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During the past 10 years, many states have developed policies that try to divert from cash welfare assistance applicants who are thought to need the least amount of state help in becoming self-sufficient. State diversion programs consist of one or more of the following three components: (1) formal diversion assistance programs (usually a one-time cash payment made directly to the family or to a vendor for expenses incurred by the family); (2) applicant job search, in which applicants for the Temporary Assistance for Needy Families (TANF) block grant program are required to participate in a job search program; and (3) resource referral, whereby intake/case workers identify other forms of assistance that may be available to a family, such as child care assistance, transportation assistance, aid from family and/or friends, or referral to a drug treatment program. This report describes formal state diversion programs. The source of information for Table 1 and the Appendix is the state annual report on the TANF block grant program for FY2005. In some instances, the TANF state plans submitted to qualify for federal block grant funds were used to supplement incomplete information. In addition, this report includes information from state data reports and state Internet sites on the numbers of families being diverted from TANF assistance. However, this information is sporadic, and the terms used by the states are not always uniform. Readers should note that although applicant job search and resource referral are considered diversion strategies, they are not considered diversion assistance in Table 1 or the Appendix . Throughout much of its history, cash welfare to families represented a paradox for both policymakers and the public: On the one hand, policymakers wanted to provide a minimum level of financial assistance to needy families. However, on the other hand, they wanted to prevent those families from falling into dependency. Since the late 1960s, concerns over the size and cost of the welfare system—and its effects on the parents and children that it serves—have led federal welfare policymakers to promote work as a path to self-sufficiency. During the early 1990s, many states had moved forward with their own demonstrations and initiatives under waiver authority in Title IV-A of the Social Security Act (i.e., referred to as Section 1115 waivers) to promote self-sufficiency of welfare families. One method that some states used to promote self-sufficiency was to divert individuals who were either job-ready or had other sources of income from becoming welfare recipients by offering them a one-time financial payment as an alternative to enrollment in the now repealed Aid to Families with Dependent Children (AFDC) program. According to some observers, states have historically tried to keep some people off the welfare rolls. In the past, this was sometimes accomplished by warding off requests for aid by not providing program information to the public; omitting information about certain program benefits or services to persons who came to the welfare office with the intention of applying for assistance; speaking to people in a condescending or derogatory manner; asking personal or embarrassing questions; requesting unnecessary documentation; and delaying application interviews. In addition, several states offered relocation assistance to certain AFDC-eligible families. Under this "relocation" practice, some families eligible for AFDC benefits were encouraged to leave the state to pursue employment opportunities in other areas or were told that an inexpensive bus ticket to another state could result in the family receiving higher monthly AFDC benefits. In 1996, policymakers concurred with assertions that for significant numbers of poor families, receipt of cash welfare had become a permanent state rather than a temporary phase. P.L. 104-193 , the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, signaled the end of an era. It was generally agreed that mandatory work requirements, together with a lifetime limit on cash welfare benefits, would "end welfare as we know it" by moving parents from welfare to work, encouraging responsibility, and improving children's lives. Under the 1996 law, eligible low-income families with children were no longer entitled to a cash welfare benefit (AFDC); instead, federal funds were sent to the states in the form of a Temporary Assistance for Needy Families (TANF) block grant, under which states have had almost complete control over program eligibility and benefits. The 1996 welfare reform law ( P.L. 104-193 ) does not contain specific diversion provisions, nor does it contain any prohibitions against the use of diversion programs. Thus, states are able to include diversion programs among their array of "welfare" related strategies if they so choose. Some differences between past efforts at deterrence and current diversion practices include the following: (1) states, on a widespread basis, have formally incorporated diversion programs and activities into their TANF programs; (2) diversion is viewed as helping families maintain their independence from welfare; (3) diversion focuses attention on a family's specific circumstances and needs. During the past several years, as part of their diversion activities, several states (Kentucky, Washington, Florida, South Carolina, Arkansas, Colorado, and Michigan) have offered relocation assistance to TANF-eligible families as a substitute for ongoing TANF benefits. However, unlike prior relocation practices, states now appear to be focused on encouraging families to move to where they may be more likely to find jobs. In many instances this may be within the state rather than out of the state. The number of families on AFDC/TANF dropped from a high of 5.1 million in March 1994 to 1.9 million in September 2005. During the March 1994-August 1996 period, many states were under Section 1115 waivers testing innovative approaches to reducing the welfare rolls and promoting self-sufficiency. These numbers, however, don't highlight the number of families that were diverted from the TANF rolls. Before 1999, there were only a couple of studies pertaining to state diversion policies and practices. This is no longer the situation. On April 1, 1999, the Office of the Assistant Secretary for Planning and Evaluation (ASPE) at the Department of Health and Human Services (HHS) sent out a notice inviting applications for FY1999 funding for studies on the status of applicants and potential applicants to the TANF program, individuals and families in the TANF program, and individuals and families who leave TANF. Six out of the seven FY1999 Welfare Outcomes Grants were awarded by ASPE to states that proposed to study the impact of welfare reform on TANF applicants. Subsequent to the FY1999 grants, another four states received ASPE funding. The 10 ASPE grantees with an applicant diversion component to their studies included the following states (see footnote below for citations): Arizona, two consortia of counties in California, Florida, Illinois, New York, South Carolina, Texas, Washington, Milwaukee County, and Wisconsin. The reports of these studies have been completed. Most of the reports discuss a variety of information about individuals and their families who were formally or informally diverted from TANF, including their economic and noneconomic well-being and participation in government programs. Readers should note that only Texas and North Carolina studied "formal" diversion programs. The other states did not study this population partially because of low participation in formal lump-sum diversion assistance programs. A synthesis of some of the diversion studies funded by the ASPE indicates that a significant proportion of families who were diverted from TANF were receiving TANF benefits some 12 months later. The final rule on the TANF program was published in the Federal Register on April 12, 1999. Under the final regulations, non-recurrent, short-term benefits (provided for four months or less) for crisis situations do not count as TANF assistance. Further, child care, transportation, and work supports for employed families are not considered "assistance." Since diversion is not to be considered TANF assistance, families receiving diversion aid are not subject to TANF work requirements, time limits, child support assignment, or data reporting requirements. Ten years after the 1996 welfare law was enacted, the TANF block grant program was reauthorized. P.L. 109-171 , the Deficit Reduction Act of 2005 (enacted on February 8, 2006) included, among other things, an extension of the basic TANF block grant through FY2010 at an annual $16.5 billion funding level. P.L. 109-171 requires that the Secretary of Health and Human Services issues regulations regarding the TANF program by June 30, 2006. In FY2004, $271 million in combined federal and state funds was spent on cash payments for diversion assistance or other non-recurrent short term benefits (i.e., emergency assistance, housing aid, transportation aid, etc.). As noted above, one strategy states are using to reduce the need for ongoing welfare is referred to as "diversion"assistance. By expanding the requirements that families must meet in order to be eligible for TANF benefits and referring families to alternative resources, diversion programs have the potential to dramatically alter state approaches to providing assistance to poor families with children. Families are diverted from receiving monthly cash TANF payments if they can be persuaded to be assisted through other means or persuaded to use other resources. Before the 1996 welfare reform law and some pre-1996 state waivers, when families applied for cash welfare benefits, the emphasis was on determining their eligibility for assistance and completing their application. Now, in many states cash assistance is viewed as a last resort, and diversion assistance is viewed as a positive alternative to going on welfare. In states with diversion programs or activities, the primary emphasis is on determining what a family needs to support itself. This could be a one-time cash payment to deal with an emergency or minor crisis, support services such as child care, transportation, or health care benefits, or help finding a job. These types of services and aid may enable a family to maintain its self-sufficiency without actually going on welfare. Diversion typically is designed to be a program, activity, or payment that is intended to divert TANF applicants from ongoing TANF benefits and instead substitute short-term cash assistance or other services to meet immediate needs. Diversion payments generally are equal to several months' benefits. Their purpose is to help families meet temporary emergencies. It is generally offered as a one-time payment in lieu of extended cash benefits. Acceptance of a diversion payment usually makes a family ineligible for TANF assistance for a certain period of time. Welfare diversion comes in a variety of forms such as lump sum payments, vendor payments, supportive services, and resource referral. In addition, applicant job search is used by some states as a diversion activity. Sometimes it is not easy to identify what diversion is and what it is not. According to Nathan and Gais, an activity like eligibility screening may be a form of diversion when it is carried out in certain ways, while other times it may simply be part of an eligibility review. Some staff view diversion as "preventing" applicants from becoming recipients, others view it as "helping" applicants find other appropriate tools to remain independent of ongoing assistance. The one-time lump sum payment approach is designed to keep families with a short-term financial need, who may not need ongoing assistance, from entering the welfare system. The lump sum payment may be in the form of cash, a voucher, or a vendor payment. Under the lump sum payment approach, caseworkers screen TANF applicants to determine if a lump sum payment can effectively address the immediate reason for the TANF application. In some cases, in order to receive the lump sum payment eligible applicants must have work-related needs directly affecting their ability to obtain or maintain employment, such as loss of transportation due to needed car repairs. In other cases, eligible applicants can have a variety of short-term or emergency needs such as overdue rent or utility bills or child care problems. One-time cash payments can help families support themselves in a number of ways. Such payments may enable families to get their cars repaired so they can get to work, make overdue rent payments so they can avoid eviction from their homes, or get through a medical emergency that temporarily precludes work. Unlike emergency assistance under AFDC, which generally was provided to prevent destitution and homelessness among families (particularly welfare families), diversion aid is provided to families who just need a modest boost in income to remain off the welfare rolls. According to a 1999 HHS-funded report by the George Washington University (GWU) Center for Health Policy Research, States' early efforts to divert families from the welfare rolls focused primarily on providing families facing short-term crises with the financial resources needed to resolve those crises. Because of this early focus and the widespread adoption of lump sum payment programs, these programs are often perceived as the primary mechanism through which families are being diverted from the welfare system. However, our case studies reveal that, in practice, lump sum payment programs are rarely used ... Thus, unlike broadly targeted applicant job search programs, lump sum payment programs are unlikely to result in widespread diversion from the welfare system. Providing families assistance with job search and requiring applicants to engage in job search activities before they can qualify for monthly cash assistance may enable some individuals to find jobs and be diverted from the welfare rolls. The mandatory job search approach requires TANF applicants to engage in job search before applying for benefits and is designed to encourage individuals to find employment quickly to eliminate their need for cash assistance. In some cases, the TANF applicant is diverted from cash welfare because he or she finds a job; in some cases because the person already has income and does not have time to engage in any type of structured job search; and in some cases, the applicant finds the requirements of the program (e.g., number of employer contacts, formal meeting, etc.) too stringent or stressful and he or she abandons the idea of TANF assistance. According to a 1999 GWU study, "Work First" programs have formed the core of most state efforts to build an employment-focused welfare system. These programs, characterized by their emphasis on rapid entry into the labor market, encourage recipients to take the first job that comes along, expecting that their first job will not be their last and that it is far easier to move into a better job from a bad job than from no job at all. Applicant job search programs take the work first concept to its logical extreme: they seek to encourage or require families to look for employment immediately so as to obviate the need for them ever to receive assistance in the first place. The availability of support services such as child care, transportation assistance, and health care benefits combined with food stamps, but not tied to the receipt of monthly cash benefits, may sometimes be enough to enable some families to maintain their self-sufficiency without going on welfare. The resource referral approach encourages TANF intake workers to explore with the applicant other forms of assistance that may be available to them, such as child care assistance, transportation assistance, aid from family and/or friends, referral to drug treatment programs, etc. This approach is seen as a by-product of the perspective that welfare is a temporary, last-resort option, rather than the only course of action available to the family. The referral approach does not guarantee that families will obtain the services or help that they need. According to a 1999 GWU study, Among all diversion activities, efforts to link applicants for cash assistance with alternative resources are the least common: in our analysis of state efforts to divert applicants from TANF, only seven states indicated they are making a concerted effort to explore alternative resources with applicants before proceeding with an application for TANF. As TANF caseloads fall and the pressure of time limits mounts, it is possible that more and more localities will explore ways to link applicants for assistance with alternative resources, providing cash assistance only when all other avenues have failed. In addition to being the least utilized option for diverting applicants from the welfare rolls, linking families with alternative resources is also the least understood diversion strategy, possibly because, as our case studies reveal, it is possible to link families with alternative resources in very different ways. Readers should also note that in the late 1990s, when many states began implementing diversion programs, most applicants for welfare benefits viewed TANF, food stamps, and Medicaid as a package, and thereby many families who were diverted from TANF or denied TANF benefits mistakenly believed that they were ineligible for food stamps and Medicaid as well. This perception has been corrected, and it is now generally agreed that it is no longer a problem. In fact, during the period FY2000-FY2005, food stamp participation increased 49%, from 17.2 million in FY2000 to 25.7 million in FY2005. Similarly, although Medicaid enrollment numbers for adults and their dependent children dropped in 1996 and 1997, they have been increasing since then. The number of Medicaid recipients (adults and their dependent children) was 24.8 million in 1995, dropped to 23.9 million in 1996 and to 22.6 million in 1997, increased to 26.9 million in 1998, and reached 37.8 million in 2002 (the latest available data). As far back as the 1960s, many individuals and organizations publicly complained that more people were turned away informally than were formally denied assistance. Informal diversion results when program rules and requirements discourage families who might otherwise be eligible for TANF benefits from applying for them. It is reported that some potential recipients of TANF are being diverted from pursuing their applications simply by learning of the stronger work and child support enforcement requirements at orientation; and that other families who expect that they will be required to explore alternative resources even though they do not believe those resources can meet their needs, may choose not to bother to apply for TANF benefits. According to a 1998 HHS-funded study by the GWU Center for Health Policy Research, We define informal diversion as diversion that occurs as a response to program rules and requirements that are intended to impose a stricter set of expectations on recipients even though a potential TANF recipient has not participated in those activities. For example, some families who know they will be expected to look for work immediately (or almost immediately) may choose to look for work and find it on their own, eliminating their need to apply for assistance. Other families may not apply for assistance because they anticipate that they will not be able to meet the higher expectations set forth by the new program. Others may choose not to apply because they assume they are no longer eligible under the new program rules. A 2003 study found that each of the sites (Ramsey County, Minnesota; San Diego County, California; Mercer County, New Jersey; Providence, Rhode Island; Cook County, Illinois; and Bibb County, Georgia) ...normally requires at least two visits to the office to complete the application process, providing the opportunity for applicants to drop out of the process. Moreover, most sites also include a screening interview or a program orientation. These activities, often completed on the day of the initial visit to the office, allow for a preliminary exchange of information that may convince applicants that they are likely to be found ineligible, that they do not want to comply with one or more application requirements, or that the expected benefits from going through the process are too small to be worth the trouble. The sites that have implemented applicant job search requirements have introduced an activity that has increased the burden in time and cost for applicants. In fact, in the site with the most stringent job search requirement (Cook County), 62% of the study sample either decided not to apply for TANF or did not complete the application process—a proportion nearly twice that of most other sites. Most analysts agree that informal diversion is hard to detect because it can have either positive or negative consequences, depending on the circumstances of the diverted families. Also, the family's reason for accepting diversion assistance or for not pursuing TANF assistance may be ambiguous in that the family may be discouraged with the application process or the rules of the TANF program, or the family may be confused about their options. On April 12, 1999, the final rule on the TANF program was published in the Federal Register. These regulations took effect on October 1, 1999. Under the final regulations, non-recurrent, short-term benefits (provided for four months or less) for crisis situations do not count as TANF assistance. Further, child care, transportation, and work supports for employed families are not considered "assistance." Since diversion is not to be considered TANF assistance, families receiving diversion aid are not subject to TANF work requirements, time limits, child support assignment, or data reporting requirements. In the discussion of the regulations, HHS stated, ...we realize that diversion activities are an important part of state strategies to reduce dependency and that restrictive federal rules in this area could stifle the States' ability to respond effectively to discrete family problems. We also understand that subjecting families in diversion programs to all the TANF administrative and programmatic requirements would not represent an effective use of TANF or IV-D [child support enforcement] resources. For example, it does not necessarily make sense to require that, for a single modest cash payment, the state must open up a TANF case, collect all the case-record data which that entails, require the assignment of rights to child support, open up a IV-D case, and start running a federal time-limit clock. HHS further stated that much of the diversion aid is work-focused (including supports provided to individuals participating in applicant job search), and that the benefits to the families are non-recurrent and short-term in nature and therefore would not undermine the TANF provisions on work, time limits, or self-sufficiency. Pursuant to the final regulations, HHS is collecting only aggregate level spending information on diversion programs and activities. The exclusion of diversion activities from the definition of "assistance" means that HHS is not collecting disaggregated data (i.e., detailed information on individuals, such as age, race, and educational attainment) on the diversion caseload. Persons who receive diversion aid are also excluded from the aggregate caseload count. However, because of the importance of some of these "nonassistance" approaches to self-sufficiency, the final regulations added three new annual reporting requirements that concern diversion, including requiring states to provide a description of the non-recurrent, short-term benefits they are providing. Beginning October 1, 1999, states also were required to include (1) the eligibility criteria for these benefits (together with any restrictions on the amount, duration, or frequency of payments); (2) any policies they have implemented that limit such payments to families eligible for assistance or that have the effect of delaying or suspending eligibility for assistance; and (3) any procedures or activities developed under the TANF program to ensure that individuals diverted from TANF benefits receive appropriate information about, referrals to, and access to Medicaid, food stamps, and other programs that provide benefits that could help them successfully move into employment. Although states do not need to report on the characteristics of diverted families since diversion is not considered "assistance" under the final regulations, the aggregate spending data, together with studies on state diversion activities, provide some information on the use and effect of diversion programs. One of the advantages of diversion programs is that they may help families facing temporary financial problems get the immediate short-term financial assistance they need to obtain or retain a job. Research also indicates that women who as children received cash welfare assistance had a greater probability of not completing high school, of having a child outside of marriage, and of spending more time on welfare than women who as children did not receive cash welfare. Contrary to some of the early findings on diversion programs, a 2005-2006 report indicated that only about 20% of diversion program participants enrolled in the TANF program within 12 to 18 months of receiving diversion assistance. Moreover, according to the report, "... diversion programs seem to appropriately skim the best-able applicants rather than attracting those who are more likely to need long-term assistance ." Some policymakers are concerned that discouraging parents and caretaker relatives from applying for TANF benefits may not be acting in the best interests of families. They contend that some crucial needs of diverted families may remain unmet, and that diversion programs may inadvertently persuade low-income families to accept a larger, up-front diversion payment rather than enrolling in the TANF program without fully weighing the consequences. A 2002 Urban Institute study found that a significant share (17%-34%) of eligible persons (representing 500,000 to 1 million persons) who were diverted from the TANF program could gain substantial income and important services by enrolling in TANF. Moreover, the author of a 2003 report, entitled " Which TANF Applicants are Diverted, and What Are Their Outcomes? " found that " Diverting from TANF, relative to enrolling in and leaving the program, is associated with lower rates of employment and higher rates of Food Stamp program participation." The author stated that this finding may indicate that many families diverted from TANF probably have long-term needs that are not met by diversion. Based on the annual state reports on the TANF program, in FY2005, 28 states and the District of Columbia provided lump sum diversion payments to TANF applicants ( see Table 1 ); 16 states and the District of Columbia required TANF applicants to engage in active job searches before their application for TANF is approved; and 15 states were using a "fairly aggressive" form of resource referral. Table 1 presents a comparison of states with lump sum diversion payments. For a detailed description of each state's lump sum diversion activities, see Appendix . Table 1 indicates that 18 states provided cash payments, 5 states provided cash and/or vendor payments or services, 3 states and the District of Columbia provided vendor payments only, and 2 states provided loans. In 11 states and the District of Columbia, diversion payments were equal to a maximum of three months' worth of TANF benefit payments; in 5 states diversion payments were equal to a maximum of four months' worth of TANF benefit payments. In several states, diversion payments were limited to a specific dollar amount, ranging from $1,000 to $1,600. In 9 states and the District of Columbia, diversion payments could be made to a family only one time; in 8 states diversion payments were limited to once in a 12-month period. Moreover, most states prohibit recipients of diversion payments from being eligible for TANF benefits for at least a few months and often for up to a year. Virginia is one of 28 states that uses diversion lump sum payments. Virginia reports that in April 2005, 51 different localities (out of 122 localities in the state) had 193 diversion cases; these diversion cases represented an amount equal to about 8% of approved TANF applications in April 2005. The type of assistance needed included money for housing or utilities, transportation, medical, child care and other temporary needs. According to statewide data, the majority of applicants rarely opt to receive financial diversion payments in lieu of regular cash assistance. According to an Urban Institute report, local staff attribute the low rate to the fact that most applicants truly need longer-term assistance. The report contends that the low utilization rate also may be due to reluctance on the part of staff to "market" this option aggressively because they are unconvinced of its value. Arizona spent $789,137 on its Short-Term Crisis Services program in FY2005. The average monthly number of families assisted was 353, and 4,233 families were served during FY2005. The average monthly cost of the Short-Term Crisis Services/ diversion assistance program was $65,761 in FY2005, and the average amount of diversion assistance per family was $186. Oklahoma spent $853,827 on its diversion assistance program in FY2005. The average monthly number of families assisted was 99, and 1,185 families were served during FY2005. The average monthly cost of the diversion assistance program was $71,252 in FY2005, and the average amount of diversion assistance per family was $720. Iowa diverted 35 families from TANF in FY2004 at an average cost of $1,406. In comparison, in FY2004, there were 3,100 TANF payments averaging $353. About 55% of TANF recipients left the program within six months after receiving TANF cash benefits. In comparison, about 93% of the families receiving diversion assistance remained off the TANF rolls for at least 17 months. The FY2004 appropriation for the diversion assistance program in Iowa was $1,280,467. Washington paid a monthly average of $1,365 in diversion payments to 501 TANF applicant families during FY2005. The state FY2005 (July 2004-June 2005) expenditures on the Diversion Cash Assistance program amounted to $8,210,862. The majority of diversion assistance adult recipients were female (58%) and white (68.5%). Only 12.2% of adults were married and the median age for an adult was 29 years. Washington's maximum TANF payment for a three-person family is $793 per month. A family living in Washington is eligible for only one diversion payment in any 12-month period and the maximum diversion payment cannot exceed $1,500. As mentioned earlier, 28 states and the District of Columbia have formal diversion programs. The amount of the lump sum diversion payment varies by state. Several states pay a flat sum ranging from $1,000 to $1,600; while others provide a cash payment equal to a specified number of months (usually three) of the state's maximum TANF benefit for the appropriate family size. The number of times a family can receive diversion assistance also varies by state. States are almost equally divided between allowing families to receive one diversion payment every 12 months and allowing families to receive one diversion payment in their lifetime. Most states prohibit TANF benefits to families that receive diversion assistance for a period at least equivalent to the diversion payment, and some states have longer ineligibility periods. (For more details on formal diversion programs, see Table 1 .) Although the lump sum assistance approach represents the most common form of diversion activity, the number of families assisted by such payments is relatively small. The August 1998 GWU study points out that States can be characterized as making it easy for TANF applicants to be diverted where the lump sum payment program policies use relatively broad eligibility criteria, allow lump sum payments to be used for more than just work-related needs, and do not impose onerous repayment requirements or other penalties on lump sum payment recipients. States can also be seen as deliberately limiting the number of participants in their lump sum payment programs when the program policies use very specific eligibility criteria, limit the use of lump sum payments to work-related needs, and impose onerous repayment requirements and automatic penalties. Many observers contend that it is applicant job search programs, rather than formal diversion programs, that have the ability to impact large numbers of families and have more potential of diverting significant numbers of applicant families from applying for TANF benefits. This summary is limited to programs that states categorize as diversion programs. It does not include emergency assistance, short-term employment aid, or housing assistance. The information in this Appendix is based on Annual State TANF reports for FY2005 for all of the states listed, except for the District of Columbia, Florida, Idaho, Ohio, and Oklahoma (FY2004 annual TANF report); Kentucky (TANF State Plan for FY2004); Iowa (TANF State Plan for FY2005); and Delaware, New Mexico, and Wisconsin (TANF State Plan for FY2006). Alaska A lump sum diversion payment may be offered instead of ongoing assistance and services if the adult applicant is job-ready and it is determined that the family needs only short-term financial assistance to enable the parent or caretaker relative to secure employment and support his or her family. The amount of the lump sum payment must be sufficient to meet the family's immediate needs but may not exceed three months' worth of the Alaska Temporary Assistance Program (ATAP) benefit that otherwise would have been paid to the family if it had chosen not to participate in the diversion program. If the family reapplies for ATAP benefits within three months of receipt of the diversion payment, the diversion payment is to be treated as unearned income, prorated over the three-month period, and deducted from the family's ATAP benefit. A family that receives a diversion payment may not receive another diversion payment before the 12 th month following the month in which it last received a diversion payment. Moreover, the family is limited to a lifetime maximum of four diversion payments. Arizona Based on an applicant's Arizona residency, willingness to work or enter into employment training, documentation of a crisis situation making it difficult to meet the household's monthly expenses, and household income below the poverty guidelines during the most recent 30-day period work history, the Arizona state department of economic security will determine whether the applicant should be offered the diversion option (i.e., acceptance into the Short-Term Crisis Services program. Under the Short-Term Crisis Services program, financial assistance may be authorized to pay a utility bill or deposit, rental obligation or deposit, or mortgage payments. Payments also are available for special needs related to employment, such as eyeglasses, car repair, and dental care. The maximum payment for utility assistance and special needs is $300. A maximum payment of $1,500 is allowed for a rent or mortgage payment. A family can only receive Short-Term Crisis Services (i.e., diversion) assistance once in a 12-month period. A family that receives the diversion payment is eligible for all other services for which TANF recipients are automatically eligible. They also receive referrals for appropriate services and benefits available in the community, such as Employment and Training, Utility Discount Programs, and other supportive programs designed to help client attain self-sufficiency. Arkansas A family is eligible for a one-time diversion payment if (1) the adult has never received a diversion payment, (2) the adult is currently employed but having a problem that jeopardizes the employment, (3) the adult has been promised a job but needs help in order to accept the job (e.g., car repairs, uniforms, etc.), (4) the adult has a related minor child living in the home, and (5) the adult agrees to forego Arkansas' regular Transitional Employment Assistance (TEA) benefit for at least 100 days from the date of application. An adult may receive a diversion payment only once during his or her lifetime. The diversion payment is equal to the actual amount needed to resolve the crisis but cannot exceed three month's worth of the maximum TEA benefit for the household. The diversion payment is a loan which the client is expected to repay to the state when he or she is able to do so. The diversion payment counts as TEA month(s) for purposes of the 24-month work time limit if the adult later applies for TEA assistance, unless the diversion aid has been repaid. If not repaid, the diversion aid counts for up to three months of the time limit based on the amount of the diversion payment divided by the maximum grant for the family size. If the individual is diverted from the TEA program, the caseworker continues to process any other pending application for services (e.g., Food Stamps, Medicaid, child care, etc.). California The diversion program is designed to provide upfront cash or services to solve short-term problems of families that are eligible for the California Work Opportunity and Responsibility to Kids (CalWORKs—i.e., TANF) program. The county shall assess whether the applicant would benefit from a lump sum diversion program. In making its determination, the county may consider the applicant's work history, prospects for employment, housing situation, and adequacy of the applicant's child care arrangements. If the county determines that the family would benefit from the diversion program, the family is given the option of whether or not to participate. The lump sum diversion aid is a negotiated cash or noncash payment (or service). If, after accepting diversion aid, the family reapplies for TANF benefits within the amount of time that corresponds to the diversion grant divided by the TANF benefit the family would have otherwise received, the county shall, at the option of the applicant, either recoup the diversion payment from the family's monthly TANF benefit (over a period of time determined by the county) or count the appropriate months toward the five-year TANF time limit. If an individual reapplies and qualifies for CalWORKs after the diversion period has ended, then only one month of the diversion period counts toward the time limit. The lump sum diversion payment generally is not considered income in determining food stamp eligibility. Moreover, during the period of the diversion, the applicant family shall be eligible for Medicaid benefits and child care. (However, with respect to Medicaid, it is not automatic but the county is supposed to follow the existing procedures for making a Medicaid determination.) In addition, any child support collected by the applicant or recovered by the county must not be used to offset the diversion payment. Colorado State diversion payments are provided to applicants and recipients of the Colorado Works program who volunteer to accept a one-time benefit or service in lieu of ongoing cash assistance. An applicant family may receive a diversion grant if it does not need ongoing cash assistance and has a demonstrable need for a specific item or type of assistance. The actual amount of the lump sum payment, the time period that the applicant agrees to not apply for Colorado Works benefits in any county in the state, and other expectations are defined by the county department. County diversion payments are provided to applicants who are not eligible for cash assistance under the Colorado Works program, but who are otherwise TANF eligible if the family does not need ongoing cash assistance and has a demonstrable need for a specific item or type of assistance. The actual amount of the lump sum payment, the time period that the applicant agrees to not apply for any further cash welfare assistance in any county in the state and other expectations are defined by the county department. Providing county diversion payments to families is strictly a county option, and some counties do not provide this type of assistance. Connecticut Since October 1, 1998, Connecticut has offered a diversion assistance program. Diversion aid must be offered to families that (1) are eligible for Connecticut's Jobs First program (i.e., TANF), (2) include an adult that is employed or who has a job offer that starts within three months, or who has a solid work history or marketable job skills, (3) demonstrate a short-term need that cannot be met with current or anticipated family resources, and (4) with the provision of a service or short-term benefit, would be prevented from needing monthly TANF benefits. Diversion aid may include, but not be limited to employment services, child care assistance, transportation assistance, housing assistance, utilities assistance, clothing assistance, and assistance with purchasing or maintaining work tools. In no event shall the amount of the diversion payment be greater than the cash assistance equivalent of three month's worth of the TANF benefit for such family. A family receiving a diversion payment shall be ineligible to receive monthly TANF benefits for a period of three months from the date of application for TANF. Diversion aid counts as three months toward the 21-month TANF benefit time limit in Connecticut, regardless of the amount of the diversion payment. A family receiving diversion assistance is offered help in obtaining other benefits for which they may be eligible such as food stamps, child care assistance, medical assistance, employment services, transportation assistance, and energy assistance. Delaware Since October 1, 1999, Delaware has offered diversion assistance to applicant families whose employment is jeopardized by a financial problem. A family may be eligible for diversion assistance if (1) the parent is living with a biological or adopted minor child, (2) the adult has not received a diversion payment in the last 12 months, (3) the diversion aid will alleviate the crisis, (4) the parent is currently employed but having a problem that jeopardizes the employment or has been promised a job but needs help in order to accept the job (e.g., car repairs, uniforms, etc.), and (5) the family's income and resources would qualify them for TANF. Diversion assistance, which is available to both applicant and recipient families, is not a supplement to regular TANF assistance but is in place of it. Sample uses of diversion assistance include transportation, clothing, tools and equipment, union dues, up-front employment costs, relocation costs for verified employment in another county or state (moving equipment rental, gas, lodging for days of the move, first month's rent, rental and utility deposit). Diversion assistance may not exceed $1,500 and are made to a third-party vendor. Recipients must agree to forego TANF cash aid for one to three months, depending on the size of diversion aid. If the diversion assistance is from $0 through $500.099, the family must forego TANF cash aid for one month; if it is from $501 through $1,000.00, two months; and if it is from $1,001 through $1,500, three months. The once-a-year limitation on diversion assistance and the period of ineligibility can be eliminated if circumstances beyond the client's control make re-application for diversion assistance necessary. District of Columbia TANF applicants may qualify for the District of Columbia's Diversion Payment Program in lieu of receiving on-going TANF assistance. In order to be considered for diversion assistance, the applicant (1) must have a bona fide offer of employment that she or he is willing to accept, (2) must meet the income and asset test for TANF assistance, (3) live with a related minor child, (4) must not have received a diversion payment in the last 12 months or received TANF or Program on Work, Employment, and Responsibility (POWER) benefits in the last six months, (5) have an immediate financial barrier, which, if eliminated, would enable the individual to obtain or retain employment, and (6) agree to accept the one-time diversion assistance payment rather than TANF assistance. Diversion payments can pay for items such as auto insurance or car repair, rent and utilities, work clothes, and professional licenses or fees. The diversion payment can not exceed three month's worth of the maximum TANF benefit for the family and generally is made directly to vendors. Receipt of diversion assistance does not count toward the TANF 60-month time limit. Families who receive diversion assistance are still processed for Food Stamps and Medicaid. No applications for the Diversion Payment Program were approved in FY2004. Florida Diversion payments provide immediate assistance in helping a family to meet a financial obligation while they are securing employment or child support (e.g., shelter or utility payment, a car repair to continue employment, or other assistance which will alleviate the applicant's emergency financial need). The state may offer up-front, cash diversion payments to an applicant family that would "likely" meet all Temporary Cash Assistance (i.e., TANF) eligibility rules. Up-front diversion payments are limited to up to $1,000 per family. Families receiving up-front diversion must sign an agreement restricting the family from applying for Temporary Cash Assistance benefits for three months, unless an emergency is demonstrated by the department. If such an emergency exists and the family reapplies within three months after receiving the diversion aid, the diversion payment is prorated over a two-month period and subtracted from any regular Temporary Cash Assistance payment received by the family. The up-front diversion assistance agreement must state that the diversion assistance is a once-in-a-lifetime benefit, and that the client may apply for Food Stamps and Medicaid. Hawaii In FY2005, Hawaii implemented a new Self-Sufficiency program called Upfront Universal Engagement Grant Diversion. This program is designed to support employment and eliminate the need for families to enter into the welfare system. A lump sum benefit is issued in exchange for a four-month period of ineligibility. During the initial four months of assistance, families receive "non-assistance" benefits. These benefits do not affect the TANF lifetime eligibility limit of 60 months. Participants are immediately referred to a work program, and the focus is on getting these individuals employed within the grant diversion period. Idaho A family applying for Temporary Assistance for Families in Idaho (TAFI) may be eligible for a one-time cash payment for an emergency need. One-time emergency needs could include car repair, moving expenses, employment agency fee, tools, uniforms, child care, housing expenses, and medical expenses. The family must have needs that cannot be met with existing resources. A family cannot receive a TAFI one-time payment if the family received emergency assistance or at-risk services within the past 12 months. The amount of the cash payment is equal to the amount of need or up to three times the maximum monthly TAFI benefit amount for the appropriate family size. The applicant family is ineligible for TAFI benefits for a period of two months of benefits for every month of TAFI benefit payment used in the one-time option. This period of ineligibility is counted against the 24-month time limit. In addition, Idaho counts a partial month of diversion cash as a full month of TANF assistance. To illustrate, if a family receives diversion assistance equal to the value of two months and two days of assistance, that is considered the same as three months of TANF assistance and thereby would make the family ineligible for six months of TANF. A family already receiving TAFI also is eligible for a one-time cash payment to be used for employment-related expenses, such as relocation and moving expenses, tools, and union dues to permit the parent or caretaker relative to accept or retain employment. Participant families can receive a one-time cash payment equal to one-half of the remaining months of eligibility, up to a maximum of three times the maximum monthly grant for which they would have been eligible. Iowa Family Investment Program (FIP, i.e., TANF) Diversion assistance is available to families that meet designated income limits, have an eligible child in the home, provide Social Security numbers, and volunteer for diversion assistance instead of receiving FIP cash benefits. Diversion recipients must have identifiable barriers to obtaining or retaining employment that can be substantially addressed through the immediate short-term benefits or services. Examples of diversion assistance include transportation costs including car repair, payments, and license fees; shelter costs including rent, mortgage, and utilities; job-specific expenses including licensing fees, tools, uniforms, and shoes; and very limited, short-term child care. While a family may receive diversion assistance more than once, the program is not to be used to provide ongoing benefits. Diversion assistance is provided through vendor payments. Receipt of FIP diversion assistance shall result in a period of ineligibility for FIP for that family, including new members moving into the household. The period of FIP ineligibility shall equal the number of calendar days arrived at by using the following formula: Kentucky The Family Alternative Diversion (FAD) payment is available to families eligible for the Kentucky-Temporary Assistance Program (K-TAP) with a short-term financial crisis. Families who receive diversion assistance are ineligible for K-TAP benefits for 12 months unless non-receipt would result in abuse or neglect of a child or if the parent is unable to provide adequate care or supervision due to loss of employment through no fault of the parent. FAD payments may be in cash or vendor payments, and may include, but are not limited to, access to job preparation activities, work support services, child care, and housing assistance. The maximum amount of the diversion payment is limited to $1,300. Families may be approved for FAD once every two years, with multiple payments to the family and/or vendor, but payments must be made within three months of the date of application for diversion assistance. The FAD program provides families with referrals to the Child Support Enforcement, Food Stamp, and Medicaid programs, as well as child care and other appropriate service providers. Maine Alternative Aid Assistance is offered to all TANF eligible applicants. To assist applicants who seek short-term assistance (for items such as child care or car repairs) to obtain or retain employment, the Department of Human Services shall provide a one-time vendor payment of up to three times the monthly TANF grant for which the family otherwise would have been eligible. If the family reapplies for TANF within three months of receiving alternative aid, the family must repay any alternative aid received in excess of the amount that the family would have received on TANF. The method of repayment must be the same as that used for the repayment of unintentional overpayments in the TANF program. Alternative Aid Assistance does not count toward the 60-month time limit. Eligibility for Food Stamps and Medicaid is routinely determined after the applicant family selects either Alternative Aid or TANF. Moreover, Maine's automated client eligibility system provides applicant families with an opportunity to access other programs that may help them get or keep employment. Maryland A local department of human resources may offer a Welfare Avoidance Grant (WAG) to a Family Investment Program (FIP) applicant family. The total amount of the grant may not exceed three times the maximum monthly allowable amount for the number of individuals in the assistance unit unless there is a compelling need and the maximum does not exceed 12 times the maximum monthly allowance amount for the number of individuals in the assistance unit. A FIP application must be denied during the period covered by the Welfare Avoidance Grant. The local human resources department may provide a family with a Welfare Avoidance Grant more than once if a new emergency occurs. Medicaid benefits are available for the family if the family would have been eligible for TANF, except for the one-time payment. Minnesota Minnesota counties were required to implement the Diversionary Work Program by July 1, 2004 (the program was established on July 1, 2003). The Diversionary Work Program is a four-month program that provides services and supports to eligible families to help them move immediately to work rather than go on welfare. Most families who apply for the Minnesota Family Investment Program (MFIP) will be in the diversion program for four months. A family can participate in the diversion program for only four months in a 12-month period. The maximum amount of diversion aid is equal to four times the maximum monthly MFIP benefit amount for the appropriate family size. Upon receipt of a diversion payment, the family is ineligible for MFIP for the time period for which the diversion payment was issued. The Diversionary Work Program provides help with rent, utilities or other housing costs, child care, family issues that may prevent or delay employment, and short-term training. The program may also help families receive Food Stamps, Medicaid, and child care benefits. The four months of the Diversionary Work Program do not count toward the TANF 60-month time limit. New Mexico Diversion payments are lump-sum payments given to families to meet a specific need that will enable the applicant to keep a job or accept a bonafide job offer. A diversion payment is available to an initial applicant benefit group (either a new applicant or an active case that has been closed for at least one month, and does not include New Mexico Works (NMW) cases closed because of a third sanction) who meets all NMW eligibility criteria. Applicants must enter into a written agreement that defines the terms and expectations of the diversion grant; documents the reason why cash assistance is not required; and identifies the need for a specific type of short-term assistance. The maximum amount of the diversionary payment is $1,000. The diversion payment is limited to two times in an applicant's five-year time limit. Diversion recipients are ineligible for NMW or another diversion payment for 12 months. If an individual received diversion payments from another state, he or she also is ineligible for NMW or diversion assistance for 12 months. North Carolina The Work First Diversion Assistance program offers benefit diversion in lieu of Work First Family Assistance as an alternative for families. It is an optional package of services which includes (1) a one-time lump sum payment equal to a maximum of three months of Work First Family Assistance benefits, (2) Medicaid and food stamps for the months in the benefit diversion period, and (3) referrals to child support, child care assistance, and other community and agency resources. The Work First program manual indicates that it is appropriate for the caseworker to discuss benefit diversion only with those families who are employed, soon-to-be employed, or between jobs. The caseworker is supposed to explain what diversion is and point out its advantages and disadvantages. Ohio Independent of the Ohio Works First program, the Prevention, Retention, and Contingency (PRC) program is intended to help families overcome immediate barriers to achieving or maintaining self-sufficiency. Its goal is to encourage employment and prevent people from sliding out of the work force and onto public assistance. The PRC replaced the Family Emergency Assistance Program but with much broader guidelines. Beginning October 1, 1997, every county was required to have a PRC Program. In keeping with the principle of giving counties maximum flexibility in designing and implementing programs, counties can design their PRC Program to best fit the needs of their community. Oklahoma Diversion assistance is available to families with minor children when there is a short-term crisis and intervention services are needed to retain or obtain employment. To receive diversion assistance, an individual must be employed or have bona fide offer, have a financial need which if not met can cause loss of employment or an employment offer. The applicant must be screened for literacy and substance abuse prior to receipt of diversion assistance. If the applicant refuses to complete the screenings, the application for diversion assistance is denied. If screening indicates a need, a referral is made to an appropriate provider. If the applicant fails to follow through with the referral, this does not affect the eligibility for diversion assistance. Diversion benefits can equal up to three months of the TANF payment. Diversion recipients are ineligible for TANF benefits for one year. Diversion benefits may only be provided to a family once. Families are informed of other benefits available to them, such as Food Stamps, Medicaid, child care, substance abuse treatment, domestic violence counseling, and marriage counseling. Oregon Although Oregon does not have a diversion program per se, it does provide lump sum payments to persons applying for TANF if the person indicates that he or she needs cash for car repair, employment-related tools or clothing so he or she can obtain or retain a job. The cash payment is not a fixed amount and the person can apply for TANF the next month if he or she needs ongoing monthly assistance. Payments are limited to 200% of the TANF payment standard. Support services include but are not limited to child care, transportation, tools, fees, and counseling. Pennsylvania The purpose of the diversion payment is to meet a specific crisis situation or episode of need that is expected to eliminate a family's need for ongoing cash assistance. To be eligible for this initiative, the TANF-eligible family must meet TANF income/resource requirements and definitive conditions (minor child, specified relative and deprivation); be employed or have a recent work history; have a financial need that, if met, eliminates the family's need for ongoing TANF cash assistance; and have a verified plan for ongoing self-support from earned or unearned income. A diversion payment is equal to the TANF cash payment for the family in question for one, two, or a maximum of three months, depending upon a family's need. A family will be eligible for only one diversion payment in a 12-month period. Services and/or items that may be purchased with this payment include, but are not limited to, work expenses such as uniforms and tools; mortgage, rent, or other housing expenses; car repairs, inspections, payments, insurance premium payments and other transportation costs; child care; and costs to relocate to secure employment. South Dakota Only applicants who "would" be eligible for TANF are eligible for diversion assistance. The applicant also must be currently employed or have received a formal job offer. The family may receive a diversion payment for employment-related expenses. The diversion payment cannot exceed two times the maximum monthly TANF payment for the appropriate family size. An applicant who is diverted and receives payment will be ineligible for TANF cash assistance for three months, beginning with the first day of the calendar month following the month of TANF application. If the applicant reapplies for TANF within this three-month period, he or she will be required to reimburse the Department of Social Services for the diversion payment (pro-rated over the three-month period). To pay back the pro-rated amount, deductions will be made from the client's TANF cash assistance. Family units can be diverted more than once during the five-year life time limit. However, staff is very cautious about diverting a family a second time. Applicants who have been diverted from TANF are helped with completing applications for the Food Stamp, Medicaid, and Child Support Enforcement programs, and are referred to the appropriate program office. Texas The Achieving Change for Texans (ACT) program provides a one-time cash payment for applicant families who need crisis assistance. Families that choose the one-time lump sum payment must forego regular TANF benefits for 12 months. The maximum diversion payment is equal to $1,000 regardless of family size. The $1,000 diversion payment is not counted as income for food stamp purposes, but is considered a resource in the month received. Families who choose the diversion payment in lieu of TANF assistance are automatically screened for eligibility for Medicaid, and are advised that they may also apply for Food Stamp benefits. Utah Diversion assistance is available for non-recurring, short-term assistance during a financial crisis. Diversion assistance cannot exceed three times the maximum monthly amount of TANF cash aid that the family would otherwise be qualified to receive. Child care supportive services and "Y" funds also are available to support success during and after the diversion period. "Y" funds are funds used to reimburse an individual for work- and training-related expenses. "Y" funds may be used to assist the customer to alleviate circumstances that impede the individual's ability to begin or continue employment, job search, training or education. There is not a limit on the amount of "Y" funds an individual may receive. However, payments greater than $1,000 must be approved by a supervisor. Virginia Virginia's diversionary assistance provides a one-time cash payment worth up to four months of benefits to meet a one-time crisis such as a transportation, child care, or housing emergency. In order to qualify for diversionary assistance, an applicant must be otherwise eligible for TANF. In order to receive diversionary assistance, the applicant must relinquish his or her right to TANF assistance for a time period determined by dividing the benefit total by the monthly TANF cash benefit for which the household would have been eligible and multiplying by 1.33. Application for diversionary assistance is made on the same application for benefits that a person uses to apply for TANF, Food Stamps, and Medicaid. In addition, the integrated computer system processes benefits for Food Stamps and diversionary assistance using the same information provided during a dual interview. All applicants for assistance receive a brochure that provides information on all benefit programs. Washington Washington offers a Diversion Cash Assistance program that is designed to provide eligible applicant families with brief, emergency assistance to help them through their crisis. Diversion assistance may include cash or vouchers in payment for the following needs: child care, housing assistance, transportation-related expenses, food, medical costs for the applicant's immediate family, and employment-related expenses which are necessary to keep or obtain paid unsubsidized employment. A diversion payment is available once in each 12-month period for each adult applicant. Diversion payments may not exceed $1,500 for each instance. If a family enrolls in the TANF program within 12 months of receiving diversion aid, the prorated dollar value of the diversion payment shall be treated as a loan from the state, and recovered by deduction from the family's monthly TANF benefit. Washington uses a unified application form for TANF cash benefits, Medicaid, and Food Stamps. Clients are advised of their eligibility for those benefits at the time of application. West Virginia West Virginia offers a Diversionary Cash Assistance program to encourage applicant families not to apply for ongoing monthly TANF cash assistance. After assessment and approval by a Family Support Specialist, the state may issue a one-time diversion payment to eligible applicant families. The diversion payment cannot exceed three times the maximum monthly TANF payment for the appropriate family size. When a diversion assistance payment is accepted, the family is ineligible for TANF cash assistance for three months. West Virginia's eligibility determination system processes the Diversionary Cash Assistance payment and also determines other programs and benefits for which the family may be eligible such as the Food Stamp and Medicaid programs. Wisconsin The Wisconsin Works program offers "Job Access Loans" to W-2 eligible individuals if the person needs the loan for an immediate and discrete financial crisis, or the person needs the loan to obtain or continue employment. Job Access Loans may not exceed $1,600. Some examples of appropriate use of Job Access Loans include car repairs and loans, fees for obtaining a drivers's license, clothing or uniforms for work, rent or security deposits, to prevent eviction and enable the individual to obtain or maintain employment, and self-employment/entrepreneurial activities. The loan may be paid back in cash or through a combination of cash and volunteer community work. | One strategy that states are using to reduce the need for ongoing welfare is referred to as "diversion." Diversion is typically considered to be a payment, program, or activity that is intended to divert applicants for Temporary Assistance for Needy Families (TANF) benefits from completing the application process and thereby becoming potentially eligible for monthly TANF assistance. Welfare diversion comes in a variety of forms, such as lump sum payments, vendor payments, supportive services, and resource referral. In addition, applicant job search is used by some states as a diversion activity. Sometimes it is not easy to identify what diversion is and what it is not. A procedure like eligibility screening may be a form of diversion when it is carried out in a certain manner, while at other times it may merely be part of an eligibility review. Diversion payments generally are equal to several months' benefits. They usually are offered as a one-time payment in lieu of extended cash benefits. Acceptance of a diversion payment ordinarily makes a family ineligible for TANF assistance for a certain period of time. According to the latest available reported data, 28 states and the District of Columbia provided lump sum diversion payments to TANF applicants; 16 states and the District of Columbia required TANF applicants to engage in active job searches before their application for TANF was approved; and 15 states were using a fairly aggressive form of resource referral. Under the final TANF regulations, non-recurrent, short-term benefits (e.g., diversion) for crisis situations (provided for no more than four months) do not count as TANF assistance. Since diversion is not considered TANF assistance, families receiving diversion aid are not subject to TANF work requirements, time limits, child support assignment, or data reporting requirements. This report discusses welfare diversion and state use of diversion strategies. It will be updated periodically as new data and information become available. |
