right now.
+ Mr. Lewis. Of course.
+ Ms. Byrne. But it's something, that I think, again, we have
+a role to play in coordination with the Federal Trade
+Commission and others, in getting folks down to these sites so
+that they aren't taken.
+ There is an insurance scam going around in Fargo right now
+where people are purporting to sell retroactive flood
+insurance.
+ Mr. Lewis. That's easy isn't it? I'll just collect your
+premium and see if you can collect your payment.
+ Ms. Byrne. That's right. And so I was on the radio station
+with them this morning, saying there is no such thing. You
+can't have retroactive flood insurance. So if they come and
+approach you, just close the door.
+ And hopefully that got to a few people who won't be taken
+in by it.
+ Mr. Stokes. Mr. Chairman, I concur with you, that what Mrs.
+Byrne has just said to us about these kinds of scams taking
+place in disaster sites, is something for us to take a look at,
+particularly with the type of concern and interest that you
+have and that I have and that this Subcommittee has relative to
+FEMA and these disasters.
+ People already devastated by that type of thing just do not
+need people in there.
+ Mr. Lewis. There's no question that at times of panic,
+times of disaster and concern, people react and look for help
+and look for answers, and they can be taken advantage of. It's
+a very interesting subject that I haven't really thought about.
+ Ms. Byrne. When your basement is under five feet in water,
+sometimes that stress makes you lose that common sense that you
+would ordinarily have. And so we have to just kind of remind
+folks that they've got to look for licensed and bonded
+contractors and things like that.
+ Mr. Lewis. Well, one member of our Committee, a new member
+this year, who never loses her common sense, regardless, would
+at least like to say hello. Mrs. Meek?
+ Mrs. Meek. Thank you, Mr. Chairman. Good to see you again.
+Very good to have a colleague back. I am certain in accord with
+the Chairman and Mr. Stokes about the fraud and the scam
+artists that follow these natural disasters.
+ I've had a lot of experience with that after the hurricane
+in Miami. Some people still do not have their homes rebuilt.
+Bogus contractors are still running around. It doesn't seem
+like anyone can get a hold on this.
+ The country has tried. And FEMA is trying. And I'm glad to
+hear they may ask for some kind of coordinated effort in doing
+this, because it is still a big scam, and people just cannot
+recoup their farms and the monies that they have lost.
+ I am new to the Committee. Therefore I'm having not
+problems, but I have a concern. You are the third agency that
+has appeared before us with a consumer type focus. And I
+understand that you have no regulatory power, but I would like
+you to differentiate very quickly if you can the difference
+between you and the other acronyms, and I shouldn't say
+acronyms, but the others who have appeared before us.
+ The second thing is, why is it we couldn't have--no one
+here is old enough except Lou to remember the lady who used to
+be the Federal consumer person--always on television.
+ Ms. Byrne. Esther Peterson.
+ Mr. Stokes. Esther Peterson?
+ Mrs. Meek. It wasn't Esther Peterson. This lady was--Betty
+Furness.
+ Mr. Lewis. Oh, yes.
+ Mrs. Meek. Everybody in the country knew about Betty
+Furness.
+ So is there any reason why this Congress could not build a
+mega-so-called consumer agency with perhaps a head to it with
+all of these different groups under that agency.
+ I can see how an organization like that would work. But I
+need to know from you the differentiation, and also what you
+think of my idea.
+ Ms. Byrne. Well, let me take your last question first, that
+when this agency was put together under President Richard
+Nixon, it was pretty much one big agency.
+ And so little by little it was bifurcated and trifurcated
+and spun off. And the way that it was spun off is that the
+Consumer Product Safety Commission, the one that testified
+first here today, deals in things. They deal in tangible
+things, and the safety of those things.
+ And the CIC, the Consumer Information Center, is a
+distribution center for all Federal publications. And as I told
+Congressman Hobson, while you were out, it can be anywhere from
+how to be a good consumer to how to worm your dog. It has all
+the information you could ever use.
+ And we deal in services and information. Information in how
+to protect your privacy, services in credit card fraud, debt,
+how to protect your financial health, telemarketing fraud. All
+of those things, those services and the information that
+sometimes goes wrong for the consumer.
+ So we've got Consumer Product Safety Commission who deals
+with real time tangible items. We've got CIC who distributes
+all the information. We've got us who deal with services, and
+information products.
+ Mr. Lewis. You wouldn't think Mrs. Meek was a new member of
+the Committee for her to be asking that question, would you?
+ Any further questions, Mrs. Meek?
+ Mrs. Meek. No, sir. Thank you.
+ Mr. Stokes. Mr. Chairman.
+ Mr. Lewis. Yes?
+ Mr. Stokes. Before you conclude, my understanding is that
+this is our last witness, and this terminates our hearings for
+this year.
+ I just want to take this opportunity to say to you, as I
+sit here and reflect, you and I have served on this
+subcommittee together for a long period of time.
+ Mr. Lewis. A long time.
+ Mr. Stokes. A number of years. And we've both served when
+neither one of us was chair. [Laughter.]
+ So we've been here a long time. But I want to commend you
+for the excellent hearings that you've conducted this year, the
+very fair manner in which you have presided over all of our
+hearings, and it's a pleasure to serve under your chairmanship.
+And I just want the record to reflect that.
+ Mr. Lewis. Thank you very much, Mr. Stokes.
+ Mr. Stokes. And I'm sure I speak for Mrs. Meek and all the
+members on our side.
+ Mr. Lewis. There are many of us who are attempting to
+extend the spirit of Hershey. You may have heard about our
+conference at Hershey, Pennsylvania.
+ Ms. Byrne. Absolutely.
+ Mr. Lewis. Actually there is a great residue there on both
+sides of the aisle, of people who want to begin dealing with
+issues in terms of their problems and solutions rather than
+sometimes being driven by rhetoric alone.
+ But, indeed, it is a pleasure to work with you, and I
+appreciate those comments. And we appreciate your being with
+us, and with that, this meeting is adjourned, and our hearings
+are adjourned for this year.
+
+[Pages 659 - 935--The official Committee record contains additional material here.]
+
+
+
+
+
+
+
+ W I T N E S S E S
+
+ ----------
+ Page
+Blanding, W.L., Jr............................................... 1
+Brodsky, L.C..................................................... 1
+Brown, Ann....................................................... 503
+Bryson, J.T...................................................... 41
+Byrne, L.L....................................................... 625
+Corea, Col. A.N.................................................. 391
+Coronado, Gil.................................................... 1
+D'Amours, N.E.................................................... 177
+Davis, R.T....................................................... 41
+Dola, Steven..................................................... 415
+Fenner, R.M...................................................... 177
+Galdo, J.H....................................................... 41
+Gall, M.S........................................................ 503
+Guest, H.E....................................................... 41
+Herrling, Maj. Gen. J.P.......................................... 391
+Kelly, Col. K.C.................................................. 391
+Kelly, M.H....................................................... 41
+Knight, George................................................... 41
+Lancaster, H.M................................................... 415
+McGinty, K.A..................................................... 205
+Means, Col. D.F.................................................. 391
+Metzler, J.C., Jr................................................ 415
+Moy, K.S......................................................... 93
+Nasif, Teresa.................................................... 449
+Newburger, Beth.................................................. 449
+Pond, K.S........................................................ 391
+Porrata, C.B..................................................... 41
+Rubin, Hon. R.E.................................................. 93
+Smith, Rory...................................................... 415
+Widener, M.L..................................................... 41
+Woerner, Gen. F.F................................................ 391
+Yolles, H.S...................................................... 177
+
+
+
+
+
+
+
+ I N D E X
+
+ ----------
+
+ Selective Service System
+
+ Page
+Annual Report to Congress........................................ 9
+ A Message from the Director.................................. 9
+ Congressional Affairs........................................ 12
+ Financial Management......................................... 15
+ Information Management....................................... 25
+ Operations................................................... 19
+ Planning, Analysis and Evaluation............................ 28
+ Public Affairs............................................... 16
+ Resource Management.......................................... 10
+ The Regions.................................................. 23
+Biography--Executive Director.................................... 29
+Committee Position............................................... 30
+Cost of English and Spanish Public Service Announcements......... 40
+Cost Per Registration............................................ 39
+Mail-back Postcard............................................... 36
+Mobilization Timetables.......................................... 33
+Moving the Data Management Center................................ 39
+Opening Remarks.................................................. 1
+ Automation Modernization..................................... 2
+ Greetings from the Lewises................................... 2
+ Mobilization Timetable....................................... 2
+ Service to America Initiative................................ 3
+Other Outsourcing or Moves....................................... 39
+Outsourcing...................................................... 35
+Public Service Announcement...................................... 34
+ Obtaining Celebrity Support.................................. 35
+Service to America Initiative.................................... 30