With the current economic downturn, Members of the 111 th Congress are likely to be faced with many policy options aimed at economic improvement. A focus of past debates has been on the impact immigrants have on jobs and wages. Yet, these discussions frequently take on a different focus when it comes to foreign investors, in part because such visas are targeted at immigrants that are poised to inject capital into the economy and create employment. Foreign investors are often viewed as providing employment opportunities for U.S. citizens rather than displacing native workers. Thus, Congress has in previous years been willing to set aside both temporary and permanent visas for foreign investors with the goal that this visa distribution would net positive economic effects. Yet, extending foreign investor visas provides several potential risks as well, such as visa abuses and security concerns. With the extension of the immigrant investor visa pilot program—a program aimed at granting permanent immigrant visas for investments into certain limited liability corporations—until September 30, 2012, Members of Congress will have to decide if the current policy towards foreign investors should be maintained, or if a different set of policies should be implemented. The central policy question surrounding foreign investors—and particularly legal permanent resident (LPR) investors—is whether the benefits reaped from allocating visas to foreign investors outweigh the costs of denying visas to other employment-based groups. The subsequent analysis provides a background and contextual framework for the consideration of foreign investor visa policy. After a brief legislative background, this report will provide discussions of immigrant and nonimmigrant investors visas, a comparison of U.S. and Canadian immigrant investor programs, an analysis of the relationship between investment and migration, and finally a review of current issues. Since the Immigration Act of 1924 the United States has expressly granted visas to foreign nationals for the purpose of conducting commerce within the United States. Although foreign investors had previously been allowed legal status under several Treaties of Friendship, Commerce and Navigation treaties, the creation in 1924 of the nonimmigrant treaty trader visa provided the first statutory recognition of foreign nationals as temporary traders. With the implementation of the Immigration and Nationality Act of 1952 (INA), the statute was expanded to include nonimmigrant treaty investors—a visa for which trade was no longer a requirement. Nonimmigrant visa categories for traders and investors have always required that the principal visa holder stems from a country with which the United States has a treaty. The nonimmigrant visa classes are defined in §101(a)(15) of the INA. These visa classes are commonly referred to by the letter and numeral that denotes their subsection in §101(a)(15) of the INA, and are referred to as E-1 for nonimmigrant treaty traders and E-2 for nonimmigrant treaty investors. Unlike nonimmigrant investors, who come to the United States as temporary admissions, immigrant investors are admitted into the United States as LPRs. With the Immigration Act of 1990, Congress expanded the statutory immigrant visa categories to include an investor class for foreign investors. The statute developed an employment-based (EB-5) investor visa for LPRs, which allows for up to 10,000 admissions annually and generally requires a minimum $1 million investment. Through the Regional Center Pilot Program, investors may invest in targeted regions and existing enterprises that are financially troubled. This pilot program was extended by the Basic Pilot Program Extension and Expansion Act of 2003 to continue through FY2008. Foreign investors are generally considered to help boost the United States economy by providing an influx of foreign capital into the United States and through job creation. For investor immigrants, job creation is an explicit criterion, while with the nonimmigrant visa categories economic activity is assumed to spur job growth. Additionally, foreign investors are often associated with entrepreneurship and increased economic activity. Critics, however, believe that such investors may be detrimental since they potentially displace potential entrepreneurs that are United States citizens. There is currently one immigrant class set aside specifically for foreign investors coming to the United States. Falling under the employment-based class of immigrant visas, the immigrant investor visa is the fifth preference category in this visa class. Thus, the immigrant investor visa is commonly referred to as the EB-5 visa. The basic purpose of the LPR investor visa is to benefit the United States economy, primarily through employment creation and an influx of foreign capital into the United States. Although some members of Congress contended during discussions of the creation of the visa that potential immigrants would be "buying their way in," proponents maintained that the program's requirements would secure significant benefits to the U.S. economy. Proponents of the investor provision offered predictions that the former-Immigration and Naturalization Service (INS) would receive approximately 4,000 applications annually. These petitioners' investments, the drafters speculated, could reach an annual total of $4 billion and create 40,000 new jobs. The Senate Judiciary Committee report on the legislation states that the provision "is intended to provide new employment for U.S. workers and to infuse new capital into the country, not to provide immigrant visas to wealthy individuals" (S.Rept. 101-55, p.21). As amended by the Immigration Act of 1990, the Immigration and Nationality Act (INA) provides for an employment-based LPR investor visa program designated for individuals wishing to develop a new commercial enterprise in the United States (INA §203(b)(5)). The statute stipulates that The enterprise must employ at least 10 U.S. citizens, legal permanent residents (LPRs), or other work-authorized aliens in full time positions. These employees may not include the foreign investor's wife or children. The investor must further invest $1 million into the enterprise, such that the investment goes directly towards job creation and the capital is "at risk." However, if an investor is seeking to invest in a "targeted area" then the required capital investment may be reduced to $500,000. For each fiscal year, 7.1% of the worldwide employment-based visas (roughly 10,000 visas) are set aside for EB-5 investors, of which 3,000 are reserved for entrepreneurs investing in "targeted areas." The business and jobs created must be maintained for a minimum of two years. According to regulations, enterprises being proposed need not be backed by a single applicant. Multiple applicants may provide financial backing in the same enterprise, provided that each applicant invests the required minimum sum and each applicant's capital leads to the creation of 10 full-time jobs. The applicant may also combine the investment in a new enterprise with a non-applicant who is authorized to work in the United States. Furthermore, each individual applicant must demonstrate that he or she will be actively engaged in day-to-day managerial control or as a policymaker. Petitions as a passive investor will not qualify. However, since limited partnership is acceptable, regulations do not prevent the investor from living in another location or engaging in additional economic activities. The Regional Center Pilot Program differs in certain ways from the standard LPR investor visa. Established by §610 of P.L. 102 - 395 (October 6, 1992), the pilot program was established to achieve the economic activity and job creation goals of the LPR investor statute by encouraging investors to invest in economic units known as "Regional Centers." Regional Center designation must be approved by the Department of Homeland Security's (DHS) United States Citizenship and Immigration Service (USCIS), and is intended to provide a coordinated focus of foreign investment towards specific geographic regions. Areas with high unemployment are especially likely to receive approval as a Regional Center, since they are less likely to receive foreign capital through foreign direct investment (FDI) (although the basic requirements apply to all regional petitions). Up to 5,000 immigrant visas may be set aside annually for the pilot program. These immigrants may invest in any of the Regional Centers that currently exist to qualify for their conditional LPR status. The Basic Pilot Program Extension and Expansion Act of 2003 scheduled the program to sunset in FY2008. However, the Department of Homeland Security Appropriations Act, 2010 ( P.L. 111-83 , §548), extends the authorization of the Regional Center Pilot Program through September 30, 2012. Following the 2003 legislation, USCIS decided to develop a new unit to govern matters concerning LPR investor visas and investments. On January 19, 2005, the Investor and Regional Center Unit (IRCU) was created by the USCIS, thereby establishing a nationwide and coordinated program. USCIS believes that the IRCU will serve the dual purpose of guarding against EB-5 abuse and encouraging investment. The USCIS approximates that between 75-80% of EB-5 immigrant investors have come through the pilot program since it began, and that limited partnerships constitute the most significant portion of this group. In contrast to the high number of applications for other employment-based LPR visas, the full allotment of almost 10,000 LPR investor visas per fiscal year has never been used. As Table 1 below shows, the number of LPR investor admissions reached 1,361 admissions in FY1997, or 13.6% of the program's visa supply. In subsequent years, the program declined markedly, before increasing up to 1,360 in FY2008. Despite the low numbers of overall investor admissions, the program has seen a marked increase since the implementation of the Regional Center Pilot Program expansion in 2004. From FY1992 to FY2004, the cumulative total amount invested into the United States by LPR investor visa holders was approximately $1 billion and the cumulative number of LPR investor visas issued was 6,024. Since FY2004, an additional 1,901 immigrant investor visas have been issued. In the earlier years of the program, it attracted a relatively higher rate of derivatives than principals. However, in the last three years the distribution of visas between principals and derivatives has more closely approximated parity. Derivatives have historically accounted for approximately 66% of immigrant investor visa recipients, while principals account for 34%. According to data from DHS, in the time span of FY1992 through May 2006, authorities had received a cumulative total of 8,505 petitions for immigrant investor visas. Of these petitions, 4,484 petitions had been granted while 3,820 had been denied —an approval rate of 52.7%. Furthermore, in this same time span, officials received 3,235 petitions for the removal of conditional status from the LPRs of immigrant investors. These petitions were granted in 2,155 cases (a 66.6% approval rate), while the remaining 910 petitions for the removal of conditional status were denied. Although numerous possible explanations for the overall low admission levels of LPR investor visas exist, the notable drop in admissions in FY1998 and FY1999 is due in part to the altered interpretations by the former-INS of the qualifying requirements that took place in 1998. The 21 st Century Department of Justice Appropriations Act (2002) provided remedies for those affected by the former-INS' 1998 decision, and provided some clarification to the requirements to promote an increase in petitions. A 2005 report from GAO listed a number of contributing factors to the low participation rates, including the rigorous nature of the LPR investor application process and qualifying requirements; the lack of expertise among adjudicators; uncertainty regarding adjudication outcomes; negative media attention on the LPR investor program; lack of clear statutory guidance; and the lack of timely application processing and adjudication. It is unknown how many potential investors opted to obtain a nonimmigrant investor visa or pursued other investment pathways. A recent law journal article on investor visas suggested that the two year conditional status of the visa and the alternate (and less expensive) pathways for LPR status often dissuaded potential investors from pursuing LPR investor visas. Yet, since FY2003, the number of immigrant investor visas issued has increased on an annual basis. According to the GAO study, of the LPR visas issued to investors, 653 had qualified for removal of the conditional status of LPR visa (not including dependents). GAO estimates that these LPR investors invested approximately $1 billion cumulatively into their collective enterprises and 99% kept their enterprise in the same state where it was established. The types of enterprises these investors established were often hotels/motels, manufacturing, real estate, or domestic sales, with these four categories accounting for 61% of the businesses established by LPR-qualified investors. Furthermore, an estimated 41% of the businesses by LPR-qualified investors were set up in California. The subsequent states with the highest percentages of established enterprises were Maryland, Arizona, Florida and Virginia with 11%, 8%, 7%, and 7% respectively (for examples of current investment projects see Appendix B ). As Figure 1 shows, persons obtaining LPR investor visas to the United States between FY1998 and FY2007 has fluctuated in number. While 824 persons obtained such LPRs in FY1998, the total for FY2003 was 64. From FY2003 through FY2008, the total number grew by 2,125% to a total of 1,360. Thus, despite a notable recent upward trend in growth, the issuance of LPR investor visas has not yet recovered to the levels of the mid-to-late 1990s. Additionally, during the time period depicted in Figure 1 , 38.9% of the 3,754 visas issued were for individuals adjusting status. The remaining 61.1% were issued to new arrivals. The majority of these new arrivals occurred in FY2006-FY2008. When coming to the United States as a temporary investor, there are two classes of nonimmigrant visas which a foreign national can use to enter: the E-1 for treaty traders and the E-2 for treaty investors. An E-1 treaty trader visa allows a foreign national to enter the United States for the purpose of conducting "substantial trade" between the United States and the country of which the person is a citizen. An E-2 treaty investor can be any person who comes to the United States to develop and direct the operations of an enterprise in which he or she has invested, or is in the process of investing, a "substantial amount of capital." Both these E-class visas require that a treaty exist between the United States and the principal foreign national's country of citizenship. In the majority of cases, a commerce or navigation treaty serves as the basis for the E-class visa extension (though other bilateral treaties and diplomatic agreements can also serve as a foundation). A number of countries offer both the E-1 and E-2 visas as a result of reciprocal agreements made with the United States, although many countries only offer one. Currently there are 75 countries who offer the treaty class visas. Of these countries, 28 offer only the E-2 treaty investor visa while 4 countries offer only the E-1 treaty trader visa (see Appendix A ). In the cases where a country offers both types of visas, an applicant who qualifies for both types of visa may choose based upon his or her own preference. Such decisions, however, would depend upon the specific nature of the business as the E category visas carry different qualifying criteria for renewal. Although each category has some unique requirements, other requirements cut across all categories of nonimmigrant investor visas. An applicant for any of the nonimmigrant investor categories must satisfy the following criteria: the principal visa recipient must be a national of a country with which the United States has a treaty. the principal visa recipient must be in some form of executive or supervisory role in order to qualify as a treaty trader or investor the skills the principal visa recipient possesses must be essential and unique to the enterprise under consideration the visa holder must show an intent to depart the United States at the end of the visa's duration of status if investing in an existing enterprise, the applicant must show that the employer of the treaty trader or investor must be at least 50% owned by nationals of the treaty country. A person granted an E-class visa is eligible to stay in the United States for a period of two years. Although an applicant is obligated to show intent of departing the United States at the end of the visa duration, the E-class visas may be renewed for an indefinite number of two year periods provided that the individual still qualifies. Spouses and child dependents are granted the same visa status and renewal as the principal visa holder so long as the child is under the age of 21, after which the child must apply and qualify for his or her own visa. Generally with the E-class visas, the individual may not engage in other employment than that which is stipulated, although incidental activities are generally allowed. If any E-class individual wishes to change employer, he or she is under obligation to contact the Department of State (DOS) and apply for adjustment of status. The E-1 formally traces back to the 1924 Immigration Act, although merchants working under treaty terms were recognized visa holders prior to this act. Under current law, the E-1 visa is to be issued to an individual who engages in substantial trade between the United States and his or her country of nationality. According to immigration regulations, trade is defined as "the exchange, purchase or sale of goods and/or services. Goods are tangible commodities or merchandise having intrinsic value. Services are economic activities whose outputs are other than tangible goods." This expanded definition of trade into the service sector allows for a fairly broad understanding of what trade may entail. The term "substantial trade" has never been explicitly defined in terms of monetary value. Rather, the term is meant to indicate that there is an amount of trade necessary to ensure a continuing flow of international trade items. For smaller businesses, regulatory qualification for treaty trader status may be derived from demonstrating that the trading activities would generate an income sufficient to support the trader and his or her family. The qualifications for sufficient volume or transaction have not been explicitly set in the regulations, but a minimum qualification is that more than 50% of the business's trade must flow between the United States and the treaty country from which the E-1 visa holder stems. The E-2 investor visa is a visa category that stems from the 1952 Immigration and Nationality Act (INA). The qualifying applicant for such a visa is coming to the United States in order to "develop or direct the operations of an enterprise in which he has invested, or is in the process of investing a substantial amount of capital." Unlike the E-1 visa, the business need not be engaged in trade of any kind. However, the same rules concerning ownership are still applicable. In cases of ownership of an enterprise, the regulations require that the E-2 visa holder control at least a 50% interest in an enterprise. The burden of proof for E-2 qualification lies with the applicant in the same manner as with the other E-class visas. There is no explicit monetary amount for what constitutes a "significant amount of capital." The DOS has operated under a regulatory proportionality principle that dictates that the amount an individual invests must be enough to ensure the successful establishment and growth of an enterprise, and there must be some level of investment risk assumed by the treaty investor. Because of this proportionality regulation, an investment in a small to medium-sized enterprise is acceptable. For smaller sized investments, the DOS generally requires that the investment amount be a higher percentage of the enterprise value. For higher valued enterprises the investment percentage becomes less relevant, provided that the monetary amount is deemed substantial. As further grounds for regulatory qualification for an E-2 investor visa, investments in marginal enterprises are not eligible for acceptance. Consequently, the DOS applies a two-pronged test for marginality. On the one hand, the enterprise in which the applicant seeks to make an investment must be capable of providing more than a minimal living for the investor and his or her family. However, the rules are capable of recognizing that some businesses need time to establish themselves and become viable. Consequently, as a second prong of the test, the investor's enterprise must be deemed capable of making a significant economic impact within five years of starting normal business activity. If neither of these prongs is successfully passed, the enterprise is deemed marginal and the application is rejected. An additional category of E-class nonimmigrant visa—the E-3 visa for Australian nationals—does exist, but it is set aside for use by specialized workers, and not for investors or traders. E-class visas are largely distributed to foreign nationals from the regions of Asia and Europe. This result is not surprising since the majority of treaty countries are in these two regions. Furthermore, one could reasonably expect that the financial requirements embedded in nonimmigrant investor visa categories would result in a high correlation between the nationality of qualifying applicants and country membership in the Organization for Economic Cooperation and Development (OECD)—an organization of capital abundant countries. As Figure 2 shows, the Asian region was issued the highest number of E-class visas in FY2009, with a total of 14,843 visas issued. These Asian issuances constitute more than any other region, and represent 45.5% of the worldwide total. Within the Asian region, the biggest user of the E-class visa is Japan, whose nationals accounted for 9,533 of the visa issuances in FY2009, a figure representing 29.2% of the 32,655 worldwide E-class visas issued that fiscal year. Europe's 10,943 E-Class visas accounted for 33.5% of the worldwide total, while the North American share of 3,897 visas represented 11.9%. Oceania's issuance accounted for 2,387 visas, or 7.3% of the total. South America and Africa each accounted for less than 1.7% of the worldwide total, and combined their nationals represented approximately 1.8% of the worldwide E-class visa issuances for FY2009. The admissions data on nonimmigrant investors offers more detailed insights into the origins of the visa holders. Table 2 provides cumulative totals of E-class visa admissions into the United States in FY2008 by region of origin, with a detailed breakdown of the Asian region. The figures listed in Table 2 show that the Asian region accounted for approximately 47.7% of the nonimmigrant investor visa admissions into the United States. In FY2008, Japan accounted for the majority of nonimmigrant investor admissions with 85,175 admissions. South Korea's 13,801 nonimmigrant investors admitted account for 6.0% of the United States total for FY2008. It is worth noting that the fast growing markets of China and India (the world's two largest population centers) combined for slightly less than 900 admissions. The second largest region of origin for nonimmigrant investor admissions was Europe, with slightly more investors admitted than Japan. And while Europe's 87,787 admissions accounted for 38.1% of the total U.S. nonimmigrant investor admissions in FY2008, the 276 admissions of nationals from African countries accounted for approximately one-tenth of 1% of this same total. The Department of Homeland Security (DHS) offers statistics on the admissions of nonimmigrants and their destination state. Table 3 indicates the destination states of nonimmigrant treaty trader and investor visa admissions into the United States for FY2008. The state with the highest number of nonimmigrant investors as their destination in FY2008 was California with 46,835 admissions, accounting for 20.3% of the admissions total. Following California, the next three biggest recipients of nonimmigrant investors were New York, Florida, and Texas with 27,252, 24,668, and 22,126 admissions each, respectively. In the respective order, these state admissions accounted for 11.8%, 10.7% and 9.6% of the admissions total in FY2008. The only other states with a combined total of more than 10,000 nonimmigrant treaty trader and investor visa admissions were Michigan and New Jersey. Michigan was the destination state of 12,331 nonimmigrant investors admitted, while New Jersey attracted 11,748 admissions. These totals accounted for 5.3% and 5.1% of the United States admissions total, respectively. The remaining states represented the destination states for approximately 37.2% of nonimmigrant traders and investors. Historically, more investors have applied to enter the United States as nonimmigrants than immigrants, possibly because the less stringent requirements for the nonimmigrant investor visa make it easier to obtain. However, relative to other nonimmigrant categories, the admission levels of investor nonimmigrants are low. With the ease of movement, technological advances, and ease of trade restrictions, many investors may be choosing to invest in the United States from abroad and enter the United States on B-1 temporary business visas or visa waivers. Although there are many countries with investor visa programs—including the United Kingdom, Australia, and New Zealand—the Canadian investor program has the strongest parallels to those of the United States. These parallels are in part due to the fact that the U.S. immigrant investor program was modeled after its Canadian counterpart. The Canadian program allows investors who have a net worth of at least $800,000 (Cdn) to make a $400,000 (Cdn) investment through Citizenship and Immigration Canada (CIC). The Canadian government additionally offers an entrepreneurial visa for foreign nationals with a net worth of $300,000 (Cdn). These nationals are required to invest and participate in the management of a certain sized business, and they must produce at least one new full-time job for a non-family member. Between 1986 and 2002, the Canadian investor visa program attracted more than $6.6 billion (Cdn) in investments. From FY1992 through FY2004, United States LPR investor immigrants had invested an estimated $1 billion in U.S. businesses. According to published accounts, the Canadian investor visa was developed initially to attract investors from the British colony of Hong Kong. The visa was created in 1986 in response to the significant numbers of investors seeking to migrate from Hong Kong in anticipation of the transfer of the colony from British to Chinese control. For these investors, the visa offered an opportunity to establish legal permanent residence in a country that was perceived to be more embracing of individual property rights and open markets. These immigrant investors from Hong Kong, along with other immigrant investors, have cumulatively invested over $3 billion in the Canadian economy. As Figure 3 demonstrates, the annual number of immigrant investor visas issued over the past decade has remained multiple times higher than that of its United States counterpart. The margin between these two programs was closest in 1997, when the Canadian issuance of 5,595 immigrant investor visas was approximately 400% higher than the U.S. total of 1,361 immigrant investor visas issued. Although these ratios have fluctuated, the sizable Canadian advantage in this measure has remained. In terms of the absolute levels, the Canadian immigrant visa level for 2008 represented a 13-year high, while the U.S. level for the same time period roughly equaled its 13-year high. Both countries have shown an upward trend in immigrant investor visas since 2003. What is unclear from the data is whether the competition between the U.S. and Canadian program (as well as investor programs in other countries) constitutes a zero-sum game. There are no data available showing the motive for migration among investors, or if they perceive the United States and Canada as interchangeable investment locations. If the investors are motivated purely by the economic returns, then economic theory suggests that equalizing the program financial requirements should result in more equal rates of petitions. Furthermore, a lowering of the financial requirements should increase the supply for both countries. However, if the immigrant investors are motivated to migrate by non-financial considerations, then equalizing the United States program requirements with its Canadian counterpart is likely to have little impact on the current trends. Classical economic theory has posited that trade liberalization (including the reduction of investment restrictions) establishes a conditional inverse theoretical relationship between foreign direct investment (FDI) and migration. In other words, as trade increases, migration pressures decrease. The theory posits that an increased level of FDI should reduce migratory pressures through growth in the targeted economy. As economic growth produces a higher demand for labor, workers in that economy feel less pressure to seek employment in foreign economies, provided that the new jobs complement the workforce's skills. For example, if economic growth creates demand for skilled labor, then an unskilled labor force should not experience any reduced migration pressures. Thus, while FDI increases host-country growth, there is not necessarily a direct reduction in host-country migration pressures. The investor visas offered by the United States operate on the principal that FDI into the United States should spur economic growth in the United States. According to the classical theory, if these investments are properly targeted towards the U.S. labor force's skill sets, it should reduce the migration pressures on U.S. workers. Such economic growth from FDI should further spur greater demand for trade. In FDI between capital abundant countries such as the OECD member states (between whom a marked majority of FDI flows), the empirical evidence has largely supported this notion. Furthermore, it has provided an increased per capita income in these states, as well as boosted the general standard of living. What is less clear from the empirical research is the degree to which potential migration provides any additional incentive for investment activity in the United States. The classical trade theory asserts that trade and migration are substitutes, and that trade liberalization should reduce migratory pressures. These basic propositions are generally agreed to hold in the long term. Consequently, in the long term classical trade theory suggests there should be little migration of investors from countries with liberalized trade arrangements with the United States. Instead, these investors would achieve their investments through conventional FDI. Furthermore, the theory suggests that investors would be more likely to migrate from countries with restrictive trade policies (a policy more highly correlated with less economically developed countries). Critics of the classical economic models contend that despite elegant predictions, the models produced by the theory frequently do not capture the costs of international finance. Such critics argue that foreign investments often occur at the expense of local businesses, and result in exploitive practices of local labor. These criticisms are particularly common when critiquing the economic relationship between capital abundant countries and less economically developed countries (LEDC). According to the argument, more powerful countries can leverage their power to construct investment relationships that shift a disproportionate amount of profits to the capital abundant countries. Simultaneously, a greater share of the costs are shouldered by the less powerful country. Classical economists generally respond by noting that these investments are still producing growth in the LEDCs, making the countries better off than without the investments. However, LEDCs remain a source of contention between the classical economic theorists and their critics. Some scholars have expressed doubt about the posited trade/migration substitutability, suggesting that the relationship in the short or medium term could look different from the long term. One of the arguments put forward is that trade and migration are complementary for countries with different levels of development. Under such a scenario, economic growth in a sending country would provide potential migrants with the economic means to overcome relatively high migration costs. Other observers point to such factors as imperfect credit markets and currency fluctuations as significant "push" factors for potential migrants. These latter factors, however, are generally more highly correlated with LEDCs. Therefore, both the complementary and substitutability theories of trade and migration suggest that higher demand for investor out-migration should currently lie in the populations of LEDCs. However, as noted earlier, investor visas issued to regions with LEDCs are relatively few. What makes the visa program distinct from conventional FDI is that it involves trade through the import of human capital. Consequently, these visas have potential for creating a so-called "brain drain" migration out of less-developed sending-countries. LEDCs are by definition limited in their capital levels, and economic theory would suggest that exporting capital from a capital scarce country would inhibit its growth and development. Classical theorists would argue that the United States would be better served by sending FDI into LEDCs, thereby promoting economic growth in LEDCs and a subsequent higher demand for U.S. goods. Such investment, the theory dictates, would promote job growth both in the United States and abroad. Instead, targeting investors from capital abundant countries for sector specific investments would serve a more complementary role for the global market. By attracting capital abundant country investors, the United States' economic growth and productivity could be stimulated without adversely affecting the consumption and trade potential of the investor's country of origin. Some recent scholarly work has drawn a distinction between the decision-making factors of potential temporary and permanent migrants. Amongst temporary migrants, it is the employment prospects and wage differentials that are significant variables in deciding whether to migrate. Differences in both gains and price levels should affect the cost/benefit calculation of the potential migrants, as these variables will affect potential levels of consumption and savings. For permanent migrants, however, the prospects for professional and social mobility are the main motivating factors. The distribution of visas among Asian countries shows marked country-specific tendencies among investor visa petitioners. Specifically, the polarization among petitioners towards either immigrant (permanent) or nonimmigrant (temporary) visas suggests that a significant proportion of applicants are substituting immigrant visas for nonimmigrant visas, or vice versa. For example, while Japan accounted for 36.9% of all the foreign nationals arriving on nonimmigrant treaty trader and investor visas in FY2008 ( Table 2 ), its nationals represented only 1% of all the LPR investor visas issued since FY1992. Conversely, nationals of Taiwan accounted for roughly 40% of immigrant investors issued since FY1992, but only 1.5% of nonimmigrant arrivals in FY2008. In the context of the aforementioned theory, these opposite behaviors suggest that Japanese investors are seeking to capitalize on wage differentials, while Taiwanese, Chinese, and (to some extent) South Korean investors are pursuing professional and social mobility. Although some considerations weigh more heavily on the decisions of immigrant and nonimmigrant investors, no single explanation accounts for the behavior of investor visa petitioners. Japan, for example, has some trade restrictions with the United States through voluntary export restraint agreements limiting auto and steel exports to the United States, suggesting from the theoretical standpoint that Japanese investors would choose to temporarily migrate. The Japanese governments have also complained that the post-9/11 customs regulations and practices of the United States inhibit U.S./Japanese trade. Despite the suggestion by these factors that Japanese investors are temporarily substituting trade with migration, it is also plausible that Japan's weak economic performance has reduced the professional mobility opportunities—a motivation associated with permanent migration. From 1991-2000, Japan's real (adjusted for inflation) average GDP growth rate was 1.4%, and it fell to 0.9% from 2001 to 2003. Yet, regardless of motivation, Japanese investors are predominantly choosing to temporarily migrate to the United States. The fact that China, Taiwan and South Korea have had strong economic performance in the last decade and relatively higher levels of immigrant investors to the United States, suggests that these investors are migrating for more than financial purposes. These investors may be more strongly motivated by the family and/or social network connections to previously migrated investors and other LPRs in the United States. These theoretically derived motives, however, must be further tested empirically before any conclusive behavioral statements can be made. Classical economic theory holds that investments provide for multiplier effects throughout the economy by increasing demand for other goods and services. For example, an increase in demand for corn may increase the demand for storage facilities, which results in an increase in construction contracts. The U.S. Department of Commerce has quantified these effects through the Regional Input-Output Modeling System (RIMS II). The RIMS II multipliers have become a significant factor in assessing indirect economic activity and employment effects for Regional Center Pilot Program petitions. Using the regional multipliers for various industries, foreign investment funds are frequently shown to yield increases in demand across an economy that are several times higher than the direct input by an investor. Thus, despite the relatively low number of investors entering the United States, the impact of each investment by a foreign investor is a multiplied factor greater than the direct investment, depending upon which industry and region is being invested in. Furthermore, studies showing the direct economic investments of foreign investors may not fully capture the economic impact of these investors upon a region. In recent years, significant efforts have been made by administrative agencies to both promote investment by foreigners in the United States economy, and to close perceived loopholes for visa exploitation. At the center of these efforts has been the USCIS' changes to the Regional Center Pilot Program, which addressed fraud concerns and the development of a Regional Center unit for coordination and targeting of foreign investments. During the late 1990's, the LPR investor visa was suffering from high levels of fraudulent applications. There has been concern that potential immigrants could use schemes of pooling their funds and transferring the money to demonstrate the existence of sufficient capital. Furthermore, applicants could potentially use promissory notes that would allow for their repayment after a six year time period. Since the LPR was only conditional for two years, some observers feared that these investors could pull out of their respective investments after being granted their LPR, have the promissory notes forgiven, and the enterprise would collapse. As a result, the USCIS has engaged in a policy of not accepting promissory notes, although the regulations state that petitions with promissory notes may be considered for approval. Additionally, the creation of the Investor and Regional Center Unit (IRCU) within USCIS has allowed greater scrutiny of applications through increased resources and coordination of petitions processing. Petitioners now must provide extensive documentation that traces the source of their funds to show that the capital was legally obtained. Prior to the creation of IRCU, the former-INS had been criticized for becoming more restrictive in application reviews for Regional Center designation, including allowing some applications to remain pending for more than three years. In 2005, concerns were raised by both Members and advocates that the IRCU still did not process applications quickly enough, and that staff members had competing obligations within IRCU. Proponents of the Regional Center Pilot Program believe it has attracted a significant amount of capital and that addressing these criticisms would further increase the levels of foreign investments through the LPR investor visa. USCIS has responded to these criticisms by expanding the number of Regional Centers available for LPR investor investments. Working with foreign financing from the immigrant investor program has become highly attractive for many domestic investors. A number of current investment projects are using LPR investor financing because it is less costly for the domestic investors. For domestic investors, employing LPR investor funds becomes a significantly cheaper option than a bank loan, since there is no requirement to pay interest on the financing. Additionally, because the enterprises are less saddled with financing debt they are more quickly able to turn a profit. The LPR investor visa petitioners are still able to qualify for conditional LPR status under these investment structures through the multiplier rules for employment and capital that the USCIS employs. Thus, limited partnerships of domestic investors with LPR investor visas has become a popular option for financial stabilization and enterprise start-up in Regional Centers as diverse as Philadelphia and South Dakota. In the efforts to rebuild the sections of New Orleans damaged by Hurricane Katrina, developers and officials alike have taken an interest in attracting foreign capital. USCIS officials are working closely with New Orleans officials to establish New Orleans as another Regional Center for LPR investor visa investments. Officials at USCIS are hopeful that the program success that the Philadelphia targeted center is experiencing can be replicated in New Orleans. Since being designated a Regional Center, Philadelphia has attracted over 100 LPR investors and most of their investments are being used to help finance the renovation and transformation of the 1,100 acre shipyard (for further discussion, see Appendix B ). In the 111 th Congress, authorizing language in the Department of Homeland Security Appropriations Act, 2010 ( P.L. 111-83 , §548), extends the authorization of the Regional Center Pilot Program through September 30, 2012. The Senate-passed version of the act had included language to permanently reauthorize the EB-5 Regional Center Pilot Program, but this language was not included in the conference agreement. On July 22, 2009, the Senate Judiciary Committee held a hearing to assess the Regional Center Pilot Program, with some members expressing support for the program's permanent authorization. Some legislation has also proposed modifying the qualifying criteria as a targeted area to lower the threshold for investment amounts in some geographic regions as a means of enticing more applications by potential immigrant investors. There are currently no other programs for targeting investments by immigrant investors to the United States. Additional investor visa issues that could surface may relate to temporary investors. In terms of nonimmigrant visas, the Danish government has been lobbying the United States to grant E-2 treaty investor visas to Danish nationals. Originally, this provision was granted to the Danes on May 2, 2001 as part of a protocol to the treaty granting nationals of Denmark E-1 nonimmigrant trader visa eligibility. The protocol was never ratified, however, due to congressional objections over the inclusion of immigration provisions in a trade agreement. Subsequently, Representative Sensenbrenner introduced H.R. 3647 in the 109 th Congress, which was passed in the House on November 16, 2005, and would have allowed nationals of Denmark to enter and operate in the United States as investors under E-2 treaty investor nonimmigrant visas. Currently, Danish nationals are only allowed E-1 treaty trader visas. Denmark is one of four countries whose nationals are eligible for E-1 treaty trader visas, but not E-2 treaty investor visas (see Appendix A ). Appendix A. E-Class Visa Privileges by Year of Attainment Appendix B. Immigrant Investor Pilot Program Projects There are currently numerous targeted economic regions set up for the Regional Center Pilot Program for the EB-5 visa category. These targeted areas have focused on different types of investments in order to achieve economic benefits for the given region. Below are descriptions of a couple of the projects that are currently in place under the Regional Center Pilot Program and the results these projects are producing. The South Dakota International Business Institute (SDIBI), Dairy Economic Development Region (DEDR) is the only regional targeting center currently run by a state government. Approved in June 2005, this Regional Center was the result of a state-wide effort to find an improved method of attracting foreign capital to South Dakota. From the state's perspective, the EB-5 pilot investor program offered a more promising solution than the E-2 nonimmigrant visa, since officials could offer investors the benefit of LPR status. Additionally, the job-creation criterion of the EB-5 visa aligned well with the state's focus on job creation from foreign investments (as opposed to isolated capital injections). In its application for Regional Center designation, the state said it would focus its efforts on attracting dairy farm investors. USCIS agreed to the designation on the condition that South Dakota would allow for limited partnerships of foreign investors with domestic farmers. As a result, South Dakota currently has enterprises fully owned and operated by foreign investors, as well as limited partnerships. Since the regional designation took effect, South Dakota has attracted 60 foreign investors to its dairy industry (with an additional 10 applications still pending). These foreign investors have injected approximately $30 million into the South Dakota economy, with an additional $6 million in matching funds coming from local farmers. Furthermore, this combined $36 million in invested funds has resulted in almost $90 million in bank financing for the various dairy investment projects. As a direct consequence of these foreign investments, 240 additional jobs have been created and 20,000 additional cows have been brought to South Dakota. Using the RIMS II multipliers for investment and employment, the foreign investments from EB-5 immigrants have resulted in a total of 638 additional jobs and over $360 million in additional funds to the regionally targeted economy. According to SDIBI/DEDR Director Joop Bollen, the pilot program has afforded South Dakota "a tremendous opportunity," not only because of the direct investments and multiplier effects, but because of the other investments made by the foreign investors. According to Director Bollen, the attraction of foreign investors has had significant spillover effects into the restaurant and meat packing industries. As a result, SDIBI/DEDR hopes to focus on attracting additional investments for its meat packing plants. As such, Director Bollen stated that it was of paramount concern to the SDIBI/DEDR that USCIS have sufficient resources to quickly adjudicate EB-5 immigrant visa petitions. If the adjudication process is too long, Director Bollen stated, then the opportunity cost may make a South Dakota dairy investment unappealing to foreign investors. CanAm Enterprises is a private financial advising group which serves to structure, promote and administer the Philadelphia Industrial Development Center (PIDC) Regional Center. The group works in conjunction with the City of Philadelphia through the PIDC to facilitate the city development (mainly in the city's shipyard area) and provide investor credibility. This public/private partnership was developed to aid the transition of Philadelphia from a manufacture-based to a service based economy. The main strategy has been to use collateralized loans to attract investments in industries that provide long-term full time employment. By doing so the city hopes that investors will wish to invest in other projects and sectors of the city's economy. When the Philadelphia Naval Base was closed as part of the base closures of the 1970s, the base was handed over to the PIDC for transformation to civilian use. Despite the city's efforts the shipyard was unable to remain competitive in the ship construction industry. However, with the passage of requirements following the Exxon Valdez oil spill (and the ongoing regulations from the Jones-Shafroth Act), the civilian shipbuilding industry in the United States became economically viable again. The federal government and the city of Philadelphia combined to invest over $400 million into the Philadelphia shipyard. Additionally Norwegian shipbuilding companies were brought in as investors in the shipyard and provided valuable training and human capital to the shipyard. Since production restarted, EB-5 investors have become increasingly important for providing funds to remove production bottlenecks. A recent example includes the use of EB-5 funds for the development of a more advanced painting technology for the ships. Philadelphia is one of the Regional Centers that has been most successful in attracting foreign investors through the EB-5 visa. There are approximately 60 EB-5 visa investors in Philadelphia who have invested a total of $75 million into the city. Additionally, there are around 30 petitions that are under review for other investment projects. The lead official at CanAm Enterprises told CRS that while they believe the funds have been important to the city, the human capital the investors bring is equally important. This official stated that the investors being brought to the United States represented highly competent entrepreneurs, who not only made investments in the city beyond their initial investment, but also facilitated greater economic activity through exchanges with their existing foreign networks. | With the current economic downturn, Members of the 111th Congress are likely to be faced with many policy options aimed at economic improvement, including the possible consideration of amending visa categories for foreign investors. Foreign investors are often viewed as providing employment opportunities for U.S. citizens rather than displacing native workers. Yet, extending foreign investor visas provides several potential risks as well, such as visa abuses and security concerns. Thus, a potential policy question for Congress—and particularly legal permanent resident (LPR) investors—is whether the benefits reaped from allocating visas to foreign investors outweigh the costs of denying visas to other employment-based groups. There are currently two categories of nonimmigrant investor visas and one category of immigrant investor visa for legal permanent residents (LPR). The visa categories used for nonimmigrant investors are: E-1 for treaty traders; and the E-2 for treaty investors. The visa category used for immigrant investors is the fifth preference employment-based (EB-5) visa category. According to Department of Homeland Security (DHS) statistics, there were 230,647 nonimmigrant treaty trader and investor visa arrivals in the United States in FY2008. For the same time frame, DHS reported the granting of 1,360 investor visas. When viewed from a comparative perspective, the investor visas of the United States are most closely mirrored by those of Canada. The LPR investor visa draws especially strong parallels to the Canadian immigrant investor visa, since the latter served as the model for the former. Comparing the admissions data between these two countries, however, reveals that the Canadian investor provision attracts many times the number of investors of its United States counterpart. Yet, both countries showed an upward trend in immigrant investor visas in the last two years. The investor visas offered by the United States operate on the principle that foreign direct investment into the United States should spur economic growth in the United States. According to the classical theory, if these investments are properly targeted towards the U.S. labor force's skill sets, it should reduce the international migration pressures on U.S. workers. To attract foreign investors, research indicates that temporary migrants are motivated most significantly by employment and wage prospects, while permanent migrants are motivated by professional and social mobility. Theoretically, however, it is unclear to what extent potential migration provides additional incentive for investment activity. Investors from developed countries may sometimes lack incentive to settle in the United States since they can achieve foreign direct investment (FDI) and similar standards of living from their home country. Yet, in cases where foreign investors have been attracted, the economic benefits have been positive and significant. Immigrant investors have been subject to notable administrative efforts in the past couple of years. In 2005, DHS developed the Investor and Regional Center Unit (IRCU) to govern matters concerning LPR investor visas and investments to better adjudicate petitions and coordinate investments. In the 111th Congress, authorizing language in the Department of Homeland Security Appropriations Act, 2010 (P.L. 111-83, §548), extends the authorization of the Regional Center Pilot Program through September 30, 2012. |
Nearly all of the outstanding debt of the federal government is subject to a statutory limit. For years, the public debt limit has been codified in Section 3101(b) of Title 31 of the United States Code . Periodic adjustments to the debt limit typically have taken the form of amendments to 31 U.S.C. 3101(b), usually by striking the current dollar limitation and inserting a new one. In recent years, such legislation has taken the form of suspending the debt limit through a date certain, with an increase to the dollar limit made administratively at the end of the suspension period. The congressional budget process provides for the annual adoption of a concurrent resolution on the budget, which sets forth appropriate levels of the public debt—along with levels of revenues, spending, and the deficit or surplus—for the upcoming fiscal year and at least four additional years. The budget resolution, however, does not become law. Therefore, subsequent legislation is necessary in order to implement budget resolution policies, including changes to the statutory limit on the public debt. In addition, Congress may consider adjustments to the public debt limit outside the context of the budget resolution, such as when the House and Senate are unable to agree on a budget resolution or when the current debt limit is not sufficient to meet existing financial obligations. Under current legislative procedures, the House and Senate may originate and consider legislation adjusting the debt limit in several different ways. They may consider such legislation under regular legislative procedures, either as freestanding legislation or as a part of a measure dealing with other topics. Alternatively, they may change the debt limit as part of the budget reconciliation process provided for under the Congressional Budget Act of 1974. In addition, Congress has twice established special procedures for congressional disapproval of adjustments to the debt limit authorized by certain statutes. Finally, the House has originated debt limit legislation under its former House Rule XXVIII (the so-called Gephardt rule); the House repealed the rule at the beginning of the 112 th Congress (2011-2012). Although the Constitution requires that revenue measures originate in the House, this requirement is not considered to apply to debt limit measures. Over the years, however, most debt limit legislation has originated in the House. The House Ways and Means Committee and the Senate Finance Committee exercise jurisdiction over debt limit legislation. It is extremely difficult for Congress to effectively influence fiscal and budgetary policy through action on legislation adjusting the debt limit. The need to raise (or lower) the limit during a session is driven by many previous decisions regarding revenues and spending stemming from legislation enacted earlier in the session or in prior years. Nevertheless, the consideration of debt limit legislation often is viewed as an opportunity to reexamine fiscal and budgetary policy and is marked by controversy. Consequently, House and Senate action on legislation adjusting the debt limit often is complicated, hindered by political difficulties, and subject to delay. The three ways the House and Senate have originated and considered debt limit legislation, as well as the congressional disapproval procedures first established under the Budget Control Act of 2011, are discussed briefly below. The House and Senate may develop and consider legislation adjusting the debt limit under regular legislative procedures in both chambers, either as freestanding legislation or as a part of a measure dealing with other topics. The House Ways and Means Committee and the Senate Finance Committee may originate measures adjusting the debt limit at any time. The Senate usually acts on legislation originated by the House. However, in 2002 and 2004, for example, the Senate originated debt limit legislation ( S. 2578 and S. 2986 , respectively), which became P.L. 107-199 and P.L. 108-415 , respectively. Consideration of a debt limit measure in the House usually is subject to a special rule, reported by the House Rules Committee, that may include debate limitations, restrictions on the offering of amendments, and other expediting features. In the Senate, consideration of debt limit measures is generally not subject to expedited procedures; nongermane amendments may be offered and the measures may be debated at length unless cloture is invoked or other limitations are agreed to by unanimous consent. In 2009, for instance, an adjustment to the public debt limit (Section 1604, Div. B, P.L. 111-5 ) was considered under the regular legislative process as part of the economic stimulus legislation in the early part of 2009. The House passed (on January 28) its version of the economic stimulus legislation ( H.R. 1 , the American Recovery and Reinvestment Act of 2009) without any provision increasing the public debt limit. The Senate, however, included an increase to the public debt limit in its version passed on February 10. The House and Senate subsequently agreed to the conference report to accompany H.R. 1 , which included the Senate's provision to increase the public debt limit, on February 13. President Barack Obama signed the legislation on February 17, 2009 ( P.L. 111-5 ). The budget reconciliation process is an optional procedure associated with the congressional budget resolution; the budget reconciliation process may be used only if the House and Senate agree to a budget resolution that contains reconciliation directives. The budget reconciliation process, as provided for by the Congressional Budget Act, is intended to facilitate the timely consideration and enactment of legislation that implements, in whole or in part, the budget policies reflected in the budget resolution, including changes to the debt limit. Reconciliation legislation is subject to expedited consideration in both chambers. In the Senate, where the expedited procedures have the most impact, debate on reconciliation legislation is limited, amendments must be germane, and extraneous matter is prohibited. Although the predominant focus of reconciliation legislation has been to change revenue and spending levels, four such measures also were used to adjust the debt limit: the Omnibus Budget Reconciliation Act of 1986 ( P.L. 99-509 ; October 21, 1986), Section 8201 (100 Stat. 1968); the Omnibus Budget Reconciliation Act of 1990 ( P.L. 101-508 ; November 5, 1990), Section 11901 (104 Stat. 1388-560); the Omnibus Budget Reconciliation Act of 1993 ( P.L. 103-66 ; August 10, 1993), Section 13411 (107 Stat. 565); and the Balanced Budget Act of 1997 ( P.L. 105-33 ; August 5, 1997), Section 5701 (111 Stat. 648). The Senate adopted a rule prohibiting the consideration of a budget reconciliation bill pursuant to the FY2016 budget resolution that "would increase the public debt limit" (see Section 2001(b) of S.Con.Res. 11 , 114 th Congress). The House also has originated debt limit legislation pursuant to its former House Rule XXVIII, commonly referred to as the "Gephardt rule" (named after its author, Representative Richard Gephardt). The House, as noted above, repealed this rule at the beginning of the 112 th Congress (2011-2012). The rule provided for the automatic engrossment of a House joint resolution changing the statutory limit on the public debt when Congress had completed action on the congressional budget resolution. The joint resolution was deemed to have passed the House by the same vote as the conference report on the budget resolution. The Senate has never had a comparable procedure. If the Senate chose to consider a House joint resolution originated pursuant to the Gephardt rule, it did so under the regular legislative process. Under the regular legislative process, as noted above, consideration of debt limit measures, even those originated by the Gephardt rule, generally is not subject to expedited procedures; nongermane amendments may be offered, and the measures may be debated at length, unless cloture is invoked or other limitations are agreed to by unanimous consent. The Senate sometimes has considered such debt limit measures for days and amended them. In 1985, for example, the Senate added extensive budget enforcement procedures (the Balanced Budget and Emergency Deficit Control Act of 1985, also known as "Gramm-Rudman-Hollings") to H.J.Res 372 , a measure that the House had originated under the Gephardt rule. More recently, in 2010, the Senate added statutory "pay-as-you-go" enforcement procedures (often referred to as PAYGO) to H.J.Res 45 , a measure that the House had originated under the Gephardt rule pursuant to the adoption of the FY2010 budget resolution ( S.Con.Res. 13 , 111 th Congress). The Senate passed the measure, as amended, on January 28, 2010, and the House subsequently passed the measure without further amendment on February 4, 2010. In such cases that the Senate amended the rule-initiated debt limit legislation, the House was required to vote on the Senate-amended legislation before it was sent to the President. Overall, from the time the rule was established in 1980 to the end of the 111 th Congress (2010), the House had originated 20 joint resolutions under this procedure. The Senate had passed 16 of these joint resolutions, passing 10 without amendment and six with amendments. Of the 20 joint resolutions originated by the House under the Gephardt rule, 15 have been enacted into law. In 11 of the 31 years between 1980 and 2010, the rule was either suspended (1988, 1990-1991, 1994-1997, and 1999-2000) or repealed (2001-2002) by the House. In most cases, the House suspended the rule because legislation changing the statutory limit was not necessary at the time. In addition, in four years, the House and Senate did not complete action on a budget resolution for that year (1998, 2004, 2006, and 2010). In the past six years, legislation adjusting the debt limit twice has included congressional disapproval procedures, effectively providing Congress with a second opportunity to consider the adjustment to the debt limit. In the first instance, enacted as part of the Budget Control Act of 2011 ( P.L. 112-25 ), signed into law on August 2, 2011, special procedures allowed for congressional disapproval of the increases to the debt limit authorized by the act. The act authorized increases to the debt limit by at least $2.1 trillion (and up to $2.4 trillion) in three installments. First, upon the certification by the President that the debt subject to limit was within $100 billion of the debt limit, the debt limit was increased by $400 billion immediately. Second, if Congress did not enact into law a joint resolution of disapproval within 50 calendar days of receipt of the certification, the debt limit was to be increased by an additional $500 billion. The House passed a disapproval resolution ( H.J.Res. 77 ), but the Senate did not. If Congress had enacted a joint resolution of disapproval (presumably over a presidential veto), the debt limit would not have been increased by the additional $500 billion, and the Office of Management and Budget would have been required to sequester budgetary resources on a "pro rata" basis, subject to sequestration procedures and exemptions provided in Sections 253, 255, and 256 of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended. Third, after the debt limit had been increased by the first $900 billion and upon another certification that the debt subject to limit was again within $100 billion of the debt limit, Congress had 15 calendar days to enact into law a joint resolution of disapproval to prevent the third automatic increase in the debt limit (again over a presumed presidential veto). If Congress did not enact such resolution, the debt limit was to be increased by one of three amounts: (1) $1.2 trillion; (2) an amount between $1.2 trillion and $1.5 trillion if Congress passed and the President signed into law legislation introduced by the Joint Select Committee on Deficit Reduction; or (3) $1.5 trillion, if a constitutional amendment requiring a balanced budget was submitted to the states for ratification. The House again adopted another disapproval resolution ( H.J.Res 98 ), but the Senate subsequently rejected a motion to proceed to the resolution. Therefore, the debt limit was increased by $1.2 trillion, because other criteria that would have allowed for a larger amount were not met. In summary, while an initial increase in the debt limit of $400 billion was effective immediately and not subject to congressional disapproval, subsequent additional increases of $500 billion and $1.2 trillion were subject to congressional disapproval. That is, for either of the two subsequent additional increases in the debt limit, if Congress had enacted a joint resolution of disapproval, the debt limit would not have been increased. Expedited procedures that limited debate and prevented amendments were established for the joint resolution of disapproval to ensure timely consideration. Although only a majority of each chamber would have been necessary to agree to a resolution of disapproval, to prevent an increase, supermajority support would have been necessary. This is because if the Treasury had advised the President that further borrowing was required to meet existing commitments, the President might normally be expected to veto the congressional resolution of disapproval. Congress can override a presidential veto, but to do so would require the support of two-thirds of each chamber. In 2013, similar congressional disapproval procedures were included in legislation suspending the debt limit through February 7, 2014 ( H.R. 2775 , 113 th Congress). In this instance, Congress had 22 calendar days to enact, presumably over the President's veto, legislation disapproving the suspension and subsequent adjustment to the debt limit authorized by the Default Prevention Act of 2013 (Section 1002 of P.L. 113-46 , Continuing Appropriations Act, 2014, enacted on October 17, 2013). On October 30, pursuant to the act and H.Res. 391 , the House passed a joint resolution disapproving the suspension of the debt limit by a vote of 222-191. On October 29, 2013, however, the Senate rejected a motion to proceed to its own disapproval resolution ( S.J.Res. 26 ) by a vote of 45-54, effectively precluding any further congressional action. A total of 96 debt limit measures have been enacted into law since 1940 (see Figure 1 ). The number of laws rose steadily from the 1950s through the 1980s, from six to 24, but dropped to 13 in the 1990s. Six of the 13 laws enacted in the 1990s were temporary extensions over a three-month period in 1990, enacted largely to accommodate lengthy negotiations during a budget summit between Congress and the President. Nine debt limit laws were enacted in the 2000s, and six debt limit laws have been enacted so far in this decade. As mentioned previously, debt limit legislation has been developed and considered under regular legislative procedures in both chambers, pursuant to the House's so-called Gephardt rule, or as part of the budget reconciliation process. Of the total 96 debt limit measures enacted into law since 1940, 77 were considered under regular legislative procedures, 15 were initiated pursuant to the Gephardt rule, and four were considered as part of omnibus budget reconciliation legislation. Compared with regular legislative procedures, the Gephardt rule accelerates action in the House (but not the Senate), and the budget reconciliation process expedites consideration in both chambers. Table 1 provides information on the 28 measures adjusting the public debt limit enacted since 1990. Of these 28 measures, 21 were considered under regular legislative procedures in both chambers either as stand-alone legislation (9 measures) or as part of legislation involving other matters (12 measures), 4 were initiated pursuant to the Gephardt rule, and 3 were considered as part of omnibus budget reconciliation legislation. In two instances, the debt limit legislation also included procedures to provide for a congressional disapproval process. | Nearly all of the outstanding debt of the federal government is subject to a statutory limit, which is set forth as a dollar limitation in 31 U.S.C. 3101(b). From time to time, Congress considers and passes legislation to adjust or suspend this limit. The annual budget resolution is required to include appropriate levels of the public debt for each fiscal year covered by the resolution. The budget resolution, however, does not become law. Therefore, the enactment of subsequent legislation is necessary in order to implement budget resolution policies, including changes to the statutory limit on the public debt. In addition, Congress may consider adjustments to the public debt limit outside the context of the budget resolution, such as when the House and Senate are unable to agree on a budget resolution or when the current debt limit is not sufficient to meet existing financial obligations. Under current legislative procedures, the House and Senate may originate and consider legislation adjusting the debt limit in several different ways. They may consider such legislation under regular legislative procedures, either as freestanding legislation or as a part of a measure dealing with other topics. Alternatively, they may change the debt limit as part of the budget reconciliation process provided for under the Congressional Budget Act of 1974. The House also has originated debt limit legislation under its former House Rule XXVIII (the so-called "Gephardt rule"); the House repealed the rule at the beginning of the 112th Congress (2011-2012). In addition, Congress has twice established special procedures for congressional disapproval of adjustments to the debt limit authorized by certain statutes. During the period from 1940 to the present, Congress and the President have enacted a total of 96 measures adjusting the public debt limit—77 under regular legislative procedures in both chambers, 15 under the Gephardt rule, and 4 under reconciliation procedures. This report will be updated as developments warrant. |
The psychological health of active duty servicemembers has been an issue of significant concern for Congress in recent years, with particular attention to the links between deployments and psychological health concerns, such as post-traumatic stress disorder (PTSD). News stories have emphasized the challenges faced by some servicemembers returning from deployments, but psychological health is a salient issue for the entire active duty force. It should also be pointed out that mental health issues are not unique to servicemembers or military service. Research suggests that an estimated 26.2% of Americans ages 18 and older experience a diagnosable mental disorder in any given year. Within the Department of Defense (DOD), the Office of the Assistant Secretary of Defense (Health Affairs) is primarily responsible for the medical aspects of mental health issues. The individual military services (Army, Navy, Marine Corps, and Air Force) also conduct a variety of mental health programs and suicide prevention efforts. In 2012, a Defense Suicide Prevention Office was opened to provide suicide prevention services across all the services. This report will discuss the prevalence of different psychological health concerns within the Armed Forces, current mental health screening and treatments, and DOD responses. It will also provide an overview of the recommendations of key reports and studies, past congressional actions and funding, and current issues for Congress. Finally, the report discusses specific mental health issues, including PTSD, alcohol and drug use disorders, depressive disorders, traumatic brain injury, and suicide in more detail. This report does not address veterans. Veteran's mental health issues are addressed in CRS Reports CRS Report R41921, Mental Disorders Among OEF/OIF Veterans Using VA Health Care: Facts and Figures , by [author name scrubbed], CRS Report R40941, Traumatic Brain Injury Among Veterans , by [author name scrubbed], and CRS Report R42340, Suicide Prevention Efforts of the Veterans Health Administration , by [author name scrubbed]. Overall, mental health disorders have significant impacts on servicemember health care utilization, disability, and attrition from service. In 2011, mental disorders accounted for more hospitalizations of servicemembers than any other illness and more outpatient care than all illnesses except musculoskeletal injuries and routine medical care. Between 2001 and 2011, the rate of mental health diagnoses among active duty servicemembers increased approximately 65%. A total of 936,283 servicemembers, or former servicemembers during their period of service, have been diagnosed with at least one mental disorder over this time period (see Figure 1 ). Nearly 49% of these servicemembers were diagnosed with more than one mental disorder. Between 2000 and 2011, diagnoses of adjustment disorders, depression, and anxiety disorders (excluding PTSD) made up 26%, 17%, and 10% of all diagnoses of mental disorder diagnoses. Alcohol abuse and dependence disorders, and substance abuse and dependence disorders made up 13% and 4%, respectively. PTSD represented approximately 6% of mental disorder diagnoses over this time period. (See Figure 2 .) The rates of specific mental disorders have also changed dramatically between 2000 and 2011. The reported incidence of PTSD has increased approximately 650%, from about 170 diagnoses per 100,000 person years in 2000, to approximately 1,110 diagnoses per 100,000 person years in 2011. The incidence of anxiety, adjustment disorders, and depression diagnoses has also increased. By contrast, the incidence of alcohol abuse/dependence, schizophrenia, and personality disorders fell. (See Table 1 , Figure 3 .) Among the services, the Army, followed by the Marine Corps, has consistently had the highest incidence rates for PTSD, major depression, alcohol dependence, and substance dependence between 2007 and 2010, followed by the Navy and the Air Force. (See Figure 4 .) Hospitalizations for mental health mental disorders were steady between 2000 and 2006, before increasing more than 50% from 2006 through 2009, from 10,262 to 15,328. This increase in hospitalizations was driven by sharp increases in hospitalization for PTSD, depression, and substance abuse. Calculated by lost duty time, the Army has been the service most affected by hospitalizations of active duty servicemembers for mental disorders, followed by the Marine Corps. (See Figure 5 .) TBI has been considered a "signature injury" of the conflicts in Iraq and Afghanistan. However, approximately 80% of servicemember TBIs occur in a non-deployed setting. Common causes of TBI include vehicle crashes, falls, sports and recreation activities, and military training. Since 2001, it is reported that servicemembers have experienced about 255,852 TBIs, including approximately 212,741 incidences of mild TBI, approximately 20,168 incidences of moderate TBI, approximately 6,472 incidences of severe TBI/penetrating head injuries, and 16,471 unclassifiable TBIs. Incidents of mild TBI rose sharply between 2005 and 2007, due in part to more aggressive screening measures for mild TBI instituted in 2006. (See Figure 7 .) Diagnoses of TBI in deployed settings nearly doubled between 2010 and 2011, due in part to a greater focus on identifying and treating TBIs among deployed servicemembers. Beginning in 2010, suicide has been the second-leading cause of death for active duty servicemembers, behind only war injuries. Researchers have suggested that, similar to suicides among civilians, suicides by servicemembers are often impulsive acts triggered by various stressors, including relationship problems and financial or legal problems. Suicides among the active duty forces have increased between 1998 and 2012, rising from approximately 200 deaths by suicide in 1998 to 349 in 2012. Between 1998 and 2011, the incidence rate of deaths by suicide for active duty servicemembers overall was approximately 14 per 100,000 person years. Most of the increase in suicide rates between 2000 and 2011 has been concentrated in the Army and Marine Corps. Between 2005 and 2009, the incidence of suicide has nearly doubled for Army and Marine personnel, while remaining approximately level for Navy and Air Force personnel. In 2011, the suicide rate for Army personnel was approximately 23 per 100,000, while the rates for the Navy and Marine Corps were approximately 15 per 100,000 and the rate for the Air Force was approximately 13 per 100,000. While the rates of suicide in the Armed Forces overall have increased between 1998 and 2011, the rates for active duty servicemembers overall remain lower than for comparable civilian populations. Lower suicide rates among the Armed Forces have been attributed to a variety of factors, including the servicemember's full-time employment; "healthy-worker" effects, including a sense of belonging and purpose among active duty servicemembers; and universal access to health care among the military population. Accession into the uniformed services provides an opportunity to screen potential servicemembers for potential behavioral health issues. Certain learning, behavioral, and psychological conditions are considered disqualifying for military service. However, there is no required battery of psychological tests for accessions into the military other than the learning and behavioral questions on the Armed Services Vocational Aptitude Battery (ASVAB). During the course of the history and physical that every recruit is required to complete, specific questions and other methods are utilized to evoke potential markers of psychological and behavioral dysfunction potentially incompatible with military service. Since 2009, the Supplemental Health Screening Questionnaire has augmented the standard Report of Medical History (DD 2807-2). This form includes 12 queries regarding past history of psychiatric, psychological, or behavioral issues as well as questions regarding substance abuse. Any condition reported or elucidated during the examination that does not meet the Department of Defense Instruction (DODI) 6130.03: Accession Medical Standard is considered disqualifying. Each service has the authority to waive the standard on a case by case basis. According to data provided by DOD from the U.S. Military Entrance Processing Command's database, out of 296,000 accessions in fiscal year 2009, a total of 11,845 accessions with medical waivers were granted. Of these, 1,178 were accessions with mental health conditions, of which 127 were for anxiety, 32 for depression, 182 for personality disorder, and 19 for PTSD. In addition, during the physical examination portion of accession medical evaluation, evidence of self-harm, mutilation, or excessive or otherwise inappropriate tattooing or piercings, among other physical findings, would lead the examiner to evaluate the recruit further for psychological problems or maladaptive behavior. In any of the above situations, reasonable suspicion on the part of the examiner that the recruit may manifest psychological or behavior health conditions incompatible with service would be referred for further psychological evaluation and if found unfit, would be subjected to the decision of the individual service to exercise its waiver authority. The study of the effects of prior psychological and behavioral health issues on successful military service is ongoing. Multiple forms of additional screening tools have and are being piloted, however, to date, the requisite data to determine if these tools have any predictive value in determining the ability of a recruit to complete a successful tour of duty are still outstanding. Servicemembers are required to receive an annual physical examination known as a periodic health assessment (PHA). The PHA is intended to identify changes in health status, including mental health changes, especially those that could impact a member's ability to perform military duties. Servicemembers who are deployed in connection with a contingency operation are required to receive face-to-face mental health assessments conducted by mental health professionals . Separate assessments are required at four separate times: within 120 days before the estimated date of deployment, between 90 and 180 days after return from deployment, between 181 days and 18 months after return from deployment, and between 18 and 30 months after return from deployment. Assessments must be administered at least 90 days apart. The following conditions are cited as limiting deployability, meaning an individual diagnosed with these conditions may not deploy: (1) Psychotic and/or bipolar disorders; (2) Psychiatric disorders under treatment with fewer than 3 months of demonstrated stability; (3) Clinical psychiatric disorders with residual symptoms that impair duty performance; (4) Mental health conditions that pose a substantial risk for deterioration and/or recurrence of impairing symptoms in the deployed environment; and (5) Chronic medical conditions that require ongoing treatment with antipsychotics, lithium, or anticonvulsants. Servicemembers on active duty are covered by DOD's TRICARE Prime health insurance program. Under this program servicemembers receive free health care without any copayments, deductibles, or premiums. Servicemembers typically receive most of their health care in a military treatment facility but may be referred to private providers for specialty care or if insufficient providers are available on base. Prior authorization is not required for services received through a military treatment facility but is required for all nonemergency inpatient behavioral health care services. Psychiatric emergencies do not require prior authorization, but authorization is required for continued stay in the facility beyond the initial emergency. The Telemental Health program is available to all U.S. TRICARE beneficiaries. At Telemental Health-participating TRICARE facilities, secure audio-visual conferencing is available to connect with off-site mental health care providers. TRICARE covers medical treatments that DOD has deemed to be proven safe and effective by reliable evidence as defined in regulation. TRICARE excludes from coverage services and supplies that are not medically or psychologically necessary for the diagnosis or treatment of a covered illness (including mental disorder) or injury. It also excludes treatments that are not proven medically. All services related to a non-covered condition or treatment, or provided by an unauthorized provider, are also excluded from coverage. Authorized providers of mental health care include psychiatrists, clinical psychologists, certified marriage and family therapists, certified nurse practitioners, and certified clinical social workers. Certain services otherwise not covered by TRICARE may, in certain circumstances, be provided through the DOD Supplemental Health Care Program. This program is not subject to the statutory TRICARE coverage limitations and has been used, for example, to provide cognitive therapy to TBI patients. Active duty servicemembers may receive treatment from military mental health providers as well as federal civilian and contractor mental health providers. In some circumstances active duty servicemembers also may be referred outside of military treatment facilities to private providers. Mental health providers include psychiatrists, psychologists, social workers, licensed mental health counselors, and psychiatric nurse practitioners. Concerns about the potential for servicemembers to lack appropriate access to mental health care due to insufficient numbers of mental health providers led to legislation mandating that DOD develop and implement a plan to significantly increase the number of DOD military and civilian mental health personnel by September 30, 2013. Overall, Defense Health Program personnel has increased, with officer end strength growing from 31,244 in fiscal year 2012 to a projected 31,852 for fiscal year 2014 and from 64,236 civilian personnel to 67,577 over the same period. The 2014 budget request specifically includes an increase of $21 million to fund expansion of embedded behavioral health (EBH) teams in the Army to 19 Army installations world-wide. EBH teams are composed of 13 civilian behavioral health personnel and provide behavioral health care to servicemembers in close proximity to their unit areas. The intent is to optimize care and maximize behavioral health resources through early identification of servicemembers with behavioral health problems. Treatment of servicemembers is generally provided by either civilian or military mental health care providers working in a military treatment facility. Their treatment decisions typically are made following clinical practice guidelines. DOD and the Department of Veterans Affairs (VA) have worked together to develop joint clinical practice guidelines, including, among others, guidelines for PTSD, TBI, depression, and substance abuse disorder. The VA/DOD Evidence-Based Practice Guideline Work Group (EBPWG) was established to advise the VA/DOD Health Executive Council on the use of clinical and epidemiological evidence to improve the health of the population across the Veterans Health Administration (VHA) and Military Health System. The EBPWG has two co-chairpersons (one from VA and one from DOD) and includes representatives for each military branch and the VHA Veterans Integrated Service Networks (VISN). The workgroup was first chartered in 2004. It continues to refine existing guidelines as circumstances require and develop new clinical practice guidelines. Concern has been expressed that servicemembers may underreport mental health conditions as a result of stigma attached to seeking treatment for those conditions. DOD has issued instructions to all heads of DOD components stating: It is DOD policy that: a. The DOD shall foster a culture of support in the provision of mental health care and voluntarily sought substance abuse education to military personnel in order to dispel the stigma of seeking mental health care and/or substance misuse education services. b. Healthcare providers shall follow a presumption that they are not to notify a Service member's commander when the Service member obtains mental health care or substance abuse education services. This policy further requires that "Commanders must also reduce stigma through positive regard for those who seek mental health assistance to restore and maintain their mission readiness, just as they would view someone seeking treatment for any other medical issue." Efforts to address the stigma issue may be, at least in part, responsible for greater rates of mental health diagnoses. The Armed Forces Health Surveillance Center stated that: The Department of Defense has made significant efforts to reduce stigmas associated with care seeking for, and treatment of, mental illnesses and to remove barriers to receiving timely and appropriate diagnostic and treatment services. Undoubtedly, such changes have resulted in increases in the detection and treatment of previously undiagnosed mental disorders and more complete documentation of mental disorders in electronic medical records. Nevertheless, the Mental Health Advisory Teams report a stable response pattern over the years among junior enlisted servicemembers to questions regarding factors that affect an individual's decision to receive mental health services, with over 30% of individuals screening positive for mental disorders reporting fear of harm to career. Many active duty servicemembers and activated Guard and Reserve members seek mental disorder treatment through the military health care system. Between FY2007 and FY2012, the costs to the military health system of providing mental disorder treatments to active duty servicemembers and activated Guard and Reserve members has nearly doubled, increasing from about $468 million in FY2007 to about $994 million in FY2012. (See Figure 8 .) These numbers include mental disorder treatment costs for all active duty and activated Guard and Reserve members. Costs for mental disorder treatments for servicemembers while deployed are not available. In FY2012, the military medical system spent nearly $1 billion on mental disorder treatment costs for active duty and activated Guard and Reserve members. Over half of these costs, about $567 million, were for outpatient active duty mental health treatments. Overall, approximately 63% of mental disorder treatment costs were for outpatient treatment, 31% for in-patient treatment, and 7% for pharmacy costs. Mental disorder treatment for active duty servicemembers accounted for 89% of military health care spending on mental disorder treatment between FY2007 and FY2012, approximately $4 billion. Over the same time frame, the military health system spent about $461 million on mental health care treatment for activated Guard and Reserve members. (See Figure 9 .) Not all costs of active duty and activated Reserve and Guard mental health treatment will appear in this chart, as not all servicemembers seek mental disorder treatment through the military health system. Deactivated Guard and Reserve members are covered by the Transitional Assistance Management Program for 180 days. Following this 180 days, deactivated Guard and Reserve members may be eligible to purchase TRICARE Reserve Select coverage. Those ineligible to purchase TRICARE Reserve Select may be eligible to purchase the Continued Health Care Benefit Program, which can provide benefits for up to 18 or 36 months, depending on eligibility. DOD and the services have implemented a number of programs and strategies to promote psychological resilience among servicemembers. "Psychological resilience" is understood to be the ability to bounce back from negative experiences. It is thought to be related to an individual's ability to avoid experiencing diagnosable mental health conditions. However, a RAND study reported that "there is very little empirical evidence that these programs effectively build resilience." With respect to suicide, "DOD and each service have a myriad of activities currently in place to prevent suicides." To better coordinate these efforts, DOD has created a Defense Suicide Prevention Office to oversee cross-service programs. These programs include (1) a DOD Suicide Prevention and Risk Reduction Committee that meets monthly, (2) the Real Warriors Campaign, a public education initiative to address the stigma of seeking psychological care and treatment, (3) the Department of Defense Suicide Event Report (DoDSER), and (4) annual suicide-prevention conferences. In addition, the services each have a suicide prevention program manager to oversee service-specific programs. However, here too empirical evidence for the efficacy of these programs is limited. One recent study stated that the "quality of mental health care and counseling offered in DOD is unknown, and efforts to improve quality, such as training providers in evidence-based practice, are not integrated into the system of mental health care offered in DOD treatment facilities." The Defense Centers of Excellence for Psychological Health and Traumatic Brain Injury (DCOE) was established in 2007 to focus on prevention, outreach, and care for servicemembers with psychological health conditions, including TBI. The DCOE for Psychological Health and Traumatic Brain Injury are intended to be principal integrators and authorities on psychological health and traumatic brain injury knowledge and standards for DOD. There are three centers under the DCOE: the Defense and Veterans Brain Injury Center, the Deployment Health Clinical Center, and the National Center for Telehealth and Technology. Support responsibility for DCOE is currently shifting from the TRICARE Management Activity office to the Army's Medical Research and Materiel Command. A key project of the DCOE centers in 2013 will be "determining the impact of mental health programs across the military." A number of reports have made recommendations that Congress could build upon in fashioning legislation or conducting oversight. These reports include in reverse chronological order: The Institute of Medicine (IOM) published the results of the first phase of a two-part study titled "Treatment for Posttraumatic Stress Disorder (PTSD) in Military and Veteran Populations" in July 2012. The IOM report concluded with seven general recommendations, in five major areas, for further areas of research and service. The report findings were summarized by the DOD as: History, Diagnostic Criteria, and Epidemiology — Servicemembers that served in OEF/OIF/OND appear to have a 13%-20% lifetime prevalence of PTSD. In contrast, the unadjusted general population lifetime prevalence of PTSD in adults appears to be 8%; Neurobiology — Further research is needed to identify biomarkers of PTSD, brain imaging diagnostic models, and effective pharmacologic agents to enhance therapy-related learning; Programs and Services for PTSD in the DO D and VA — Both the DOD and VA have a played an active and pivotal role in the prevention, screening, diagnosis, and treatment of PTSD; however, further evaluation is needed to identify the effectiveness of these efforts; Prevention — DOD supports several PTSD prevention programs that build resiliency and teach servicemembers to anticipate some of the traumatic events commonly experienced in combat zones; Screening and Diagnosis — Screening measures for PTSD are essential to the identification of servicemembers and veterans that need treatment. DOD currently utilizes screening tools, but needs to ensure that every servicemember identified through such screening methods is referred to trained professionals that can provide comprehensive assessments, diagnosis, and treatment; Treatment — The VA/DOD clinical practice guidelines for the management of PTSD make specific suggestions concerning treatment of PTSD symptoms. IOM recognizes that DOD offers numerous treatments for PTSD, and continues to develop additional treatment methods; and Co-occurring Psychiatric and Medical Conditions and Psychosocial Complexities — Given the presence of co-occurring conditions in more than 50% of OEF/OIF/OND veterans, IOM recommends evidence-based PTSD models to ensure the success of PTSD treatment for comorbid conditions. DOD generally concurred with the IOM report recommendations and findings. In Phase 2 of its study, the IOM will analyze barriers to care and ways to improve access to high-quality care for servicemembers and veterans. The RAND National Defense Research Institute released a study entitled "The War Within, Preventing Suicide in the U.S. Military" in February 2011. The War Within report made 14 recommendations in 6 categories: 1. Raise Awareness and Promote Self-Care; 2. Identify Those at High Risk; 3. Facilitate Access to High-Quality Care; 4. Provide High-Quality Care; 5. Restrict Access to Lethal Means; and 6. Respond Appropriately. Section 733 of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 ( P.L. 110-417 ) required the Secretary of Defense to establish a Task Force "to examine matters relating to prevention of suicide by members of the Armed Forces." The DOD Task Force on the Prevention of Suicide by Members of the Armed Forces was established in August 2009, and was composed of seven DOD and seven non-DOD members. In August 2010, the Task Force issued a document entitled "The Challenge and the Promise: Strengthening the Force, Preventing Suicide and Saving Lives" that listed 49 findings and 76 associated recommendations. The Task Force's report did not address the earlier Army report described below. The findings fall into four areas: Organization and Leadership; Wellness Enhancement and Training; Access to, and Delivery of, Quality Care; and Surveillance, Investigations, and Research. In July 2010, the Department of the Army issued a document entitled "Health Promotion, Risk Reduction, and Suicide Prevention (HP/RR/SP) Report" (hereinafter referred to as "the Army Report") that listed 67 specific conclusions and recommendations. Among the Army Report's major findings was discovering gaps in the identification and mitigation of high-risk behavior among soldiers. The report attributed these gaps to an operational tempo that required leadership focus on deployment rather than the enforcement of policies designed to ensure good order and discipline. The Army Report's recommendations were addressed to specific audiences, including Army Headquarters (HQDA), the Medical Command (MEDCOM), and Unit Commanders and are organized by themes. Recommendations addressed to HQDA appear most amenable to congressional action. Since 2003, DOD has deployed a series of teams to Iraq and Afghanistan to evaluate soldiers' psychological health in theater, the results of which are published as publicly available reports. The sixth, and most recent, of these Mental Health Advisory Teams (MHAT VI) to report worked in Iraq from February to March 2009 and in Afghanistan from April to June 2009. The teams included research psychologists, a social worker, a psychiatric nurse, and enlisted behavioral-health specialists. The reports have made numerous recommendations, including to continue the "funding of basic-research models of concussive and traumatic brain injury work to advance the development of novel evidence-based interventions" that would require continuing congressional action in the form of appropriations. Executive Order 13625, "Improving Access to Mental Health Services for Veterans, Service Members, and Military Families," issued on August 31, 2012, contained a number of provisions designed to increase access to and the quality of mental health care for active duty servicemembers, including establishing an interagency task force with an annual reporting requirement as well as providing for increased mental health care staffing within the Department of Veterans Affairs. With respect to broadly applicable issues, Executive Order 13625 provides for a National Research Action Plan, stating: Sec. 5. Improved Research and Development. (a) The lack of full understanding of the underlying mechanisms of PostTraumatic Stress Disorder (PTSD), other mental health conditions, and Traumatic Brain Injury (TBI) has hampered progress in prevention, diagnosis, and treatment. In order to improve the coordination of agency research into these conditions and reduce the number of affected men and women through better prevention, diagnosis, and treatment, the Departments of Defense, Veterans Affairs, Health and Human Services, and Education, in coordination with the Office of Science and Technology Policy, shall establish a National Research Action Plan within 8 months of the date of this order. (b) The National Research Action Plan shall include strategies to establish surrogate and clinically actionable biomarkers for early diagnosis and treatment effectiveness; develop improved diagnostic criteria for TBI; enhance our understanding of the mechanisms responsible for PTSD, related injuries, and neurological disorders following TBI; foster development of new treatments for these conditions based on a better understanding of the underlying mechanisms; improve data sharing between agencies and academic and industry researchers to accelerate progress and reduce redundant efforts without compromising privacy; and make better use of electronic health records to gain insight into the risk and mitigation of PTSD, TBI, and related injuries. In addition, the National Research Action Plan shall include strategies to support collaborative research to address suicide prevention. (c) The Departments of Defense and Health and Human Services shall engage in a comprehensive longitudinal mental health study with an emphasis on PTSD, TBI, and related injuries to develop better prevention, diagnosis, and treatment options. Agencies shall continue ongoing collaborative research efforts, with an aim to enroll at least 100,000 service members by December 31, 2012, and include a plan for long term follow up with enrollees through a coordinated effort with the Department of Veterans Affairs. In addition to funding via the Defense Health Program, Congress has also allocated significant funding to research in these issues through the Congressionally-Directed Research Program. There are no specific line items in the DOD budget request for suicide prevention or PTSD. Generally PTSD treatment and research costs are included in the Defense Health Program operations and maintenance (O&M) appropriation. Suicide prevention funds are included in the services' management accounts. Therefore, it is not possible to provide complete totals for all funding that may be directed to these purposes. The Congressionally Directed Medical Research Programs' Psychological Health and Traumatic Brain Injury (PH/TBI) Research Program (formerly called Post Traumatic Stress Disorder and Traumatic Brain Injury Research Program) was established in 2007 in response to U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, P.L. 110-28 , which provided $150 million (M) for research on PTSD and $150M for research on TBI. An additional $1M was provided for research on PTSD in P.L. 109-289 . As discussed elsewhere in the report and as listed in Appendix B , numerous laws have been enacted with provisions intended to address military mental health issues. These efforts include provisions to improve screening for mental health conditions and TBI, and providing for additional mental health providers, improved reporting, and continued research. While Congress has taken significant interest in issues related to the psychological health of the active duty forces, including PTSD, alcohol and substance abuse, depression, traumatic brain injury, and other mental health concerns, significant areas for potential congressional oversight remain. These include: The physical manifestations in the brain of mental health conditions, including PTSD, are poorly understood. Further research is needed to identify biomarkers, brain imaging, diagnostic models, and effective pharmacologic agents to enhance therapy-related learning. In conducting its oversight activities, Congress may wish to monitor ongoing research efforts for significant findings with implications for current mental health strategies, as well as consider whether there are gaps in research being conducted into the causes, biomarkers, and translational research for improved treatments. Screening measures for mental health conditions and TBI are essential to the identification of servicemembers and veterans that need treatment. DOD uses screening tools, but many observers recommend greater involvement of primary care providers in this process. Once servicemembers are identified as having potential diagnoses, oversight may be needed to assure they will be referred to trained professionals that can provide comprehensive assessments, diagnosis, and evidence-based treatment. Given the presence of co-occurring conditions in more than 50% of OEF/OIF/OND veterans, the IOM has recommended evidence-based models to ensure the success of treatments for comorbid conditions. In conducting its oversight activities, Congress may wish to consider how the efficacy of treatment is monitored and evaluated. Although Congress has provided resources allowing DOD to expand its pool of military mental health providers, Congress may wish to determine how DOD is responding to Institute of Medicine (IOM) findings expressing "serious misgivings about inadequate and untimely clinical follow-up and low rates of delivery of evidence based treatments, especially therapies to treat PTSD, depression, and substance use disorder. There are scant data documenting which treatments patients receive or whether those treatments were appropriate and timely." Congress may also wish to examine the question of whether DOD is ensuring optimal means of access to and assignment of mental health care providers. Congress may also wish to examine the effectiveness of DOD initiatives to encourage servicemembers to seek care, and reduce the stigma of seeking mental health care. Congress may wish to examine the appropriateness of DOD's response to RAND study findings that the two most evidence-supported suicide prevention strategies are (1) training primary care physicians to assess servicemembers for depression or other risk factors for suicide, and (2) restricting servicemembers' access to lethal means, primarily private firearms. As discussed above, Executive Order 16325 requires a special interagency task force to evaluate: agency efforts to improve care quality and ensure that DOD and VA providers and community based mental health providers are trained in the most current evidence based methodologies for treating PTSD, TBI, depression, related mental health conditions, and substance abuse; agency efforts to improve awareness and reduce stigma for those needing to seek care; and agency research efforts to improve the prevention, diagnosis, and treatment of TBI, PTSD, and related injuries, and explore the need for an external research portfolio review. Congress may wish to be apprised of these evaluation efforts. In addition, Congress may consider whether additional oversight is necessary in areas such as: The allocation of resources between research, treatment, oversight, types of providers, provider to program staffing; and The efficacy of entities such as the DCOE for Psychological Health and Traumatic Brain Injury. DOD's spending on mental health care treatment has increased, as the number of active duty servicemembers receiving diagnoses of mental health conditions and seeking treatment for these conditions has increased. Congress may wish to examine the role of supplying larger amounts of mental health care in the context of the Defense Health Program (DHP) appropriation since growth in the unified medical budget relative to the overall Defense budget has been identified by some senior leaders as unsustainable. Although this report has addressed only the issues of active duty mental health, Congress may well be interested in examining the implications of DOD's programs as they relate to the long-term costs experienced in the various programs administered by the VA. Within the active duty forces, psychological health issues include diagnosed mental disorders, such as depression or PTSD, as well as other mental health problems, such as problems with personal relationships or family circumstances. Other mental health issues facing the Armed Forces include traumatic brain injuries (TBI) and the suicides of servicemembers. Mental health issues in the active duty force have an impact not only on the individual servicemembers and their families, but also on the services as a whole. In this report, much of the data comes from past issues of the Medical Surveillance Monthly Report , a publication of DOD's Armed Forces Health Surveillance Center. The Armed Forces Health Surveillance Center (AFHSC) data include diagnoses received by servicemembers though the military medical system while on active duty service. The AFHSC data are the most complete and reliable data on servicemember diagnoses of mental health conditions, however, they likely represent the lower bound of actual servicemember incidences of diagnosable mental health disorders. These data do not include servicemembers who may experience mental health problems but who do not seek treatment for them at a fixed military medical or reimbursable civilian location. Accordingly, these data likely underestimate the true incidence and prevalence numbers and rates among active duty servicemembers of the U.S. Armed Forces. Additionally, these data will likely not capture Reserve and Guard servicemembers who seek mental health treatment after they are deactivated. The underlying database used by the Armed Forces Health Surveillance Center is the Defense Medical Surveillance System. This database includes ambulatory visits and hospitalizations at fixed military medical and reimbursed civilian locations by servicemembers while on active duty, but does not include medical encounters at non-fixed locations. Medical encounters outside of fixed locations, such as care received in deployed settings or shipboard, are not routinely entered into the Defense Medical Surveillance System, and are thus not available for analysis. These Armed Forces Health Surveillance Center data are of diagnoses of selected mental disorders, rather than continued care for diagnosed mental disorders. Incidence cases were generally defined as one hospitalization, two outpatient visits for the same diagnostic coding within 180 days, or a single outpatient visit in a psychiatric or mental health care specialty setting where the mental disorder was the primary or second diagnosis. Diagnostic codes of the selected mental disorders used to assemble the data are included in Appendix A . A servicemember was counted only once for each mental disorder during the surveillance period, although they may have been counted as a unique case for more than one of the mental disorders. Since many individuals have more than one diagnosis, the total of the number of diagnoses does not reflect the actual number of individual servicemembers who have been diagnosed. In considering relative numbers of diagnoses over time, it may also be useful to keep in mind that although there were 1,425,113 active duty servicemembers as of September 31, 2011 (at the end date of most of the time series data presented), over fiscal years 2001 through 2011, the total number of individuals who left military service since September 11, 2001, is estimated to be 1,790,290. The methodology used by the Armed Forces Health Surveillance Center is different from that used in other studies frequently reported in the news media and elsewhere, therefore the results are not directly comparable. Data caveats may apply to other studies as well and in many instances may be discussed in the article or study itself. (Please see text box below for an explanation.) According to current diagnostic criteria for PTSD ( see text box, below ), a person must experience a traumatic event involving death or serious injury, or a threat to the physical integrity of self or others, and react to the trauma with intense horror, fear, or helplessness. Sometime after that trauma, the person must also develop symptoms that cause clinically significant distress or impairment lasting for more than one month. Those symptoms must include symptoms from each of the following three symptom clusters: Reexperiencing the traumatic event, such as having recurring and distressing recollections or nightmares; Avoidance of stimuli associated with the trauma, such as thoughts, feelings, and conversations, along with diminished responsiveness and loss of interest in activities; and Hyperarousal, such as irritability, anger, hypervigilance, insomnia, or difficulty with concentration. The formal DSM-IV-TR diagnostic criteria are below: Acute PTSD occurs when the duration of symptoms is between one and three months. Patients with symptoms extending for more than three months are considered to have chronic PTSD. Delayed-onset PTSD occurs when symptoms begin at least six months after the trauma. These criteria may change with the impending issuance of a DSM-V expected sometime in 2013. In 2010, 5,959 cases of PTSD were diagnosed in active duty servicemembers, a rate of approximately 8.4 new cases per 1,000 servicemembers. Overall, 2% of active duty servicemembers had ever received a PTSD diagnosis. However, the rates of PTSD diagnoses in the Army and Marine Corps were much higher than for servicemembers in the Air Force and the Navy. In 2010, the incidence rates of new diagnoses of PTSD in the active duty Army and Marine Corps were 14.3 per 1,000 and 9.7 per 1,000, respectively, compared to incidence rates of 3.7 per 1,000 for the Navy and 3.4 per 1,000 for the Air Force. (See Figure 10 .) Estimates of PTSD prevalence vary depending on the methodologies used in developing them, including the means of assessment and the characteristics of the applicable population (e.g., deployment history), among other factors. Additionally, prevalence estimates based on screening tools and reported symptoms, including the pre- and post-deployment health assessments required of all deployed servicemembers, will tend to be higher than those based on the numbers of clinical diagnoses of PTSD. However, rates of PTSD incidence relying solely on PTSD diagnoses will likely underestimate the true prevalence of PTSD among the Armed Forces, given the variety of barriers to mental health treatment that exist. According to the Veterans' Administration, studies have shown that approximately 10%-18% of combat troops serving in Iraq or Afghanistan have probable PTSD after deployment. One study, estimating PTSD prevalence based on post-deployment health assessments and reassessments (conducted 90 and 180 days after return from deployment, between 181 days and 18 months after return from deployment, and between 18 and 30 months after return from deployment), found that that probable PTSD prevalence based on reported symptoms among active duty servicemembers increased from 11.8% to 16.7% between assessments. For reservists and National Guard members, this study found that probable PTSD rates rose from 12.7% to 24.5% by the second assessment. A telephone-based survey of personnel previously deployed to Iraq or Afghanistan found that approximately 14% reported symptoms indicative of probable PTSD. This study found that risk factors for PTSD included Guard or Reserve status, being of the female gender, Hispanic ethnicity, more lengthy deployments, and more extensive exposure to combat. However, as discussed above, these studies relied on reported symptoms to estimate the probable prevalence of PTSD, rather than actual diagnoses of PTSD. By comparison, in the U.S. population as a whole, the proportion of those who have ever experienced PTSD was estimated at 6.8%. The proportion of the U.S. population currently experiencing PTSD was estimated at 3.5%. Between January 1, 2001, and December 3, 2012, a total of 103,792 PTSD cases have been diagnosed in servicemembers who have been deployed for at least 30 days in support of OEF, OIF, or OND, according to DOD data. As Figure 11 indicates, the number of diagnoses is higher among deployed servicemembers than non-deployed servicemembers. As of July 31, 2012, approximately 2,453,036 servicemembers from the active duty, National Guard, and Reserve components have ever deployed to OEF, OIF, and/or OND. Several studies have linked diagnoses of PTSD with factors common in the deployment experience. Specifically, greater combat exposure, length and/or number of deployments, perceived threat of personal danger, and deployment-related physical injuries have been associated with greater PTSD risk among servicemembers deployed to Operation Enduring Freedom, Operation Iraqi Freedom, and/or Operation New Dawn. Other factors, such as perceived preparedness for combat, have also been found to mitigate the link between combat and perceived threat. Additionally, a sense of unit cohesion has been associated with a lower risk of PTSD in OEF/OIF/OND servicemembers. Greater exposure of deployed Army and Marine Corps servicemembers to these aspects of combat, such as greater perceived threat of personal danger or deployment-related physical injuries, could be a factor in the higher rates of PTSD among the Army and Marine Corps, as compared to the Navy and Air Force. Between 2001 and 2012, approximately 80% of PTSD cases among previously deployed servicemembers were diagnosed in active component servicemembers. Approximately 13% of PTSD diagnoses among previously deployed servicemembers were given to National Guard members, while 7% were given to Reserve component members. Two studies of National Guard and Reserve troops found that post-deployment stressors, including economic and relationship difficulties, also appear to be PTSD risk factors for OIF-deployed servicemembers. The Diagnostic and Statistical Manual IV Trial Revision (DSM-IV-TR) uses specific terminology to refer to various categories of diagnoses related to alcohol and substance use. The broadest category is "substance-related disorders," which includes both "substance use disorders" (e.g., alcohol abuse or nicotine dependence) and "substance-induced disorders" (e.g., intoxication or withdrawal). Within the category of "substance use disorders," the DSM-IV-TR distinguishes between "abuse" and "dependence." (See text box below.) Substance-related disorders include dependence on and abuse of drugs, alcohol, or other substances (e.g., nicotine). A diagnosis of dependence requires at least three of seven diagnostic symptoms (e.g., tolerance or withdrawal). Substance use that does not meet criteria for dependence, but leads to clinically significant distress or impairment, is called abuse. Each diagnosis is specific to the substance, so an individual may have multiple diagnoses of abuse or dependence—one for each substance (e.g., marijuana dependence and cocaine abuse). Alcohol-related diagnoses and medical encounters in the active duty forces have increased since 2001, with the sharpest increases since 2007. (See Figure 12 .) Between 2001 and 2010, 190,302 servicemembers had at least one medical encounter where they received an acute alcohol diagnosis, such as drunkenness, excessive blood alcohol content, or alcohol poisoning. Approximately 21% of these were considered recurrent acute cases, with at least three medical encounters with acute alcohol diagnoses. However, over 90% of these recurrent acute cases likely represent treatment encounters, rather than recurrent acute cases. Approximately 4% of all coded acute alcohol diagnoses represent actual recurrent cases. Over the same time period (2001–2010), over 141,000 active duty servicemembers had a medical encounter in which they received a diagnosis connected to alcohol abuse or dependence, such as alcohol abuse or alcoholic liver disease. In a 2008 survey of servicemembers, 47% self-reported as binge drinkers and 5% reported possible dependence. Between 2000 and 2011, drug abuse disorders accounted for 4% of mental disorders diagnosed among the active duty forces, with a total of 73,623 diagnoses. Though rates dipped in 2011, the rate of drug disorder diagnoses had risen between 2000 and 2009. (See Figure 13 .) The increase in substance abuse disorders is often connected to deployment. Incidence rates of cannabis and cocaine use declined, while rates of opioid and "mixed/other" substance abuse increased sharply. (See Figure 14 .) This rise potentially reflects an increase in the misuse of prescription drugs. While overall drug use is lower in the military than civilian populations, prescription drug abuse has recently been increasing at a greater rate in the military than among the civilian population. Substance abuse disorder diagnoses declined with increasing age, time in service, rank, and number of combat deployments. Rates of substance abuse diagnoses were 1.8 times greater among the youngest servicemembers than older servicemembers, while junior enlisted servicemembers had diagnoses of substance abuse disorders at a rate 17.6 times higher than officers. Substance abuse rates were consistently highest in the Army, followed by the Marine Corps. A 2008 health survey of servicemembers found a decrease in illegal drug use since the 2005 survey, but an increase in prescription drug misuse, predominantly prescription pain medication. (See Figure 15 .) Researchers have suggested that these increases in self-reported drug misuse can be partially attributed to improve survey design, as well as to increased deployments and associated diagnoses of pain disorders, PTSD, and other mental disorders. Depression, formally diagnosed as major depressive disorder (see text box) is a mental disorder characterized by episodes of all-encompassing low mood accompanied by low self-esteem and loss of interest or pleasure in normally enjoyable activities. Major depressive disorder is a very common mental disorder in the United States, affecting approximately 16% of adults across their lifetimes, and approximately 6.6% of adults in any 12-month period. In a subset of the overall U.S. population with the same socio-demographic characteristics of the U.S. Army, the estimated prevalence of major depression was 1.3%. Among active duty troops, the prevalence of major depressive disorder for never-deployed troops was estimated at 5.7%, based on a meta-analysis of previous studies. The prevalence of major depressive disorder among currently deployed servicemembers was estimated at 12%, and at approximately 13% for previously deployed servicemembers. One limitation of this analysis was that it was not able to control for those servicemembers who did not respond to surveys or screenings, potentially underrepresenting servicemembers with high risk of mental disorders in the survey data. A second limitation is that the sampling within some of the individual studies over-represented combat units in the Armed Forces, and over-represented the months just before deployment and just after redeployment. According to analysis by the Armed Forces Health Surveillance center using the number of diagnoses of major depressive disorder among the active duty forces, the percentage of the active duty forces ever diagnosed with major depressive disorder rose from 4.4% in 2007 to 5.1% in 2010, while the incidence rate of new diagnoses rose to 19.2 per 1,000 per year in 2009 from 17.3 per 1,000 per person per year in 2007 before declining to 15.1 per 1,000 per year in 2010. (See Figure 16 .) Limited data are available about the rates of major depressive disorder among the individual services. However, data on diagnoses of major depressive disorder among the services allow for limited comparison of the incidence rates between the services. The incidence rate of diagnoses of major depressive disorder is highest among the Army over this four-year period, peaking at 28.8 per 1,000 per year in 2009. Adjustment disorder is a psychological response to one or more stressors, including life events such as divorce or a period of unemployment. The diagnosis includes four components: the stressor(s), symptoms, the lack of an alternative explanation for the symptoms, and the timing of the symptoms. Stressors may occur once, multiple times, or be chronic. A diagnosis of adjustment disorder does not require specific symptoms. Rather, it requires clinically significant distress, such as anxiety or depressed mood, or impairment in functioning, such as social or occupational problems. A diagnosis of adjustment disorder is a residual category for cases that do not meet the criteria for another mental disorder. Finally, a diagnosis of adjustment disorder must take the timing of the symptoms relative to the stressor(s) into account. In order for a diagnosis of adjustment disorder to be appropriate, symptoms must appear within three months of the onset of the stressor(s) and resolve within six months of the termination of the stressor(s). Adjustment disorder is acute if symptoms resolve within six months in total, and chronic if symptoms persist for longer than six months. Between 2000 and 2011, adjustment disorders accounted for 26% of mental disorders diagnosed among the active duty forces, for a total of 471,833 diagnoses. The rates of adjustment disorder diagnoses increased by 98% between 2000 and 2011. The Diagnostic and Statistical Manual also provides a means of recording other circumstances of concern that are clinically significant, but that are not diagnosable mental disorders. These are called "V codes" (not to be confused with the DSM-V issued by the APA in May 2013, the successor edition to the DSM-IV-TR) and identify conditions other than a disease or injury. These codes are also used to report significant factors that may influence present or future care or may be a focus of clinical attention. V codes are not necessarily a primary diagnosis. V codes in the DSM-IV-TR include codes for problems in partner relationships; other family relationships; maltreatment, such as physical abuse or sexual abuse; and life circumstances, including bereavement and occupational, religious, academic, identity, or acculturation problems. For details on the use of V codes for mental health issues in the military, please see Appendix A . Active duty servicemembers have been provided assistance for other mental issues, such as difficulties related to life circumstances (including pending, current, or recent deployments), difficulty in a partner relationship, or mental, behavioral, or substance use difficulties. Between 2000 and 2011, over 425,000 active duty servicemembers sought help for these mental health problems. This number does not include servicemembers who received diagnoses for specific mental disorders. Overall, incidence rates of DSM "V codes" related to mental health issues have declined overall from 2000 through 2011 by approximately 30%, but with a sharp increase between 2004 and 2005. Incidence rates and numbers of DSM "V codes" connected to mental, behavioral, and substance abuse issues are the only category of mental health problems to have increased between 2000 and 2011, increasing by approximately 120%. (See Figure 17 .) While these other mental health issues are not themselves mental health diagnoses, they play an important role in the psychological health of the active duty force. For example, one study of servicemembers who have received mental health care for "V code" conditions related to family or partner problems found they were at increased risk of death by suicide. The Centers for Disease Control and Prevention defines TBI as an injury to the head arising from blunt or penetrating trauma, or from acceleration-deceleration forces that result in one or more of the following: decreased level of consciousness; amnesia regarding the event itself or events preceding or following the injury; skull fracture; a neurological or neuropsychological abnormality such as disorientation, agitation, or confusion; or an intracranial lesion such as a traumatic intracranial hematoma, cerebral contusion, or penetrating injury. Neurologists classify the severity of the TBI as mild, moderate, severe, or penetrating. (See Table 5 .) Penetrating TBIs are open head injuries in which the dura mater, the outer layer of the meninges (the membranes that surround the brain), is penetrated. Because TBI has a readily observable physical cause, it is much different than psychological health conditions. Nevertheless, as discussed below, there may be associations between TBI and other mental health diagnoses. TBI is a common injury from the wars in Iraq and Afghanistan, and is a signature injury of improvised explosive device (IED) blasts. However, according to the Defense and Veteran's Brain Injury Center, 84% of TBIs occur in a non-deployed setting. Common causes of TBI include crashes in privately owned and military vehicles, falls, sports and recreation activities, and military training. Symptoms of mild TBI often include headache; dizziness; weakness; sensitivity to light or sound; cognitive symptoms, including difficulty with attention, memory, or language; and psychological symptoms, including irritability, depression, anxiety, or personality changes. Symptoms of mild TBI often overlap with symptoms of other psychological issues, and therefore require concurrent treatment. Approximately 85%-90% of servicemembers who have sustained a combat-related, mild TBI recover with no lasting clinical difficulties. Symptoms of moderate or severe TBI often include longer periods of confusion or disorientation, loss of consciousness, and memory loss. MRI or CT results may be normal or abnormal. Moderate or severe TBI sustained in combat requires early recognition of the injury and speedy evacuation to a combat support hospital or trauma center where specialized neurological care is available. Effective treatment and decisions during the period immediately after brain injury are essential for optimal outcomes. Since 2001, servicemembers have experienced about 255,852 TBIs, including approximately 212,741 incidences of mild TBI, approximately 20,168 incidences of moderate TBI, approximately 6,472 incidences of severe TBI/penetrating head injuries, and 16,471 unclassifiable TBIs. (See Figure 18 .) Incidents of mild TBI rose sharply between 2005 and 2007, due in part to more aggressive screening measures for mild TBI instituted in 2006. (See Figure 19 .) Since March 2006, all servicemembers returning from theatre and all servicemembers arriving at Landsruhe Medical Center receive a TBI screen regardless of other medical conditions. Diagnoses of TBI in deployed settings nearly doubled between 2010 and 2011, due in part to a greater focus on identifying and treating TBIs among deployed servicemembers, as reflected in the July 2010 "Policy Guidance for the Management of Concussion/Mild Traumatic Brain Injury in the Deployed Setting." These policies require TBI screening for those exposed to potentially concussive events, and medical evaluation for all servicemembers who sustained physical injury, exhibited TBI symptoms such as headache or ear ringing, or were within 50 meters of a blast. Screening for TBI is indicated if the servicemember has been exposed to any mechanism of injury that could potentially cause TBI, for example, blast exposures, falls, or vehicle crashes. According to researchers, reliance on servicemember self-reports and co-occurring conditions can make TBI screening challenging. The deployed acute screening tool for concussion, the Concussion Management Algorithm, was updated in early 2012. Screening for concussion is required for any servicemember who is in a vehicle with a blast event, collision, or rollover; is within 50 meters of a blast; sustains a direct blow to the head; or at the direction of their commander, for example, with repeated exposures to injury mechanisms. All exposed servicemembers, including those who test negative for concussion, are mandated to rest for 24 hours before returning to duty. All services have experienced a rise in the number of TBIs, although the rate of increase has been much greater for the Army and Marines Corps than for the Navy and Air Force. When broken out by type of TBI (mild, moderate, severe/penetrating, or unclassifiable), Army servicemembers have experienced the greatest number of TBIs of each type. (See Figure 20 .) Over the 12 years between 2000 and 2011, approximately 175,290 active component servicemembers had at least one TBI diagnosis. Records of the cause of injury were not available for over 60% of these diagnoses. Between 2008 and 2011, for the 24,115 servicemembers where the cause of the TBI was recorded, approximately 74% were the result of accidents, including motor vehicle accidents (20%), falls (20%), or striking or being struck by an object (15%). Assaults and battle injuries were each the reported cause of 11% of TBIs where the cause was recorded. In combat theatres, 6,950 TBIs were diagnosed between 2008 and 2011. While only 15% of these diagnoses had cause-of-injury codes, nearly all of these TBIs were attributed to combat injuries (88%) or gun/explosive accidents (7%). A 2008 Institute of Medicine report conducted a meta-analysis and review of research on the long-term consequences of TBI. Studies have found TBI and brain injury survivors are at elevated risk for depression, generalized anxiety disorder, and PTSD. One study of TBI and associated psychiatric illnesses found that 49% of those with moderate or severe TBI had evidence of psychiatric illness, compared to 34% in the mild TBI group and 18% of those without TBI. The risk generally scales with the increased severity of a TBI. There is also limited evidence that suggests an association between TBI and completed suicide, although there is insufficient evidence to determine whether there is an association between TBI and attempted suicide. Among Gulf War veterans, there is limited/suggestive evidence of an association between mild TBI and PTSD. The 2008 Institute of Medicine report also concluded that TBI is associated with aggression, irritability, emotional reactivity, sleep disorders, drug and alcohol abuse and dependence, and personality disorders, among other personality and behavioral outcomes related to poor psychosocial functioning. Several studies have shown a connection between TBI and a greater risk of developing dementia. A 2010 study of 280,000 veterans at the San Francisco VA Medical Center found that 15% of veterans diagnosed with TBI developed dementia, compared to 7% of those without a diagnosis. The 2008 Institute of Medicine meta-analysis and review of research on the long-term consequences of TBI concluded that that there is evidence of an association between moderate or severe TBI and dementia of the Alzheimer type and Parkinson's disease. It also found that there is limited or suggestive evidence between mild TBI and some types of dementia. Beginning in 2010, suicide has been the second-leading cause of death for active duty servicemembers, behind only war injuries. Researchers have suggested that, similar to suicides among civilians, suicides by servicemembers are often impulsive acts triggered by various stressors, including relationship problems, financial or legal problems, or financial problems. Suicides among the active duty forces have increased between 1998 and 2012, rising from approximately 200 deaths by suicide in 1998 to 349 in 2012. (See Figure 21 .) Between 1998 and 2011, 2,990 servicemembers on active duty have died by suicide, with an incidence rate of approximately 14 per 100,000 person years. However, the suicide rate among active duty servicemembers has sharply increased since 2005, reaching a peak of 18.5 per 100,000 in 2009 and declining slightly to 17.5 per 100,000 in 2010 and 18 per 100,000 in 2011. (See Figure 22 .) While the rates of suicide in the Armed Forces overall have increased between 1998 and 2011, the rates remain lower than for comparable civilian populations. Lower suicide rates among the Armed Forces have been attributed to a variety of factors, including the servicemember's full-time employment; "healthy-worker" effects, including a sense of belonging and purpose among active duty servicemembers; and universal access to health care among the military population. From 1990 to 2000, before the wars in Iraq and Afghanistan, the incidence of suicide in active duty forces was approximately 25% lower than in comparable civilian populations, approximately 8.31 per 100,000 people per year among the active duty forces, as compared to 12.31 per person per year in the civilian population. Between 1998 and 2011, researchers have estimated that if the active duty Armed Forces had the same rates of death by suicide as a comparable civilian population, the number of deaths by suicide among male active duty servicemembers would have been approximately 23% higher, resulting in an additional 598 deaths by suicide among male servicemembers. Rates of death by suicide also differ across the services. Between 1998 and 2011, the Army has experienced the greatest number of servicemember deaths by suicide, 1,370, or 46% of all servicemember deaths by suicide. (See Figure 23 .) Most of the increase in suicide rates between 2000 and 2011 has been concentrated in the Army and Marine Corps. Between 2005 and 2009 the incidence of suicide has nearly doubled for Army and Marine personnel, while remaining approximately level for Navy and Air Force personnel. In 2011, the suicide rate for Army personnel was approximately 23 per 100,000, while the rates for the Navy and Marine Corps were approximately 15 per 100,000 and the rate for the Air Force was approximately 13 per 100,000. According to the 2011 DOD Suicide Event Report, servicemembers who died by suicide in 2011 were more likely than the rest of the general military population to be male, junior enlisted (E1-E4) or high school educated, under the age of 25, and non-Hispanic white. These trends among attempted suicides and death by suicide among the active duty forces for 2011 were similar to those in 2010 and 2009, the two other calendar years for which detailed information is available. Additionally, the suicide rate for divorced servicemembers was 55% greater than the suicide rate for married servicemembers in 2011. In general, these data regarding deaths by suicide among the active duty forces must be regarded with caution. The deaths by suicide, as captured by the Armed Forces Medical Examiner system, include only suicides that occurred during active duty military service. Therefore, these suicide figures for the active duty forces do not include deaths by suicide or suicide attempts by inactivated National Guard and Reserve members, or individuals who die by suicide after their military service has ended. In addition, suicides by various methods may be difficult to authoritatively ascertain as suicides. For example, suicides by drug overdoses or automobile accidents may be misclassified as accidents, leading to the undercounting of both deaths by suicide and suicide attempts. Between 1998 and 2011, firearms were the most frequently used method of suicide by active duty servicemembers, accounting for 62% of suicides among males and 42% among females. The proportion of suicides due to firearms was highest in the Reserve component, at 70%. Firearms were the most commonly used method of suicide among males of all age groups and females age 20 and over. Nearly 60% of all active duty deaths by suicide in 2011 used firearms. Non-military issue firearms were used in 49% of deaths by suicide in 2011. Hanging was the second most common cause of death by suicide, accounting for 20% of all deaths by suicide. In 2011, drug overdoses were the most common method of suicide attempts, accounting for nearly 60% of non-fatal attempted suicides. Of all suicide attempts that involved drug use, 64% involved the use of prescription drugs. 