+ Agency's Technical Ability................................... 31
+ Department of Defense Help................................... 32
+ Proposed Expenses............................................ 33
+ Recruitment Service.......................................... 32
+Streamlining Agency.............................................. 38
+Written Statement................................................ 4
+ Agency Continues to be Examined.............................. 5
+ Automated Data Processing (ADP) Initiatives.................. 7
+ Fiscal History (Chart)....................................... 4
+ Health Care Personnel Delivery System (HCPDS)................ 6
+ Impact of New Induction Timetables........................... 5
+ Planning and Performance Measures............................ 5
+ Registration Improvement..................................... 6
+ Service to America Initiative................................ 7
+
+ Neighborhood Reinvestment Corporation
+
+Acknowledging the Importance and Success of NRC.................. 54
+Campaign for Home Ownership...................................... 57
+Chairman's Trip to New Orleans................................... 55
+Community Development Block Grants and Home...................... 80
+Comparison with Bangladesh Program............................... 58
+Defining Critical Mass........................................... 53
+Developing a New Campaign........................................ 59
+Economic Development............................................. 58
+Engaging the Private Sector...................................... 56
+Examples of Tax Base Increases................................... 42
+Explaining Budget Request Figure................................. 53
+Federal Low-Income Housing Purchases............................. 88
+Grants and Leveraging............................................ 66
+Loan Default Rates............................................... 86
+Measures of Impact............................................... 43
+Mutual Housing Associations...................................... 83
+Mutual Housing................................................... 61
+Neighborhood Housing Services of Cleveland, Inc.................. 73
+Neighborhood Housing Services of America......................... 70
+Neighborworks Client's Characteristics........................... 75
+Neighborworks' Campaign for Home Ownership....................... 65
+Network's Focus on Diversity..................................... 56
+NHSA's Secondary Market.......................................... 91
+Opening Remarks.................................................. 41
+Personnel........................................................ 72
+Program Reviews and Audit........................................ 61
+Preserving Affordable Housing.................................... 60
+Preserving Affordable Housing.................................... 68
+Questioning OMB's Recommendation................................. 54
+Reduction in Grant Request....................................... 59
+Request for Affiliation/Creation of Neighborworks Organization... 81
+Results of FY 1996 Appropriation................................. 41
+Statement of George Knight....................................... 44
+Training Costs................................................... 64
+Training Institutes Courses...................................... 63
+Training Institutes.............................................. 62
+What Has Been Learned............................................ 42
+
+ Community Development Financial Institution
+
+Administrative Costs............................................. 127
+Application Review............................................... 154
+Capital Access and Economic Activity............................. 95
+CDFI Fund Staffing Plan.......................................... 122
+Concluding Remarks............................................... 155
+Default Rates and Performance Goals.............................. 123
+Disbursing Funds................................................. 126
+Disbursing Loans and Grants...................................... 130
+Eligibility...................................................... 128
+Entitlement Programs............................................. 100
+Housing.......................................................... 128
+Introductory Remarks............................................. 93
+FY 1998 Budget Justification..................................... 156
+Leveraging Other Money........................................... 108
+Matching Funds................................................... 125
+Microenterprise Activity......................................... 97
+Multifamily Housing.............................................. 129
+National Credit Union Administration............................. 100
+Number of Applications........................................... 126
+One-to-One Ratio................................................. 121
+Opening Remarks of Director Moy.................................. 106
+Opening Remarks of Secretary Rubin............................... 94
+Performance Agreements........................................... 110
+Performance Agreements........................................... 124
+Profiles of Organizations Selected for Funding................... 131
+Public Housing Programs.......................................... 121
+Questions for the Record......................................... 165
+Repayment Capacity............................................... 123
+Rural Areas...................................................... 109
+Santa Cruz Community Credit Union................................ 109
+Self-Sufficiency................................................. 98
+Self-Sustaining Institutions..................................... 108
+Shorebridge Strategy............................................. 109
+Small Businesses................................................. 129
+Staffing......................................................... 127
+Training Initiative.............................................. 124