41% of all deaths by suicide or attempts at suicide involved prescription drug use. Alcohol use was involved in 31% of suicide attempts. Firearms were used in 4% of suicide attempts. Between 1998 and 2011, nearly half of active duty deaths by suicide involved personal weapons, while about 6% of suicide attempts involved firearms. (See Figure 24 .) Firearms were present in the homes of 50% of servicemembers who died by suicide, as compared to 11% of servicemembers who attempted suicide. DOD officials are developing a suicide prevention campaign that will encourage friends and families of potentially suicidal servicemembers to safely store or voluntarily remove personal firearms from their homes. Most servicemembers who attempted suicide (76%) or died by suicide (74%) were not known to have communicated their potential for self-harm. Those who did most often communicated with spouses, friends, and other family members. Of the 301 servicemembers who died by suicide in 2011: 55% had no known behavioral health disorder; 20% had mood disorders. 11% had depression, the most common diagnosed mood disorder; 16% had an anxiety disorder. The most common anxiety disorder, at 6% of deaths by suicide, was PTSD; 25% had a known history of substance abuse, while 16% received substance abuse treatment services; 40% received outpatient behavioral health care, while 17% had received outpatient behavioral health services within the month prior to suicide; 15% had received inpatient behavioral health treatment; 26% had a known history of psychotropic medication use, most frequently antidepressants (22%); 47% had experienced a failure of a spousal or intimate relationship, 27.5% within the 30 days prior to suicide; 18% had experienced Article 15 proceedings/non-judicial punishment, while 13% had experienced civil legal problems; 21% had a known history of job loss or instability, e.g., demotions; and, 47% had been deployed, while 8% had been deployed multiple times. 15% had direct combat experience. In 2011, 915 active duty servicemembers attempted, but did not complete, suicide. 896 servicemembers attempted suicide once, 18 attempted suicide twice, and 1 servicemember attempted suicide three times. Of the 915 active duty servicemembers who attempted suicide in 2011: 64% had a known history of a behavioral health disorder; 34% had a mood disorder, most frequently major depression (21%); 25% had diagnoses of anxiety disorders, most frequently PTSD (12%); 27% had a known history of substance abuse; 43% had a known history of psychotropic medication use, most frequently antidepressants (36.5%); 61% had received outpatient behavioral health services within the month prior to suicide; 52% had experienced a failure of a spousal or intimate relationship, 33% within the month prior to suicide; 19% had experienced Article 15 proceedings/non-judicial punishment, while 7% had experienced civil legal problems; 31% had a known history of job loss or instability, e.g., demotions; and 40% had been deployed, 4% had been deployed multiple times, and 17% had direct combat experience. The reasons for the higher rates in mental health diagnoses and suicide rates among Army and Marine personnel are not clear. While repeated ground combat tours would be a possible answer, according to U.S. military medical researchers, "to date no study has definitively confirmed an independent variation" of ground combat tours with servicemember suicides. Researchers suggest that "the cumulative strain from the protracted war effort, across both deployed and garrison environments" may be "causing higher population prevalence of mental disorders," leading to higher suicide rates. Many Members of Congress, military leaders, and health providers have expressed concern that increased numbers of deployments and shorter "dwell" times between deployments have increased the stress and mental health toll on U.S. servicemembers. However, studies of deployed servicemembers have reached varying conclusions regarding the links between deployment(s) and various psychological health concerns, including PTSD, depression, anxiety, and stress. While several studies have found higher rates of mental health problems among repeat deployers than among first-time deployers, other studies have found little evidence of a causal link between repeated deployments and various mental health problems. One possible explanation is that servicemembers who are more negatively affected by deployments are less likely to deploy again, and may leave the Armed Forces. Therefore, the servicemembers who deploy repeatedly may be more resilient. Additionally, servicemembers with repeated deployments may gain additional knowledge, skills, and confidence in combat environments, also increasing their psychological resilience. According to an analysis of diagnoses received by previously deployed active component servicemembers, rates of diagnoses of anxiety disorders and adjustment reactions (including PTSD) rose after the first, second, and third deployments, before falling sharply for the fourth and fifth deployments. A follow-up study, focusing specifically on mental health diagnoses received in the year after a servicemember returns from combat, found that among male servicemembers, diagnoses of PTSD, adjustment reactions, anxiety-related disorders, and depressive disorders were more common after second, third, and fourth deployments than first deployments. Among male servicemembers, a greater proportion was diagnosed with alcohol or drug disorders, suicidal ideation/self-inflicted injuries, and psychosocial problems after the first deployment than all following deployments. The results among female servicemembers were somewhat different. Like among male servicemembers, PTSD diagnoses increased following the second, third, and fourth deployments. However, the percentage of female servicemembers diagnosed with other mental disorders, including depressive disorders, alcohol/drug disorders, suicidal ideation/self-inflicted injury, adjustment reactions, anxiety disorders, and psychosocial problems all declined after repeated deployments. (See Figure 25 .) Overall, for all deployed active component servicemembers, larger percentages received diagnoses of PTSD and anxiety-related disorders after the second and/or third deployment than after the first deployment. The rates of PTSD diagnoses fall sharply after the fourth and fifth deployments. However, for other mental disorders than anxiety disorders and PTSD, a greater proportion of deployed servicemembers receive diagnoses after their first deployment than subsequent deployments. Quickened deployment cycles and the shorter "dwell" time between deployments are often cited as a risk factor leading to greater stress and higher rates of mental disorders among deployed servicemembers. However, a recent analysis by the Armed Forces Health Surveillance Center found that the percentages of deployed servicemembers diagnosed with a mental disorder were greater among servicemembers with longer dwell times between deployments. However, the study cautions that personal circumstances can greatly influence the nature, magnitude, duration, and effects of stresses related to transition and readjustment periods, such as preparing for or following a deployment. The Armed Forces Health Surveillance Center study also speculates that the double transition from "warrior" to being fully adjusted as non-deployed back to "warrior" status may play a role. They also note that servicemembers with medical conditions associated with recent deployments may have very long dwell times and be at a higher risk of recurrent or related conditions following their deployment. Deployed servicemembers in health care occupations consistently had the highest rates of PTSD diagnoses, as well as diagnoses of other anxiety disorders, adjustment reactions, and depressive disorder than servicemembers in other occupations, including combat-specific occupations. (See Figure 26 .) One possible explanation is that the consistent exposure of servicemembers in health care occupations to traumatic injuries suffered by others leads to higher rates of PTSD, as compared to the more intermittent, but more intense and personal exposures to life-threatening experiences among combat-specific occupations. Additionally, servicemembers in health care occupations likely have a higher utilization of health care, including mental health care, than servicemembers in combat-specific occupations. Appendix A. Diagnostic Codes Appendix B. Legislation National Defense Authorization for Fiscal Year 2013 The National Defense Authorization Act for Fiscal Year 2013 ( P.L. 112-239 ) contained several sections addressing military mental health issues, including: Section 580 required the Secretary of Defense, acting through the Under Secretary of Defense for Personnel and Readiness, to establish within the Office of the Secretary of Defense a position with responsibility for oversight of all suicide prevention and resilience programs of DOD and each of the military departments. Section 581 amended Chapter 1007 of Title 10, United States Code, to codify the Suicide Prevention and Community Health and Response Program for National Guard and Reserve component members, to require the Secretary of Defense to provide training on suicide prevention, resilience, and community healing and response at Yellow Ribbon Reintegration Program events and activities, to move the program from within the Office for Reintegration Programs to the Office of the Secretary of Defense, and to repeal subsection (i) of Section 582 of the National Defense Authorization Act for Fiscal Year 2008 (10 U.S.C. 10101 note). The program would terminate on October 1, 2017. Section 582 required the Secretary of Defense, acting through the Under Secretary of Defense for Personnel and Readiness, to develop within the Department of Defense a comprehensive policy on the prevention of suicide among servicemembers. Section 583 required the Secretary of the Army to conduct a study of resilience programs within the Army that would draw upon professionally accepted measurements and assessments to evaluate the impact of these programs. Section 703 amended Section 1074m(a) of Title 10, United States Code, to align mandatory post-deployment person-to-person mental health assessments for certain servicemembers with other existing health assessments by changing the required assessment period from between 180 days after deployment to 1 year after deployment, to between 180 days after deployment to 18 months after deployment. Section 706 authorized the Secretary of Defense to carry out a pilot program to enhance the efforts of DOD in research, treatment, education, and outreach on mental health, substance use disorders, and traumatic brain injury in members of the National Guard and Reserves, their family members, and their caregivers through agreements with community partners. Section 723 required the Secretary of Defense and the Secretary of Veterans Affairs to jointly enter into a memorandum of understanding providing for the sharing between departments of the results of examinations and other records on members of the Armed Forces that are retained and maintained with respect to the medical tracking system for members deployed overseas. Section 724 required the Secretary of Defense and the Secretary of Veterans Affairs to jointly enter into a memorandum of understanding providing for certain members of the Armed Forces to volunteer or be considered for employment as peer counselors under certain peer support counseling programs carried out by the Secretary of Veterans Affairs. Section 725 required the Secretary of Defense to provide for the translation of research on the diagnosis and treatment of mental health conditions into policy on medical practices. Section 726 required the Secretary of Veterans Affairs to develop and implement a comprehensive set of measures to assess mental health care services provided by the Department of Veterans Affairs. Section 727 authorized the Secretary of Veterans Affairs to provide counseling and mental health services to certain members of the Armed Forces and their family members at vet centers. Section 729 required the Secretary of Veterans Affairs to carry out a national program of outreach to societies, community organizations, nonprofit organizations, and government entities in order to recruit mental health providers to provide mental health care services for the VA on a part-time, without compensation basis. Section 730 amended Section 1720F(j) of Title 38, United States Code, to require the Secretary of Veterans Affairs to establish and carry out a peer support counseling program as a part of the existing comprehensive program designed to reduce the incidence of suicide among veterans. National Defense Authorization Act for Fiscal Year 2012 The National Defense Authorization Act for Fiscal Year 2012 ( P.L. 112-81 ) contained provisions that addressed military mental health issues: Section 703 authorized the Secretary of Defense to provide to any Reserve member performing inactive-duty training during scheduled unit training assemblies access to mental health assessments with a licensed mental health professional who would be available for referrals during duty hours at the principal duty location of the member's unit. The provision further required each Reserve member participating in annual training or individual training to have access to behavioral health support programs. Section 711 directed the Secretary of Defense to prescribe and maintain regulations relating to commanding officer and supervisor referrals of members for mental health evaluations. The provision required that these regulations seek to eliminate any perceived stigma associated with seeking and receiving mental health services. The provision further outlined procedures for mental health evaluations, and prohibited using such referrals to retaliate against whistleblowers. Section 723 required the Secretary of Defense to report to the defense and appropriations committees assessing the benefits of neuroimaging in an effort to identify and improve the diagnosis of PTSD. Section 724 directed the Secretary of Defense to report to the defense and appropriations committees on the implementation of DOD policy related to the management of concussion and mild traumatic brain injury in the deployed setting. National Defense Authorization Act for Fiscal Year 2011 The Ike Skelton National Defense Authorization Act for Fiscal Year 2011 ( P.L. 111-383 ) contained provisions that addressed military mental health issues: Section 712 required the current DOD medical tracking system for members deployed overseas to include the use of pre- and post-deployment medical examinations and health reassessments to (1) reflect the medical condition of members before their deployment; (2) record any changes to their condition during their deployment; and (3) identify health concerns, including mental health concerns, that may become manifest several months following their deployment. The provision further required that these medical records include information on the prescription and administration of psychotropic medications. Section 713 provided license requirements for health care professionals who are members of the National Guard performing training or duty in response to an actual or potential disaster while operating in their state role. Section 722 required the Secretary of Defense to (1) develop and implement a comprehensive policy on consistent automated neurological cognitive assessments of members before and after deployment; and (2) revise the policy on a periodic basis in accordance with experience and evolving best practice guidelines. Section 723 directed the military department Secretaries to assess and report on the incidence of PTSD by military occupation. It further required the Secretary of Defense to ensure that all such assessments, findings, plans, and reports are transmitted to the centers of excellence for the treatment and prevention of PTSD and traumatic brain injury, as established under the NDAA for Fiscal Year 2008. Section 724 requires the Secretary to prescribe regulations concerning requirements that mental health counselors must meet in order to practice independently under TRICARE. S.Rept. 111-201 requested the Secretary of Defense to submit a report on cognitive rehabilitation therapy for TBI. In response, on April 30, 2012, the Under Secretary of Defense for Personnel and Readiness submitted a report to Congress entitled "Cognitive Rehabilitation Therapy for Traumatic Brain Injury." National Defense Authorization Act for Fiscal Year 2010 The National Defense Authorization Act for Fiscal Year 2010 ( P.L. 111-84 ) contained provisions that addressed military mental health issues: Section 52 1 authorized the Secretary of each military department to detail officers as students at accredited schools of psychology in the United States for training leading to a degree of Doctor of Philosophy in clinical psychology. Section 595 amended the NDAA for Fiscal Year 2008 to direct the Office for Reintegration Programs (part of the Yellow Ribbon Reintegration Program under such act) to establish a program to provide National Guard and Reserve members and their families, and assist local communities, with training in suicide prevention and community healing and response to suicide. Section 596 directed the Secretary of Defense to (1) conduct a comprehensive review and assessment of DOD programs and activities for the prevention, diagnosis, and treatment of substance abuse disorders in members, as well as DOD policies relating to the disposition of substance abuse offenders in the Armed Forces; (2) report findings and recommendations to the defense committees; and (3) submit to the defense and appropriations committees a plan for the improvement and enhancement of such programs, activities, and policies. The section also requires such plan to include a comprehensive DOD statement of policy, mechanisms to ensure the availability of services and treatment as well as the prevention and reduction of substance abuse disorders, and specific instructions on the prevention, diagnosis, and treatment of substance abuse in members. It also requires confidentiality for members with respect to treatment. This section also directs the (1) Secretary of Defense to provide for an independent study on substance use disorders programs for servicemembers by the Institute of Medicine of the National Academy of Sciences or other independent entity; and (2) the results of this report must be reported to the Secretary of Defense and the defense and appropriations committees. Section 708 directed the Secretary of Defense to issue guidance for the provision of a person-to-person mental health assessment for each member deployed in connection with a contingency operation within specified periods before and following deployment. It excludes from assessment requirements members determined not to have been subjected or exposed to operational risk factors during such deployment. Section 712 directed the Secretary of Defense to (1) report to the defense and appropriations committees on the implementation of DOD policy guidance regarding deployment-limiting psychiatric conditions and medications; and (2) establish and implement a policy for the use of psychotropic medications for deployed members. Section 714 directed each military department secretary to increase by a specified amount the number of active-duty mental health care personnel authorized for that department. Requires the Secretary of Defense to (1) report to the defense and appropriations committees on the appropriate number of such personnel required to meet the mental health care needs of members; (2) develop and implement a plan to significantly increase the number of such personnel by the end of FY2013; and (3) report to such committees on the feasibility and advisability of establishing one or more military mental health specialties for officers or enlisted members in order to better meet the mental health care needs of members and their families. In response to these reporting requirements, DOD submitted a report entitled "Mental Health Personnel Required to Meet Mental Health Care Needs of Service Members, Retired Members, and Dependents." Section 71 5 required the Secretary of Defense to (1) conduct a study on the management of medications for physically and psychologically wounded members; and (2) report study results to the defense committees. Section 722 directed the Secretary of Defense to (1) conduct a comprehensive review of the mental health care and counseling services available to dependent children of members; (2) report review results to the defense committees; and (3) develop and implement a comprehensive plan for improvements in access to quality mental health care and counseling services for military children. Section 723 required the Secretary of Defense to (1) provide for a clinical trial to assess the efficacy of cognitive rehabilitative therapy for members and former members who have been diagnosed with a traumatic brain injury incurred in the line of duty in Operations Iraqi Freedom or Enduring Freedom and are referred for such therapy; and (2) provide an initial and final assessment report to the defense and appropriations committees. Section 726 directed the Secretary of Defense to provide for a study on the treatment of PTSD, to be conducted by the Institute of Medicine of the National Academy of Sciences or other independent entity. National Defense Authorization Act for Fiscal Year 2009 The Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 ( P.L. 110-417 ) contained provisions that addressed military mental health issues: Section 733 required DOD to establish a task force to examine matters relating to the prevention of suicide by members of the Armed Forces. The task force was required to report to the Secretary recommendations on a comprehensive policy designed to prevent such suicides. In response to language in H.Rept. 110-652 to the National Defense Authorization Act for Fiscal Year 2009, on August 26, 2010, DOD reported to Congress on the possibility for providing a referral for a second opinion to potentially suicidal servicemembers in combat. This report stated that DOD has decided not to develop a policy to mandate consultation or second opinion for suicidal patients in theater. In response to additional language in the same House report, on June 2, 2009, DOD reported to Congress on DOD progress on suicide prevention. The report stated that the RAND National Defense Research Institute as well as the DOD Suicide Prevention Task Force were undertaking evaluations of matters related to suicide prevention. National Defense Authorization Act for Fiscal Year 2008 The National Defense Authorization Act for Fiscal Year 2008 ( P.L. 110-181 ) contained provisions that addressed military mental health issues: Section 708 included mental health care within the definition of "health care" under the TRICARE program. It also required a report from the Secretary of Defense to the defense committees on the adequacy of access to mental health services under the TRICARE program. Section 716 required the Secretary to conduct a comprehensive review of (1) the need for gender- and ethnic group-specific mental health treatment and services for members; and (2) the efficacy and adequacy of existing gender- and ethnic group-specific mental health treatment programs and services for members. Section 717 directed the Secretary of Defense to (1) establish criteria that licensed or certified mental health counselors must meet in order to independently provide care to TRICARE beneficiaries; (2) contract for an independent study of the credentials, preparation, and training of such individuals; and (3) report study results to the defense committees. Section 1621 required the Secretary to establish in DOD a center of excellence in the prevention, diagnosis, mitigation, treatment, and rehabilitation of (1) TBI; (2) PTSD; and (3) military eye injuries Section 1661 directed the Secretary to enter into an agreement with the National Academy of Sciences (NAS) for a study on the physical and mental health and other readjustment needs of members and former members who deployed in Operations Iraqi Freedom or Enduring Freedom (and their families) as a result of such deployment. Requires the (1) NAS to report to the Secretaries and the defense and appropriations committees upon the completion of each of the two phases of such study; and (2) Secretaries to develop a final DOD-VA response to such findings and recommendations. Section 1634 required a joint report from the Secretaries to the defense committees on DOD-VA changes to ensure that traumatic brain injury victims receive a medical designation concomitant with such injury, rather than a designation which assigns a generic classification such as "organic psychiatric disorder." National Defense Authorization Act for Fiscal Year 2007 The John Warner National Defense Authorization Act for Fiscal Year 2007 ( P.L. 109-364 ) contained provisions that addressed military mental health issues: Section 721 directed the Secretary of Defense to (1) conduct a 15-year longitudinal study on the effects of traumatic brain injury incurred by members of the Armed Forces in Operations Iraqi Freedom and Enduring Freedom; and (2) provide periodic and final reports to Congress on study results. Section 735 amended the NDAA for Fiscal Year 2006 to require the task force on mental health established under such act to consider, as part of its assessment of DOD mental health services provided to military personnel, the specific needs of members deployed in Operations Iraqi Freedom or Enduring Freedom upon their return from deployment. Section 738 required additional elements for pre-deployment and post-deployment medical examinations, including current treatment and an assessment of traumatic brain injury, and provides criteria for referral for further evaluation. It also directs the Secretary of Defense to prescribe minimum mental health standards for eligibility of a member for deployment to a combat or contingency operation. Requires the (1) Comptroller General to conduct a study of, and report to the defense committees on, the implementation of the requirements of this section; and (2) the Secretary of Defense to implement the requirements and report to such committees on such implementation. Section 741 directed the Secretary to carry out no less than three one-year pilot projects to evaluate the efficacy of various approaches to improving the capability of the military and civilian health care system to provide early diagnosis and treatment of post-traumatic stress disorder (PTSD) and other mental health conditions. Requires one of such projects to be (1) designed to evaluate diagnostic and treatment approaches for use by primary care providers to improve the diagnosis and treatment of PTSD; (2) focused on members of the National Guard or Reserve located more than 40 miles from a military medical facility, and whose personnel are served primarily by civilian community health resources; and (3) designed to provide outreach to family members on PTSD and other mental health conditions. Section 744 required the Secretary to establish within DOD a panel to develop curricula for training family members in the provision of care and assistance to members and former members with traumatic brain injuries. It designated this panel as the Traumatic Brain Injury Family Caregiver Panel. National Defense Authorization Act for Fiscal Year 2006 The National Defense Authorization Act for Fiscal Year 2006 ( P.L. 109-163 ) contained provisions that addressed military mental health issues: Section 594 required a member's pre-separation counseling to include information concerning (1) the availability of mental health services and the treatment of post-traumatic stress disorder (PTSD), anxiety, depression, suicide, and other mental health conditions associated with service in the Armed Forces; (2) veterans' training and hiring priorities; (3) veterans' small business ownership and entrepreneurship programs; (4) employment and reemployment rights; (5) veterans' preference in federal employment; (6) available housing counseling assistance; and (7) a description of veterans' health care and other benefits. Section 721 required the Secretary to develop a program to improve awareness of the availability of mental health services for, and warning signs about mental health problems in, dependents of members who served or will serve in a combat theater during the previous or next 60 days. It also directs the Secretary to (1) carry out a pilot project to evaluate the efficacy of various approaches to improving the capability of the military and civilian health care systems to provide early diagnosis and treatment of PTSD and other mental health conditions; and (2) report to the defense and appropriations committees on the project. Section 722 authorized the Secretary to carry out pilot projects on improving the early diagnosis and treatment of PTSD and other mental health conditions. Authorizes at least one such project at a National Guard or Reserve facility located at least 40 miles from a military medical facility and whose personnel are served primarily by civilian community health resources. Section 723 required (1) the Secretary to establish within DOD a task force to examine matters relating to mental health and the Armed Forces; (2) the task force to report to the Secretary, including an assessment of, and recommendations for improving, mental health care provided by the military departments; (3) the task force to report to the Secretary on all activities undertaken under this section; and (4) the latter report to be transmitted to the defense and veterans' committees. National Defense Authorization Act for Fiscal Year 2005 The Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005 ( P.L. 108-375 ) contained provisions that addressed military mental health issues: Section 723 required the Comptroller General to study, and report to Congress on, mental health services available to members of the Armed Forces, including: (1) the availability and effectiveness of existing mental health treatment and screening resources; and (2) obstacles preventing members and their families from obtaining needed services. | Military servicemembers suffering from post-traumatic stress disorder (PTSD), traumatic brain injury (TBI), and depression, as well as military suicides, continue to be a major concern of Congress. Numerous legislative provisions have been enacted over the past years to address these issues. Members will likely seek to offer legislation in the 113th Congress to address this complex set of issues. This report is intended to provide assistance in understanding the issues associated with psychological health in the active duty forces, potential congressional responses, and what questions may remain unanswered. Key points in this report include the following: mental disorders such as PTSD are poorly understood and in most cases cannot be physically identified but, rather, must be diagnosed using symptoms reported by the servicemember; estimates of the prevalence of mental health conditions in any given population may be greatly affected by the methodology used; diagnoses of mental health conditions among active duty servicemembers have increased substantially relative to non-deployed servicemembers. This increase may be due to the psychological toll of exposure to conflict, but may also be due in part to increased and improved screening methods as well as Department of Defense (DOD) efforts to reduce the stigma associated with seeking mental health treatment that might dissuade some servicemembers from reporting mental health concerns or accessing care; and reliable evidence is lacking as to the quality of mental health care and counseling offered in DOD facilities. A 2012 Institute of Medicine (IOM) study recommended that DOD undertake efforts to measure the effectiveness of efforts to improve quality, such as training providers in evidence-based practice, that are not integrated into the system of mental health care offered in DOD treatment facilities. Significant areas for potential congressional oversight activities regarding psychological health in the active duty forces include the following: research into the causes and physical manifestations of psychological health conditions, screening tools, and treatments; the effectiveness of screening and treatment efforts; servicemembers' access to mental health care, including efforts to reduce the stigma of seeking mental health care, waiting times for care, staffing levels of mental health treatment professionals, mental health care available in remote or deployed settings, and care available to de-activated Reserve and Guard members; the quality of mental health care available to servicemembers, including the use of appropriate and effective treatments by qualified mental health treatment professionals; oversight of ongoing program evaluation efforts, including evaluation of the variety of suicide-prevention, stigma-reduction, and transition assistance programs within the services and DOD; and the costs of mental health care for active duty servicemembers, including present costs through the Defense Health Program, as well as the future costs of mental health care once servicemembers are no longer part of the active duty forces. |
I n Pom Wonderful v. Coca-Cola , Pom first brought a suit in 2008 against Coca-Cola, claiming that Coca-Cola's Pomegranate Blueberry beverage name and label violates the Lanham Act and California's unfair competition laws because it misleads consumers to believe that the beverage consists of primarily pomegranate and blueberry juices when it actually contains mostly apple and grape juices. The district court in California and the Ninth Circuit held that the Food, Drug, and Cosmetic Act (FDCA) precludes Pom's Lanham Act claim due to the Food and Drug Administration's (FDA's) exclusive authority to regulate food labels and the absence of any FDA action against Coca-Cola for this label. The U.S. Supreme Court granted certiorari and in an 8-0 decision held that Pom Wonderful may bring a Lanham Act claim alleging unfair competition from false or misleading product descriptions on food and beverage labels regulated by the FDCA. Pom Wonderful v. Coca-Cola presents several significant legal issues, including the enforcement of the statutory requirements for food and beverage labeling and the complex relationship among the FDCA, the Lanham Act, and the state laws involved in this regulatory scheme. When such an overlap among various statutes occurs, questions regarding the relationship among federal statutes and state laws arise among the different actors involved, such as the federal government, beverage manufacturers, and consumers. This report explores these various legal issues in the context of Pom Wonderful v. Coca-Cola and beverage labeling. The two legal issues before the courts in Pom Wonderful focused on the interaction of federal statutes with both state and federal laws. On remand, the lower courts will have to consider again the issues of preemption, specifically whether the FDCA preempts Pom's California state law claims when the state law provisions are not identical to the federal law. Additionally, the Supreme Court's preclusion analysis in Pom Wonderful adds to the current case law addressing preclusion of Lanham Act claims by the FDCA. However, further litigation may be needed to clarify how the Supreme Court's holding in Pom Wonderful applies to Lanham Act food and beverage claims that are dissimilar to Pom's Lanham Act claim as well as other FDA-regulated products like cosmetics. The report begins with an overview of the statutory and regulatory background of beverage labeling, including affirmative requirements for beverage labels, the FDCA and Lanham Act provisions for misbranding, and the enforcement of these two federal statutes. Next, the report discusses the procedural history of Pom Wonderful v. Coca-Cola and the legal arguments made by both parties. The report then concludes by analyzing legal issues presented in the Pom Wonderful case concerning preemption and preclusion in the context of the U.S. Supreme Court's analysis in its Pom Wonderful decision. Both the FDCA and the Lanham Act impact the content of juice labels, including Coca-Cola's Pomegranate and Blueberry beverage. The following section examines the provisions in these two federal statutes on which the parties and the courts in Pom Wonderful relied for their legal analysis. The section begins with an overview of the FDA requirements for the content of beverage labels. Next, the section discusses the misbranding provisions in both the FDCA and the Lanham Act. The section then concludes by highlighting the different enforcement mechanisms for these two federal statutes. FDA regulations outline several affirmative requirements for juice labels, such as Coca-Cola's Pomegranate Blueberry, reflecting the ingredients, flavors, and production of the beverage. The FDA promulgated these rules to implement the Nutrition Labeling and Education Act of 1990. During the notice and comment period of the rulemaking, FDA noted that a multiple-juice beverage named for a represented flavor would not necessarily be misleading if "consumers [are] given enough accurate information to easily ascertain the nature of the juices represented to be present in a multiple-juice beverage." Unlike other types of labels, such as those for drugs, the FDA does not preapprove juice labels under these regulations. The regulations first distinguish between "juices" and other beverages. Only beverages that are 100% juice may be called juice. Beverages diluted to less than 100% juice must have the word "juice" qualified with another term such as "beverage," "drink," or "cocktail." For example, a beverage containing less than 100% cranberry juice may be labeled "Cranberry Juice Cocktail." If the beverage contains a mixed combination of fruit or vegetable juices, then the name of the beverage must be the name of the juices in descending order of predominance by volume unless the label indicates that the named juice is used as a flavor. For example, "Apple, Pear and Raspberry Juice Drink" or "Raspberry-Flavored Apple and Pear Juice Drink" addresses the differences in volume of the various juices. If the label presents one or more but not all of the juices, then the name must indicate that more juices are present. For example, "Apple Juice Blend" signifies that the beverage contains other juices than the predominant apple. If one or more juices are named (but not all) and the named juice(s) is not the predominant juice, the name of the beverage must either state that the beverage is flavored with the named juice or state the amount of the named juice in a 5% range. If the juice has been modified, then the common name shall include a description of the modification, such as "Acid-reduced Cranberry Juice." If juices in the beverage are made from concentrate, the name must indicate that fact using terms such as "from concentrate" or "reconstituted." Both the FDCA and the Lanham Act prohibit the "misbranding" of food and beverage labels. Under the FDCA, a food is misbranded if the "labeling is false or misleading in any particular." As Congress enacted the FDCA to protect the health and safety of the public, FDCA's misbranding provision protects the consumer from negligent or false labeling that may cause physical harm, by, for example, not disclosing the correct information and preventing the consumer from making the right health choices. At its most basic meaning, courts have interpreted FDCA's misbranding provision to target a label that characterizes the food or beverage to be something other than it is. In the seminal case U.S. v. Ninety-Five Barrels (More or Less) Alleged Apple Cider Vinegar, the Court found the vinegar labeled "Excelsior Brand Apple Cider Vinegar Made from Selected Apples" to be something other than indicated. The vinegar at issue was made from dehydrated apples and not from apple cider "as [is] generally known" for this type of beverage. Therefore, the Court found the product was misbranded due to this misrepresentation of the beverage's production and content. Courts have noted the significance of "or" in the FDCA's misbranding provision ("false or misleading"), signaling that a label of misbranded food may be misleading without it being false and vice versa. Deception from a misbranded food label may arise due to the use of statements that are not technically false or may be literally true. Similarly, statements may be technically accurate, but can still mislead the consumer. To determine whether a label is false or misleading, courts generally look at the ordinary meaning of words and not necessarily the trade or commercial meaning. A misleading label could potentially deceive the "unthinking and credulous" consumer, not necessarily a "reasonable" consumer. However, it is not necessary to show that a consumer was actually misled or deceived or that the intent to deceive was present. The entire label does not need to be deceptive in order to violate FDCA's misbranding prohibition. Food is "misbranded" if it appears that any single representation on the label is false or misleading. In U.S. v. An Article of Food ... "Manischewitz ... Diet Thins," the court found that a label for matzo crackers was misleading as the use of the phrase "Diet-Thins" encourages consumers to assume, incorrectly, that the food would lead to weight loss. The court held that the government did not need to prove that the entire label was misleading, just one section. Moreover, a court may also consider certain segments of the label within the context of the entire label. The court in U.S. v. An Article of Food Consisting of 432 Cartons, More or Less, each Containing 6 Individually Wrapped Candy Lollipops of Various Flavors concluded that although the labeling on the inside of the candy box may be misleading, a jury may find the label not to be misleading when read together with the description of the contents listed on the outside of the carton. While the FDCA focuses on public health, the Lanham Act, also known as the Trademark Act of 1946, seeks to "protect persons engaged in ... commerce against unfair competition." Congress intended the act to protect a business's reputation whose goodwill may be diverted by deceptive advertisements or labels and to encourage consumers to purchase products in confidence by reassuring consumers that a specific mark designates the product that they expect and wish to buy. The Lanham Act's false and misleading advertising provision, Section 43(a), enables those who claim to be damaged by another's false or misleading advertisement to bring suit against this entity and seek civil damages. Courts have broken down Section 43(a) into five main elements. For a successful Lanham Act claim, the plaintiff must prove that (1) the defendant made false or misleading statements about the product; (2) there is actual deception or at least the tendency to deceive a substantial portion of an intended audience; (3) the deception was material to the consumer's purchasing decisions; (4) the product traveled in interstate commerce; and (5) there is a likelihood of injury to the plaintiff (such as declining sales or loss of goodwill). To demonstrate that a statement is false under the Lanham Act, the plaintiff must show that it is literally false, or that it is literally true but likely to mislead or confuse consumers. Generally, puffery in advertising is not actionable under Section 43(a) as "no one would rely on its exaggerated claims" and, therefore, it is not deceptive. Similarly, unsupported or unsubstantiated claims are not per se violations of Section 43(a). For literally true but misleading statements, a plaintiff must produce evidence that the target audience, rather than the general public, was or is likely to be misled. The Lanham Act and the FDCA have different enforcement mechanisms. Only the federal government may enforce the provisions under the FDCA. The FDCA prohibits private litigants from suing to enforce compliance with the FDCA and its implementing regulations. To remedy alleged mislabeling violations, the FDA may send out warning letters to firms and facilities that the agency believes are violating the FDCA. The agency also has seizure authority to remove misbranded products from the marketplace. Immediately after the seizure, a hearing occurs where the owner of the misbranded food has the right to object to the seizure as an exercise of his due process rights. However, due process principles are generally applied narrowly during post-seizure hearings because of the public health and safety concern. At the hearing, the court will decide whether to condemn the product or whether to release the goods if the government has failed to provide sufficient evidence to justify the seizure. The court may allow the owner to correct the defects of the product, such as through relabeling, after condemnation. Unlike the FDCA, the Lanham Act offers private enforcement remedies. While the Lanham Act states that "any person who believes that he or she is or is likely to be damaged by" a false or misleading representation may seek civil damages, courts have not found standing for consumers under this provision of the Lanham Act, but instead require some commercial injury for standing. The circuit courts are split as to whether a plaintiff must be a competitor of the defendant in order to have standing. The Third Circuit has stated that a non-competitor may have sufficient standing under Section 43(a). The Ninth Circuit has held, however, that the plaintiff must allege a commercial injury that limits the plaintiff's ability to compete with the defendant in order to qualify for standing. The Lanham Act provides for injunctive and monetary relief. For injunctive relief, a plaintiff must show that the defendant's representations about its product "have a tendency to deceive consumers." While this standard requires less proof than actual deception, a plaintiff must show that at least some consumers were misled by the advertisement. Once a violation of Section 43(a) has been established, a district court may exercise broad discretion in awarding monetary relief to the plaintiff. The plaintiff may recover lost profits, the defendant's profits gained as the result of the false advertising, and attorney's fees at the discretion of the court in exceptional cases. While the Lanham Act permits courts to increase the damages, the statute does not permit courts to award punitive damages for violations of Section 43(a). Pom Wonderful LLC produces, markets, and sells bottled pomegranate juice and pomegranate juice blends. The Coca-Cola Company produces, markets, and sells bottled juices and juice blends under the Minute Maid brand. In September 2007, Coca-Cola began promoting its new juice blend, "Pomegranate Blueberry." This juice blend contains approximately 99.4% apple and grape juices, 0.3% pomegranate juice, 0.2% blueberry juice, and 0.1% raspberry juice. The label of Pomegranate Blueberry depicts a fruit vignette of the five fruit ingredients in the juice. Below the fruit vignette reads "Pomegranate Blueberry" and "Flavored Blend of 5 Juices." The back of the bottle reads "Minute Maid Enhanced Pomegranate Blueberry Is Made With A Blend of Apple, Grape, Pomegranate, Blueberry, and Raspberry Juices From Concentrate and Other Ingredients." In 2008, Pom sued Coca-Cola, alleging that Coca-Cola misled consumers to believe that the Pomegranate Blueberry beverage contains mostly pomegranate and blueberry juices when it actually contains mostly apple and grape juices. Specifically, Pom claimed that Coca-Cola violated the false-advertising provision of the Lanham Act (§43(a)), in addition to California's Unfair Competition Law and False Advertising Law, which prohibit misleading advertising, and California's Sherman Law, which includes language materially identical to FDCA's misbranding provision, Section 343(a)(1). Coca-Cola responded that the beverage's name and label complied with FDA regulations, which, therefore, precludes Pom's Lanham Act challenge. Coca-Cola also moved to dismiss Pom's state law claims on the basis that the FDCA preempts state law obligations not identical to the federal law. The District Court for the Central District of California partially granted summary judgment to Coca-Cola, holding that the FDCA's regulations barred Pom's Lanham Act challenge of the Pomegranate Blueberry name and labeling. The court reasoned that the FDA had already spoken directly on the issue of identifying beverages with non-primary juices through its regulations. The court also emphasized that the beverage name complies with these regulations. Additionally, the court held that Pom lacked statutory standing to pursue the state law claims. Pom's interest in the expectancy of consumer profits did not qualify, for the court, as injury under the doctrine of standing. Pom appealed the district court decision to the Ninth Circuit, which affirmed the district court's holding that the FDCA and its regulations bar Pom's Lanham Act claim for both the Pomegranate Blueberry name and label. While the Ninth Circuit refrained from stating that compliance with the FDCA or FDA regulations will always insulate a defendant from Lanham Act liability, the court deferred to Congress's decision to delegate beverage juice labeling to the FDA and to FDA's expertise in the area. The Ninth Circuit remanded the case to the district court to reconsider issues of standing in connection with Pom's state law claims. The U.S. Supreme Court granted petition for a writ of certiorari in January 2014. The issue before the Court was whether a private party may bring a Lanham Act claim challenging a food label that is regulated by the FDCA. In its brief before the Court, Pom argued that neither the FDCA nor the Lanham Act contains a provision limiting the application of the Lanham Act in the context of misleading food labels. If Congress had intended to preclude Lanham Act claims in this instance, according to Pom, Congress could have added an express preclusion provision, when it added the state law preemption provision to the FDCA in 1990. Moreover, Pom further argued that Coca-Cola's label could have complied with both the FDCA and the Lanham Act, but the company chose not to label its product in such a manner. Pom also stated that the Ninth Circuit's holding would leave the entire regulation of misleading food labels with the FDA, an agency that does not have the necessary resources to fulfill this task. In response, Coca-Cola argued that Congress has demonstrated its intent to preclude Lanham Act claims and thus to create a uniform national scheme for food labeling regulation through the FDCA and the act's bar against a private cause of action. The specificity of the FDCA and the Nutritional Labeling and Education Act (NLEA) compared to the broad language in the Lanham Act, according to Coca-Cola, demonstrates Congress's intent to preclude a Lanham Act claim in these circumstances. Coca-Cola continued that a "specific" federal law (one with multiple, precise requirements), such as the FDCA, can narrow the scope of a general federal law even if the specific law does not expressly indicate this intention. In Coca-Cola's view, the FDCA's exclusive delegation of enforcement authority to the federal government and NLEA's express preemption clause signal Congress's intent to do so. In an 8-0 decision, the Supreme Court held that the Ninth Circuit's ruling that Pom's Lanham Act claim is precluded by the FDCA was incorrect, as the text, legislative history, and structure of the two acts do not support preclusion for this type of claim. Congress, according to the Court, did not intend the FDCA to preclude Lanham Act claims, such as Pom's. Further analysis of the Supreme Court's decision is provided in the following discussion on select legal issues. The primary issue before the Supreme Court in Pom Wonderful v. Coca-Cola was whether the FDCA precludes Pom's Lanham Act claim. Additionally, the lower court on remand is likely to consider the issue of preemption (the displacement of state law requirements for federal law) for Pom's state law claims. The following section provides an overview of these two legal issues, preemption and preclusion, in the context of Pom Wonderful v. Coca-Cola and juice labeling. Preemption occurs when federal law displaces state law requirements. As the legal basis for preemption, the Supremacy Clause of the Constitution states that the "Laws of the United States" made in pursuance of the Constitution are by definition "the supreme Law of the Land" "notwithstanding" "the Constitution or the Laws of any State to the Contrary." Federal preemption occurs when: "(1) Congress enacts a statute that explicitly pre-empts state law; (2) state law actually conflicts with federal law; or (3) federal law occupies a legislative field to such an extent that it is reasonable to conclude that Congress left no room for state regulation in that field." When first considering a preemption case, the Supreme Court has instructed courts to "start with the assumption that the historic police powers of the States were not to be superseded by [a] Federal Act unless that was the clear and manifest purpose of Congress." The Court regards this presumption against preemption as heightened when "federal law is said to bar state action in fields of traditional state regulation." For over a century, the Court has found food labeling, as part of the effort to protect consumers from fraud and to ensure food safety, to be an area of traditional state regulation. For lower courts in recent cases, this presumption does not necessarily bar further analysis of a preemption claim as they explore the various types of preemption discussed below. Courts generally consider express preemption first, specifically whether Congress has enacted an express preemption provision indicating its intent to preempt some state law. In 1990, Congress passed the Nutrition Labeling and Education Act (NLEA) amending the FDCA to prescribe national uniform nutrition labeling for foods. NLEA included an express preemption provision, Section 343-1(a), which states that "... no State or political subdivision of a State may directly or indirectly establish under any authority or continue in effect as to any food in interstate commerce" certain misbranding labeling requirements already established by the FDCA such as food identity, imitation food, and prominence of information on the label. The express preemption provision does not address the false or misleading label provision (§343(a)(1)). One California district court has remarked that the absence of the false or misleading provision (§343(a)(1)) from the express preemption provision means that the FDCA does not preempt any state law claims arising from false or misleading labels. NLEA's Section 6(c) also states that the act "shall not be construed to preempt any provision of State law, unless such provision is expressly preempted under [21 U.S.C. §343-1]." In addition to an express provision, preemption may also occur when state law conflicts with federal law, such as when it is impossible for a party to comply with both state and federal requirements. Such conflict occurs when compliance with both federal and state regulations is a "physical impossibility." The Supreme Court rarely invokes this doctrine, but provides a hypothetical example in Florida Lime & Avocado Growers, Inc. v. Paul. In this case, the Supreme Court referred to a situation in which federal law prohibited the marketing of any avocado with more than seven percent oil, while California law excluded from the state any avocados measuring less than eight percent oil. An implied field preemption may occur when state law regulates conduct in a field that Congress intended to occupy exclusively. A court may infer field preemption unless the field includes areas traditionally occupied by the states. In these cases, the court must find "clear and manifest" congressional intent to supersede state laws. For preemption cases regarding state misbranding laws similar to FDCA's false and misleading provision, defendants claiming preemption have pointed to the FDCA's enforcement provision as congressional intent that FDCA should supersede state laws. In Chavez v. Blue Sky Natural Beverage Co., the defendant argued that the FDCA's bar against private litigants bringing suits for noncompliance with the FDCA signals congressional intent that the FDCA serves as the only authority in food labeling cases. However, the court found that this did not demonstrate "clear and manifest" intent to occupy the entire field of food labeling. Defendants also claim preemption is warranted when state law requirements are not identical to federal requirements or when Congress has so broadly regulated the field that there is no room left for state regulation in that particular issue area. The defendant in Holk v. Snapple Beverage Corp. argued that as the FDCA so extensively regulates food beverage labeling, the federal statute should preempt similar state laws. However, the Third Circuit disagreed, stating that the mere existence of a federal regulatory scheme, even such an extensive one as FDCA's, does not imply preemption of state laws by itself. While the Supreme Court did not consider Pom's state law claims, the district court on remand will likely consider these claims and the issue of preemption. Pom initially brought several state law claims against Coca-Cola under California's Unfair Competition Law and California's False Advertising Law, which prohibit deceptive practices and misleading advertising. The district court initially ruled that the FDCA preempted Pom's state law claims, according to Section 343-1(a) of the FDCA, to the extent that the California laws imposed obligations that are not identical to those imposed by the FDCA and its implementing regulations. The court specifically pointed to the FDA regulations outlining the affirmative requirements for beverage labels, which the California Unfair Competition and False Advertising Laws do not address. However, the district court did not find preemption on implied field preemption grounds, emphasizing the lack of evidence signaling congressional intent that the FDCA should occupy exclusively the food labeling and advertising field. Pom later amended its initial complaint to include claims under California's Sherman Law, which includes language that is materially identical to FDCA's misbranding provision. Ultimately, the district court found that Pom did not have standing to assert the state law claims as Pom did not lose money or property as a result of the unfair competition. Pom's "lost business opportunity" in the pomegranate juice market was not sufficient to give it standing, according to the court, as it did not show that Pom was entitled to restitution from the defendant. The Ninth Circuit disagreed with the district court's standing analysis insofar as it based its decision on Pom's eligibility of restitution. The circuit court remanded the case to the district court to rule on the state law claims. While the Supreme Court did not address the merits of Pom's state law claims, the Supreme Court did note that it is significant that the FDCA's preemption provision distinguishes among different FDCA requirements. For example, the preemption provision forbids state law requirements that are of the type but not identical to specific food and beverage labeling provisions. If the district court finds that Pom has standing to bring the state law claims, it is likely that the district court will consider this preemption provision when reviewing the case on remand. When two federal statutes regulate a similar area, the courts, "absent a clearly expressed congressional intention to the contrary, [should] regard each as effective." The alternative approach of giving maximum effect to each statute is to preclude one statute for the other, when the court finds that the statutes conflict and otherwise cannot effectively operate together. Such an interpretation can occur on a broad scale or more narrowly in a specific instance. In either context, courts generally examine whether such a conflict exists and whether one statute has impliedly repealed the other. Repeals by implication are generally not favored and tend not to be based on perceived conflict alone. "When there are two acts upon the same subject, the rule is to give effect to both if possible.... The intention of the legislature to repeal 'must be clear and manifest.'" Congressional intent to repeal a statute or part of a statute should be clear and present in the text. Repeal by implication generally is allowed only where "(1) provisions in the two acts are in irreconcilable conflict, the later act to the extent of the conflict constitutes an implied repeal of the earlier one; and (2) if the later act covers the whole subject of the earlier one and is clearly intended as a substitute, it will operate similarly as a repeal of the earlier act." Creating a corollary to the second part of this rule, the Supreme Court has stated that absent a clear intention otherwise, "a specific statute will not be controlled or nullified by a general one, regardless of the priority of enactment." Prior to Pom Wonderful , courts have both permitted and denied a plaintiff to pursue a food or beverage Lanham Act claim in particular circumstances. Generally, courts allow a Lanham Act claim if the claim does not depend on the direct or indirect interpretation of the FDCA or FDA regulations. The court in Grove Fresh Distributors, Inc. v. Flavor Fresh Foods, Inc. permitted the plaintiff's Lanham Act claim, which turned on the definition of orange juice from concentrate. The plaintiff alleged that the defendant's representation that the product was 100% orange juice from concentrate was false because the product contained additives and adulterants. Even though the plaintiff referred to the FDA regulation's definition of orange juice in its claim, the court still permitted the Lanham Act claim to continue because the plaintiff did not have to rely on the FDA regulations to meet the elements of the Lanham Act. According to the court, the plaintiff could have used other alternatives, such as the market definition of orange juice, in order to show that the defendant's representation was "false" under the Lanham Act. Before Pom Wonderful, courts generally did not permit a Lanham Act claim if the claim required an original interpretation of FDA regulations and the FDA had not yet ruled or acted upon that particular product. Permitting such a claim would, according to the courts, usurp FDA's interpretive authority and undermine Congress's decision to limit FDCA enforcement to the federal government. The court in Summit Technology, Inc. v. High Line Medical Instruments extended deference to the FDA for the same reason. In this case, the plaintiff's Lanham Act claim alleged that the defendant falsely implied that the importation of the defendant's laser system was legal. The FDA had not yet determined whether to take action against the defendant for its importation of the product. In order to assess the validity of the plaintiff's falsity claim, the court would have had to perform an "original interpretation" of the FDA regulations before the FDA had a chance to interpret and act upon its own regulations. The court refused to perform such an interpretation, which would have preempted the FDA before it had acted. Similarly, courts tend not to permit a Lanham Act claim related to whether a defendant's conduct violates the FDCA. In PhotoMedex, Inc. v. Irwin, the plaintiff claimed that the defendant made false representations under the Lanham Act about FDA clearance to market the defendant's device. For this particular device, the manufacturer can obtain FDA clearance, according to the FDA regulations, if the product is sufficiently similar to a device that has already received clearance. The court did not permit the Lanham Act claim in this case, as it required the court to interpret whether the defendant qualified for FDA clearance and not whether the FDA had or had not granted the clearance. Courts generally do not permit Lanham Act claims concerning false or misleading use of terms defined by FDA regulations. The plaintiff in Eli Lilly & Co. v. Roussel Corp. alleged that the defendant's use of "generic" and "safe and effective" in an FDA application was false. Because the claim required the court to interpret the FDA regulations' definition of these terms to determine their falsity, the court denied the Lanham claim. Similarly, in Healthpoint v. Ethex Corp., the plaintiff claimed that the defendant's advertising of the safety and effectiveness of its drugs violated the Lanham Act, specifically the inappropriate use of FDA terms "equivalent to" and "alternative to." The court dismissed the Lanham Act claim because it determined that the correct use of these terms in the context of drug marketing required the interpretation and application of the FDCA and FDA regulations. In Pom Wonderful v. Coca-Cola, the Supreme Court held that "[c]ompetitors, in their own interest, may bring Lanham Act claims like Pom's that challenge food and beverage labels that are regulated by the FDCA." In reaching that conclusion, the Supreme Court first looked at the text of both statutes and noted the absence of any provision in either statute that forbids or limits Lanham Act claims. This absence, according to the Court, is "'powerful evidence that Congress did not intend FDA oversight to be the exclusive means of ensuring' proper food and beverage labeling." For the Court, even FDCA's preemption provision supported finding no preclusion in this case. Instead, the provision indicated that Congress intended the FDCA to preempt state law in particular contexts only, according to their interpretation of Section 343-1(a). The Supreme Court further commented on the relationship between the Lanham Act and the FDCA. According to the Court, these two federal statutes complement each other in food and beverage labeling, with the Lanham Act protecting commercial interests and the FDCA protecting health and safety. Similarly, the Court pointed to the opportunity, offered by the Lanham Act, for private companies that have market expertise to enforce the Lanham Act, which in turn provides incentives for manufacturers to "behave well" in the context of food and beverage labeling. Because the FDA does not preapprove food and beverage labels under its regulations, precluding Lanham Act claims in this context, according to the Court, would leave commercial interests with less effective protection regarding enforcement. The Court reasoned that it is unlikely that Congress intended this result. As of the date of this report, the scope of Pom Wonderful's holding as applied to all food/beverage Lanham Act claims is unclear. The Supreme Court, in its decision, emphasized that the FDCA does not preclude Lanham Act claims like Pom's. However, the case history, as discussed in the previous section, reveals that the courts have distinguished between Lanham Act claims that require courts to interpret FDA regulations and those, like Pom's, that permit a court to consider the Lanham Act "independently" from the FDA regulations. Further litigation requiring the courts to apply the Pom Wonderful holding is necessary to determine whether "like Pom's" is read broadly (to all food/beverage Lanham Act claims) or more narrowly. Similarly, it is also unclear whether the Pom Wonderful holding applies to other FDA-regulated products such as drugs and cosmetics. A legislative response may also clarify this relationship between the Lanham Act and the FDCA in other cases. However, the Supreme Court's opinion in Pom Wonderful does elucidate how two federal statutes may interact with each other, not only in the context of food labeling, but also in the greater federal regulatory framework. | This report discusses two different federal statutes that regulate beverage labels. The Food, Drug, and Cosmetic Act (FDCA) and its implementing regulations outline requirements for beverage labels reflecting the different ingredients of the juice. The FDCA also prohibits misbranded food and beverages when labels are false and misleading. The Lanham Act, the federal trademark statute that regulates unfair competition, also prohibits misleading labels and advertisements that may hurt a competitor's business and/or goodwill. While these two statutes both impact juice labels, the overall purpose and enforcement of these two statutes differ. Only the federal government can enforce the FDCA, while the Lanham Act allows competitors to enforce the act's principles in the courts. The Lanham Act prohibits unfair competition, while the FDCA seeks to ensure public health and safety. These similarities and differences raise questions regarding the legal options for businesses claiming harm from a misleading or misbranded beverage label, such as the negative impact on the market for their products. Such questions include whether a business can seek relief against a competitor's misleading juice label in court. The courts and parties in Pom Wonderful v. Coca-Cola encountered this issue, specifically regarding Coca-Cola's allegedly misleading juice label. In 2008, Pom brought suit against Coca-Cola alleging that Coca-Cola's Pomegranate Blueberry beverage name and label violates the Lanham Act and California's unfair competition laws because it misleads consumers to believe that the beverage consists of primarily pomegranate and blueberry juices when it actually contains mostly apple and grape juices. The district court in California and the Ninth Circuit held that the FDCA precludes Pom's Lanham Act claim because of the Food and Drug Administration's (FDA's) exclusive authority to regulate food labels and the absence of any FDA action against Coca-Cola for this label. The U.S. Supreme Court held that Pom may bring a Lanham Act claim alleging unfair competition from misleading beverage labels regulated by the FDCA because of the absence of anything in the text, legislative history, or structure of the FDCA or the Lanham Act that shows congressional intent to preclude such Lanham Act claims. The two legal issues before the courts in Pom Wonderful focused on the interaction of federal statutes with both state and federal laws. On remand, the lower courts will have to consider again the issues of preemption, specifically whether the FDCA preempts Pom's California state law claims when the state law provisions are not identical to the federal law. Additionally, the Supreme Court's preclusion analysis in Pom Wonderful adds to the case history addressing the preclusion of Lanham Act claims by the FDCA. However, as consumers appear increasingly concerned about how food products are labeled, further litigation may be needed to clarify how the Supreme Court's holding in Pom Wonderful applies to Lanham Act food and beverage claims that are dissimilar to Pom's Lanham Act claim. Similarly, it is unclear how Pom Wonderful may apply to other FDA-regulated products such as drugs and cosmetics. Despite the possibility for further litigation, Pom Wonderful provides a useful opportunity to observe and understand the interplay between two federal statutes that can be applied to the wider federal regulatory context. |
The Carl D. Perkins Career and Technical Education Improvement Act of 2006 ( P.L. 109-270 ), reauthorized and revised the Carl D. Perkins Vocational and Technical Education Act of 1998 (Perkins III; P.L. 105-332 ) and renamed the act the Carl D. Perkins Career and Technical Education Act of 2006 (Perkins IV). Perkins IV supports the development of academic and career and technical skills among secondary and postsecondary education students who elect to enroll in career and technical education (CTE) programs, sometimes referred to as vocational education programs. Perkins IV was authorized by statute through FY2012 and was funded at $1.1 billion in FY2014. The General Education Provisions Act (GEPA) automatically extended the authorization for one additional fiscal year to FY2013. CTE provides occupational and non-occupational preparation at the secondary, postsecondary, and adult education levels. Generally, CTE programs require two years or less of postsecondary education or training. As defined in a publication by the U.S. Department of Education's (ED's) National Center for Education Statistics (NCES), CTE prepares students for roles outside the paid labor market, teaches general employment skills, and teaches skills required in specific occupations or careers. For example, CTE provides preparation in homemaking and a variety of occupations, such as nursing, business administration, culinary arts, automotive maintenance, software programming, engineering technology, and cosmetology. The definition distinguishes CTE from liberal arts: the fine arts, English, mathematics, science, foreign languages, and the humanities. On April 19, 2012, the Obama Administration announced its blueprint for reauthorization of Perkins IV (hereinafter referred to as the Blueprint) in an effort to create more high quality CTE programs. The Blueprint is intended to conform to the policy goals of all high school graduates being prepared for both college and a career and the United States having the highest proportion of college graduates in the world. The proposal is expected to "usher in a new era of rigorous, relevant, and results-driven CTE shaped by four core principles:" 1. More effective alignment of CTE programs with labor market needs and high-growth industry sectors, in particular; 2. Stronger collaboration among secondary and postsecondary institutions, employers, and industry partners in an effort to improve the quality of CTE programs; 3. A meaningful accountability system based upon common definitions and clear metrics for performance; and 4. Increased innovation supported through systemic reform of state policies and practices. As of February 2014, the House in the 113 th Congress has held two hearings on reauthorization of the act. On September 20, 2013, the House Subcommittee on Early Childhood, Elementary, and Secondary Education held a hearing entitled "Preparing Today's Students for Tomorrow's Jobs: A Discussion on Career and Technical Education and Training Programs." On November 19, 2013, the House Committee on Education and the Workforce held a hearing entitled "Preparing Today's Students for Tomorrow's Jobs: Improving the Carl D. Perkins Career and Technical Education Act." This report is divided into three major sections. The first section provides a brief history of federal legislation supporting CTE. This is followed by an examination of Perkins IV that describes the major programs and provisions. The last section provides statistics on the funding of and participation in Perkins IV programs. To reduce reliance on individuals trained in foreign vocational schools, improve domestic wage earning capacity, reduce unemployment, and protect national security, federal funding for vocational education was initiated with the passing of the Smith-Hughes Act in 1917. About 30 years later, the George-Barden Act (P.L. 80-402) expanded federal support of vocational education to support vocations beyond agriculture, trade, home economics, and industrial subjects. The National Defense Education Act (P.L. 85-864), signed into law in 1958, focused on improving instruction in science, mathematics, foreign languages, and other critical areas. It also provided additional funding for vocational education to prepare individuals for technical occupations related to national defense. In addition to the Smith-Hughes Act, Congress provided further support for the development of vocational education in states and territories. A 1934 act provided grants to states for the salaries of faculty of agricultural, home economics, and trades and industrial subjects. A 1936 act replaced the 1934 act, added funding for the salaries of faculty in distributive occupations, and further required that states match the federal grants. The Vocational Education Act of 1946 amended the 1936 act to change the allocation of funds for each vocational education subject and allow support for salaries, teacher training, training program development, counseling, and equipment and supplies. In 1963, the Vocational Education Act (P.L. 88-210) was signed into law. In addition to increasing federal support for vocational education schools, including the construction of area vocational education school facilities, the act also provided funding for vocational work-study programs and research, training, and demonstration programs related to vocational education. Five years later, the Vocational Education Amendments of 1968 (P.L. 90-576) modified the existing vocational education programs. The amendments also established a National Advisory Council on Vocational Education and provided funding for collecting and disseminating information about programs administered by the Commissioner of Education, now the Secretary of Education (hereafter referred to as the Secretary). In 1984, the Vocational Education Act was renamed the Carl D. Perkins Vocational Education Act (Perkins I, P.L. 98-524 ). While continuing federal support for vocational education, it established programs emphasizing the acquisition of job skills through both vocational and technical education. The act also sought to make vocational education programs accessible to "special populations," including individuals with disabilities, disadvantaged individuals, single parents and homemakers, and incarcerated individuals. The Carl D. Perkins Vocational and Applied Technology Education Act Amendments of 1990 (Perkins II, P.L. 101-392 ) made several revisions to the 1984 act. Notably, the act created the Tech-Prep program designed to coordinate secondary and postsecondary vocational education activities into a coherent sequence of courses. The law also provided up to 25% of funds for state programs and required that at least 75% of funds be allocated to local recipients. Most set-asides for "special populations" were removed from the legislation, but the program remained focused on providing members of special populations with access to high-quality vocational education. These populations included disadvantaged and disabled students, limited English-proficient students, and students enrolled in programs to eliminate sex bias. Programs to eliminate sex bias were designed to prepare students for nontraditional training and employment (e.g., training women to be welders or men to be nurses). The law also required states to develop and implement performance standards and measures (e.g., program completion and job placement) to assess gains in learning and program performance. The Carl D. Perkins Vocational and Applied Technology Education Amendments of 1998 ( P.L. 105-332 ) reauthorized and revised Perkins II and renamed the act the Carl D. Perkins Vocational and Technical Education Act of 1998 (hereafter referred to as Perkins III). Perkins III increased the funds distributed to the local level by states from 75% to 85%, of which 8.5% could be reserved for programs in rural and other high-need areas. Perkins III also allowed states to set aside up to 1% of their total grant for programs for individuals in state institutions (such as prisons) and required that states set aside between $60,000 and $150,000 for services related to nontraditional programs and employment. The act strengthened accountability through the establishment of core indicators of performance with levels negotiated between each state and the Secretary (i.e., adjusted levels of performance), sanctions based on states' failing to meet the performance levels, and incentive grants to states for exceeding performance levels established under Perkins III and under the Workforce Investment Act (WIA, P.L. 105-220 ). On August 12, 2006, the Carl D. Perkins Career and Technical Education Improvement Act of 2006 was signed into law (Perkins IV; P.L. 109-270 ). Perkins IV renamed the act to refer to CTE rather than vocational and technical education. The act reinforced the existing accountability system by establishing separate core indicators of performance for the secondary and postsecondary levels, requiring grantees to meet at least 90% of their adjusted levels of performance on each of their core indicators of performance or be required to develop and implement an improvement plan, and limiting fiduciary sanctions. The act also explicitly linked CTE provisions with the academic standards required under the Elementary and Secondary Education Act (ESEA). A major innovation was the requirement that each local recipient offer the relevant elements of at least one state developed program of education, providing a progressive sequence of secondary and postsecondary courses that lead to an industry recognized credential. Finally, the act permitted eligible agencies to consolidate their funding under the Tech-Prep program into the Basic State Grants program. Perkins IV is the main source of specific federal funding for CTE. The most recent estimate of the total funds expended on CTE that were federal funds was published in 2004 by ED and estimated that 5% of CTE expenditures were federal funds. The remainder is funded by state and local funds. The act authorizes federal funding for five main programs: (1) the Basic State Grants program (Title I), (2) Tech Prep (Title II), (3) National Programs (Section 114), (4) the Tribally Controlled Postsecondary Career and Technical Institutions program (TCPCTIP; Section 117), and (5) Occupational and Employment Information (Section 118). This section describes the major sections and provisions of Perkins IV. The purpose of Perkins IV is to develop the academic and career and technical skills of secondary and postsecondary education students who elect to enroll in CTE programs, particularly programs that prepare students for high-skill, high-wage, or high-demand occupations in current or emerging professions. The act aims to achieve this through the following grant programs: Basic State Grants, which support the development, maintenance, and improvement of CTE at the state and local level; Tech Prep, which specifically supports programs that integrate secondary and postsecondary CTE; and Tribally Controlled Postsecondary Career and Technical Institutions (TCPCTI), which supports CTE programs at TCPCTIs. Grant recipients are expected to develop rigorous and challenging academic and technical standards and assist students in meeting such standards. The standards must link secondary and postsecondary education. Perkins IV is also intended to promote professional development that improves the quality of CTE teachers, faculty, administrators, and counselors, and to support partnerships among educational institutions, local workforce investment boards, and business and industry. In addition to the grant programs, Perkins IV authorizes the conduct and dissemination of national research and information on best practices that improve CTE programs through two initiatives. National Programs support research, evaluation, and dissemination of CTE practices. Occupational and Employment Information supports the dissemination of occupational and employment information. Perkins IV defines CTE as organized educational activities that offer a sequence of courses that provides individuals with coherent and rigorous content aligned with challenging academic standards and relevant technical knowledge and skills needed to prepare for further education and careers in current or emerging professions; provide technical skill proficiency, an industry-recognized credential, a certificate, or an associate degree; and may include prerequisite courses (other than a remedial course); and include competency-based applied learning that contributes to the academic knowledge, higher-order reasoning and problem-solving skills, work attitudes, general employability skills, technical skills, and occupation-specific skills, and knowledge of all aspects of an industry, including entrepreneurship, of an individual. Funds cannot be used for students prior to the 7 th grade, except that equipment and facilities purchased may be used by such students. Over 90% of the funds appropriated under Perkins IV are used to provide Basic State Grants. These formula grants are awarded to the 50 states, the District of Columbia, the Commonwealth of Puerto Rico, and each outlying area. States subsequently make grants to support CTE activities at the secondary and postsecondary levels primarily in local educational agencies (LEAs), area CTE schools, and community colleges. Uses of funds include, for example, developing the career and technical skills of students, providing instructional materials and equipment, providing professional development, supporting career and academic counseling, developing and updating CTE curriculum, and assessing the supported CTE programs. Federal Perkins IV funds supplement state and local funding of CTE to encourage the accomplishment of federal education policy goals. These goals as prominently manifested in Perkins IV include the attainment of rigorous academic standards by CTE students, the integration of secondary and postsecondary CTE elements into single programs of study, and the assessment and accountability of the achievement of educational and post-educational outcomes. The following subsections describe in detail the Basic State Grants program. Each subsection specifically describes the eligible grant recipients, application requirements, allocation of funds, uses of funds, and accountability requirements. Of the funds appropriated for the Basic State Grants, the Secretary of Education (hereafter referred to as the Secretary) initially reserves 0.13% for the outlying areas, 1.25% for the Native American programs, and 0.25% for the Native Hawaiian programs. Of the 0.13% set-aside for the outlying areas, Guam receives an initial allotment of $660,000; American Samoa and the Commonwealth of the Northern Mariana Islands each receive an initial allotment of $350,000; and the Republic of Palau receives an initial allotment of $160,000. The remainder is divided equally between Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands. In practice, since FY2008 the appropriation has been insufficient to meet the initial allotments; therefore, the initial allotment for each area has been proportionally reduced. The outlying areas use their allotments to train teachers and counselors; develop curricula; and improve CTE in secondary schools and institutions of higher education (IHEs) or improve cooperative education programs involving secondary schools and IHEs. The Native American programs set-aside of 1.25% provides competitive grants or contracts to Bureau of Indian Education (BIE)-funded schools that are not proposing to fund secondary CTE programs, federally recognized Indian tribes, tribal organizations, Alaska Native entities, and consortia of such. Indian tribes, tribal organizations, and Alaska Native entities may use their funds to support CTE programs in BIE-funded secondary schools, but the BIE must provide an equal match of the funds, if sufficient funds are available, and must not reduce CTE funding from the prior year. Secondary CTE programs in BIE-funded schools are not eligible under NACTEP because they receive funding through the states. Special consideration is given to applicants that involve, coordinate with, or encourage tribal economic development plans; and to tribally controlled colleges or universities that are either accredited or are candidates for accreditation as institutions of postsecondary CTE or that operate accredited CTE programs that issue certificates of completion. NACTEP funds may be used to carry out CTE programs and services or to provide student stipends or direct assistance to students. The CTE programs must offer a sequence of courses that lead to academic and skill proficiency and include competency-based applied learning. Funds may support new CTE programs and services or improve or expand existing CTE programs and services. A portion of the funds may be used for stipends to CTE students who have an income that is at or below the national poverty level and for whom work-study is insufficient to allow their participation without a stipend. Funds may be used to provide direct assistance in the form of tuition, dependent care, transportation, books, and supplies to students who are members of a special population if necessary for their program participation. Alternatively, each organization, tribe, or entity receiving assistance under NACTEP may consolidate funds with those received from eligible programs in accordance with the provisions of the Indian Employment, Training and Related Services Demonstration Act of 1992 (25 U.S.C. § 3401 et seq.). Eligible programs are any formula-funded programs that promote job training, tribal work experience, employment opportunities, or skill development, or any program designed for the enhancement of job opportunities or employment training. The programs may be coordinated under a single plan, single budget, and single reporting system in order to integrate the program services and reduce administrative costs. In FY2007, for the 2007-2008 academic year, the Secretary competitively awarded five-year grants to 30 entities in 14 states. The FY2007 awards used FY2006 funds. The awards were between $240,000 and $602,000 annually. The entities were 12 tribally controlled colleges or universities, 12 tribes, one tribal education agency (TEA), one tribal school board, and four other tribal organizations. The Secretary extended the FY2007 awards through FY2013. ED awarded 31 new two-year grants using FY2013 funds for the 2013-2014 academic year. The FY2013 entities were 15 tribally controlled colleges or universities, 14 tribes, one tribal school board, and one other tribal organization. From the 0.25% of funds reserved for the Native Hawaiian program, the Secretary awards grants to or enters into contracts with community-based organizations that primarily serve and represent Native Hawaiians. Grantees may use funds to plan, conduct, and administer CTE programs, or portions thereof, that benefit Native Hawaiians. The specific uses of funds mirror those under the NACTEP, except the ability to consolidate under the Indian Employment, Training and Related Services Demonstration Act. The Secretary made competitive two-year awards for FY2007 to eight projects to a single grantee—ALU LIKE, Inc. The FY2007 awards used FY2006 funds. The Secretary made new three-year awards beginning in FY2009. The FY2009 awards used FY2008 funds. The FY2009 awards funded several projects through three grantees: ALU LIKE, Inc., the Waianae District Comprehensive Health and Hospital Board, and the Office of Instructional Advancement for the Saint Louis School. The Secretary extended the FY2009 awards through FY2013. ED awarded seven new two-year grants to ALU LIKE, Inc. using FY2012 funds for the 2013-2014 academic year. After funds are set aside for the outlying areas, NACTEP, and NHCTEP, funds are allocated by formula to the 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands (referred to as "states" hereafter). Each state designates an "eligible agency" or state board as the sole state agency responsible for the administration of CTE in the state or for the supervision of the administration of CTE in the state. This section provides a description of how the statutory formula works. The base formula for determining state allocations is designed to favor states with larger populations that are of high school age and two years thereafter and states with a lower than average per capita income. The base formula depends on three population groups: persons aged 15 to 19, inclusive; persons aged 20 to 24, inclusive; and persons aged 25 to 65, inclusive. The base formula also depends on a state allotment ratio. The state's allotment ratio is calculated by dividing the per capita income (pci) for the state by the pci for the 50 states and the District of Columbia combined. The result is multiplied by 0.5 and subtracted from one. Where: ARatio = allotment ratio for the state pci_s = per capita income for the state pci_n = per capita income for the 50 states and the District of Columbia Per capita income is defined as the total personal income in a state divided by the population of the state. Therefore, a state that has a pci equal to the pci for the 50 states and the District of Columbia combined has a calculated allotment ratio of 0.5. States with a pci that is lower than the national average are assigned allotment ratios greater than 0.5, and states with a pci that is higher than average are assigned values below 0.5. If the calculated allotment ratio is higher than 0.60 or lower than 0.40, it is adjusted to 0.60 or 0.40, respectively, to ensure that no state has an allotment ratio above 0.60 or below 0.40. The Virgin Islands and Puerto Rico are assigned an allotment ratio of 0.60 regardless of the calculated value. The base formula allocates 50% of the funding available for state grants according to each state's proportion of the quantity determined by multiplying the state's number of persons aged 15 to 19, inclusive, by the state's allotment ratio. In other words, a state's proportion of the funding is obtained by multiplying the state's number of persons aged 15 to 19, inclusive, by the state's allotment ratio. The resulting amount is divided by the total of these amounts for all states, and then multiplied by 50% of the available funding. Where: ALLOC A = initial state allocation based on persons aged 15 to 19 APP = funding available for state grants ARatio = allotment ratio for the state P 15-19 = state population aged 15 to 19 = sum of value for all states. In addition, the base formula allocates 20% of the funding available for state grants according to each state's proportion of the quantity determined by multiplying the state's number of persons aged 20 to 24, inclusive, by the state's allotment ratio. The resulting amount is divided by the total of these amounts for all states, and then multiplied by 20% of the available funding. Where: ALLOC B = initial state allocation based on persons aged 20 to 24 APP = funding available for state grants ARatio = allotment ratio for the state P 20-24 = state population aged 20 to 24 = sum of value for all states. Further, the base formula allocates 15% of the funding available for state grants according to each state's proportion of the quantity determined by multiplying the state's number of persons aged 25 to 65, inclusive, by the state's allotment ratio. The resulting amount is divided by the total of these amounts for all states, and then multiplied by 15% of the available funding. Where: ALLOC C = initial state allocation based on persons aged 25 to 65 APP = funding available for state grants ARatio = allotment ratio for the state P 25-65 = state population aged 25 to 65 = sum of value for all states. Finally, the base formula allocates the remaining 15% of the funding available for state grants according to each state's proportion of the quantity determined by summing the state's initial allocations for each of the three population groups. The resulting amount is divided by the total of these amounts for all states, and then multiplied by 15% of the available funding. Where: ALLOC D = initial state allocation based on persons aged 15 to 65 APP = funding available for state grants ALLOC A = initial state allocation based on persons aged 15 to 19 ALLOC B = initial state allocation based on persons aged 20 to 24 ALLOC C = initial state allocation based on persons aged 25 to 65 = sum of value for all states. Each state's total initial allocation is determined by summing the aforementioned initial allocations. Where: ALLOC 1 = total initial state allocation ALLOC A = initial state allocation based on persons aged 15 to 19 ALLOC B = initial state allocation based on persons aged 20 to 24 ALLOC C = initial state allocation based on persons aged 25 to 65 ALLOC D = initial state allocation based on persons aged 15 to 65 The largest portion (50%) of the funding available to the states is assigned based on the age group of persons aged 15 to 19, inclusive—the Perkins IV priority population group. The inclusion of pci in the formula helps to provide states with lower pci's with additional grant funds. Thus, states with a larger number of persons aged 15 to 19 and a lower pci will receive a larger initial allocation than states with a relatively smaller number of persons aged 15 to 19 and a higher pci. Under current law, there are several provisions that alter these initial allocations. The first set of provisions applies if the total amount of funding available for state grants is equal to or less than the base amount of funding available in FY2006 ($1,155,902,206). The second set of provisions applies if the total amount of funding available for state grants exceeds the base amount of funding available in FY2006. Formula for FY2006 Level or Decreased Funding If the total amount of funding available for state grants is equal to or less than the base amount of funding available in FY2006, the initial state allocations are altered to ensure that no state's allocation is below certain minimum grant amounts. One minimum amount is the state's FY1998 grant (hold harmless); the other minimum is 0.5% of the total allocated to states. The 0.5% minimum may be adjusted based on a special rule. The special rule calculates for each state the lesser of (1) 150% of its prior year grant and (2) the state population of 15 to 65 year olds multiplied by 150% of the national average per pupil payment (NAPPP). Based on these calculations, an adjusted 0.5% minimum is calculated for the state as the lesser of the 0.5% minimum or the amount calculated under the special rule. The adjusted 0.5% minimum is subsequently compared with the amount the state received in FY1998, and the larger amount is considered its minimum grant amount. For any state whose initial allocation is lower than its minimum grant amount, its initial allocation is adjusted to its minimum grant amount. For any state whose initial allocation exceeds its minimum grant amount, its initial allocation is ratably reduced to provide states whose initial allocations were below their minimum grant amounts with their minimum grant amounts. However, the resulting ratably reduced grants may be further adjusted if the results for a single state fall below that state's minimum grant amount. Figure 1 is provided to demonstrate how the formula works in practice. Formula for Funding That Exceeds the FY2006 Level If the total amount of funding available for state grants exceeds the base amount of funding available in FY2006, the initial state allocations are altered to provide more funding to the states that did not receive the 0.5% minimum. Specifically, up to one-third of the new money is allotted to states with FY2006 grants that were less than the 0.5% minimum for the current year. New money is defined as the amount by which the current year's funding available to states exceeds the FY2006 funding available to states. The new money is allotted based on an inverse proportion of how far below the minimum grant amount of 0.5% each state's FY2006 grant is. In other words, states further from the 0.5% minimum receive a larger proportional increase above their FY2006 grant amount in comparison to states with an initial allocation that is below but closer to the 0.5% minimum. As a result of this allotment procedure, none of the small states could receive more than the minimum grant amount of 0.5% of the current amount allotted for state grants. The remaining funds (at least two-thirds of the new money) would be allotted to the other states based on the initial allocation and a 0.5% minimum, except that no state would receive a grant less than its FY1998 grant. If the appropriation is sufficient, then all grantees receive at least the 0.5% minimum. Figure 2 is provided to demonstrate how the formula works in practice. Once funds are allocated to the states according to the aforementioned formulas, states may reserve up to 10% of their state grant funds for state leadership activities (see the subsequent section on State Leadership Activities). States may also reserve the greater of up to 5% or $250,000 for program administration. Administrative activities include planning, evaluation, compliance reviews, technical assistance, and the development and maintenance of data systems. States must match the Perkins IV administrative reservation with an equal amount of funds from nonfederal sources. States are required to distribute at least 85% of state grant funds to the local level (i.e., to eligible recipients such as LEAs and community colleges). Up to 10% of the funds distributed to the local level may be reserved for distribution to local providers that are in rural areas, areas with high percentages of CTE students, and areas with high numbers of CTE students (rural/high CTE). In 2009-2010, 15 states chose not to reserve any funds for rural/high CTE providers. Of the remaining states that reserved funds, the average reservation was 6.5%. Subsequent to the rural/high CTE reservation, states decide the split of local level funds between secondary and postsecondary education. Statutory provisions give states the flexibility of how much to fund secondary and postsecondary CTE. Based on the most recent data available, in 2009-2010 states distributed 61% of funds, on average, to secondary education providers. Distributions to Secondary Education Providers Eligible recipients at the secondary level are LEAs that serve secondary level students, including public charter schools that operate as LEAs, BIE-funded schools, area CTE schools providing secondary education, educational service agencies (ESAs), or consortia of such. Perkins IV provides a choice of three methodologies for states to distribute funds to eligible recipients at the secondary level—(1) a formula prescribed by statute, (2) a method devised by the state, and (3) an alternative method prescribed by statute for minimal distributions. 1. The formula prescribed by statute for determining substate secondary level allocations is designed to favor local providers serving a larger population living below the poverty level. Population is the number of persons aged 5 through 17 who reside in the school district served by the LEA. Seventy percent (70%) of the funds designated for distribution to secondary education providers is distributed based on the population living below the poverty level in the LEA compared to the total population living below the poverty level in all participating LEAs in the state. The remaining 30% of the funds is distributed based on the population in the LEA compared to the total population in all participating LEAs in the state. The data are adjusted to make the allocations reflect any changes in school district boundaries that may have occurred since the population and/or enrollment data were collected, and to include LEAs, charter schools, and BIE-funded schools without geographical boundaries. 2. The Secretary may permit a state to use an alternative secondary substate formula if the formula more effectively targets funds on the basis of poverty to local secondary education providers within the state than the statutorily described formula. 3. Finally, if the state-chosen distribution to secondary education is 15% or less of the state's total grant funds distributed to the local level, the state may allocate funds on a competitive basis or any alternative method. In 2009-2010, no state distributed 15% or less of the total state grant funds to secondary providers. For LEAs to receive a grant under the first or second methodology, the amount must be greater than $15,000. LEAs may form consortia to meet the threshold grant requirement. The threshold grant requirement will be waived if the LEA demonstrates an inability to enter into a consortium and is either located in a rural, sparsely populated area or is a public charter school operating secondary CTE programs. Distributions to Postsecondary Education Providers Eligible recipients at the postsecondary level are LEAs providing postsecondary education; area CTE schools providing postsecondary education; tribally controlled colleges and universities; ESAs; public or nonprofit IHEs that offer CTE courses that lead to technical skill proficiency, an industry-recognized credential, a certificate, or a degree; and consortia of such. Perkins IV provides a choice of three methodologies for states to distribute funds to eligible recipients at the postsecondary level—(1) a formula prescribed by statute, (2) a method devised by the state, and (3) an alternative method prescribed by statute for minimal distributions. 1. The formula prescribed by statute for determining substate postsecondary allocations is designed to favor providers serving a larger population of disadvantaged CTE students. Funds designated for distribution to postsecondary education providers are distributed based on the sum of the numbers of federal Pell Grant recipients and recipients of assistance from the BIE enrolled in CTE programs of the provider compared to the sum of the number of such recipients for all providers. The minimum grant amount is $50,000. 2. The Secretary may permit a state to use an alternative secondary substate formula if the formula more effectively targets funds to local postsecondary education providers with the highest numbers of economically disadvantaged individuals within the state than the statutorily described formula. 3. Finally, if the state-chosen distribution to postsecondary education is 15% or less of the total state grant funds distributed to the local level, the state may allocate funds on a competitive basis or any alternative method. In 2009-2010, six states allocated 15% or less of the state's total grant funds to postsecondary education providers. Perkins IV provides states considerable flexibility in implementing the funding. The act was designed to increase "state and local flexibility in providing services and activities designed to develop, implement, and improve [CTE], including tech prep education." To a certain extent, states can determine which CTE programs to implement and how to measure achievement. To receive funding, the state eligible agency must coordinate, develop, and submit a six-year state plan to the Secretary, and evaluate the program, services, and activities. The state plan must be developed through public hearings and consultation with an array of stakeholders, including but not limited to academic and CTE teachers, faculty, and administrators; educational institutions; parents and students; workforce investment boards (WIBs); interested community members; and representatives of business, industry, and labor organizations. The plan is to include such substance as descriptions of the activities supported and how these activities will help the state meet or exceed its goals or targets on performance measures defined by statute and by the state; the career and technical programs of study (see box below), which may be adopted by LEAs and postsecondary institutions; the professional development, recruitment, and retention strategies; efforts to facilitate the transition of subbaccalaureate CTE students into baccalaureate degree programs; and the integration of academics with CTE to ensure learning in and attainment of the same challenging academic proficiencies that are taught to all other students. Alternatively, the state plan may be submitted as part of a Section 501 Unified Plan, as authorized by the Workforce Investment Act of 1998 (WIA) (see the section below on "Relationship with the Workforce Investment Act" for more information on unified plans). The plans are approved by the Secretary unless they do not meet the Perkins IV statutory requirements or the state's proposed levels of performance on the core indicators of performance have not been approved by the Secretary (see the section below on " Accountability and Performance " for more information on levels of performance and the core indicators of performance). As described earlier, states may reserve up to 10% of their allocation for state leadership activities. There are nine required state leadership activities: 1. An assessment of the Perkins IV-funded CTE programs, including their impact on special populations; 2. Developing, improving, or expanding the use of technology in CTE; 3. Professional development programs; 4. Strengthening the academic and career and technical components of CTE programs that improve the academic and career and technical skills of students through the integration of coherent and relevant content aligned with challenging academic standards and relevant CTE, to ensure achievement in CTE subjects and the core academic subjects (as defined in Section 9101 of the Elementary and Secondary Education Act (ESEA)); 5. Providing preparation for nontraditional fields in current and emerging professions, and other activities that expose students, including special populations, to high-skill, high-wage occupations, for which states must reserve at least $60,000 but not more than $150,000; 6. Supporting partnerships among stakeholders to enable students to achieve state academic standards and career and technical skills, or complete career and technical programs of study; 7. Serving individuals in state institutions, such as state correctional institutions and institutions that serve individuals with disabilities, for which states may reserve up to 1% of their state allocation; 8. Support for programs for special populations that lead to high-skill, high-wage, or high-demand occupations; and 9. Technical assistance for local providers. Leadership activity funds may also be used for activities such as improving academic and career counseling, supporting career and technical student organizations (CTSOs), and establishing articulation agreements between secondary and postsecondary education providers. An articulation agreement describes a program providing a nonduplicative sequence of progressive achievement leading to technical skill proficiency, a credential, a certificate, or a degree through credit transfer agreements in a written commitment agreed upon at the state level or approved annually by educational institutions providing the different levels of instruction. State leadership funds may not be used for program administration. Perkins IV requires eligible recipients at the local level to develop and improve CTE programs. To receive funding, local secondary and postsecondary education providers must submit local plans to the state eligible agency. The local plan must include how CTE activities will be carried out, and how these activities will support meeting the state and local adjusted levels of performance; how at least one state approved CTE program of study identified in the state plan will be adopted; how the integration of academics with CTE will be improved to ensure learning in and attainment of the same challenging academic proficiencies that are taught to all other students; how professional development for faculty will promote the integration of academic standards and CTE; how students will gain experience in and knowledge of industry; how all the relevant stakeholders are involved in the plan development and implementation; the sufficiency of size, scope, and quality of the CTE programs offered; the process for continual evaluation and improvement of the provider's performance; how the achievement and success of special populations and individuals in nontraditional fields will be promoted; and any other requirements established by the state agency. In general, local education providers use their funds to improve and support CTE programs. At least one of the CTE programs offered must include the relevant elements of not less than one state approved career and technical program of study identified in the state plan. All of the CTE programs must ensure academic achievement and career and technical skill attainment; link education at the secondary and postsecondary levels; provide industry experience and understanding; be of sufficient size, scope, and quality to be effective; and provide activities to prepare special populations for high-skill, high-wage, or high-demand occupations that will lead to self-sufficiency. The local education providers must develop, improve, or expand the use of technology in CTE; provide professional development programs; and assess their CTE programs. Perkins IV limits the use of local funds for administrative costs to 5%. In addition to the aforementioned requirements, Perkins IV also includes a list of permitted uses of local funds. Examples of permissible activities are the involvement of parents, businesses, and labor organizations in the design, implementation, and evaluation of CTE programs; the provision of career guidance and academic counseling; the assistance of CTSOs; the provision of direct assistance in circumstances as described in the " Native American Career and Technical Education Program (NACTEP) " section of this report; the leasing, purchasing, upgrading, or adapting of equipment, including instructional aids and publications designed to strengthen and support academic and technical skill achievement; and initiatives that facilitate the transition of subbaccalaureate CTE students into baccalaureate degree programs. Similar to other federal education programs distributed to states by formula, Perkins IV requires that states and local providers meet accountability provisions as outlined in statutory provisions to optimize the return on the federal investment in CTE. The accountability system requires that states and local providers meet goals or targets on the core indicators of performance established by statute and on any additional indicators of performance established by the state or face sanctions. The six required core indicators of performance at the secondary level are CTE student attainment of the state-determined proficient levels on the mathematics, reading or language arts, and science academic assessments, as adopted by the state in accordance with Title I of the Elementary and Secondary Education Act (ESEA); CTE student attainment of career and technical skill proficiencies, including those measured by assessments that are aligned with available and appropriate industry recognized standards; rates of CTE student attainment of each of the following: secondary school diplomas; General Education Development (GED) credentials or other state-recognized equivalents; and proficiency credentials, certificates, or degrees, in conjunction with a secondary school diploma (if such credential, certificate, or degree is offered by the state in conjunction with a secondary school diploma); CTE student graduation rates as described in Title I of ESEA; CTE student placement in postsecondary education or advanced training, in military service, or in employment; and CTE student participation in, and completion of, CTE programs that lead to nontraditional fields. The five required core indicators of performance at the postsecondary level are CTE student attainment of challenging career and technical skill proficiencies, including those measured by assessments that are aligned with available and appropriate industry-recognized standards; CTE student attainment of an industry-recognized credential, a certificate, or a degree; CTE student retention in postsecondary education or transfer to a baccalaureate degree program; CTE student placement in military service or apprenticeship programs or placement or retention in employment, including placement in high-skill, high-wage, or high-demand occupations or professions; and CTE student participation in, and completion of, CTE programs that lead to employment in nontraditional fields. As previously mentioned, states may also identify additional indicators of performance. The state adjusted levels of performance are annual goals or targets for each of the core indicators of performance. The levels are established by each state with input from the local education providers and agreed upon by the Secretary. The levels are intended to ensure continual improvement for each state and take into consideration the adjusted levels of other states. In addition to the adjusted levels of performance agreed upon by the Secretary, each state that establishes additional indicators of performance also establishes state levels of performance for each additional indicator. The levels of performance on the additional indicators do not require approval or agreement by the Secretary. States annually report to the Secretary on the progress of CTE students served by Perkins IV in achieving the state adjusted levels of performance and the state levels of performance, including the levels of performance for special populations. Each indicator must be disaggregated by special populations (students with disabilities, economically disadvantaged students, students preparing for nontraditional fields, single parents, displaced homemakers, and limited English proficient (LEP) students) and the ESEA Title I subgroups (all students, economically disadvantaged students, LEP students, students with disabilities, and students in major racial and ethnic groups). In addition, the Secretary requires data disaggregation by gender and migrant status. The annual state reports (Consolidated Annual Reports) are publicly disseminated by the Secretary. Although each core indicator of performance must be disaggregated, the adjusted levels of performance apply only at the aggregate level. Local education providers may accept the state adjusted levels of performance as their local adjusted levels of performance or negotiate with the state to set new local adjusted levels of performance. In addition, each local provider may establish local levels of performance for each of the state's additional indicators of performance. Local providers must report annually to the state and public on the progress of CTE students served by Perkins IV in achieving the local adjusted levels of performance and local levels of performance, if established. States that do not meet at least 90% of a state adjusted level of performance for any of the core indicators of performance in any year are required to develop and implement a program improvement plan in consultation with the appropriate stakeholders. The improvement plan must be implemented in the first year following the program year in which the state failed to meet the state adjusted level of performance. The Secretary is required to provide technical assistance if the state is not properly executing its responsibilities or is not making substantial progress. If the state fails to implement its improvement plan, fails to make any improvement in meeting its state adjusted levels of performance within the first program year of implementing its improvement plan, or fails to meet at least 90% of the state adjusted level of performance for the same core indicator of performance for three consecutive years, the Secretary may withhold all, or a portion of, the state's leadership and administrative funds after notice and opportunity for a hearing. The Secretary must use the withheld funds to provide technical assistance, to assist in the development of an improved state improvement plan, or for other improvement activities consistent with Perkins IV for the state. Likewise, local providers that do not meet at least 90% of a local adjusted level of performance for any of the core indicators of performance face similar sanctions with three exceptions. The state rather than the Secretary provides technical assistance to the local providers. The state may withhold all, or a portion of, the local provider's funding. Finally, the state must use the withheld funds to provide (through alternative arrangements) services and activities to students within the area previously served by the local provider to meet the purposes of Perkins IV. Title II of Perkins IV authorizes another state formula grant program known as Tech Prep. The goal of the program is to combine and coordinate secondary and postsecondary vocational education activities into a coherent sequence of courses, known as the "2+2" model for two years of secondary education followed by two years of postsecondary education, which may include a two-year apprenticeship program. States award grants to consortia consisting of participants from both the secondary and postsecondary education levels. Consortia use the funds to develop and maintain CTE 2+2 programs of study. Funds are allocated to the states according to the Basic State Grant allocation without the application of minimum grant amounts. States must describe in their Basic State Grants state plan how Tech Prep activities will be coordinated with other activities described in the state plan. The Tech Prep program may be operated as a separate program, or the funds may be combined under the Basic State Grants. If eligible agencies choose to combine program funds, funds are considered as being allotted under the Basic State Grants program and must be distributed to eligible recipients in accordance with that program. In 2010-2011, the last year applicable, 28 states consolidated all or a portion of their Tech Prep funds into the Basic State Grants. The Tech Prep funds that are not consolidated with Basic State Grants funds are allocated by each state to local providers through four-year or six-year grants awarded competitively or through a formula determined by the eligible agency. Eligible local providers are consortia of at least one eligible secondary education provider and at least one eligible postsecondary education provider. The eligible secondary education providers are the same as the eligible secondary level local providers under the Basic State Grants. The eligible postsecondary education providers are nonprofit IHEs that offer a two-year associate's degree, two-year certificate, or two-year postsecondary apprenticeship program, or proprietary IHEs that offer a two-year associate's degree program. A consortium may also include baccalaureate degree-granting IHEs, employers, business intermediaries, and labor organizations. If all Tech Prep funds are not consolidated under the Basic State Grants, the Tech Prep program must meet several requirements. The participants of each consortium must operate under an articulation agreement providing credit transfer agreements. The CTE program must be a program of study that combines at least two years of secondary education with at least two years of postsecondary education