+Bank Opposition.................................................. 198
+Capital in Low-Income Communities................................ 200
+Common Bond Issue................................................ 197
+Community Development Credit Unions.............................. 199
+Community Development Revolving Loan Program..................... 191
+Cooperation Among Community Organizations........................ 198
+Court Injunction................................................. 189
+Field of Membership Legislation.................................. 190
+Field of Membership.............................................. 189
+How Credit Unions Can Help....................................... 199
+Introductory Remarks............................................. 177
+Low-Income Credit Unions......................................... 190
+Maximum CLF Loan Authority....................................... 191
+Opening Remarks.................................................. 178
+Personal Bankruptcy.............................................. 197
+Predatory Institutions........................................... 200
+Program Performance.............................................. 191
+Working Capital.................................................. 201
+
+ Council on Environmental Quality
+
+Welcoming Remarks by Chairman Lewis.............................. 205
+Introductory Remarks............................................. 205
+Opening Statement................................................ 206
+CEQ's Oversight Role............................................. 206
+Environmental Assessments........................................ 207
+CEQ's Role on Policy............................................. 207
+NEPA Implementation and Improvement.............................. 208
+Utah's Desert Wilderness......................................... 208
+NEPA and Public Participation.................................... 210
+NEPA: Integration of Environmental, Economic and Social
+ Objectives..................................................... 210
+Budgetary Increase Request....................................... 212
+Staffing Increase................................................ 214
+NEPA as a Policy Tool............................................ 216
+Shortcomings in NEPA Implementation.............................. 216
+Reinventing NEPA................................................. 216
+Mining Law Proposal.............................................. 219
+NEPA Reinvention Time Frame...................................... 220
+Homestead Air Force Base......................................... 221
+EPA's Rule on Ozone and Particulate Matter....................... 222
+Proposed Asset Exchanges......................................... 223
+Agency Rent Cost................................................. 225
+Air Quality Standards............................................ 225
+Florida Everglades............................................... 226
+Brownfields Sites................................................ 228
+Flood Plains..................................................... 229
+Questions for the Record......................................... 231
+FY 1998 Budget Justification..................................... 355
+
+ American Battle Monuments Commission
+
+ABMC Management and Leadership................................... 402
+Accounting Systems............................................... 410
+Fiscal Year 1998 Budgetary Requests.............................. 393
+Foreign Currencies............................................... 400
+Foreign Currency Fluctuation..................................... 398
+Full Time Equivalents............................................ 400
+Individual Cemetery Funding...................................... 405
+Introductory Remarks............................................. 391
+Maintenance Backlog Analysis..................................... 401
+Maintenance Backlog.............................................. 400
+Management Headquarters.......................................... 401
+Pay Raises....................................................... 399
+Questions for the Record......................................... 412
+Rental Funding................................................... 405
+State Department Funding......................................... 410
+World War II Memorial Dedication Date............................ 406
+World War II Memorial Design Approval Process.................... 407
+World War II Memorial Design Approvals........................... 408
+World War II Memorial Fund Raising Sources....................... 409
+World War II Memorial Funding.................................... 406
+World War II Memorial Fundraising and Cost....................... 406
+World War II Memorial Program Management......................... 410
+World War II Memorial Site....................................... 408
+World War II Memorial............................................ 403
+World War II Memorial............................................ 407
+Written Statement of General Woerner............................. 394
+
+ Cemeterial Expenses, Army
+
+Closing.......................................................... 446
+Columbarium Cost................................................. 442
+Columbarium...................................................... 416
+Construction Projects............................................ 415
+Contracts........................................................ 441
+Estimating the Kinds of Visitors................................. 447
+Fiscal Year 1997 Request......................................... 415
+FY 1998 Budget Justification..................................... 424
+Government-wide Streamlining..................................... 416
+Grave Liners..................................................... 443
+International Visitors........................................... 445
+Introduction..................................................... 415
+Master Plan...................................................... 442
+Non-Funeral Events............................................... 444