in a nonduplicative, sequential course of study or with an apprenticeship program of not less than two years; integrates academic and CTE instruction, utilizing work-based and worksite learning experiences where appropriate and available; provides technical preparation in a career field, including high-skill, high-wage, or high-demand occupations; builds student competence in core academic subjects (as defined in Section 9101 of Elementary and Secondary Education Act) and technical skills, as appropriate, through applied, contextual, and integrated instruction, in a coherent sequence of courses; leads to technical skill proficiency, an industry-recognized credential, a certificate, or a degree in a specific career field; leads to placement in high-skill or high-wage employment, or to further education; and utilizes CTE programs of study, to the extent practicable. The program must meet state developed academic standards. Tech-prep programs are also required to provide in-service professional development for teachers, faculty, and administrators; and provide professional development programs for counselors. In addition, the program must provide equal access to individuals who are members of special populations and preparatory services to non-CTE participants. Finally, a Tech Prep program must coordinate its activities with activities conducted under the Basic State Grants. The Perkins IV Tech Prep program also includes additional permissible uses of funds, such as equipment acquisition and improved career guidance. Each consortium receiving funding is required to establish and report on the following indicators of performance with respect to Tech Prep participants: the number of secondary and postsecondary education students served; the number and percent of secondary education students who enroll in postsecondary education, enroll in postsecondary education in the same field of study pursued at the secondary level, complete a state or industry-recognized credential or licensure, earn postsecondary credit while enrolled at the secondary level, and enroll in remedial math, writing, or reading courses in postsecondary education; and the number and percent of postsecondary education students who are placed in a related field of employment not later than 12 months following graduation from the program, complete a state or industry-recognized credential or licensure, complete a two-year degree or certificate program within the normal time of completion for the program, and complete a bachelor's degree within the normal time of completion for the degree. In addition, the Secretary requires each consortium to report on the core indicators of performance required under the Basic State Grants. Each consortium receiving Tech Prep funding must enter into an agreement with the eligible agency to meet a minimum level of performance on the core indicators of performance and the three aforementioned indicators of performance. If a consortium does not meet these performance levels for three consecutive years, the eligible agency must require the consortium to resubmit an application for a Tech Prep grant. In addition, if grants are made to consortia on a formula basis, the eligible agency may terminate funding to a consortium that fails to meet its performance levels for three consecutive years. Perkins IV authorizes national activities (Section 114) requiring the Secretary to collect performance information about, and report on, the condition of CTE and the effectiveness of state and local Perkins IV programs, including through an annual report to Congress; collect assessment information on a nationally representative sample of CTE students; appoint an independent advisory panel to advise the Secretary on the execution of an independent evaluation and assessment of Perkins IV-funded CTE programs, including the implementation of Perkins IV; submit the aforementioned independent evaluation to the Congress on or before July 1, 2011; and award a grant, contract, or cooperative agreement, on a competitive basis, to an IHE, a public or private nonprofit organization or agency, or a consortium of such institutions, organizations, or agencies to establish a national research center to carry out scientifically based research and evaluation to improve the education, employment, and training of CTE participants and to improve the preparation and professional development of CTE faculty. ED's National Center for Education Statistics (NCES) maintains various CTE statistics based on data from various NCES surveys. For federal, state, and local policy makers, practitioners, and other stakeholders, ED also maintains a resource and information-sharing portal, the Perkins Collaborative Resource Network (PCRN), which includes information on current CTE legislation, grants, and accountability data, as well as resources for developing and implementing rigorous, state-of-the-art CTE programs. The University of Louisville received a grant of $4.5 million in each of FY2007-FY2010 and $2.5 million in each of FY2011 and FY2012 to operate the National Research Center for Career and Technical Education (NRCCTE). A new contract was awarded to the Research Triangle Institute for FY2013-FY2016 for a total of $6.2 million to operate the National Center for Innovation in Career and Technical Education (NCICTE). The last independent evaluation of Perkins and vocational education (hereafter referred to as the 2004 NAVE ) was completed in 2004 and evaluated Perkins III. Key findings included that CTE provided short- and medium-term earning benefits for most students, including economically disadvantaged students, at both the secondary and postsecondary levels; secondary CTE students had higher academic achievement than CTE students 10 years prior; and the integration of secondary CTE and academic instruction was slow and challenging. The evaluation recommended that the act be focused on either academic education or CTE with streamlined accountability requirements, have separate goals for secondary and postsecondary CTE, and fold the Tech Prep secondary/postsecondary integration and articulation into the Basic State Grants program to a greater extent. Perkins IV authorizes grants to two tribally controlled postsecondary career and technical institutions: United Tribes Technical College (UTTC) in North Dakota and Navajo Technical College (NTC) in New Mexico. These IHEs are eligible for TCPCTIP grants because they do not receive funds under the Tribally Controlled College or University Assistance Act of 1978 (TCCUAA; 25 U.S.C. 1801 et seq.) or the Navajo Community College Act (25 U.S.C. 640a et seq.). UTTC and NTC are also the only recipients of funds from the Department of the Interior's Tribal Technical Colleges program (TCCUAA, Title IV; 25 U.S.C. 1861 et seq.), which supports their postsecondary CTE programs. Funds may be used for CTE programs for Indian students and for the associated institutional support costs. Subject to the availability of appropriations, funds may be used for expenses associated with, but not limited to, maintenance, repair, and minor improvements; equipment; special instruction (including special programs for individuals with disabilities and academic instruction); boarding costs; transportation; daycare and family support programs for students and their families; and student stipends. Sufficient funds are awarded to the two IHEs to pay associated maintenance, operation, capital expenditures, repair, replacement, and institutional support of their CTE programs. In the event that sufficient funds are not available, each IHE receives a per student payment that is proportional to the previous year─the product of the prior year's funding per full-time equivalent (FTE) Indian student enrolled in both IHEs and the current full-time equivalent (FTE) Indian student count for the IHE, plus inflation. Where: ALLOC IHE = allotment for the IHE APP prioryear = program appropriation for the prior year FTE total = full-time equivalent (FTE) enrollment of Indian students in both IHEs FTE IHE = full-time equivalent (FTE) enrollment of Indian students in the IHE Infl = inflationary increase of necessary costs beyond the institution's control The Secretary has developed, in compliance with statutory provisions, a complaint resolution procedure for grant determinations and calculations. Section 118 of Perkins IV authorizes the Secretary to provide assistance and funding to state-designated entities that collect and disseminate occupational and employment information. These entities are jointly designated in each state by the Governor and the state agency that oversees CTE. Statutory provisions do not specify how funds will be disseminated. Funds may be used to support career guidance and academic counseling and to improve access to information and planning resources that relate academics and CTE to career goals. Funds may also be used to improve coordination and communication among administrators and planners of Perkins IV programs and labor market information, as authorized by Section 15 of the Wagner-Peyser Act (WPA; 29 U.S.C. 49 et seq.), to avoid duplication of efforts and promote information sharing, and to provide readily available occupational information. The Basic State Grants, national programs, Section 118, Tech Prep, and TCPCTIP are each authorized at such sums as may be necessary for each of FY2007-FY2012. Appropriations for Perkins IV have generally declined from $1.304 billion in FY2007 to $1.080 billion in FY2013; however, the FY2014 appropriation was increased to $1.133 billion (see Table 1 ). The Basic State Grants receive two separate appropriation amounts: an appropriation for the current fiscal year (e.g., appropriated funds that are to be obligated during FY2012 are appropriated in the FY2012 appropriations act) and an advance appropriation for the subsequent fiscal year (e.g., appropriated funds that are to be obligated during FY2013 are appropriated in the FY2012 appropriations act). Advance funding provides federal, state, and local officers "adequate notice" of the availability of federal funds for carrying out ongoing education activities and projects. Total appropriations for the Basic State Grants, including the advance, have generally decreased from $1.18 billion in FY2007 to $1.06 billion in FY2013; however, the FY2014 appropriation was increased to $1.118 billion. The advance appropriation has been fairly stable at about $791 million in each year. The Tech Prep program was funded $105 million in FY2007 and $103 million in each of FY2008-FY2010. The program has not been funded since FY2010. The national evaluation of Perkins III (hereafter referred to as the 2004 NAVE ) provided an option for future Perkins legislation of eliminating Tech Prep for its failure to sufficiently integrate and articulate secondary and postsecondary education and target high poverty students. The Administration's FY2011 budget requested $0 for Tech Prep, indicating that states could fulfill the Tech Prep program requirements under the Basic State Grants but with greater flexibility. In 2009-2010, 26 states consolidated all of their Tech Prep funds into the Basic State Grants, and one state consolidated part of its Tech Prep funds into the Basic State Grants. Appropriations for the Tribally Controlled Postsecondary Career and Technical Institutions (TCPCTIP) program are provided through the Higher Education account of the annual appropriations act rather than as part of the Career, Technical, and Adult Education account. Appropriations for TCPCTIP increased from $7.4 million in FY2007 to $8.2 million in FY2010 before declining to $7.7 million in FY2014. Additional Perkins IV provisions specify grantee treatment of private school staff and students, grantee fiscal considerations, and the relationship between Perkins IV and WIA. Perkins IV requires, to the extent practicable and upon written request, eligible agencies and eligible recipients to include secondary education staff in nonprofit private schools in the geographical area served by the eligible agency or recipient in CTE professional development activities. Perkins IV allows eligible recipients, upon written request, to provide for the "meaningful" participation in CTE programs and activities of secondary school students who reside in the geographic area and who are enrolled in nonprofit private schools. In addition, upon written request, the eligible recipient must consult "in a timely and meaningful manner" with representatives of nonprofit private schools located in the geographical area served by the eligible recipient to discuss the meaningful participation of secondary education students attending these schools in Perkins IV-funded CTE programs and activities. Perkins IV includes supplement not supplant and maintenance of effort requirements. The supplement not supplant provision prohibit states and local education providers from using Perkins IV funds (1) to provide services that state and/or local funds have provided or purchased in the previous year; (2) to provide services that are required to be provided under federal, state, or local law; or (3) to provide services for non-CTE students but charged to Perkins IV for CTE students. Also, a state must maintain or exceed its CTE expenditures per student or the aggregate CTE expenditures for the second preceding fiscal year compared to the preceding fiscal year. However, if the total Perkins IV appropriations decrease, states may decrease their fiscal effort by the same percentage that the appropriations decreased. The unduplicated CTE course enrollment counts are shown in Figure 3 . Enrollment is an unduplicated count of all students reported by each state as having taken one or more CTE courses at the secondary, postsecondary, and adult levels. These courses may or may not be funded with Perkins IV funds. Enrollment increased from 10.6 million students in 2001-2002 to 13.0 million in 2006-2007 before declining to 12.1 million students in 2007-2008. The latest enrollment reported for 2009-2010 was 12.5 million. Table 2 disaggregates enrollment in CTE courses by student characteristics, including gender, race/ethnicity, and special populations. These courses may or may not be funded with Perkins IV funds. Although male students are overrepresented (53%) at the secondary level, they are underrepresented (45%) at the postsecondary level. Over half of the participants are White, 54% at the secondary level, 57% at the postsecondary level, and 62% at the adult level. Approximately half of the participants are economically disadvantaged—51% at the secondary level, 50% at the postsecondary level, and 59% at the adult level. This percentage may suggest the effectiveness of the focus on low-income students in the formula allocation process. Figure 4 disaggregates CTE concentrators by career cluster and by education level. The most popular career clusters at the secondary level are business management (21%), agriculture (17%), information technology (16%), and human services (15%). At the postsecondary level, almost two-thirds of CTE concentrators are clustered in either the health sciences (42%) or business management (23%). Almost two-thirds of CTE concentrators in adult CTE programs are focused in either the health sciences (48%) or transportation (16%). The most recent program performance results reported by ED are for the 2008-2009 and 2009-2010 program years. The performance results indicate each state's progress in achieving its adjusted levels of performance on the core indicators of performance (described in the section entitled "Accountability and Performance"). PY2008-2009 was the first year for which states were required to report all of the performance indicators. The 2007-2008 program year was a transition year to Perkins IV from Perkins III. Transition year reporting requirements were abbreviated in comparison to the aforementioned full requirements for subsequent years. For the secondary level core indicators of performance ( Table 3 ), 10 states met or exceeded each of their adjusted levels of performance in PY2008-2009 compared to 12 states in PY2009-2010. An additional 27 states were required to develop an improvement plan following PY2008-2009 because they did not meet at least 90% of their adjusted levels of performance on every indicator. The number of states requiring an improvement plan increased to 28 states following PY2009-2010. In PY2009-2010, the graduation rate indicator was met or exceeded by the largest (49) number of states, and the indicator for placement after secondary education was met or exceeded by the fewest (30) number of states. For the postsecondary level core indicators of performance ( Table 3 ), 14 states met or exceeded each of their adjusted levels of performance in PY2008-2009 compared to 10 states in PY2009-2010. An additional 25 states failed to meet at least 90% of an adjusted level of performance and thus were required to develop an improvement plan following PY2008-2009. Following PY2009-2010, 15 states were required to develop an improvement plan. In PY2009-2010, the technical skill attainment indicator was met or exceeded by the largest (48) number of states, and the indicator of student placement after postsecondary education was met or exceeded by the fewest (28) number of states. | The Carl D. Perkins Career and Technical Education Improvement Act of 2006 (Perkins IV; P.L. 109-270) supports the development of academic and career and technical skills among secondary education students and postsecondary education students who elect to enroll in career and technical education (CTE) programs, sometimes referred to as vocational education programs. Perkins IV was authorized through FY2012, which ended on September 30, 2012. The authorization was extended through FY2013 under the General Education Provisions Act, although the act continues to receive appropriations in FY2014. The U.S. Department of Education issued its blueprint for reauthorization in April 2012. This report provides a summary of Perkins IV. The largest program authorized under Perkins IV is the Basic State Grants program. This program provides formula grants to states to develop, implement, and improve CTE programs, services, and activities. The formula awards proportionally larger grants to states with larger populations that are in the age range traditionally enrolled in high school or within two years of high school graduation and to states with a lower than average per capita income. Incorporated in the formula are certain features that guarantee minimum funding levels. These features are a FY1998 hold harmless and a minimum equal to 0.5% of the total amount available for state grants. Each state is able to decide how much of its federal funds will be dedicated to secondary education and how much to postsecondary education. Once this decision is made, funds must generally be distributed to the local secondary and postsecondary education providers through formulas defined by Perkins IV or the state. Approximately 12.5 million students enrolled in CTE courses during the 2009-2010 academic year (most recent data available). These courses may or may not be funded with Perkins IV funds. Two key requirements for receiving funds under the Basic State Grants program are offering CTE programs of study and compliance with accountability requirements. Secondary and postsecondary education providers must adopt the appropriate elements of at least one state-approved CTE program of study. Programs of study incorporate secondary and postsecondary education elements into a coordinated, nonduplicative progression of courses leading to an industry-recognized credential, certificate, or degree. Perkins IV also requires that states and secondary and postsecondary education providers meet targets on statutorily defined performance measures or face sanctions. Perkins IV also authorizes additional programs: Tech Prep, national programs, Tribally Controlled Postsecondary Career and Technical Institutions (TCPCTI), and Occupational and Employment Information. Of these, only national programs and TCPCTI received funding in FY2011-FY2014. |
A corporation is subject to civil and criminal liability for the misconduct that its officers, employees, and agents committed for its benefit. Federal authorities may prosecute a corporation; its officers, employees, and agents; or both. For a corporation, however, indictment can be fatal. Commentators point to the experience of the Arthur Andersen accounting firm as evidence that some companies cannot survive the mere accusation of criminal wrongdoing, even if they might have been vindicated ultimately. Under most circumstances, corporations and their servants alike enjoy the right to attorney-client privileges and to attorney work product protection in connection with government investigations of possible misconduct. Yet, the Justice Department's federal prosecution policy at one time suggested that a corporation faced an increased risk of prosecution, if it claimed those privileges or if it paid the business-related litigation costs of its officers and employees. The federal courts in at least one circuit have concluded that the manner in which the policy (the so-called Thompson Memorandum) was implemented contravened the dictates of the Fifth and Sixth Amendments. Both Houses held hearings on the matter during the 109 th Congress and the 110 th Congress. The House Judiciary Committee reported out the Attorney-Client Privilege Protection Act of 2007, which the House passed under suspension of the rules on November 13, 2007. Soon thereafter, the Department of Justice announced a revised policy concerning the circumstances under which a corporation's failure to waive its attorney-client privilege might influence the decision to prosecute it. The 110 th Congress concluded without further action, although a related amendment to the Federal Rules of Evidence did pass. Proposals similar to that passed by the House in the 110 th Congress have been introduced in the 111 th Congress, H.R. 4326 (Representative Scott); S. 445 (Senator Specter). At common law, corporations were considered incapable of committing or of being punished for criminal misconduct. That perception has changed, however. Corporate criminal liability is now a matter of legislative choice. And the view of the courts is much the same as it was over a century ago, when the Supreme Court observed: We see no valid objection in law, and every reason in public policy, why the corporation which profits by the transaction, and can only act through its agents and officers, shall be held punishable by fine because of the knowledge and intent of its agents to whom it has intrusted authority to act in the subject-matter of making and fixing rates of transportation, and whose knowledge and purposes may well be attributed to the corporation for which the agents act. While the law should have regard to the rights of all, and to those of corporations no less than to those of individuals, it cannot shut its eyes to the fact that the great majority of business transactions in modern times are conducted through those bodies, and particularly that interstate commerce is almost entirely in their hands, and to give them immunity from all punishment because of the old and exploded doctrine that corporation cannot commit a crime would virtually take away the only means of effectually controlling the subject-matter and correcting the abuses aimed at. New York Central R.R. v. United States , 212 U.S. 481, 495-96 (1909). Both as a general matter and within individual criminal statutes, federal law leaves little doubt when a criminal proscription applies to corporate entities. The Dictionary Act provides that "[i]n determining the meaning of any Act of Congress, unless the context indicates otherwise ... the words 'person' or 'whoever' include corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals." With this in mind, criminal statutes ordinarily condemn—"whoever," or any "person" who—engages in the misconduct they proscribe. In some instances, the statute goes a step further and supplies an even more expansive crime-specific definition. When a federal criminal statute applies to corporations, the courts have generally said that a corporation is liable for the violations committed for its benefit by its officers, employees, or agents acting, within the apparent scope of their authority, even if the corporation has either generally or specifically prohibited the misconduct in question. Of course, the officers, employees, or agents whose misconduct is imputed to the corporation are usually subject to criminal liability as well. It is a matter of prosecutorial discretion whether to prosecute an apparently culpable corporation, or its apparently culpable agents, employees, and officers, or both the corporation and the individuals through whom it has acted. Because their interests are intertwined, corporations often bear the legal costs of defending their agents, employees, and officers in litigation arising out of conduct within the apparent scope of their employment. The corporation in such cases, however, is generally entitled to reimbursement should its agent, officer or employee be convicted or otherwise found at fault. The attorney-client privilege and work product protection are federal evidentiary privileges, which means they are "governed by the principles of the common law as ... interpreted by the courts of the United States in light of reason and experience," F.R.Evid. 501, unless altered by rule or statute. The attorney-client privilege is one of the oldest common law privileges. The purpose of the privilege is to encourage "full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and the administration of justice." It protects confidential communications with an attorney made in order to obtain legal advice or assistance. It is available to corporations as well as to individuals. In the case of a corporation, it now seems beyond dispute that the privilege applies to the confidential communications from its officers, agents, and employees to its attorney for the purpose of supplying the corporation with legal advice or assistance. At one time, however, some courts believed the privilege should be limited to the communications of the "control group of the corporation," those ultimately responsible for corporate policy. The Supreme Court in Upjohn found this reading too limited. The case began when officials at Upjohn became concerned that some of its officers or employees might have been involved in the business-related bribery of foreign officials. Upjohn's general counsel was instructed to conduct an investigation. Following the internal investigation, Upjohn reported suspicious payments to the Securities and Exchange Commission (SEC) and the Internal Revenue Service (IRS). The company also identified which of its officers and employees had been interviewed or had submitted responses to questionnaires as part of the internal investigation. Then the IRS issued a summons demanding that Upjohn turn over all its files on the internal investigation including responses to its general counsel's questionnaires and memoranda and to notes of the investigation's interviews conducted under his supervision. Upjohn refused to comply, claiming attorney-client and attorney work product privileges, and the IRS sought judicial enforcement of its summons. The Sixth Circuit Court of Appeals rejected Upjohn's attorney-client claim on the grounds that the communications sought were not those of Upjohn's control group, thus not those of the client, and therefore not privileged. The Supreme Court found this control group test insufficiently protective. The test failed to recognize the importance of the attorney's fact gathering communications with the corporation's employees conducted in order to provide the corporate client with legal advice or assistance. In doing so, it frustrated the very purpose of the privilege by discouraging full and frank disclosures by those associated with the company who were in a position to expose it to civil and criminal liability, thereby denying counsel the basis for sound legal advice and assistance. Moreover, it chilled communications between counsel and company employees designed to ensure company compliance with the law. In a situation like the one in Upjohn , the attorney represents the corporation, the privilege that envelops the communications with the attorney belongs to the corporation, and may be waived by the corporation. Although disclosure ordinarily waives the privilege, the circuits are divided over whether the privilege may survive disclosure for limited selective purposes (selective waiver) such as the disclosures in Upjohn to government investigators or regulators. The prospect of selective waiver was apparently first raised in Diversified Industries v. Meredith , where the Eighth Circuit held voluntary disclosure to the Securities and Exchange Commission (SEC) did not constitute a waiver of the privilege for subsequent purposes. To one extent or another, the District of Columbia, First, Second, Third, Fourth and Tenth Circuits have declined to accept the Eighth Circuit suggestion that the attorney-client privilege may be claimed following a selective disclosure to a governmental agency. The existence of either a common interest or joint defense attorney-client privilege further complicates matters, for either may arise in the course of an investigation of allegations of corporate misconduct. The common interest privilege is created when an attorney simultaneously represents more than one client based on their common interest in the same matter. Under such circumstances, "communications between each of the clients and the attorney are privileged against third parties, and it is unnecessary that there be actual litigation in progress for this privilege to apply." Moreover, two or more clients represented by individual attorneys may agree to work jointly in a common defense of a particular suit or case. In such circumstances, "many courts have held that the attorney-client privilege gives rise to a concomitant 'joint defense privilege' which serves to protect the confidentiality of communications, passing from one party to the attorney for another party where a joint defense effort or strategy has been decided upon and undertaken by the parties and their respective counsel." The courts have generally held—although not universally so—that communications or attorney work product protected by a joint or common defense privileges can only be waived with the consent of all parties. At least since the Supreme Court announced its decision in Hickman v. Taylor , the federal courts have recognized that an attorney's work product gathered or created in anticipation of litigation enjoys qualified disclosure protection. The protection has been reenforced by rule both on the civil side and in criminal cases. "At its core, the work-product doctrine shelters the mental processes of the attorney providing a privileged area within which he can analyze and prepare his client's case.... It is therefore necessary that the doctrine protect material prepared by agents of the attorney as well as those prepared by the attorney himself." The protection can be waived, but here too the circuits are divided on the question of whether it can survive a selective waiver in the form of disclosure to a government investigator or regulator. The Fourth Circuit and Federal Circuit have been unwilling to say that the protection afforded attorney opinion work product (work containing the attorney's analysis of the law, facts, and strategy reflecting the attorney's mental impressions) is lost simply because it has been disclosed to governmental entities. On the other hand, the Third Circuit has said without equivocation that the same standard used in the case of attorney-client waivers should apply; that is, disclosure to a governmental entity constitutes complete waiver. The other circuits that have considered the question have assumed positions at various points between the two. Five Deputy Attorneys General have issued memoranda to guide the exercise of prosecutorial discretion on the question of whether criminal charges should be brought against a corporation. Each includes provisions concerning the waiver of attorney-client and attorney work product protection, and all but one address employee legal costs and joint defense agreements as well. They are the memoranda of: Deputy Attorney Generals Holder, Thompson, McNulty, and Filip and Acting Deputy Attorney General McCallum. Signed on June 19, 1999, the Holder Memorandum was designed to provide prosecutors with factors to be considered when determining whether to charge a corporation with criminal activity. It emphasized that "[t]hese factors are, however, not outcome-determinative and are only guidelines." The factors consisted of: "1. The nature and seriousness of the offense. . . 2. The pervasiveness of wrongdoing within the corporation. . . 3. The corporation's history of similar conduct. . . 4. The corporation's timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation of its agents. . . 5. The existence and adequacy of the corporation's compliance program. . . 6. The corporation's remedial actions. . . 7. Collateral consequences ... and 8. The adequacy of non-criminal remedies. . . ." In the section devoted to cooperation and voluntary disclosure, the Memorandum stated that "In gauging the extent of the corporation's cooperation, the prosecutor may consider the corporation's willingness ... to waive the attorney-client and work product privileges." As the Comment that followed explained: One factor the prosecutor may weigh in assessing the adequacy of a corporation's cooperation is the completeness of its disclosure including, if necessary, a waiver of the attorney-client and work product protections, both with respect to its internal investigation and with respect to communications between specific officers, directors, and employees and counsel. Such waivers permit the government to obtain statements of possible witnesses, subjects, and targets, without having to negotiate individual cooperation or immunity agreements. In addition, they are often critical in enabling the government to evaluate the completeness of a corporation's voluntary disclosure and cooperation. Prosecutors, may, therefore, request a waiver in appropriate circumstances. [This waiver should ordinarily be limited to the factual internal investigation and any contemporaneous advice given to the corporation concerning the conduct at issue. Except in unusual circumstances, prosecutors should not seek a waiver with respect to communications and work product related to advice concerning the government's criminal investigation.] The Department does not, however, consider waiver of a corporation's privileges an absolute requirement, and prosecutor should consider the willingness of a corporation to waive the privileges when necessary to provide timely and complete information as only one factor in evaluating the corporation's cooperation. Holder Memorandum, VI. B. (Memorandum's footnote appears in brackets). The Memorandum also addressed the adverse weight that might be given a corporation's participation in a joint defense agreement with its officers or employees and its agreement to pay their legal fees: Another factor to be weighed by the prosecutor is whether the corporation appears to be protecting its culpable employees and agents. Thus, while cases will differ depending on the circumstances, a corporation's promise of support to culpable employees and agents either through the advancing of attorneys' fees,[*] through retaining the employees without sanction for their misconduct, or through providing information to the employees about the government's investigation pursuant to a joint defense agreement, may be considered by the prosecutor in weighing the extent and value of a corporation's cooperation. By the same token, the prosecutor should be wary of attempts to shield corporate officers and employees from liability by a willingness of the corporation to plead guilty. [Some states require corporations to pay the legal fees of officers under investigation prior to a formal determination of their guilt. Obviously, a corporation's compliance with governing law should not be considered a failure to cooperate.] Holder Memorandum, VI. B. (Memorandum's footnote in brackets at the asterisk above). Although several academics and defense counsel expressed concern over the possible impact of the waiver feature of the Holder Memorandum, a survey of United States Attorneys conducted in late 2002 indicated that waivers were rarely requested. On January 30, 2003, the Thompson Memorandum superseded the Holder Memorandum in a manner which hardly seemed designed to the meet the concerns of its critics. The Thompson Memorandum appeared to call for a more aggressive stance. The Thompson Memorandum was essentially a reissuance of its predecessor. Little of the text was new. That portion of the Memoranda devoted to the waiver of attorney-client and work product protections, and cooperation and voluntary disclosure in general—Part VI—was the same in both except for a new paragraph added in the Thompson Memorandum. The addition said nothing about waivers per se, but made clear the risks that a corporation ran if it failed to be forthcoming early on or continued to support those officers or employees that prosecutors thought culpable: Another factor to be weighed by the prosecutor is whether the corporation, while purporting to cooperate, has engaged in conduct that impedes the investigation (whether or not rising to the level of criminal obstruction). Examples of such conduct include overly broad assertions of corporate representation of employees or former employees; inappropriate directions to employees or their counsel, such as directions not to cooperate openly and fully with the investigation including, for example, the direction to decline to be interviewed; making presentations or submissions that contain misleading assertions or omissions; incomplete or delayed production of records; and failure to promptly disclose illegal conduct known to the corporation. Thompson Memorandum, VI. B. Yet, this is one of the few amendments to the Holder Memorandum. To some, the whole scale adoption of language from the earlier Memorandum suggested a Justice Department perception that the problem with the Holder Memorandum was not its content, but rather its application. The Thompson Memorandum's description of the changes might be read to confirm this impression: The main focus of the revisions is increased emphasis on and scrutiny of the authenticity of a corporation's cooperation. Too often business organizations, while purporting to cooperate with a Department investigation, in fact take steps to impede the quick and effective exposure of the complete scope of wrongdoing under investigation. The revisions make clear that such conduct should weigh in favor of a corporate prosecution. Thompson Memorandum, [Preamble]. Moreover, where the Holder Memorandum seemed to bespeak guidance, the Thompson Memorandum appeared to sound a command. The Holder Memorandum's preamble provided that, "These factors are, however, not outcome-determinative and are only guidelines. Federal prosecutors are not required to reference these factors in a particular case...." The remarks might have suggested that prosecutors enjoyed some significant degree of flexibility as to whether and how to apply the standards it announced. The Thompson Memorandum seemed to speak with a much more commanding tone; its introductory remarks stated that, "prosecutors and investigators in every matter involving business crimes must assess the merits of seeking the conviction of the business entity itself." Thompson Memorandum, [Preamble] (emphasis added). Nevertheless, the policies articulated in the Holder and Thompson Memoranda are similar to the enforcement policies announced by a substantial number of federal regulatory agencies that call for voluntary corporate disclosure of statutory or regulatory violations. Some specifically mention the waiver of the attorney-client or work product protection, while others seem to speak with sufficient generality to justify consideration on enforcement and sanction questions. In May of 2004, the United States Sentencing Commission amended Commentary in the Sentencing Guidelines that some read as an endorsement of this new, more aggressive approach. The change explicitly described the circumstances under which a corporation's failure to waive could have sentencing consequences: "Waiver of attorney-client privilege and of work product protections is not a prerequisite to a reduction in culpability score under subdivisions (1) and (2) of subsection (g) unless such waiver is necessary in order to provide timely and thorough disclosure of all pertinent information known to the organization." Although apparently crafted at least in part to ease corporate anxiety, it seemed to have the opposite effect. The following August, the American Bar Association voted to recommend that the Commentary be changed to state that waiver should not be considered a sentencing factor. The Commission instead removed from the Commentary the language quoted above that it had added in 2004. Then on October 21, 2005 came the McCallum Memorandum. It made no revision in the Thompson Memorandum, but briefly addressed the manner in which the Thompson Memorandum's policy on waiver was to be implemented. The various United States Attorneys were instructed to prepare written guidelines for supervisory approval of requests for corporate waivers. The effort did little to assuage critics. In January, 2006, the then Chairman of the House Judiciary Committee asked the Judicial Conference to consider a rule which would protect against inadvertent waiver of the attorney-client privilege, and which would permit protective court orders to limit the consequences of disclosure of privileged material during discovery, and selective waivers in the case of governmental investigations. On May 15, 2006, the Federal Advisory Committee on Evidence opened for comment a proposed evidentiary rule amendment crafted, among other things, to resolve the split in the circuits and to afford corporations some relief in the form of selective waivers. The proposed new Federal Rule of Evidence, proposed Rule 502, would have provided that disclosure of protected attorney-client or work product information to governmental investigators or regulators would not constitute a waiver of those protections with respect to third parties. The selective waiver feature of the rule, however, proved to be highly controversial and was dropped from the proposed rule the Judicial Conference recommended to the Congress. Congress ultimately accepted the recommendation and enacted a rule with only inadvertent waiver and protective order components. In ther summer of 2006, a court in the Southern District of New York held that implementation of the Thompson Memorandum's policy with regard to a corporation's reimbursement of the attorneys' fees of its employees and pressure on them to make incriminating statements violated the Fifth Amendment substantive due process rights of the employees, their Fifth Amendment privilege against self-incrimination, as well as their Sixth Amendment right to the assistance of counsel. The case began with the criminal tax investigation of an accounting firm and its employees. After issuing subject letters to more than twenty of the firm's officers and employees, prosecutors met with the firm's attorneys. At the meeting, the firm indicated that it intended to "clean house;" that it had already taken some personnel actions; that it meant to cooperate fully with the government's investigation; and that its objective was to avoid indictment of the firm and the fate of Arthur Andersen by acting so as to protect the firm and not the employees and officers targeted. The firm indicated that it had been its practice to cover the litigation costs of its employees, but that it would not pay the fees of employees who refused to cooperate with the government's investigation or who invoked their Fifth Amendment privilege. Prosecutors referred to the Thompson Memorandum and the Sentencing Guidelines and indicated they would take into account any instances where the firm was legally obligated to pay attorneys' fees. They also indicated, however, that misconduct should not be rewarded and that prosecutors would examine "under a microscope" the payment of any fees that were not legally required. In consultation with prosecutors, the firm sent the subjects of the investigation form letters informing them that attorneys' fees would be capped at $400,000 and that fees would be cut off for any employee charged with criminal wrongdoing. Thereafter, prosecutors advised the firm's attorney when one of the firm's employees proved uncooperative; the firm then advised the employees that they would be fired and their attorneys' fees cut off if they did not cooperate; and did so in cases of those employees who remained recalcitrant. The firm then entered into a deferred prosecution agreement with prosecutors for the eventual dismissal of charges under which it agreed to waive indictment; pay a $456 million fine; accept restrictions on its practice; waive all privileges including but not limited to attorney-client and attorney work product; and provide the government with extensive cooperation in its investigation and prosecution of the firm's former officers and employees. The by-then indicted former officers and employees moved to have their indictments dismissed on constitutional grounds. The court agreed that constitutional violations had occurred, but declined at least temporarily to dismiss the indictments under the understanding that the government had agreed that it would accept, without prejudice to the firm in its deferred prosecution agreement or otherwise, any fee arrangement that the firm should come to with its former officers and employees. It subsequently dismissed the indictment against 13 of the defendants, but declined to do so with respect to three others who had left the firm sometime previously and therefore had not been the victims of the misconduct the court perceived. With regard to the constitutional provisions implicated in the Stein decision, the Fifth Amendment guarantees that "No person shall ... be deprived of life, liberty, or property, without due process of law," nor "be compelled in any criminal case to be a witness against himself," U.S.Const. Amend. V. The Sixth Amendment promises that "[i]n all criminal prosecutions, the accused shall enjoy the right ... to have the Assistance of Counsel for his defence," U.S.Const. Amend. VI. The Fifth Amendment due process clause and its twin in the Fourteenth Amendment contain both procedural and substantive components. The courts have said that the substantive due process component of the due process clauses provides protection against the denial of any fundamental right to life, liberty, or property by "oppressive," "egregious or arbitrary" governmental action. Given its sweeping potential breadth, the courts have been reluctant to recognize new claims to its safeguards. They have noted that the component affords no protection against private deprivations, imposes no affirmative duties upon government entities, and protects only legally recognized entitlements not expectations or anticipated benefits. Moreover, when "a particular Amendment provides an explicit textual source of constitutional protection against a particular sort of government behavior, that Amendment, not the more generalized notion of substantive due process, must be the guide for analyzing these claims." When substantive due process is found to include a particular fundamental right, infringement by government action may only survive if it is narrowly tailored to serve a compelling governmental interest. Faced with the question of whether a particular type of government action is oppressive, egregious or arbitrary for substantive due process purposes, courts have often referred to the Rochin standard: government action cannot be said to violate substantive due process unless it first shocks the conscience of the court. The Stein court concluded that a criminal defendant has a substantive due process right "to obtain and use in order to prepare a defense resources lawfully available to him or her, free of knowing or reckless government interference." It also found that the Thompson Memorandum and the pressure the prosecutors exerted upon the accounting firm to cut off the payment of attorneys' fees for the firm's former employees impinged upon the right. While the court conceded that the government had a compelling interest in investigating and prosecuting crime and in preventing obstruction of those efforts, it felt the means chosen to serve its interests were insufficiently tailored to satisfy strict scrutiny: The first difficulty is that the Thompson Memorandum does not say that payment of legal fees may cut in favor of indictment only if it is used as a means to obstruct an investigation. Indeed, the text strongly suggests that advancement of defense[] costs weighs against an organization independent of whether there is any circling of the wagons... If the government means to take the payment of legal fees into account in making charging decisions only where the payments are part of an obstruction scheme—and thereby narrowly tailor its means to its ends—it would be easy enough to say so. But that is not what the Thompson Memorandum says. The concerns do not end here. The argument that payment of legal fees to employees and former employees is relevant to gauging the extent of a company's cooperation also is problematic. . . [I]t simply cannot be said that payment of legal fees for the benefit of employees and former employees necessarily or even usually is indicative of an unwillingness to cooperate fully. This is especially unlikely after employees have been indicted and fired, as is the situation here. Id. at 363-64 (emphasis in the original). The Stein district court initially deferred dismissing the indictments in the hopes that an alternative remedy would develop. When it took up the case again, it supplemented its earlier due process analysis with an assessment of whether the circumstances met the "shock" standard for substantive due process. It concluded that the "government's actions with respect to legal fees were at least deliberately indifferent to the rights of the defendants and others. In all the circumstances, this behavior shocks the conscience in the constitutional sense whether prosecutors were merely deliberately indifferent to the KPMG Defendants' rights or acted more culpably." The court resolved the self-incrimination issue in a separate decision following defendants' suppression motions. Here the government was a bit more successful, for, although the court found a violation in some instances, it declined to do so in others. As a general rule, statements secured under governmental threat of job termination are inadmissible in subsequent criminal proceedings. During the course of the Stein case investigation, several employees had initially refused to talk to authorities. Prosecutors then brought the matter to the attention of the firm's attorneys and employees were told to cooperate or payment of their attorneys' fees would be discontinued and if still employed they would be fired. In some cases, the coercion resulted in involuntary statements; in others, the employees made voluntary statements for reasons of their own notwithstanding the pressure. To the government's argument that no Fifth Amendment consequences flowed from the conduct of the firm, a private non-governmental actor, the court found the firm's conduct attributable to the government. Yet in the end, only two of the nine challenged statements were suppressed. On appeal, the Second Circuit found it unnecessary to address either Fifth Amendment issue because of its treatment of the Assistance of Counsel issue. The Sixth Amendment assures the criminally accused the right to assistance of counsel "in all criminal prosecutions." It is said the right generally attaches once "prosecution has been commenced, that is, at or after the initiation of adversary judicial criminal proceedings—whether by way of formal charge, preliminary hearing, indictment, information, or arraignment." Once attached, the right includes the right to counsel of the defendant's choosing, subject to several limitations. Among those limitations is the fact that an accused has no right to secure counsel of his choice using funds subject to confiscation, or as the Supreme Court stated, "[a] defendant has no Sixth Amendment right to spend another person's money for services rendered by an attorney, even if those funds are the only way that that defendant will be able to retain the attorney of his choice." The government contended that its conduct could not constitute a violation of the Sixth Amendment because (1) it had occurred before indictment and thus before the right to counsel had attached and (2) the employees had no Sixth Amendment right to pay for their counsel of choice with someone else's money. Attachment was no obstacle, replied the court, when the motive or at least the clearly foreseeable result was to impede the employees criminal defense after they were indicted. As for the Supreme Court's someone else's money comment, it referred to defendants using the government's money, money to which they had neither right nor expectation. Here, the court said the defendants had every reason to expect that the firm would have assumed their legal expenses, but for the government's intervention. In the eyes of the district court, the government's conduct so struck at the heart of the adversarial nature of the criminal justice system that it commanded redress without reference to proof of actual prejudice to its victims, and warranted the rarely granted dismissal of the indictments. The court of appeals agreed. It held (1) that "KPMG's adoption and enforcement of a policy under which it conditioned, capped and ultimately ceased advancing legal fees to defendants followed as direct consequence of the government's overwhelming influence;" (2) that "KPMG's conduct therefore amounted to state action;" (3) that " the government thus unjustifiably interfered with defendants' relationship with counsel and their ability to mount a defense in violation of the Sixth Amendment;" and (4) that "the government did not cure the violation." Both the House and Senate Judiciary Committees held hearings on the policy reflected in the Thompson Memorandum during the 109 th Congress. They heard contentions from some witnesses that: The policy represented a departure from past practices, since historically, Justice Department requests for waivers of corporate attorney-client and work product protection were unheard of. "A culture of waiver has evolved in which government agencies believe it is reasonable and appropriate to them to expect a company under investigation to broadly waive." Although characterized as "voluntary disclosures" or "waivers," in reality a company faced with a Justice Department request often has no alternative but to comply. Company officials responsible for regulatory compliance are less likely to seek the advice of counsel if they believe those communications unprotected. "[D]uring an investigation, if employees suspect that anything they say to their attorneys can be used against them, they won't say anything." Even if a company should prove innocent of any criminal or regulatory wrongdoing, it may have lost the privilege against third party civil plaintiffs by virtue of its disclosure to the government. The Justice Department's perspective was a bit different. Its officials responded that: The Holder and Thompson Memoranda emerged in an environment of corporate scandal. Congress suggested, and the Department agreed, that enormous companies and their executives simply because of their wealth, position and influence should not be considered above the law, but should instead be held accountable if they engage in criminal conduct. The Memoranda reflected an articulation of the principles that good prosecutors had long used in the context of a potential corporate prosecution. The Department believed that waivers need not be, and had not been, routinely sought. The Memoranda balance "the legitimate interests furthered by the privilege, and the societal benefits of rigorous enforcement of the laws supporting ethical standards of conduct." Waiver was one, but only one, factor considered in the exercise of prosecutorial discretion. The Department would support establishment of a selective waiver provision that would allow companies to continue to claim the attorney-client and work product protection against third parties notwithstanding disclosure to the government. In the final days of the 109 th Congress, Senator Specter introduced S. 30 which, among other things, would have prohibited federal authorities from requesting a waiver of organizational attorney-client or work product protection or predicating the adverse exercise of prosecutorial discretion on the absence of such a waiver or the payment of attorneys' fees for their employees or officers. The McNulty Memorandum, announced December 12, 2006, superseded the Thompson and McCallum Memoranda. While it incorporated a great deal of the substance of its predecessors, the McNulty Memorandum rewrote the principles and commentary that addressed corporate attorney-client and work product protection waivers as well as those covering the payment of employee litigation costs. It dropped the specific reference to the waivers from the general statement of factors to be weighed when considering whether to charge a corporation. Earlier Memoranda stated that waiver was not an "absolute" requirement for the favorable exercise of prosecutorial discretion, suggesting to some that it was a requirement under most circumstances. The McNulty Memorandum suggested that prosecutors' waiver requests were to be considered the exception rather than the rule: Prosecutors may only request waiver of attorney-client or work product protections when there is a legitimate need for the privileged information to fulfill their law enforcement obligations. A legitimate need for the information is not established by concluding it is merely desirable or convenient to obtain privileged information. The test requires a careful balancing of important policy considerations underlying the attorney-client privilege and work product doctrine and the law enforcement needs of the government's investigation. Whether there is a legitimate need depends upon: (1) the likelihood and degree to which the privileged information will benefit the government's investigation; (2) whether the information sought can be obtained in a timely and complete fashion by using alternative means that do not require waiver; (3) the completeness of the voluntary disclosure already provided; and (4) the collateral consequences to a corporation of a waiver. McNulty Memorandum, VII. B. 2. Moreover, the McNulty Memorandum divided attorney-client and work product material into two categories. Category I consisted of factual information. Category II material was described in much the same manner as opinion work product material (It "might include the protection of attorney notes, memoranda or reports containing counsel's mental impressions, conclusions legal determinations reached as a result of an internal investigation, or legal advice given to corporation"), McNulty Memorandum, VII. B.2. The Memorandum cautioned prosecutors that only in rare circumstances should they seek the waiver of Category II material, id. A request for Category I had to be approved by the United States Attorney in consultation with the head of the Department's Criminal Division; a request for Category II information required prior approval of the Deputy Attorney General, id. A corporation's refusal to waive could not be considered in the exercise of prosecutorial discretion, id. It also added an explicit provision concerning attorneys' fees, declaring that, "Prosecutors generally should not take into account whether a corporation is advancing attorneys' fees to employees or agents under investigation and indictment," id. at VII.B.3. On the other hand, it noted that, "In extremely rare cases, the advancement of attorneys' fees may be taken into account when the totality of the circumstances show that it was intended to impede a criminal investigation ... approval must be obtained from the Deputy Attorney General before prosecutors may consider this factor in their charging decisions," id. at VII.B.3. n.3. The House and Senate Judiciary Committees held hearings during the 110 th Congress which focused on the McNulty Memorandum and upon related legislative proposals. Senator Specter introduced the Attorney-Client Privilege Protection Act of 2007 ( S. 186 ) early in the 110 th Congress, which reappeared in revised form later in the Congress ( S. 3217 ). S. 186 as introduced was identical to S. 30 (109 th Cong.) that the Senator introduced at the end of the earlier Congress. It was also identical to H.R. 3013 offered in the House by Representative Scott and virtually identical to the version of that bill passed by the House. In their final versions, they were much like their successors in the 111 th Congress. The testimony of some of the hearing witnesses and the views of some commentators applauded the changes in the McNulty Memorandum and questioned the justification for the legislative proposals on several grounds, e.g.: the McNulty Memorandum changes the tone of the policy, abandoning the aggressive implications of the Thompson Memorandum in favor of statements that confirm the Department's recognition and respect for the importance of the attorney-client privilege; the Memorandum establishes a strict procedure for waiver requests and generally bars prosecutors from holding against a company its payment the legal expenses of an employee; the Memorandum strikes the proper balance between the public's interest in vigorous investigation and prosecute white collar crime and fairness to corporations and their officers and employees; experience since the issuance of the McNulty Memorandum refute the suggestion of widespread prosecutorial abuse; "legislative action is simply not needed;" although the bills have no explicit enforcement mechanism and the courts are generally reluctant to impose sanctions in the absence of statutory authority, the bills' proposals are likely to bring forth a "cottage industry of prosecutorial abuse claims" that may deter the prosecution of worthy cases; even if the Memorandum fosters an environment in which employees must waive their Fifth Amendment privilege or be fired, it results in no more than a situation in which the guilty suffer; the legislative proposals will make prosecution of white collar crime more difficult because they reduce the incentive for corporate cooperation and thereby encourage "stonewalling." Others found the McNulty Memorandum troubling and applauded the legislative proposals for several reasons of their own, e.g.: the McNulty Memorandum will continue to result in routine compelled waiver of the attorney-client privilege and the work product protection; the policy improvements contained in the McNulty Memorandum are not binding and lack an enforcement mechanism; the Memorandum continues to allow prosecutors to encourage companies to fire employees who fail to waive their Fifth Amendment rights; the Memorandum affords inadequate, partial attorney-client and attorney work product protection by assigning less stringent approval levels for waivers involving "factual" information which reveal client statements and attorney strategy; the Memorandum addresses only Justice Department investigation and prosecution practices, whereas the legislative proposals reach the practices of other agencies as well; the legislative proposals would not unduly impinge upon the prerogatives of federal prosecutors; to a limited extent, they bar interference with the attorney-client privilege, a mainstay of the Anglo-American system of justice since Elizabethan times and one whose presence has not heretofore been considered an unwarranted impediment to prosecution; the proposals would "uphold the finest traditions of the DoJ by allowing it to strike harsh blows but fair ones in combating corporate crime." Senator Specter addressed some of these observations in S. 3217 . S. 3217 expressly excluded from its protections certain terrorists organizations, illicit drug cartels, and crime-for-profit entities. Where the earlier bar applied to federal criminal and civil matters and investigations alone, S. 3217 covered administrative adjudications and proceedings as well. Where the earlier bills condemned governmental demands that an organization abandon its privileges, S. 3217 also removed any claim of those privileges from the permissible array of prosecutorial considerations. Where the earlier bills permitted authorities to request information that they might reasonably consider beyond the scope of the privileges, S. 3217 also permitted them to seek information otherwise within the reach of a federal grand jury subpoena, privilege considerations notwithstanding, or to seek information whose privilege status was unknown to them. S. 3217 would have carried forward, with some modification, the subsections added to the House bill just before its passage there. The exception it afforded to instances, in which a statute "that may authorize" authorities to compel disclosure of privileged material, was revised to cover statutes "that authorize" compulsory access. Following House passage of H.R. 3013 , then Deputy Attorney General Mark Filip issued a superseding memorandum accompanied by a revised chapter of the U.S. Attorneys Manual. The 110 th Congress adjourned without further action of the proposals. The Filip Memorandum dates from August 28, 2008. Following the pattern of earlier Memoranda, much of what appears in the U.S. Attorneys Manual is a verbatim recitation of the McNulty Memorandum. Some things, however, are new. The Filip Memorandum revisions "concern what measures a business entity must take to qualify for the long-recognized 'cooperation' mitigating factor, as well as how payment of attorneys' fees by a business organization for its officers or employees, or participation in a joint defense or similar agreement, will be considered in the prosecutive analysis." Thus, the Memorandum declares that "a corporation remains free to convey non-factual or 'core' attorney-client communications or work product—if and only if the corporation voluntarily chooses to do so—prosecutor should not ask for waivers and are directed not to do so." Nevertheless, "cooperation is a potential mitigating factor, by which a corporation . . . can gain credit in a case that otherwise is appropriate for indictment and prosecution." The entity's receipt of credit for its cooperation turns on its timely disclosure of information relating to the government's investigation, regardless of whether the entity acquired or maintains information under circumstances that entitle it to claim attorney-client or attorney work product protection. Nor does a corporation's payment of its employees' attorneys' fees or its entry into a joint defense agreement preclude credit for cooperation. On the other hand, "[i]f the payment of attorney fees were used in a manner that would otherwise constitute criminal obstruction of justice—for example, if fees were advanced on the condition that an employee adhere to a version of the facts that the corporation and the employee knew to be false—these Principles would not (and could not) render inapplicable such criminal prohibitions." This represents a substantial modification of the previous standard in the McNulty Memorandum which explicitly permitted prosecutors to weigh negatively any number of specifically identified impediments—some well short of a criminal obstruction of justice. Early in the 111 th Congress, Senator Specter introduced the Attorney-Client Privilege Protection Act of 2009 ( S. 445 ), for himself and Senators Landrieu, Carper, Kerry, McCaskill, and Cochran. It is essentially the same as the later Specter proposal in the 110 th Congress ( S. 3217 ). Towards the end of the first session, Representative Scott (Va.) introduced a similarly styled Attorney-Client Privilege Protection Act of 2009 ( H.R. 4326 ), for himself and Representatives Conyers, Smith (Tex.), Nadler, Delahunt, Coble, and Lungren. It is a replica of the bill which the House passed in the 110 th Congress ( H.R. 3013 ). The two 111 th Congress proposals are much the same, although with occasional differences. They espouse a common purpose: "to place on each agency clear and practical limits designed to serve the attorney-client privilege and work product protections available to an organization and preserve the constitutional rights and other legal protections available to employees of such an organization." They would define "attorney-client privilege" as currently understood under the federal law, that is as "the attorney-client privilege as governed by the principles of the common law, as they may be interpreted by the courts of the United States in the light of reason and experience, and the principles of article V of the Federal Rules of Evidence." They would adopt an equally contemporaneous definition of "attorney work product," i.e., "materials prepared by, or at the direction of an attorney in anticipation of litigation, particularly any such materials that contain a mental impression, conclusion, opinion, or legal theory of that attorney." The Specter bill ( S. 445 ) alone would insert a definition of "organization." The definition would foretell the scope of the bill, since the bill's commands speak to how federal prosecutors and investigators may deal with organizations. The bill's definition has two distinct components—what is an organization and what is not for purposes of the bill. It describes organizations as persons other than human beings and expressly includes state, local, and municipal governmental entities. The absence of similar definition in the Scott bill ( H.R. 4326 ) leaves open the question whether federal, state, local, and municipal entities fall within the scope of its provisions. The omission of federal and tribal governmental entities from the Specter bill's definition suggests that they would not be considered organizations for purposes of the bill. The Specter bill ( S. 445 ) would exclude from the definition of organization, drug cartels (continuing criminal enterprises (21 U.S.C. 848(c))); designated foreign terrorist organizations (18 U.S.C. 2339B(g)(6)); and entities charged under the RICO provisions. The RICO exemption may raise questions. Common business organizations do not ordinarily include drug cartels or designated foreign terrorists organizations, but they are infrequently associated with RICO prosecutions. Federal racketeer influenced and corrupt organization (RICO) provisions proscribe, among other things, the patterned commission of two or more other federal or state offenses in order to conduct the affairs of an enterprise whose activities affect interstate or foreign commerce, 18 U.S.C. 1962(c). Depending upon the circumstances, an organization might either be an offender or the victimized intestate enterprise, 18 U.S.C. 1961(3), (4). Since the bill uses the phrase "entity charged," it might be thought to apply only to offending organizations and only after they are indicted. Such a reading, however, may be more narrow than its sponsors intend. In somewhat different terms, the two bills would bar the Justice Department and other federal investigative, regulatory, or prosecutorial agencies from demanding that an organization: waive its attorney-client privilege or attorney work product protection; decline to pay the legal expenses of an employee; avoid joint defense, information sharing or common interest agreements with its employees; refrain from disclosing information concerning an investigation or enforcement action to employees; or terminate or discipline an employee for the employee's exercise of a legal right or prerogative with respect to a governmental inquiry. They would also preclude using such organizational activity as the basis in whole or in part for a civil or criminal charge against the organization. Only the Specter bill ( S. 445 ) would also prohibit the government from rewarding an organization for waiving its attorney-client privilege or work product protection. The provision may be a response to criticism some commentators have leveled against the Filip Memorandum: The problem is rooted in the fact that indictments are fatal to major corporations. This means that from the beginning of the process, a corporation is compelled to follow the prosecutor's instructions on how to avoid indictment. Under the Filip revisions, like it was under the Thompson Memorandum, the way to avoid indictment is by cooperating with the government. Now, the government will not view negatively a corporation's refusal to give privileged information. It will, however, still give credit for that privileged information. Under the Filip revisions the compelling is done differently, almost passively—allowing the implied threat of indictment to do the work. Both bills would allow the government to request information it believes is beyond the scope of the attorney-client privilege or the attorney work product protection. And they would not prevent an organization, on its own initiative, from sharing the results of an internal investigation with authorities, although the Specter bill ( S. 445 ) would preclude the government from considering such a waiver positively. Each of the bills declares that its proposals are not intended to apply to situations when the government is statutorily authorized to demand a waiver. It is not entirely clear what subsection 3014(e) intended to preserve when it referred to "any other federal statute that may authorize[s], in the course of an examination or inspection, an agent or attorney of the United States to require or compel the production of attorney-client privilege material." Many federal statutes authorize the examination or inspection of corporate records and other materials. Few, if any, federal statutes state in so many words that federal inspectors may examine otherwise privileged attorney-client or work product material. In fact, if privilege is mentioned at all, the statute is likely to preserve the privileged material against inspection. Use of the phrase in the Scott bill ( H.R. 4326 ) that "any other federal statute that may authorize" may indicate that the authors of the subsection were referring to statutes which grant general authority that on a given occasion "may" extend to compelled access to privileged material. The absence of the word "may" in the Specter bill ( S. 445 )may be intended to limit the exception to instances of explicit statutory authority to demand. The term "in the course of an examination or inspection" suggests that the exception likely would not extended to situations where the material was sought through an administrative or grand jury subpoena or through a civil investigative demand. Finally, reference to "privileged" material narrows the category further and belies any intent to include material which on its face seems "privileged" but which because of the "crime or fraud" or some other exception cannot be classified as such. It is difficult to see what remains. Finally, both bills would permit federal prosecutors, in determining whether to bring criminal charges against a corporation, to consider the fact the corporation had provided counsel for an employee, entered into a joint defense agreement with an employee, or shared information relating to investigation with an employee—but only when those activities are themselves federal crimes. Commentators who support the proposals argue that they are necessary (1) to overcome the "culture of waiver" produced by the Thompson Memorandum; (2) to establish consistent policy not only for the Department of Justice but for all federal investigative agencies; and (3) to provide stability and certainty that regularly shifting Justice Department policy statements cannot provide. Others contend that the proposals "would only frustrate the DOJ corporate charging policy, likely without altering the occurrence of waiver, but at the same time, rendering prosecutions needlessly complex." As of February 2010, neither House had held hearings on the proposals during the 111 th Congress. | The Justice Department enjoys prosecutorial discretion to bring criminal charges against a corporation, its culpable officers or employees, or both. For a corporation, indictment alone can be catastrophic, if not fatal, in some instances. The Thompson Memorandum, since replaced with guidelines in the U. S. Attorneys Manual, described the policy factors to be considered in the exercise of prosecutorial discretion. Two of the factors explicitly mentioned were whether a corporation had waived its privileges and whether it had cut off the payment of attorneys' fees for its officers and employees. Justice Department policies and practices under the Thompson Memorandum led to constitutional challenges based on the Fifth Amendment's self-incrimination clause, the Amendment's due process clause, and the Sixth Amendment's right to counsel clause. Due process and right to counsel concerns were enough for a federal district court in New York to throw out the indictments of thirteen former partners and employees of an accounting firm, charged with creating and marketing fraudulent tax shelters, United States v. Stein. The Second Circuit affirmed on right to counsel grounds and consequently found it necessary to address the merits of the due process argument. The House addressed the conflict in attorney-client protective legislation which it passed in the 110th Congress. Soon thereafter, the Department of Justice announced a revised policy concerning the circumstances under which a corporation's failure to waive its attorney-client privilege might influence the decision to prosecute it. The 110th Congress, which had previously amended the Federal Rules of Evidence relating to the inadvertent waiver of the attorney-client privilege, adjourned without taking further action on the House-passed legislation. Similar proposals, however, have been introduced in 111th Congress, H.R. 4326 (Representative Scott); S. 445 (Senator Specter). This report provides a brief discussion of the legislation, the legal background, and a chronology of related issues and events. Also available is an abridged report, stripped of its footnotes and most of its citations to authority (CRS Report RS22588, The McNulty Memorandum In Short: Attorneys' Fees and Waiver of Corporate Attorney-Client and Work Product Protection, by [author name scrubbed]). |
Economic indicators confirm that the economy went into a recession at the close of 2007. Although some economic indicators suggest that growth has resumed, unemployment remains high and is projected to remain so for some time. Historically, international migration ebbs during economic crises (e.g., immigration to the United States was at its lowest levels during the Great Depression). While preliminary statistical trends hint at a slowing of migration pressures, it remains unclear how the economic recession of the past two years affected immigration. Addressing these contentious policy reforms against the backdrop of economic crisis sharpens the social and business cleavages and narrows the range of options. Even as U.S. unemployment remains at a historically high level, some employers maintain that they continue to need the "best and the brightest" workers, regardless of their country of birth, to remain competitive in a worldwide market and to keep their firms in the United States. While support for increasing employment-based immigration may be dampened by the high levels of unemployment, proponents argue that the ability to hire foreign workers is an essential ingredient for economic growth. Those opposing increases in foreign workers assert that such expansions—particularly during a period of high unemployment—would have a deleterious effect on salaries, compensation, and working conditions of U.S. workers. Others question whether the United States should continue to issue foreign worker visas (particularly temporary visas) at this time and suggest that a moratorium on such visas might be prudent. The Immigration and Nationality Act (INA) bars the admission of a prospective immigrant who seeks to enter the United States to perform skilled or unskilled labor, unless the Secretary of Labor provides a certification to the Secretary of State and the Attorney General. Specifically, the Secretary of Labor must determine that there are not sufficient U.S. workers who are able, willing, qualified, and available at the time of the alien's application for an LPR visa and admission to the United States and at the place where the alien is to perform such skilled or unskilled labor. The Secretary of Labor must further certify that the employment of the alien will not adversely affect the wages and working conditions of similarly employed workers in the United States. The foreign labor certification program in the U.S. Department of Labor (DOL) is responsible for ensuring that foreign workers do not displace or adversely affect working conditions of U.S. workers. Under current law, DOL adjudicates labor certification applications (LCA) for permanent employment-based immigrants. As discussed in more detail below, many of the foreign nationals entering the United States on a temporary basis for employment are not subject to a labor market test (i.e., demonstrating that there are not sufficient U.S. workers who are able, willing, qualified, and available), and as a result, their employers do not file LCAs with the DOL. There are several groups of temporary foreign employees, however, that are covered by labor market tests. The DOL adjudicates the streamlined LCA known as labor attestations for temporary agricultural workers, temporary nonagricultural workers, and temporary professional workers. Foreign labor certification is one of the "national activities" within the Employment and Training Administration (ETA). Congress passed the contract labor law of 1885, known as the Foran Act, which made it unlawful to import aliens for the performance of labor or service of any kind in the United States. That bar on employment-based immigration lasted until 1952, when Congress enacted the Immigration and Nationality Act (INA), a sweeping law also known as the McCarran-Walters Act that brought together many disparate immigration and citizenship statutes and made significant revisions in the existing laws. The 1952 act authorized visas for aliens who would perform needed services because of their high educational attainment, technical training, specialized experience, or exceptional ability. Prior to the admission of these employment-based immigrants, however, the 1952 act required the Secretary of Labor to certify to the Attorney General and the Secretary of State that there were not sufficient U.S. workers "able, willing, and qualified" to perform this work and that the employment of such aliens would not "adversely affect the wages and working conditions" of similarly employed U.S. workers. This provision in the 1952 act established the policy of labor certification. The major reform of INA in 1965 included language that obligated the employers to file labor certification applications (LCAs). Within DOL, the former Bureau of Employment Security first administered labor certification following enactment of the policy in 1952. After the abolishment of Employment Security in 1969, the Manpower Administration handled labor certification. In 1975, the Manpower Administration became the Employment and Training Administration (ETA), and ETA continues to oversee the labor certification of aliens seeking to become legal permanent residents (LPRs). Currently, foreign labor certification is one of the "national activities" within ETA. The current statutory authority that conditions the admission of employment-based immigrants on labor markets tests is found in the grounds for exclusion portion of the INA. It denies entry to the United States of aliens seeking to work without proper labor certification. The labor certification ground for exclusion covers aliens coming to live as LPRs. The INA specifically states Any alien who seeks to enter the United States for the purpose of performing skilled or unskilled labor is inadmissible, unless the Secretary of Labor has determined and certified to the Secretary of State and the Attorney General that—(I) there are not sufficient workers who are able, willing, qualified (or equally qualified in the case of an alien described in clause (ii)) and available at the time of application for a visa and admission to the United States and at the place where the alien is to perform such skilled or unskilled labor, and (II) the employment of such alien will not adversely affect the wages and working conditions of workers in the United States similarly employed. The law also details additional requirements and exceptions for certain occupational groups and classes of aliens, some of which are discussed below. Immigrant admissions and adjustments for legal permanent resident (LPR) status are subject to a complex set of numerical limits and preference categories that give priority for admission on the basis of family relationships, needed skills, and geographic diversity. The INA establishes a statutory worldwide level of 675,000 LPRs annually, but this level is flexible and certain categories of LPRs are excluded from, or permitted to exceed, the limits. This permanent worldwide immigrant level consists of the following components: 480,000 family-sponsored immigrants; 140,000 employment-based preference immigrants; and 55,000 diversity immigrants. The employment-based preference categories are first preference : priority workers who are persons of extraordinary ability in the arts, sciences, education, business, or athletics; outstanding professors and researchers; and certain multinational executives and managers; second preference : members of the professions holding advanced degrees or persons of exceptional ability; third preference : skilled workers with at least two years training, professionals with baccalaureate degrees, and unskilled workers in occupations in which U.S. workers are in short supply; fourth preference : special immigrants who largely consist of religious workers, certain former employees of the U.S. government, and undocumented juveniles who become wards of the court; and fifth preference : investors who invest at least $1 million (or less money in rural areas or areas of high unemployment) to create at least 10 new jobs. In 1990, Congress had amended the INA to raise the level of employment-based immigration from 54,000 LPR visas to more than 143,000 LPR visas annually. That law also expanded two preference categories into five preference categories and reduced the cap on unskilled workers from 27,000 to 10,000 annually. Although there have been major legislative proposals since the mid-1990s to alter employment-based immigration, these preference categories remain intact. Currently, annual admission of employment-based preference immigrants is limited to 140,000 plus certain unused family preference numbers from the prior year. As Figure 1 displays, LPR admissions for the first, second and third employment-based preferences have exceeded the ceilings several times in recent years. Although there were almost the same number of first, second, and third preference employment-based LPRs in FY2007 and FY2008 (155,889 and 155,627, respectively), the number of employment-based LPRs in the extraordinary and exceptional categories rose in FY2008, particularly among those with advanced degrees. Despite the dip to 126,874 employment-based LPRs in FY2009, the first preference extraordinary category rose slightly. In FY2009, the number of skilled and unskilled LPRs was at its lowest level of admissions since FY1999. The dip and surge early in the 2000s depicted in Figure 1 was not necessarily the result of labor market demand. In 2003, processing delays—largely due to the reorganization of immigration functions as the Department of Homeland Security (DHS) was established—reduced the number of LPRs to only 705,827. Because DHS's U.S. Citizenship and Immigration Services Bureau (USCIS) was only able to process 161,579 of the potential 226,000 family-sponsored LPRs in FY2003, an extra 64,421 LPR visas rolled over to the FY2004 employment-based categories and created the spike depicted in Figure 1 . Employers who seek to hire prospective immigrant workers petition with the USCIS. An eligible petitioner (in this instance, the eligible petitioner is the U.S. employer seeking to employ the alien) must file an I-140 for the alien seeking to immigrate. USCIS adjudicators determine whether the prospective LPR has demonstrated that he or she meets the qualifications for the particular job as well as the INA employment-based preference category. In terms of employment-based immigration, decisions of the Board of Immigration Appeals (BIA) have significantly affected the implementation of the law by offering clarification of the statutory language. While DOL draws on regulations that govern its role, the USCIS is more often guided through BIA decisions and procedures spelled out in the former Immigration and Naturalization Service's Operations Instructions. Employment-based immigrants applying through the second and third preferences must obtain labor certification. The intending employer may not file a Form I-140 with USCIS unless the intending employer has obtained this labor certification, and includes the approved LCA with the Form I-140. Occupations for which the Secretary of Labor has already determined that a shortage exists and U.S. workers will not be adversely affected are listed in Schedule A of the regulations. Conversely, occupations for which the Secretary of Labor has already determined that a shortage does not exist and that U.S. workers will be adversely affected are listed in Schedule B. If there is not a labor shortage in the given occupation as published in Schedule A, the employer must submit evidence of extensive recruitment efforts in order to obtain certification. Several elements are key to the approval of the LCA. Foremost are findings that there are not "available" U.S. workers or, if there are available workers, the workers are not "qualified." Equally important are findings that the hiring of foreign workers would not have an adverse affect on U.S. workers, which often hinges on findings of what the prevailing wage is for the particular occupation and what constitutes "similarly employed workers." Prior to the Program Electronic Review Management (PERM) regulations (which are discussed below), employers would first file an "Application for Alien Employment Certification" (ETA 750 form) with the state Employment Service office in the area of intended employment, also known as state workforce agencies (SWAs). The SWAs did not have the authority to grant or deny LCAs; rather, the SWAs processed the LCAs. They also had a role in recruitment as well as gathering data on prevailing wages and the availability of U.S. workers. They then forwarded the LCA along with their report to the regional ETA office. DOL summarized the labor certification process to hire immigrant workers prior to the implementation of PERM as follows: requires employers to file a permanent labor certification application with the SWA serving the area of intended employment and, after filing, to actively recruit U.S. workers in good faith for a period of at least 30 days for the job openings for which aliens are sought. Job applicants are either referred directly to the employer or their resumes are sent to the employer. The employer has 45 days to report to either the SWA or an ETA backlog processing center or regional office the lawful job-related reasons for not hiring any referred qualified U.S. worker.... If, however, the employer believes able, willing, and qualified U.S. workers are not available to take the job, the application, together with the documentation of the recruitment results and prevailing wage information, is sent to either an ETA backlog processing center or ETA regional office. There, it is reviewed and a determination made as to whether to issue the labor certification based upon the employer's compliance with applicable labor laws and program regulations. If we determine there are no able, willing, qualified, and available U.S. workers, and the employment of the alien will not adversely affect the wages and working conditions of similarly employed U.S. workers, we so certify to the DHS and the DOS by issuing a permanent labor certification. Prior to the implementation of the procedural reforms discussed below, DOL acknowledged a backlog of more than 300,000 LCAs for permanent admissions in 2003 and projected an average processing time of 3½ years before an employer would receive a determination. At that time, DOL noted further that some states had backlogs that would lead to processing times of five to six years. The Program Electronic Review Management (PERM) regulations were published on December 27, 2004, after initially being proposed in May 2002. The stated goals of PERM are to streamline the labor certification process and reduce fraudulent filings. Now all LCAs for aliens becoming LPRs are processed through PERM. Rather than SWAs receiving the LCAs, all PERM applications are processed by national processing centers (NPCs). There are currently NPCs in Chicago and Atlanta. With the exception of their role in determining prevailing wages and maintaining the job orders, the SWAs have been removed from the LCA adjudication process. To further streamline the process, PERM offers a 10-page attestation-based form that may be submitted electronically (i.e., using web-based forms and instructions) or mailed to one of the NPCs. In additional to centralized filing, PERM requires the employer to register so that they receive a personal identification number (PIN) and password. PERM also identifies employers by their federal employer identification number. Recruitment must be completed prior to filing the labor certification, but the documentation for recruitment does not need to be submitted with the "Application for Permanent Employment Certification" (ETA Form 9089). Employers must attest that they met the mandatory recruitment requirements for all applications, which are two Sunday newspaper job advertisements; state workforce agency job order; internal posting of job; and in-house media (if applicable). There are specified exceptions to these recruitment requirements—notably those involving college or university teachers selected through competitive recruitment and Schedule A occupations. The recruitment documentation may be specifically requested by the Certifying Officers (COs) through an audit letter. Audit letters may be issued randomly or triggered by information on the form. PERM recruitment requirements also differentiate between professional and non-professional occupations. Professional occupation is defined in the final rule as "an occupation for which the attainment of a bachelor's or higher degree is a usual education requirement." If the application is for a professional occupation, the employer must conduct three additional steps that the employer chooses from a list published in the regulation. As a result of these regulatory reforms, DOL predicted that its COs will adjudicate PERM applications within 45-60 days. Since PERM provides specific recruitment and documentary requirements, less discretion is given to the COs to determine whether the recruitment requirements are met. Upon adjudication of an application, the CO will have three choices: certify the application, deny the application, or issue an audit letter. Currently, there are 24 major nonimmigrant (i.e., aliens who the United States admits on a temporary basis) visa categories, and over 70 specific types of nonimmigrant visas issued. These visa categories are commonly referred to by the letter and numeral that denote their subsection in the INA. Several visa categories are designated for employment-based temporary admission. The term "guest worker" is not defined in law or policy and typically refers to foreign workers employed in low-skilled or unskilled jobs that are temporary. While a variety of temporary visas—by their intrinsic nature—allow foreign nationals to be employed in the United States, the applications for these visas do not trigger the requirement for an LCA filing under §212(a)(5). Under current law, only employers hiring workers through the H visa categories are required to file an LCA, as discussed more fully later in the report. The major nonimmigrant category for temporary workers is the H visa, and an LCA is required for the admission of an H visa holder. The current H-1 categories include professional specialty workers (H-1B) and nurses (H-1C). Temporary professional workers from Canada and Mexico may enter according to terms set by the North American Free Trade Agreement (NAFTA) on TN visas. There are two visa categories for temporarily importing seasonal workers, that is, guest workers: agricultural guest workers enter with H-2A visas and other seasonal/intermittent workers enter with H-2B visas. The law sets numerical restrictions on annual admissions of the H-1B (65,000), the H-1C (500), and the H-2B (66,000); however, most H-1B workers enter on visas that are exempt from the ceiling. There is no limit on the admission of H-2A workers. Intracompany transferees who are executive, managerial, and have specialized knowledge, and who are employed with an international firm or corporation are admitted on the L visas. The prospective L nonimmigrant must demonstrate that he or she meets the qualifications for the particular job as well as the visa category. The alien must have been employed by the firm for at least six months in the preceding three years in the capacity for which the transfer is sought. The alien must be employed in an executive capacity, a managerial capacity, or have specialized knowledge of the firm's product to be eligible for the L visa. The INA does not require firms who wish to bring L intracompany transfers into the United States to demonstrate that U.S. workers will not be adversely affected order to obtain a visa for the transferring employee. Aliens who are treaty traders enter on E-1 visas, whereas those who are treaty investors use E-2 visas. An E-1 treaty trader visa allows a foreign national to enter the United States for the purpose of conducting "substantial trade" between the United States and the country of which the person is a citizen. An E-2 treaty investor can be any person who comes to the United States to develop and direct the operations of an enterprise in which he or she has invested, or is in the process of investing, a "substantial amount of capital." Both these E-class visas require that a treaty exist between the United States and the principal foreign national's country of citizenship. The E-3 treaty professional visa is a temporary work visa limited to citizens of Australia. It is usually issued for two years at a time. Occupationally, it mirrors the H-1B visa in that the foreign worker on an E-3 visa must be employed in a specialty occupation. Whether a cultural exchange visa holder is permitted to work in the United States depends on the specific exchange program in which they are participating. The J visa includes professors, research scholars, students, foreign medical graduates, camp counselors and au pairs who are in an approved exchange visitor program. Participants in structured exchange programs enter on Q-1 visas. Q-2 visas are for Irish young adults from specified Irish border counties in participating exchange programs. Persons with extraordinary ability in the sciences, arts, education, business, or athletics are admitted on O visas, whereas internationally recognized athletes or members of an internationally recognized entertainment group come on P visas. Generally, the O visa is reserved for the highest level of accomplishment and covers a fairly broad set of occupations and endeavors, including athletics and entertainers. The P visa has a somewhat lower standard of achievement than the O visa, and it is restricted to a narrower band of occupations and endeavors. The P visa is used by an alien who performs as an artist, athlete, or entertainer (individually or as part of a group or team) at an internationally recognized level of performance and who seeks to enter the United States temporarily and solely for the purpose of performing in that capacity. The law allows individual athletes to stay in intervals up to five years at a time, up to 10 years in total. Aliens working in religious vocations enter on R visas. The regulations define religious occupation as "an activity which relates to a traditional religious function." USCIS has proposed regulations further defining "religious denomination" to clarify that it applies to a religious group or community of believers governed or administered under some form of common ecclesiastical government. Under the proposed rule, the denomination must share a common creed or statement of faith, some form of worship, a formal or informal code of doctrine and discipline, religious services and ceremonies, established places of religious worship, religious congregations, or comparable indicia of a bona fide religious denomination. As Figure 2 illustrates, the issuances of temporary employment-based visas rose steadily over the past decade, then dropped in FY2009. In FY2009, there were 1.1 million temporary employment-based visas issued, down from a high of 1.3 million in FY2007. During the period FY1994-FY2007, the category with the largest percentage increase was the H and NAFTA workers (340.6%). The R visas also evidenced a noteworthy increase of 216.7% through FY2007. The E and L visas rose by 144.3% over this period, followed by the O and P visas, which increased by 104.5% through FY2007. The number of visas issued to H and NAFTA workers dropped by 33.4% from FY2007 to FY2009. The E and L visas fell by 18.7%, and the J and Q visas decreased by 8.1%. Only the numbers of O and P visas held steady, dipping only by 1.7%. These data are from the Department of State Consular Affairs Bureau, which reports the number of visas issued annually by category. As noted above, many of these visas are valid for several years and may be used for multiple entries into the United States. While visa data offer a measure of labor market demand for a given year, they do not reflect the actual number of temporary employment-based foreign workers in the United States any given year. Admissions data from the DHS Office of Immigration Statistics (OIS) offer a different perspective on foreign temporary workers in Figure 3 . These data indicate that foreign temporary employment-based visa holders entered the United States approximately 2.0 million times in FY2009. This number has increased markedly from a total of 1.3 million times foreign temporary employment-based visa holders entered the United States in FY1999. Most of the visa categories comprised a comparable percentage in FY1999 and FY2009, with two notable exceptions. The number of entries by H-1 visaholders had decreased by 12.2%, and the number of entries by H-2 visaholders had increased by 202.0%. That the OIS admissions number is almost twice that of the visa issuances number is due to the fact that many of these visas are multiple entry for multiple years. It is not surprising that the percentages of Hs, Ls, and Es are disproportionately larger in the OIS data than the Consular Affairs data because H, L, and E visas are typically valid for longer periods of time than some of the other temporary employment-based visas. These data suggest that temporary foreign workers who are on professional and managerial visas (e.g., H-1Bs and Ls) are more likely to exhibit circular migration patterns than less skilled temporary foreign workers in shortage occupations. The OIS admission data do not reflect the actual number of temporary employment-based foreign workers in the United States any given year. Prospective employers of H-1B, H-2A, and H-2B workers (approximately one-third of the temporary foreign workers in the United States) must apply to the Secretary of Labor for labor certification before they can file petitions with DHS to bring in foreign workers. Similarly with LCAs for LPRs, the determinations for H workers are made by DOL's Employment and Training Administration (ETA) on behalf of the Secretary or Labor. The INA requires that employers apply for a certification that there are not sufficient U.S. workers who are qualified and available to perform the work; and the employment of foreign workers will not adversely affect the wages and working conditions of U.S. workers who are similarly employed. As summarized below, the particular employer requirements to obtain labor certification differ under the three visas. H-2A and H-2B LCAs include an offer of employment. This job offer, which describes the terms and conditions of employment, is used in the recruitment of U.S. workers and H-2A or H-2B workers, as relevant. Under the H-2a and H-2B labor certification processes, as revised by regulations effective in January 2009, prospective employers must engage in specified recruitment activities filing the LCA. The largest number of H visas are issued to temporary workers in specialty occupations, known as H-1B nonimmigrants. The regulations define a "specialty occupation" as requiring theoretical and practical application of a body of highly specialized knowledge in a field of human endeavor including, but not limited to, architecture, engineering, mathematics, physical sciences, social sciences, medicine and health, education, law, accounting, business specialties, theology, and the arts, and requiring the attainment of a bachelor's degree or its equivalent as a minimum. The prospective H-1B nonimmigrants must demonstrate to the USCIS that they have the requisite education and work experience for the posted positions. After DOL approves the labor attestation, USCIS processes the petition for the H-1B nonimmigrant (assuming other immigration requirements are satisfied) for periods up to three years. An alien can stay a maximum of six years on an H-1B visa. The H-1B labor attestation, a three-page application form, is a streamlined version of the labor certification application (LCA) and is the first step for an employer wishing to bring in an H-1B professional foreign worker. As noted above, the attestation is a statement of intent rather than a documentation of actions taken. In LCA's for H-1B workers, the employer must attest that the firm will pay the nonimmigrant the greater of the actual wages paid other employees in the same job or the prevailing wages for that occupation; the firm will provide working conditions for the nonimmigrant that do not cause the working conditions of the other employees to be adversely affected; and that there is no applicable strike or lockout. The firm must provide a copy of the LCA to representatives of the bargaining unit or—if there is no bargaining representative—must post the LCA in conspicuous locations at the work site. The law requires that employers defined as H-1B dependent (generally firms with at least 15% of the workforce who are H-1B workers) meet additional labor market tests. These H-1B dependent employers must also attest that they tried to recruit U.S. workers and that they have not displaced U.S. workers in similar occupations within 90 days prior or after the hiring of H-1B workers. Additionally, the H-1B dependent employers must offer the H-1B workers compensation packages (not just wages) that are comparable to U.S. workers. Employers recruiting the H-1C nurses must attest similarly to those recruiting H-1B workers, with the additional requirement that the facility attest that it is taking significant steps to recruit and retain U.S. registered nurses. The American Recovery and Reinvestment Act of 2009 (also known as H.R. 1 , the "Stimulus Act," P.L. 111-5 ) requires companies receiving Troubled Asset Relief Program (TARP) funding to comply with the more rigorous labor market rules. Specifically, §1611 of P.L. 111-5 requires companies receiving TARP funding to follow the labor recruitment and attestation rules of H-1B dependent companies if they wish to hire foreign workers on H-1B visas. It does not, however, place any additional restrictions on companies receiving TARP funding that have other temporary foreign workers such as L-1s with specialized product knowledge or E-3 professional workers, or those petitioning for employment-based LPRs. The H-2A program provides for the temporary admission of foreign agricultural workers to perform work that is itself temporary in nature, provided U.S. workers are not available. In contrast to the H-1B and H-2B nonimmigrant visas, the H-2A visa is not subject to numerical restrictions. An approved H-2A visa petition is generally valid for an initial period of up to one year. An H-2A worker's total period of stay may not exceed three consecutive years. The INA provisions pertaining to the H-2A visa requires that employers conduct an affirmative search for available U.S. workers and that DOL determine that admitting alien workers will not adversely affect the wages and working conditions of similarly employed U.S. workers. The new regulations have replaced employer submitted recruitment documentation with an attestation-based process similar but not identical to the H-1B attestations. Under the threat of penalties including fines and revocation of certification, employers are required to attest that they have fully complied with all program requirements. Under the new regulations, employers of H-2A workers may file unnamed petitions that specify only the number of positions sought (i.e., not identifying the alien workers by name). On March 17, 2009, however, DOL published a Notice of Proposed Suspension of the H-2A Final Rule and solicited public comment for a 10-day period. According to DOL, all employers were expected to comply with the regulations effective as of January 17, 2009. In February 2010, DOL published a new H-2A final rule to replace the December 2008 rule. Beyond the procedural requirements mentioned above, the H-2A visa has requirements aimed at protecting the alien H-2A workers from exploitive working situations and preventing the domestic work force from being supplanted by alien workers willing to work for sub-standard wages. The H-2A visa requires employers to provide their temporary agricultural workers the following benefits. Employers must pay their H-2A workers and similarly employed U.S. workers the highest of the federal or applicable state minimum wage, the prevailing wage rate, or the adverse effect wage rate (AEWR). The employer must provide the worker with an earnings statement detailing the worker's total earnings, the hours of work offered, and the hours actually worked. The employer must provide transportation to and from the worker's temporary home, as well as transportation to the next workplace when that contract is fulfilled. The employer must provide housing to all H-2A workers who do not commute. The housing must be inspected by DOL and satisfy the appropriate minimum federal standards. The employer must provide the necessary tools and supplies to perform the work (unless it is generally not the practice to do so for that type of work). The employer must provide meals and/or facilities in which the workers can prepare food. The employer must provide workers' compensation insurance to the H-2A workers. H-2A workers, however, are exempt from the Migrant and Seasonal Agricultural Worker Protection Act that governs agricultural labor standards and working conditions as well as from unemployment benefits (Federal Unemployment Tax Act) and Social Security coverage (Federal Insurance Contributions Act). Farm workers in general lack coverage under the National Labor Relations Act provisions that ensure the right to collective bargaining. The H-2B program provides for the temporary admission of foreign workers to the United States to perform temporary non-agricultural work, if unemployed U.S. workers cannot be found. The work itself must be temporary. Under the applicable immigration regulations, work is considered to be temporary if the employer's need for the duties to be performed by the worker is a one-time occurrence, seasonal need, peakload need, or intermittent need. The statute does not establish specific skills, education or experience required for the visa, with some exceptions. Foreign medical graduates coming to perform medical services are explicitly excluded from the program. An approved H-2B visa petition is generally valid for an initial period of up to 10 months. An alien's total period of stay as an H-2B worker may not exceed three consecutive years. Regulations that became effective January 19, 2009, revise the definition of temporary or seasonal job for one occurrence lasting less than 10 months to one occurrence lasting up to three years, reportedly so that additional sectors of the economy (e.g., construction firms and shipyards) could use H-2B workers. Under the new regulations, employers of H-2B workers may filed unnamed petitions that specify only the number of positions sought (i.e., not identifying the individual aliens). Like prospective H-2A employers, prospective H-2B employers must apply to DOL for a certification that U.S. workers capable of performing the work are not available and that the employment of alien workers will not adversely affect the wages and working conditions of similarly employed U.S. workers. Under the new regulations, H-2B employers attest that they tried to recruit U.S. workers at prevailing wages. Unlike H-2A employers, they are not subject to the AEWR and do not have to provide housing, transportation, and other benefits required under the H-2A program. Table 1 summarizes key labor market tests for employers to meet and immigration-related protections for workers that are required for the admission of the foreign temporary workers. For employers seeking H temporary workers, only two labor market elements apply to all: (1) some form of a comparable wage requirement and (2) some affirmation that the working conditions for similarly employed U.S. workers will not be adversely affected. The INA does not delineate a standard policy to investigate and enforce violations of the LCAs, and the statutory authority for such investigations and enforcement actions varies across visa categories. The enforcement responsibilities for violations of these adverse effect provisions, however, are variously assigned to the Department of Homeland Security (DHS) or the Department of Justice (DOJ) as well as to DOL. As discussed at the outset of this report, the INA requires the Secretary of Labor to certify that the employment of an employment-based LPR will not adversely affect the wages and working conditions of similarly employed workers in the United States. The DOL Certifying Officer (CO) who learns that an LCA for an employment-based LPR is possibly fraudulent refers that case to DHS or DOJ for investigation. Presumably, DOJ and DHS could also investigate such cases as document fraud under §274C of the INA. DOL has the authority to revoke the LCA if an employer is subsequently found in violation. DOL also may debar an employer for three years if the employer is found to have violated the LCA requirements. In the case of H-1B labor attestation, however, the Secretary of Labor has statutory authority to investigate and enforce LCA violations of H-1B petitions, which she has delegated to the Administrator of the Wage and Hour Division (WHD). More precisely, the WHD is charged with investigating the complaints. The WHD Administrator may assess back wages and benefits for the H-1B worker, civil penalties against the employer, and other administrative remedies. If an employer is found to have willfully violated the INA, the WHD may conduct random investigations of that employer over the next five years. A DOL administrative law judge would decide the case if the employer charged with an H-1B violation requests a hearing. The WHD is also responsible for informing ETA and USCIS of employer violations. It is DHS, however, that has the authority to charge a fee of $500 to H-1B (and L visa) employers for H-1B visa (and L visa) fraud detection and prevention. The INA provisions governing the enforcement of LCAs for H-2A workers offer yet another approach. "The Secretary of Labor is authorized to take such actions, including imposing appropriate penalties and seeking appropriate injunctive relief and specific performance of contractual obligations, as may be necessary to assure employer compliance with terms and conditions of employment under this section." The INA authorizes appropriated funding for DOL to carry out these actions. The Secretary of Labor has delegated this enforcement authority to the WHD. DHS has the investigative and enforcement authorities for H-2B labor certifications. The INA authorizes the DHS to charge a fee of $150 to H-2B employers for fraud detection and prevention. The Secretary of DHS may delegate to the Secretary of Labor, with the agreement of the Secretary of Labor, any of the authority given to the Secretary of DHS given to impose administrative remedies (including civil monetary penalties in an amount not to exceed $10,000 per violation) for H-2B violations. The H-2B violations cited are substantial failure to meet the LCA conditions or a willful misrepresentation of a material fact in the LCA. DOL recently promulgated regulations that state that DHS had formally delegated this authority to impose penalties to the WHD as part of an revision in H-2B procedures. The new regulations have added post-adjudication audits that WHD will conduct as well procedures for penalizing employers who fail to comply the LCAs. As Figure 4 shows, funding for foreign labor certification has fluctuated over the past dozen years despite the steady upward trends in employment-based immigration ( Figure 1 and Figure 2 ). In 1997, DOL projected that its backlog of applications for permanent LCAs would grow from 40,000 to 65,000 during FY1998. By 2003, however, the backlog of LCAs for permanent admissions was 300,000, and DOL projected an average processing time of 3½ years before an employer received a determination. The Bush Administration sought and received funding increases in FY2004 and FY2005 to reduce the backlog of LCAs that were pending at that time. PERM's online filings are also credited with reducing the LCA processing times. The conference report on the FY2008 Consolidated Appropriations Act ( P.L. 110-161 ) included $42.2 million "to improve the timeliness and quality of processing applications under the foreign labor certification program." Until the implementation of PERM, state workforce agencies (SWAs) were funded to handle LCA processing with appropriations from the "national activities" account of ETA's Employment Services. As Figure 4 illustrates, Congress has increased the funding for the federal administration of LCAs to reflect the shift in workload as well as backlog issues. Although over 90% of the funding for USCIS comes from fees for providing adjudication and naturalization services that are deposited into the Examinations Fee Account, Congress has not specifically authorized DOL to collect fees to cover the costs of processing LCAs. The Clinton Administration sought authority in 1997 to charge a user fee that employers would pay to offset the cost of processing the LCAs, but Congress opted not to do so. The George W. Bush Administration had unsuccessfully sought authority to use a portion of the H-1B education and training fees for the processing of LCAs. The President's FY2011 Budget proposes $65,648,000 for foreign labor certification, of which $50,519,000 would be for the federal administration (181 FTE) and $15,129,000 would be for state grants. Although this is a decrease of $2.8 million from the FY2010 appropriation and $2.3 million from the FY2009 appropriation, it remains an increase of $10.7 million from the FY2008 appropriation. The President's FY2011 budget seeks legislative authority to charge user fees to cover the costs of processing LCA for employers seeking to import three specific types of foreign workers: those coming on permanent employment-based visa; those coming on temporary H-2A visas; and those coming on temporary H-2B visas. According to DOL budget justifications, "Once the fees are enacted, the discretionary budget request for these activities could be reduced or eliminated." The Full-Year Continuing Appropriations Act, 2011 ( H.R. 3082 ), which the House passed on December 8, 2010, would freeze FY2011 discretionary appropriations at the FY2010 level. There are very limited data available on funding for enforcing the LCAs and investigating those employers who hire temporary foreign workers. DOL is allocated one-third of the total receipts DHS obtains from employers for the H-1B and L visa fraud detection and prevention fee of $500 per employee that has been collected since FY2005. The fee of $150 per H-2B employee also goes into the same visa fraud detection and prevention account. As presented in Table 2 , DOL's estimated share of the total Fraud Prevention and Detection Fee Accounts has been $31 million in recent years. However, DOL reportedly used only $6.7 million in FY2007, $5.5 million in FY2008 and an estimated $5.5 million in FY2009 for H-1B, H-2B and L visa fraud investigation activities. During the George W. Bush Administration, DOL sought to use a portion of these H-1B and L visa funds for "self-directed" investigations aimed at industries that were more likely to employ low-wage, foreign workers. When Congress did not revise INA §286(v) to permit H-1B and L visas investigation fees to be used to fund investigations for low-skilled employment, the funds were rescinded. Although the DOL has not provided detailed data on how much of the H-1B, H-2B, and L visas investigation fees it did not expend, the conference report on the FY2008 Consolidated Appropriations Act ( P.L. 110-161 ) states The amended bill includes a rescission of $102,000,000 in unobligated funds collected pursuant to section 286(v) of the Immigration and Nationality Act. The House and the Senate proposed a rescission of $70,000,000; however, information received from the Department of Labor indicates that receipts in this account allow a higher amount to be rescinded while still ensuring that the $5,500,000 the Department estimates it will use in fiscal year 2008 under current authority remains available. DOL's Budget Justification of Appropriation Estimates for Committee on Appropriations , Volume II, however, reported that only $30,000,000 was rescinded in FY2008. It is unclear at this time what accounts for this difference in FY2008, but it has been addressed further in the FY2009 appropriation. The report language accompanying the Omnibus Appropriations Act, 2009 ( H.R. 1105 , P.L. 111-8 ) stated the following: The bill includes a rescission of $97,000,000 in unobligated funds collected pursuant to section 286(v) of the Immigration and Nationality Act. Sufficient funds will remain to ensure that the Department of Labor will be able to continue its enforcement activities under the current legislative authority. This issue was addressed in §524 of division D of the Consolidated Appropriations Act, 2010 ( P.L. 111-117 ). That provision amended §426(b) of division J of the Consolidated Appropriations Act, 2005 ( P.L. 108-447 ) to authorize the Department of Labor to use one-third of the amounts deposited into the Fraud Prevention and Detection Account for wage and hour enforcement programs and activities that focus on industries likely to employ nonimmigrants, including enforcement pertaining to §212(n) for H-1B workers and §214(c)(14)(A) for H-2B workers. The INA authorizes appropriated funding for DOL to enforce the LCAs for H-2A workers. Detailed funding data are not available to determine how much, if any, funds have been requested and appropriated to DOL for this specific activity in recent years. As noted above, the Full-Year Continuing Appropriations Act, 2011 ( H.R. 3082 ), which the House passed on December 8, 2010, would freeze FY2011 discretionary appropriations at the FY2010 level. Concern that certain multinational firms are hiring foreign professional workers on H-1B and L visas to work as temporary contractors at salaries that undercut salaries of comparable U.S. workers is cited as one of the reasons Congress has imposed an additional fee on companies who have more than 50% of their employees on H-1B or L visas. Opponents to the additional fee argue that it is discriminatory because it largely affects companies based in India. Both sides agree the additional fees make it more expensive to hire temporary foreign professional workers. The Emergency Border Security Supplemental Appropriations Act, 2010 ( H.R. 6080 , P.L. 111-230 ), temporarily increases the L visa filing fee and the fraud prevention and detection fee by $2,250 for applicants that employ 50 or more employees in the United States if more than 50% of the applicant's employees are on L or H-1B visas. It also increases the H-1B visa filing fee and the fraud prevention and detection fee by $2,000 for applicants that employ 50 or more employees in the United States if more than 50% of the applicant's employees are H-1B or L visas. The additional fees are in effect through September 30, 2014. As discussed above, the filing fees are generally deposited into the Examinations Fee Account, and the fraud prevention and detection fee are deposited into the H-1B and L Visa Fraud Prevention and Detection Fee Account. These additional fees, however, are deposited into the General Fund of the Treasury to offset the $600 million emergency border security funding that P.L. 111-230 provides in supplemental FY2010 appropriations. Many criticize the foreign labor certification process, both from the perspective of employers and employees (native-born as well as foreign-born workers). Employers often describe frustration with the process, labeling it as unresponsive to their need to hire people expeditiously. Representatives of U.S. workers question whether it provides adequate safeguards and assert that employers find ways to "end run" the lengthy process. Others point out that certain professional employees such as L intracompany transferees with specialized knowledge or E-3 professional workers from Australia are not appreciably different from H-1B workers, yet only employers of the latter are required to file LCA attestations. Advocates for temporary foreign workers, in turn, maintain that they remain caught up in the long wait for visas to become LPRs, leaving them vulnerable to exploitation by those employers who promise to petition for them. The issues that follow are illustrative of the multifaceted aspects of this debate on the labor market test for foreign workers. The option of using unemployment rates and other economic indicators to determine what occupations and sectors might import foreign workers has arisen several times over the past few decades. During the legislative debate leading up to the Immigration Act of 1990, supporters of this alternative argued that it would be a more objective basis to govern employment-based immigration and would place the priorities of the national economy ahead of individual employer preferences. At that time, however, leading government economists acknowledged that they did not have labor force and other economic data available to make such determinations. The option of using national and regional unemployment data to regulate foreign worker admissions arose most recently during the debate over comprehensive immigration reform in the 110 th Congress. Echoing earlier arguments, proponents also maintained such triggers would afford better protections for U.S. workers. Opponents asserted that adoption of such policies would prompt some firms to relocate or "out-source" to areas in which they had access to foreign workers, further harming U.S. workers in locations with higher unemployment. As the United States is rising out of an economic recession, attention is again focused on recruitment of the "best and the brightest" people to the United States. Once a debate limited to the H-1B visas, the global competition for foreign workers with advanced degrees and high-level skills has broadened to encompass more sweeping revisions to the permanent employment-based preferences. Some promote amending the INA to create expedited pathways for foreign students earning degrees at U.S. universities in the fields of the sciences, technology, engineering, or math (STEM) to become LPRs without a prospective employer submitting an LCA. However, Michael Teitelbaum, vice president of the Alfred P. Sloan Foundation (which funds basic scientific, economic and civic research) has said over the past few years that there are "substantially more scientists and engineers" graduating from U.S. universities than can find attractive jobs. A fundamental question is whether the current labor market tests to hire foreign workers offer an efficacious response to these competing perspectives on the international race for talent. Some, which notably includes a panel of international experts assembled by the Transatlantic Council on Migration, advocate what they refer to as more "flexible" and "forward-thinking" approaches to bringing foreign workers into the labor market. These options are typically based upon the human capital needs of the national economy rather than the hiring preferences of individual employers. Other policy researchers, such as the Directorate for Science, Technology, and Industry of the Organization for Economic Cooperation and Development, maintain that immigration laws and labor market protections are not the most decisive factors for talented migrants. Various factors contribute to the flows of the highly skilled. In addition to economic incentives, such as opportunities for better pay and career advancement and access to better research funding, mobile talent also seek higher quality research infrastructure, the opportunity to work with "star" scientists and more freedom to debate. The United States arguably fares quite well on these factors. Labor markets tests that employers must pass in order to hire foreign workers are arguably aimed at curbing employer abuses rather than influencing the migration decisions of foreign worker. Many argue that the labor market tests in the INA in their current forms are insufficiently flexible, entail burdensome regulations, and may pose potential litigation expenses for employers. Proponents of these views support extensive changes—particularly moving from labor certification based upon documented actions (i.e., evidence of recruitment advertisements) to a streamlined attestation of intent. These advocates of streamlining maintain it would increase the speed with which employers could hire foreign workers and reduce the government's role in delaying or blocking such employment. Others maintain that the streamlined attestation process may be adequate for employers hiring H-1B workers because those foreign workers also must meet rigorous educational and work experience requirements, but that an attestation process would be an insufficient labor market test for jobs that do not require a baccalaureate education and skilled work experience. They express concern that PERM regulations have undermined the integrity of labor market tests for the LPR process. Opponents of the new H-2A and H-2B regulations argue that they weaken government protections for vulnerable domestic and foreign workers in industries known exploitative working conditions and for lax enforcement of the minimum wage. Some recommend opting for a streamlined attestation process in which employers who have collective bargaining agreements with their U.S. workers would be afforded expedited consideration. Proponents of this position argue that collective bargaining agreements would enable the local labor-management partnerships to develop the labor market test for whether foreign workers are needed. Some allege that employers prefer foreign workers because they are less demanding in terms of wages and working conditions and that an industry's dependence on temporary foreign workers may inadvertently lead the brightest U.S. students to seek positions in fields offering more stable and lucrative careers. Many cite the GAO studies that document abuses of H-1B visas and recommend additional controls to protect U.S. workers. Some have warned that PERM and other intent-based attestations are more likely to foster non-meritorious applications than the prior system because they hinge on self-reporting by the employers and that such attestations provide inadequate protections for workers currently in the U.S. labor market. Others have expressed concern that the Certifying Officers (COs) are relatively unfamiliar with the local labor markets and that this centralized decision-making might adversely affect U.S. workers. The AFL-CIO has maintained that a thorough manual review of labor certification applications is, at times, the sole protection of American workers. DOL argues that the COs possess sufficient knowledge of local job markets, recruitment sources, and advertising media to administer the program appropriately. DOL maintains that it will handle the non-meritorious applications by adjusting the audit mechanism in the new system as needed. The Bush Administration further pointed out that it retained authority under the regulations to adjust the audit mechanism—increasing the number of random audits or changing the criteria for targeted audits—as necessary to ensure program integrity. Many practitioners observe that under PERM, employers must recruit more intensively and boost their salary offers. Many observers argue that PERM and other intent-based attestations are more susceptible to fraudulent filings. The American Council of International Personnel (ACIP), for example, has argued that PERM's audit and enforcement procedures would not act as effective deterrents to fraud and misrepresentation. One of the SWAs commenting on the proposed PERM rule stated the incidence of fraud and abuse of the current system suggests a need for tighter controls, rather than a process that relies on employer self-attestations. In terms of its evaluations of the LCA process for H-1B workers in particular, GAO reported that the H-1B petitions had potential for abuses. GAO has issued studies that recommended more controls to protect workers, to prevent abuses, and to streamline services in the issuing of H-1B visas. GAO concluded that the DOL has limited authority to question information on the labor attestation form and to initiate enforcement activities. Most recently, an investigation by USCIS's Office of Fraud Detection and National Security (FDNS) discovered that 13% of the H-1B files sampled were fraudulent and another 7% had technical violations of the law. DOL asserts that critics underestimate the process' capacity to detect and deter fraud, though the department acknowledges labor certification fraud to be a serious matter. DOL maintains the COs will review applications upon receipt to verify whether the employer-applicant is a bona fide business entity and has employees on its payroll. DOL has promised to aggressively pursue methods to identify those applications that may be fraudulently filed. The Bush Administration reportedly considered a plan to cross-check the employer's federal employer identification number with other available databases. A few practitioners assert that PERM fails in achieving the objectives of the law because, as they argue, it functions as only an enforcement mechanism for the relatively small subset of employers who are required to file LCAs. They further point out that most LPRs working in the United States entered on visas not subject to labor market tests. These observers conclude that PERM in particular and labor certification in general neither protects U.S. workers nor facilitates employers who need workers. Another view is that PERM's streamlining reforms serve to enhance enforcement. According to DOL Assistant Secretary Emily Stover DeRocco, "technology allows us to strengthen our overall program's integrity and provide better customer service." One practitioner characterizes PERM as "a step in the right direction to move these cases through and do it in a timely fashion." Some have expressed the concern that the INA's labor market tests favor large companies and unduly affect small businesses because they lack the in-house legal and human resource specialists who can complete and track the LCAs. They point to the PERM regulations in which certain types of aliens are ineligible: small business investors (who also do not qualify as fifth preference investors); employees in key positions who previously worked for affiliated, predecessor, or successor entities; and alien workers who are so inseparable from the sponsoring employer the employer would be unlikely to continue in operations without the foreign national. DOL points out that a small business investor is not an occupational category. The Administration further states that some foreign workers with special or unique skills might be eligible for labor certification under the basic process. In terms of alien workers who are "so inseparable from the sponsoring employer that the employer would be unlikely to continue in operation without the alien," DOL has long held the position that if a job opportunity is not open to U.S. workers, labor certification will be denied. Over the years, the media has aired stories of U.S. workers who have been laid off and replaced by foreign workers who are employed by subcontractors. In many of these accounts, the subcontractor provides the foreign worker fewer benefits than the displaced U.S. workers. In some instances, the displaced workers reportedly have been asked to train their foreign replacements. The additional requirements for H-1B dependent employers are expressly aimed at discouraging subcontractors who recruit H-1B workers from placing the worker with another employer who had recently laid off U.S. workers. However, multinational firms have the option of substituting employees on the L visa for those on the H-1B visa. Some employers argue that they will not be able to stay in business without expedient access to the contingent workers supplied by subcontractors, some of whom are foreign nationals with the requisite skills. These contingent workers meet the need for a specialized, seasonal, intermittent or peak-load workforce that is able to adapt with the market forces. They express concern that labor market tests for visas may limit the flexibility of firms that are hiring the caliber of workers necessary to stay competitive in the global marketplace. Some observers have expressed concern that intra-company transferees on L-1 visas should be admitted only after a determination that comparable U.S. personnel are not adversely affected, particularly in the cases of foreign nationals entering as mid-level managers and specialized personnel. They argue that the L-1 visa currently gives multinational firms an unfair advantage over U.S.