+Opening Statement................................................ 418
+Project Management............................................... 443
+Rent Fluctuations................................................ 447
+Rents............................................................ 446
+Response Time.................................................... 441
+Scheduling Delays................................................ 441
+Three Programs................................................... 416
+Visitor Study.................................................... 443
+
+ Consumer Information Center
+
+A Two-Tiered system.............................................. 456
+Advertising Budget............................................... 459
+Agency Reimbursements............................................ 459
+Average Grade.................................................... 466
+Average Salary................................................... 466
+Change in Zip Code............................................... 464
+CIC Income Application Chart..................................... 467
+Cost of Publications............................................. 456
+Cost of Consumer Information Center Service...................... 464
+Decline in Administrative Expenses............................... 460
+Distribution of Publications..................................... 455
+Drop in Rent..................................................... 465
+Expenses versus Reimbursements................................... 469
+FY 1998 Budget Justification..................................... 470
+Gift Authority for Consumer's Resource Handbook.................. 462
+Grade Creep...................................................... 461
+Income Application Chart......................................... 460
+Information with Government Checks............................... 458
+Internet Access.................................................. 455
+Opening Statement................................................ 449
+Other Services................................................... 465
+Publishing the Catalog........................................... 464
+Resources for Updating the Handbook.............................. 462
+Telephone Ordering............................................... 458
+Transferring Responsibility for Handbook......................... 462
+Welcome to Consumer Information Center........................... 449
+
+ Consumer Product Safety Commission
+
+Airbags.......................................................... 542
+Anthropometric Data.............................................. 528
+Baby Safety Showers.............................................. 527
+Bicycle Safety................................................... 569
+Butylated Hydroxy Toulene........................................ 562
+Cellular Telephones.............................................. 566
+Composition of Commission Staff.................................. 526
+Cost Benefit Analysis............................................ 551
+Cost of Wide Area Network........................................ 537
+CPSC Budget...................................................... 524
+Drawstrings on Children's Clothing............................... 553
+Effect of Budget Reduction....................................... 524
+Estimated Fire Losses in Residential Structures.................. 548
+Fire Prevention.................................................. 543
+Fire Safe Cigarette.............................................. 549
+FY 1998 Budget Justification..................................... 570
+Government Performance and Results Act........................... 568
+Housing Project.................................................. 560
+Laboratory Consolidation......................................... 554
+Laboratory Consolidation......................................... 561
+Laboratory Services.............................................. 563
+Minority and Women at CPSC....................................... 556
+Productivity of Telecommuters.................................... 541
+Savings from Telecommuting....................................... 532
+Senior Executive Service......................................... 557
+Small Business Ombudsman......................................... 552
+Special Investigations Unit Involvement.......................... 567
+Special Investigations Unit...................................... 525
+Special Investigations Unit...................................... 564
+Statement of Hon. Ann Brown...................................... 510
+Statement of Hon. Mary Sheila Gall............................... 504
+Statement of Hon. Thomas H. Moore................................ 505
+Subjects of Special Investigations Unit.......................... 565
+Summary Statement................................................ 508
+Telecommuting Cost/Benefit....................................... 539
+Telecommuting.................................................... 529
+Trend in the Number of Voluntary Corrective Actions.............. 532
+Upholstered Furniture Flammability............................... 544
+Upper Grade Level Representation................................. 556
+Voluntary Compliance............................................. 531
+
+ U.S. Office of Consumer Affairs
+
+National Consumer Hotline........................................ 652
+National Consumers Week.......................................... 648
+Office of Consumer Affairs on the Internet....................... 652
+Office of Consumer Affairs Publications.......................... 653
+Opening Remarks.................................................. 625
+Outreach to Youth................................................ 651
+USOCA FY 1998 Budget Justification............................... 659
+USOCA's Consumer Resource Handbook............................... 647
+USOCA's Consumer's Newsletter.................................... 649
+USOCA's Role in Government....................................... 647
+USOCS Request for FY 1998 Appropriations......................... 646
+Why USOCA Should Be Funded....................................... 655
+
+
+