-owned businesses by enabling multinational corporations to bring in lower-cost foreign personnel. Supporters of current law governing intra-company transfers argue that it is essential for multinational firms to be able to assign top personnel to facilities in the United States on an "as needed basis" and that it is counterproductive to have government bureaucrats delay these transfers to perform labor market tests. They warn these multinational firms will find it too burdensome and unprofitable to do business in the United States. The legal entry of foreign workers into the United States has been governed by the same basic provisions since 1952, with some policy adjustments along the way. Over a decade ago, the Commission on Immigration Reform estimated that the labor certification process costs employers in administrative, paperwork, and legal fees a total of $10,000 per immigrant. As is apparent in the analysis above, the current set of provisions and policies are visa-specific and yield various standards and thresholds for different occupations and sectors of the economy. There are, however, common critiques underlying the recruitment of foreign workers with specialized expertise as well as workers with no skills. Legislation that would reform the INA may provide an opportunity to revise and update the labor market tests; on the other hand, a consensus on the labor market tests may also be hurdle to enacting immigration reform. | Economic indicators confirm that the U.S. economy sunk into a recession in December 2007. Although some economic indicators suggest that growth has resumed, unemployment remains high and is projected to remain so for some time. Historically, international migration ebbs during economic crises; for example, immigration to the United States was at its lowest levels during the Great Depression. While preliminary statistical trends hint at a slowing of migration pressures, it remains unclear how the economic recession of the past two years has affected immigration. Addressing these contentious policy reforms against the backdrop of economic crisis sharpens the social and business cleavages and narrows the range of options. Some employers maintain that they continue to need the "best and the brightest" workers, regardless of their country of birth, to remain competitive in a worldwide market and to keep their firms in the United States. While support for increasing employment-based immigration may be dampened by the high levels of unemployment, proponents argue that the ability to hire foreign workers is an essential ingredient for economic growth. Those opposing increases in foreign workers assert that such expansions—particularly during a period of high unemployment—would have a deleterious effect on salaries, compensation, and working conditions of U.S. workers. Others question whether the United States should continue to issue foreign worker visas (particularly temporary visas) during a period of high unemployment and suggest that a moratorium on such visas might be prudent. The number of foreign workers entering the United States legally has notably increased over the past decade. The number of employment-based legal permanent residents (LPRs) grew from under 100,000 in FY1994 to over 250,000 in FY2005, and dipped to 126,874 in 2009. The number of visas issued to employment-based temporary nonimmigrants rose from just under 600,000 in FY1994 to approximately 1.3 million in FY2007. In FY2009, the number of visas issued to employment-based temporary nonimmigrants dropped slightly to 1.1 million. The Immigration and Nationality Act (INA) bars the admission of any alien who seeks to enter the U.S. to perform skilled or unskilled labor, unless it is determined that (1) there are not sufficient U.S. workers who are able, willing, qualified, and available; and (2) the employment of the alien will not adversely affect the wages and working conditions of similarly employed workers in the United States. The foreign labor certification program in the U.S. Department of Labor (DOL) is responsible for ensuring that foreign workers do not displace or adversely affect working conditions of U.S. workers. The 111th Congress has addressed one element of the labor market test for foreign workers issue in §1611 of P.L. 111-5, the American Recovery and Reinvestment Act of 2009, which requires companies receiving Troubled Asset Relief Program (TARP) funding to comply with the more rigorous labor market rules of H-1B dependent companies if they hire foreign workers on H-1B visas. Also, §524 of division D of the Consolidated Appropriations Act, 2010 (P.L. 111-117) authorized the Department of Labor to use its share of the H-1B, H-2B, and L Fraud Prevention and Detection fees to conduct wage and hour enforcement of industries more likely to employ any type of nonimmigrants (not just H-1B, H-2B or L visaholders). Finally, P.L. 111-230 (H.R. 6080) authorized additional fees on firms who have more than 50% of their employees on H-1B or L visas. This report does not track legislation and will be updated if policies are revised. |
As part of the Patient Protection and Affordable Care Act (ACA), as amended, Congress enacted the "individual mandate," which requires certain individuals to have a minimum level of health insurance. Individuals who fail to do so may be subject to a monetary penalty, administered through the tax code. Prior to ACA, Congress had never required individuals to buy health insurance, and there had been significant debate over whether the individual mandate was within the scope of Congress's legislative powers. Shortly after ACA was enacted, several lawsuits were filed that challenged the individual mandate on constitutional grounds. While some of these cases were dismissed for procedural reasons, others moved forward. These challenges culminated in a case recently decided by the Supreme Court, National Federation of Independent Business v. Sebelius (NFIB) , one of the most controversial and highly publicized cases in recent years. This case received a great deal of attention, not just because of its potential implications for federal regulation of the health care system, but also for the scope of legislative power and the relationship between the federal government, states, and individuals. The NFIB case began when attorneys general in several states brought an action in the District Court of the Northern District of Florida against the Secretaries of Health and Human Services (HHS), Treasury, and Labor, seeking declaratory and injunctive relief from various requirements of ACA, including the individual mandate. Certain individuals, the National Federation of Independent Business, and several other states later joined the lawsuit. The district court in NFIB held that the individual mandate exceeded the powers of Congress under the Commerce Clause and the Necessary and Proper Clause, and struck down ACA in its entirety. In a 2-1 ruling, the Court of Appeals for the Eleventh Circuit affirmed the district court's decision that the individual mandate exceeded Congress's enumerated powers. However, unlike the lower court, the appellate court allowed the remaining provisions of ACA to stand. The parties to the litigation subsequently petitioned the Supreme Court for review of the Eleventh Circuit's decision, and the Supreme Court agreed to hear the case. In June 2012, the Supreme Court largely affirmed the constitutionality of ACA. With respect to the individual mandate, Chief Justice Roberts wrote the controlling opinion and found that while the Commerce Clause did not provide Congress with the authority to enact the individual mandate, the mandate could be upheld as an appropriate exercise of the taxing power. The result came as a surprise to many commentators, as the lower courts in NFIB and other cases had primarily focused on the Commerce Clause in their decisions. This report provides an overview of the Court's holding with respect to the individual mandate under the Commerce Clause and the Taxing Power. It also addresses possible implications of the decision on existing federal law and future legislation. It should be noted that the Supreme Court also rendered a decision on the constitutionality of the ACA's expansion of the Medicaid program, which required that states provide coverage to adults under the age of 65 with incomes up to 133% of the federal poverty level. In a complex, fractured opinion, the Supreme Court upheld the Medicaid expansion, but limited the ability of the federal government to withhold all federal Medicaid funding unless the states accept and comply with the Medicaid expansion requirements. For a discussion of the Supreme Court's decision on the Medicaid expansion, see CRS Report R42367, Medicaid and Federal Grant Conditions After NFIB v. Sebelius: Constitutional Issues and Analysis , by [author name scrubbed]. The Commerce Clause of the U.S. Constitution empowers Congress "[t]o regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." This power has been cited as the constitutional basis for a significant portion of the laws passed by Congress over the last 50 years, and it currently represents one of the broadest bases for the exercise of congressional powers. Congress has relied on the commerce power not only to regulate health insurance and other aspects of the health care system, but also to enact a diverse array of other legislation, including environmental laws, labor laws, and civil rights laws. Despite the breadth of the Commerce Clause, prior to the NFIB case, it was unclear whether the Commerce Clause provided Congress with the authority to enact the individual mandate, as whether Congress could use the clause to require an individual to purchase a good or a service was a novel issue. As the litigation over the individual mandate made its way through the lower courts, the Commerce Clause had been the focus of the constitutional analysis, and courts came to varying conclusions. Nine federal courts, including three courts of appeals and six district courts, rendered a decision on the constitutionality of the individual mandate on Commerce Clause grounds. The three appellate courts evaluating the issue reached contrasting conclusions. While three district courts upheld the individual mandate, three struck it down. Six petitions for Supreme Court review were filed in response to appellate decisions in the Eleventh, Sixth, and Fourth Circuits, and in November 2011, the Court agreed to hear only the appeals in the NFIB case. Oral arguments in this case took place during the last week of March. Chief Justice Roberts, in a controlling opinion, found that the Commerce Clause does not provide Congress with the authority to enact the individual mandate. While the Chief Justice acknowledged that Congress's authority to regulate interstate commerce is quite broad, he also pointed out that Congress had never attempted to use this power to make individuals buy an undesired product. The Chief Justice further noted that the language of the Clause (i.e., the power to regulate interstate commerce) reflects the idea that there must be something to regulate in the first place (i.e., some type of "activity"). The problem with the individual mandate, as indicated by the Chief Justice, is that it "does not regulate existing commercial activity. It instead compels individuals to become active in commerce by purchasing a product on the ground that their failure to do so affects interstate commerce." The Chief Justice concluded that such a construction of the Commerce Clause would greatly expand the reach of the Commerce Clause beyond permissible bounds. He further explained that regulating individuals based on what they fail to do would fundamentally change the relationship between the citizen and the federal government in a way that was not intended by the Framers of the Constitution. The Administration had argued that virtually all individuals are active in the health care market because they will need health care at some point. However, the Chief Justice declined to accept this line of reasoning, opining that the Court's Commerce Clause precedent does not support the idea that Congress can dictate the conduct of an individual today based on predicted future activity. Another argument made against the constitutionality of the individual mandate was the lack of a limiting principle—the idea that if Congress could require the purchase of health insurance, it could require Americans to purchase anything. The Administration had claimed, among other things, that the requirement to purchase health insurance was different from other products because, for example, individuals receive health care services even though they cannot pay for them, and the costs of those services can be passed on to others in various ways such as higher insurance premiums. The Chief Justice disagreed with the Administration, noting that if the Court followed its reasoning, a mandatory purchase could be permitted to solve almost any problem. While no other Justice joined the opinion of Chief Justice Roberts with respect to the Commerce Clause analysis, four Justices (Scalia, Thomas, Kennedy, and Alito) issued a dissenting opinion that reached the same conclusion based on somewhat similar reasoning. Accordingly, the fact that a majority of Justices found that Congress did not have the power to enact the individual mandate under the Commerce Clause is notable. The four remaining Justices (Ginsburg, Breyer, Sotomayor, and Kagan), in a concurring opinion written by Justice Ginsburg, indicated that they would have upheld the individual mandate on Commerce Clause grounds. In addition, while the Court's decision on the constitutionality of the individual mandate did not hinge on its Commerce Clause analysis, it should be noted that lower courts may still look to and rely upon this analysis in evaluating future cases. It has been questioned what impact the NFIB case has on Congress's ability to legislate under the Commerce Clause. As discussed above, the Court's decision creates a new limitation on Congress's authority to act under the Commerce Clause—that Congress can only regulate commercial activity, not compel an individual to engage in it. Some have claimed this limitation is significant, as it reinforces the idea that Congress's Commerce Clause authority has boundaries. It has also been suggested that these new boundaries could potentially affect certain existing laws, making them susceptible to a legal challenge. Conversely, it may be argued that this new limitation may not have much of an impact on existing laws or on Congress's ability to enact future legislation under the Commerce Clause. Chief Justice Roberts, as well as the four dissenting Justices, acknowledged that the individual mandate is a novel requirement, as individuals were being forced to participate in commerce. Further, the fact that the Court did not find any other application of the Commerce Clause to be invalid arguably suggests that while future mandatory purchases could violate the Commerce Clause, other types of federal laws may not be affected. In addition, with the exception of Justice Thomas, no other Justice indicated that prior Commerce Clause precedent should be struck down. Accordingly, a reasonable argument can be made that with respect to the Commerce Clause, the NFIB case did not significantly alter the constitutional environment and that the status quo prior to ACA is largely preserved. The Constitution grants Congress the "Power to lay and collect Taxes, Duties, Imposts and Excises ... and provide for the common Defence and general Welfare of the United States." Congress's taxing power has always been recognized as broad. The question confronting the Court in NFIB v. Sebelius was whether the enforcement mechanism for the individual mandate was a "tax," which would then be permissible for Congress to enact under its taxing power. The Chief Justice's opinion answered affirmatively, upholding the provision as a valid exercise of Congress's authority. For this portion of the opinion, Chief Justice Roberts was joined by Justices Ginsburg, Breyer, Sotomayor, and Kagan. The first issue faced by the Court was determining whether the individual mandate's enforcement mechanism was a tax or a penalty for constitutional purposes. The relevant statutory provision, Section 5000A of the Internal Revenue Code, uses the term "penalty" to describe the provision. The Court, however, placed no significance on this fact, noting that prior cases had held that the choice by Congress to label a payment as penalty or tax was not controlling when assessing the provision's constitutionality. Rather than looking at labels, the Court used a functional approach under which it looked at the provision's "substance and application." The Court began by finding that the mandate provision "looks like a tax in many respects." The provision is codified in the tax code and enforced by the IRS, with the agency directed to assess and collect it in the same manner as other taxes; it applies to "taxpayers" and any amount owed is paid when people file their regular income tax returns and pay into the general Treasury; it does not apply to individuals who do not owe federal income tax because their income is less than the filing threshold; its exaction is based on "such familiar factors" as taxable income, filing status, and number of dependents; and it "yields the essential factor of any tax: it produces at least some revenue for the government." Using this functional approach, the Court then found that the individual mandate was distinguishable from prior precedent that had found some purported taxes were actually penalties that could not be justified under the taxing power. The most prominent of these, and the case primarily discussed in the majority opinion, is a 1922 decision, Bailey v. Drexel Furniture Co., which is known as the Child Labor Tax Case. There, the Court relied on a number of factors to find that the principal intent of the provision at issue was impermissibly regulatory: (1) it set forth a specific and detailed course of conduct regarding the use of child labor; (2) it was not imposed proportionately to the degree of the infraction; (3) the tax required the employer to know that the child was below age; and (4) businesses were made subject to inspection by officers of the Secretary of Labor, positions not traditionally charged with the enforcement and collection of taxes. In NFIB , the Court found that the latter three factors identified in the Child Labor Tax Case were not present with respect to the individual mandate. First, the individual mandate was not "prohibitory," as evidenced by the fact that the tax, for many people, would be "far less" than the cost of insurance. Because of this, it could be a "reasonable financial decision" to pay the tax rather than buy insurance. Second, the mandate provision clearly included no scienter requirement. Third, any exaction would be collected just like any other tax by the IRS, except, as the Court emphasized, the agency was prohibited from using "those means most suggestive of a punitive sanction, such as criminal prosecution." The Court did not expressly address the remaining factor from the Child Labor Tax Case, which was that the provision at issue in that case set forth a specific and detailed course of conduct regarding the use of child labor. The Court did, nonetheless, acknowledge the obvious regulatory purpose of the mandate provision. However, the fact the mandate provision was intended to encourage the purchase of health insurance was insignificant, with the Court noting tax provisions intended to influence behavior are common and pointing to taxes imposed on tobacco, selling marijuana, and selling firearms as examples. The Court then explained that, in distinguishing the differences between penalties and taxes, "'if the concept of the penalty means anything, it means punishment for an unlawful act or omission.'" Applied here, the Court found that Section 5000A, while clearly intended to encourage the purchasing of health insurance, did not have to be read as making the failure to do so unlawful. For evidence of this, the Court emphasized that the only consequence for the failure is owing payment to the IRS—no other "negative legal consequences" arise. Further support for its conclusion was Congress's seeming nonchalance about creating "four million outlaws"—the number of people expected to choose to pay the tax rather than buy health insurance—which the Court interpreted to indicate that the mandate is nothing more than a tax that people "may lawfully choose to pay in lieu of buying health insurance." Thus, for the majority, the fact that Congress did not provide for additional consequences after paying the initial tax was important. Finally, the Court rejected the argument that the statutory language, which states individuals "shall" buy health insurance or pay a "penalty," meant Section 5000A had to be read as punishing unlawful conduct, noting it had rejected a similar argument in a prior case in order to avoid reading a statute in a way that would have violated the Constitution. Once the Court determined that the individual mandate was a tax for constitutional purposes, it turned to look at whether the mandate violates the Constitution's limitations on Congress's taxing powers. Even where Congress has the general authority to levy a tax, the Constitution imposes additional requirements on the form of such taxes. For constitutional purposes, taxes are understood to be either direct taxes, which must be apportioned among the states based on population, or indirect taxes (i.e., duties, imposts, and excises), which must be "uniform throughout the United States." The Sixteenth Amendment then removes the requirement of apportionment for any "taxes on income," without classifying such taxes as direct or indirect. Here, the specific question was whether the individual mandate is a direct tax. If so, it would be unconstitutional since it is not apportioned among the states based on population, unless it were a "tax on income." No constitutional issue would arise if the mandate is an indirect tax (specifically, an excise tax) since it appears to satisfy the requirement of uniformity as it is geographically neutral on its face. The exact scope of the term "direct taxes" has never been determined. The Constitution does not define the term other than specifying that it includes capitations, which are a fixed tax imposed on each person in a jurisdiction. The Framers' debates provide little clarity. From its earliest days, the Supreme Court has interpreted the term relatively narrowly. The Court has found that direct taxes include capitations and real property taxes at a minimum. The Court has also suggested that other types of taxes might be direct, although it did not find any such examples until the Pollock case in 1895. In Pollock , the Court struck down the unapportioned Income Tax Act of 1894 after finding parts of it—the taxes on income from real and personal property—were direct taxes. The Pollock decision was subject to substantial criticism and led to the adoption of the Sixteenth Amendment in 1913. While Pollock has not been expressly overruled, the Court moved away from its analysis in subsequent cases, upholding a variety of unapportioned taxes on the basis they were excise taxes. In NFIB v. Sebelius , the Court easily dismissed this issue, finding that the individual mandate is not a "direct tax" since that term has only been recognized to include capitations (taxes imposed on each person in a jurisdiction) and real and personal property taxes. The Court explained that "[a] tax on going without health insurance does not fall within any recognized category of direct tax." The Court defined capitations as "taxes paid by every person, 'without regard to property, profession, or any other circumstance ,'" and emphasized that the mandate provision's "whole point" is "it is triggered by specific circumstances," specifically "earning a certain amount of income but not obtaining health insurance." The Court concluded by noting the provision is clearly not a tax on ownership of land or personal property. What does NFIB mean for Congress's taxing power? At the outset, it must be emphasized that the taxing power has always been recognized as being broad. Further, the Court has approved tax provisions even when they have a regulatory (i.e., non-revenue raising) purpose. As the Court has explained, "[i]t is beyond serious question that a tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed." For those approaching the case from this perspective, the Court's opinion with respect to the scope of the taxing power may be unremarkable. On the other hand, the Court has, on occasion, found that a tax was functionally a regulatory penalty and therefore not supported by the taxing power. Key to the Court's analysis in some of these cases was the tax played a significant enforcement role to force compliance within a regulatory scheme. In light of this, it might be notable the majority opinion did not appear to have addressed one of the Child Labor Tax Case factors: whether ACA set forth a specific and detailed course of conduct and imposed an exaction on those who transgress its standard. This was arguably the greatest similarity between the Child Labor Tax Case and the individual mandate, and the reason why some thought the mandate might be struck down under that taxing power for being "too regulatory." Going forward, one question may be whether the omission of this factor from the majority's discussion suggests that, for constitutional purposes, the prominence of these of types of regulatory motivations may be of minimal significance, with the focus instead on the nature of the exactions imposed and the manner in which they are administered. Notably, the Court in NFIB stated that because the mandate provision was a tax "under our narrowest interpretations of the taxing power," it declined to "decide the precise point at which an exaction becomes so punitive that the taxing power does not authorize it." Thus, until the Court speaks to this issue, it is not clear where that line is. Looking at those factors identified in the case as supporting the characterization of the mandate provision as a tax, some might be relatively easy to fulfill if the intent is to establish a required payment as a tax. From a practical perspective, perhaps one of the more substantive indicia is that a tax must be a relatively modest amount (i.e., it cannot be prohibitory), with the majority opinion emphasizing that it could be a "reasonable financial decision" for some people to pay the tax rather than buy insurance. The limiting principles articulated in the Court's decision might be of particular interest to those who had expressed concern about taxing inactivity, fearing that if the Court approved the mandate, this could grant Congress an almost unlimited authority under the taxing power. The majority opinion clearly states that taxing inactivity can be a valid exercise of Congress's taxing power. It identified three factors that it felt allayed any concerns about such taxation. First, the Court was comfortable with its conclusion since it was "abundantly clear" that there is no constitutional guarantee that people can "avoid taxation through inactivity." Second, the Court emphasized that Congress's taxing power is not unlimited since it would not support punitive regulatory measures. Third, the Court explained that the taxing power, while greater than the commerce power, "does not give Congress the same degree of control over individual behavior" since it only involves "requiring an individual to pay money into the Federal Treasury." Some might take issue with the first point, particularly since the one example the majority cited was capitations, an arguably unique type of tax. Further, those who are opposed to a broad interpretation of Congress's taxing power may find little comfort in the limiting principles found in the majority's opinion. On the other hand, as noted, the Court expressly left unanswered the question of when exactly a tax crosses the line to become a regulatory penalty no longer supported by the taxing power, while emphasizing that "[i]t remains true ... that the 'power to tax is not the power to destroy while this Court sits.'" Thus, because the Court analyzed the mandate under its "narrowest interpretation of the taxing power," how the Court might interpret the outer limits on that power is unresolved. | In one of the most highly anticipated decisions in recent years, the Supreme Court released its ruling regarding the constitutionality of the Affordable Care Act (ACA) in June 2012. In NFIB v. Sebelius, the Court largely affirmed the constitutionality of ACA, including its individual mandate provision. In a move that was unexpected to many, the Court upheld the mandate as a valid exercise of Congress's taxing power, but not its Commerce Clause power. First, Chief Justice Roberts, in a controlling opinion, found that the Commerce Clause does not provide Congress with the authority to enact the individual mandate. While the Chief Justice acknowledged that Congress's authority to regulate interstate commerce is quite broad, he also pointed out that Congress had never attempted to use this power to make individuals buy an undesired product. The Chief Justice further noted that the language of the Clause (i.e., the power to regulate interstate commerce) reflects the idea that there must be something to regulate in the first place (i.e., some type of "activity"). The problem with the individual mandate, as indicated by the Chief Justice, is that it "does not regulate existing commercial activity. It instead compels individuals to become active in commerce by purchasing a product on the ground that their failure to do so affects interstate commerce." The Chief Justice also noted that if the mandate were permissible under the Commerce Clause, a mandatory purchase could be permitted to solve almost any problem, thus agreeing with those who had raised concerns about a lack of a limiting principle—the idea that if Congress could require the purchase of health insurance, it could require Americans to purchase anything. While no other Justice joined the opinion of Chief Justice Roberts with respect to the Commerce Clause analysis, four Justices issued a dissenting opinion that reached the same conclusion based on somewhat similar reasoning. The Chief Justice then found the mandate provision to be a valid exercise of Congress's taxing power. For this portion of the opinion, Chief Justice Roberts was joined by Justices Ginsburg, Breyer, Sotomayor, and Kagan. The key question here was whether the mandate provision was a tax or penalty. The Court used a functional approach to find the provision was in fact a tax, looking at its substance and application, rather than any statutory labels (which used the term "penalty"). The Court rejected the argument that the provision was actually a regulatory penalty, and therefore outside the scope of the taxing power, because it was not prohibitory, had no scienter requirement, and would be collected just like any other tax by the IRS. The provision's obvious regulatory purpose was not a significant factor, with the Court noting that it is common for taxes to be intended to influence behavior. Further, the Court found the provision did not have to be read as making the failure to buy health insurance unlawful. Finally, the Court found the mandate provision, while a tax, was not a "direct tax" and therefore was not subject to the Constitution's requirement that direct taxes be apportioned among the states based on population. It should be noted that the Supreme Court also rendered a decision on the constitutionality of the ACA's expansion of the Medicaid program. For a discussion of the Supreme Court's decision on the Medicaid expansion, see CRS Report R42367, Medicaid and Federal Grant Conditions After NFIB v. Sebelius: Constitutional Issues and Analysis, by [author name scrubbed]. |
Historically, the federal government has been a primary provider of authoritative geospatial information, but some argue that consumer demand for spatial information has triggered a major shift toward local government and commercial providers. The federal government has shifted, with some important exceptions, to consuming rather than providing geospatial information from a variety of sources. As a result, the federal government's role has shifted as well toward coordinating and managing geospatial data and facilitating partnerships among the producers and consumers of geospatial information in government, the private sector, and academia. The challenges to coordinating how geospatial data are acquired and used—collecting duplicative data sets, for example—at the local, state, and federal levels, in collaboration with the private sector, are long-standing and not yet resolved. In 2003 and 2004 the Subcommittee on Technology, Information Policy, Intergovernmental Relations, and the Census, part of the House Committee on Government Reform, held two hearings on the nation's geospatial information infrastructure. A common theme to both hearings was the challenge of coordinating and sharing geospatial data between the local, county, state, and national levels. Quantifying the cost of geospatial information to the federal government has also been an ongoing concern for Congress. At the hearing in 2003, Representative Adam Putnam stated: We need to understand what programs exist across the government, how much we're spending on those programs, where we're spending that money, how efficiently, or perhaps inefficiently, we share data across Federal agency boundaries, how we separate security-sensitive geospatial data from those open for public use, and how we efficiently, or perhaps inefficiently, coordinate with State and local governments and tribes. The explosion of geospatial data acquired at the local and state levels, for their own purposes and in conjunction with the private sector, underscores the long-recognized need for better coordination between the federal government and local and state authorities. At the same time, coordinating, managing, and facilitating the production and use of geospatial information from different sources, of different quality, and which was collected with specific objectives in mind has been a challenge. The federal government has recognized this challenge since at least 1990, when the Office of Management and Budget (OMB) revised Circular A-16 to establish the Federal Geographic Data Committee (FGDC) and to promote the coordinated use, sharing, and dissemination of geospatial data nationwide. Executive Order 12906, issued in 1994, was intended to "strengthen and enhance" the general policies in Circular A-16. Executive Order 12906 specified that the FGDC shall coordinate the federal government's development of the National Spatial Data Infrastructure (NSDI). Further, EO12906 called for the establishment of a National Geospatial Data Clearinghouse to address data standardization, make geospatial data publically available, and address redundancy and incompatibility of geospatial information. Circular A-16 was itself revised in 2002, adding the Deputy Director of Management at OMB as the vice-chair of the FGDC to serve with the Secretary of the Interior, who chairs the committee. The high-level leadership and broad membership of the FGDC—10 cabinet-level departments and 9 other federal agencies—highlights the importance of geospatial information to the federal government. In fact, supplemental guidance to Circular A-16, issued by Federal Chief Information Officer Vivek Kundra on November 10, 2010, referred to federal geospatial data as a capital asset . Questions remain, however, about how effectively the FGDC is fulfilling its mission. Has this organizational structure worked? Can the federal government account for the costs of acquiring, coordinating, and managing geospatial information? How well is the federal government coordinating with state and local entities that increasingly rely on geospatial information? What is the role of the private sector? In its oversight capacity, the 112 th Congress may consider these questions from the viewpoint of reducing duplication and costs to the federal government. This report discusses issues that may be of interest to Congress—managing, sharing, and coordinating geospatial information—and includes examples of legislation. This report also summarizes a diverse set of recommendations and proposals from different non-governmental organizations for how to improve the coordination and management of geospatial information at the federal and state levels. A separate report, CRS Report R41825, Geospatial Information and Geographic Information Systems (GIS): An Overview for Congress , discusses geospatial information and GIS; provides several examples of their use; and describes the FGDC, NSDI, and their various activities and programs. This report is limited to discussions of non-classified geospatial information. Producing floodplain maps; conducting the Census; planning ecosystem restoration; and assessing vulnerability and responding to natural hazards such as hurricanes, earthquakes, and tsunamis are examples of how federal agencies use GIS and geospatial information to meet national needs. Some view federal government data as inherently geospatial. According to the Department of the Interior, the amount of government information that has a geospatial component—such as address or other reference to a physical location—is as much as 80%. Given the ubiquity of geospatial information throughout the federal government, and despite the long history of efforts to manage and coordinate such data articulated in OMB Circular A-16 and its antecedents (see Appendix for a history of Circular A-16 and its federal policy lineage), ongoing challenges to handling federal geospatial information can generally be divided into three overarching questions: What is the best way to organize and manage the vast array of geospatial information that is acquired at many levels and that has a variety of potential uses? What is the best way to share data, particularly among local, state, and federal stakeholders, each of whom may have a need for the same or similar data? What is the best way to coordinate among federal agencies, such as the administration and management by different agencies of all the federal lands in the United States? It could be argued that some level of duplication of effort, and of inefficiency in the management and sharing of geospatial information, will always exist across a vast federal bureaucracy in which a majority of government information has some geospatial component. It could also be argued that the size of the federal bureaucracy is only one contributing factor. Surveying and mapping activities themselves are prone to duplication of effort among the different missions and goals of the executive branch. The need to organize and manage geospatial data among federal agencies and among the federal government, local and state authorities, the private sector, and academia is a recurring theme. It recurs, in part, because it is widely recognized that collecting data multiple times for the same purpose is wasteful and inefficient, yet it continues to occur. Alternatively, geospatial data could be collected once to meet the requirements of several users. For example, geospatial data gathered by a local government could be made useful to the state or federal government if the data meet a set of basic and consistent guidelines and protocols. Organizational structures exist at the federal and state levels to identify and promulgate the efficient sharing, transfer, and use of geospatial information, but arguably they have not fully achieved the goal of seamlessly coordinating disparate types of geospatial data. Ideally, these efforts would produce a national spatial data infrastructure, or NSDI, and that appears to have been the intent of EO12906 and the subsequent revisions to Circular A-16 in 2002. In one sense, the FGDC exists to foster development and implementation of the NSDI. The NSDI includes the processes and relationships that facilitate data sharing across all levels of government, academia, and the private sector. Ultimately, it is intended to be the base resource and structure among geospatial data providers and users at the national, state, and local level. Yet, some members of the geospatial community have indicated that the past efforts to create a national spatial data infrastructure have not met expectations, and have called for a new effort to build a "national GIS" or a "NSDI 2.0." (See section below: " A National GIS? ") In addition to promoting the efficiency and interoperability of such a national system, some promote NSDI as "digital infrastructure" on par with other parts of the nation's critical infrastructure—such as roads, pipelines, and telecommunications—and underscore its role in the national economy and in national security. When Circular A-16 was issued in 1953, it aimed to avoid duplication of effort, and included details about coordinating federal mapping activities. As digital geospatial data became more widespread, revisions to Circular A-16 in 1990 and 2002 extended coordination of federal efforts to include digital data, and broadened the mandate to coordinate federal geospatial activities. These efforts to improve management and coordination continue: on March 3, 2006, OMB issued a memorandum asking selected departments and agencies to each designate a senior agency official to take authority and responsibility for geospatial information issues. The memorandum emphasized that "through further coordination, we will maximize our buying and maintaining of geospatial investments instead of independently investing in potentially duplicative and costly data and capabilities." The March 3, 2006, memorandum identified 15 departments and 12 independent agencies that should designate an official at the Assistant Secretary or equivalent level. Most recently, OMB issued supplementary guidance to Circular A-16 on November 10, 2010 (discussed in the next section). On November 10, 2010, the Obama Administration issued a memorandum providing supplemental guidance to the implementation of OMB Circular A-16. The supplemental guidance labels geospatial data as a capital asset, and refers to its acquisition and management in terms analogous to financial assets. Specifically, it refers to geospatial information as part of a National Geospatial Data Asset (NGDA) Portfolio. The supplemental guidance states that federal investments in geospatial data "were largely uncoordinated and often lacked transparency, and sometimes resulted in data deficiencies, lack of standardization, inefficient use of resources, lack of interoperability, or inability to share data." To address those issues, the supplemental guidance sets forth its goal of a portfolio-centric model that "cures the single agency, stovepipe model by applying consistent policy, improved organization, better governance, and understanding of the electorate to deliver outstanding results." The supplemental guidance appears to echo the same concerns regarding management, coordination, and sharing previously identified. However, it casts the solution to these challenges in terms of managing a portfolio of investments, described as "the process of tracking, maintaining, expanding, and aligning assets to address and solve the business needs of an enterprise." The document notes that a key goal of the portfolio management approach is to enable the FGDC, through its Steering Committee, to make "informed decisions" about short- and long-term priorities for NGDA themes and datasets as well as for "collaboration targets" across agencies for dataset development and funding. The approach to NGDA portfolio management would consist of "[t]he inventory, selection, organization, management, evaluation, monitoring, and setting of Federal geospatial dataset priorities to ensure that NGDA Datasets are available to support the mission needs of the Federal Government and its partners, as determined by Federal agencies and their partners and as recommended to OMB." It is not clear yet whether this "new" approach to organizing and managing federal geospatial information is significantly different from the current approach. Perhaps a financial asset portfolio management approach could provide a more internally consistent way of identifying, classifying, and managing diverse geospatial assets across multiple departments and agencies. Whether this approach will be put into practice by each individual department and agency, and how consistently the "capital asset" approach will be applied across the federal government, remains to be seen. In the executive branch, OMB is the most likely entity capable of assessing the government-wide implementation of the geospatial-information-as-financial-assets approach. Congress in its oversight capacity could choose to ask whether the approach has been implemented and, if so, whether it produced the desired results. The supplemental guidance also lays out a process for managing geospatial assets within the annual budget cycle, calling it an annual investment review process. This process could give the agencies with geospatial assets a potentially more visible role in obtaining funding to acquire and manage geospatial data. The supplemental guidance notes that this process could increase the geospatial community's effectiveness by addressing a "disconnect" between agency Chief Financial Officers and managers responsible for an agency's geospatial assets: The players traditionally active in the Federal agency budget formation process, most notably the agency CFO community, rarely have expertise in geospatial management or issues. At the same time, those with significant geospatial expertise rarely have a distinct role in the budget process. The fact that so much Federal geospatial spending is subsumed unidentifiably within other program budgets, and therefore opaque to the CFO community, is one reason for the disconnect. Whether and how the new guidance will affect FGDC management will likely be borne out in the budget priorities for agencies in the annual budget requests, the level of funding for those priorities through the annual appropriations cycle, and in program implementation. The 112 th Congress might compare and contrast the broad portfolio management approach outlined in the supplemental guidance against funding requests by agencies that invest in and manage geospatial information. The National Research Council (NRC) has reported that the value of geospatial data is better understood at the county level than it was in the past, especially land parcel, or cadastral, data. The benefits of sharing geospatial data so that what is produced locally can be used for national needs, however, are not as widely acknowledged. In the case of land parcel data specifically, many local governments create data for their own use and do not see how a national effort would bring local benefits. The NRC notes, however, that the need for complete national land parcel data has become urgent particularly for at least one application—emergency response. During the Hurricane Katrina disaster, some critical land parcel data that were needed by emergency responders, public officials, and even insurance companies were not readily available or did not exist. Further, the NRC report asserts that many of the property fraud cases associated with the hurricanes of 2005 were the direct result of poor or nonexistent geospatial data, specifically land parcel data. Several efforts to coordinate geospatial data among federal agencies have proven difficult to achieve. The National Map is an example of a work-in-progress attempting to integrate data from a variety of sources and produce a product that is widely available and useful to many users. In an example cited by the GAO in its 2003 testimony, the U.S. Forest Service (USFS) tried to create a national-level GIS for the forest ecosystem, but had to reconcile data from a variety of incompatible locally developed systems, which used a variety of standards for each forest and district. Most of the USFS effort went into reconciling the different data sets. Ultimately the USFS had to adopt the lowest-resolution format to maintain full coverage of all the forests, and could not use the higher-resolution local data. The National Integrated Land System (NILS) is another example of an ongoing effort to coordinate and integrate disparate federal land data among several agencies. The federal government owns approximately 650 million acres, about 29% of all land in the United States. The Bureau of Land Management (BLM) is the designated custodian for federal land parcel information and ownership status. Three federal agencies in addition to the BLM administer most federal lands: the USFS, Fish and Wildlife Service, and the National Park Service. In an effort to develop a single representation of federal lands, the BLM and USFS launched NILS, billed as a partnership among the federal agencies and states, counties, and private industry, to provide a single solution to managing federal land parcel information in a GIS environment. A limited amount of federal land data is available through NILS, which is currently in a project or prototype phase, and the project makes current information and tools available through its GeoCommunicator component. Both The National Map and NILS represent federal efforts to foster interagency sharing of data into a single product providing national coverage of topography and federal land holdings respectively. The utility of both efforts is limited by the quality, accuracy, and completeness of the underlying geospatial data. The National Map, as currently envisioned, will provide topographic information at the 1:24,000 scale, meaning that roughly one inch on the map equals 2,000 feet. That scale will likely limit The National Map's usefulness for depicting, for example, floodplain boundaries to meet the requirements for FEMA floodplain maps. Also, at some point in the future NILS presumably could provide one-stop shopping for an accurate assessment of the amount of federal land currently administered by each land management agency in the Department of the Interior and for the USFS. Currently, however, the best method for obtaining an accurate tally of federal lands is to contact each land management agency directly for their most up-to-date data. (Even then, data from individual agencies do not always sum to totals reported by the General Services Administration.) Both NILS and The National Map are test cases for whether and how the agencies implement the OMB-issued supplemental guidance (discussed above) for managing geospatial assets as a portfolio of investments. For example, under the new guidance presumably both projects would receive some indication of where they stand in comparison to other geospatial dataset priorities. Further, it would be expected that under the new OMB guidance those priorities would be reflected in annual budget requests from the relevant agencies, which OMB would review and approve prior to their submission to Congress. One bill introduced in the 112 th Congress on March 15, 2011, attempts to address some of the challenges to data coordination discussed above. The Federal Land Asset Inventory Reform Act of 2011 ( H.R. 1620 ) would establish a national cadastre. The legislation has been referred to the Subcommittee on Energy and Mineral Resources, House Natural Resources Committee, but has not been acted upon. A companion bill, S. 1153 , was introduced on June 7, 2011, in the Senate and referred to the Senate Energy and Natural Resources Committee. It also has not been acted upon. H.R. 1620 would require the Secretary of the Interior to develop a multipurpose cadastre of federal "real property." The legislation defines cadastre as an inventory, and defines federal "real property" as land, buildings, crops, forests, or other resources still attached to or within the land or improvements or fixtures permanently attached to the land or structures on it. The bill would require the Secretary to coordinate with the FGDC pursuant to OMB Circular A-16, to integrate the activities under the legislation with similar cadastral activities of state and local governments, and to participate in establishing standards and protocols that are necessary to ensure interoperability of the geospatial information of the cadastre for all users. Supporters of the legislation claim that a national cadastre would improve federal land management, resource conservation, environmental protection, and the use of federal real property. As noted above, the BLM currently has responsibility for maintaining federal land parcel information and ownership status, and it is not clear if H.R. 1620 would expand the current geospatial activities at BLM, shift the custodial responsibilities to another agency, or result in a different approach or program. Beginning with versions of these bills first introduced in the 110 th Congress, supporters indicated that existing inventories of federal real property are old, outdated, and inaccurate, and updates to these inventories could improve management of the federal lands. Observers also noted that the federal government lacks one central inventory that coordinates all the inventories into one usable database. On March 21, 2012, Representative Lamborn introduced H.R. 4233 , the Map It Once, Use It Many Times Act. In Title I, the bill would establish a National Geospatial Technology Administration in the Department of the Interior (DOI) that would create a National Geospatial Database of all U.S.-owned or -managed lands, Indian trust lands, and nonfederal lands. Funding for the database would be at the discretion of the administrator, who would develop and implement a funding strategy using appropriated funds, user fees, a revolving fund, partnerships with other government agencies, public-private partnerships, or some combination of some or all of the funding options. The administrator of the new organization would assume all geospatial functions currently vested by law in the DOI, the National Forest System within the U.S. Department of Agriculture, and NOAA, including all functions of the National Geodetic Survey. All federal agencies would make their geospatial data available for inclusion in the National Geospatial Database, and the database would be available to the public. Further, Section 108(a)(3) of the bill would require that the Director of the Bureau of the Census make available, for inclusion in the database, all building addresses and geographical coordinates collected by the Census Bureau. Currently the Census Bureau is forbidden to publish any private information—such as names, addresses, and telephone numbers. (Privacy issues are discussed below under the section entitled " Some Privacy Issues: Census, Farm Bill, Internet .") H.R. 4233 would also create a National Geospatial Policy Commission. The commission would produce a National Geospatial Data Plan, and the National Geospatial Technology Administration would be required to carry out the recommendations in the plan. The commission would be charged with coordinating federal agencies, state and local governments, and private entities to "eliminate redundancy in the performance of geospatial activities." The bill also calls on the commission to direct geospatial activities to private-sector firms when possible. Two of the five titles in H.R. 4233 deal with moving geospatial activities to private-sector firms and encouraging federal use of private geospatial firms generally. Title III lays out requirements for contractor performance of geospatial activities, and Title IV calls for developing a strategy to encourage and enhance the use of private geospatial firms by federal agencies and by other organizations that receive federal funds. Title V of the bill contains provisions for encouraging geospatial research and development. The Ocean and Coastal Mapping Integration Act, introduced as S. 174 and H.R. 365 in the 111 th Congress, was enacted into law as Subtitle B of Title XII of the Omnibus Public Land Management Act of 2009 ( P.L. 111-11 ). The act established a federal program to develop a coordinated and comprehensive mapping plan for the coastal waters including the exclusive economic zone and continental shelf, and the Great Lakes. Programs established by the act are intended to address issues of data sharing and cost-effectiveness by fostering cooperative mapping efforts, developing appropriate data standards, and facilitating the interoperability of data systems. Further, the program established under the act would develop these standards to be consistent with the requirements of the FGDC, so that the data collected in support of mapping are useful not only to the federal government, but also to coastal states and other entities. The theme of coordinating activities is underscored in several places in the act, specifically with other federal efforts such as the Digital Coast, Geospatial One-Stop, and the FGDC, as well as international mapping activities, coastal state activities, user groups, and nongovernmental entities. Subtitle B of Title XII of P.L. 111-11 called for a plan for an integrated ocean and coastal mapping initiative within NOAA. The agency submitted the plan to Congress on May 24, 2010. A biennial progress report on implementing the subtitle, also called for in P.L. 111-11 , from the Interagency Committee on Ocean and Coastal Mapping is undergoing interagency review and is not available. The challenge to collect and manage the geospatial data needed to meet the requirements of the act is daunting, given the array of federal agencies, affected states, local communities, businesses, and other stakeholders who have an interest in coastal mapping. Moreover, the stakeholders require wide and disparate types of data—such as living and nonliving coastal and marine resources, coastal ecosystems, sensitive habitats, submerged cultural resources, undersea cables, aquaculture projects, offshore energy projects, and others. Congress could view the development of the ocean and coastal mapping plan and its implementation as a test case: how to manage a large data collection effort—cost-effectively and cooperatively—that reaches across all levels of government and includes interest groups, businesses, NGOs, and even international partners. Nonfederal organizations and institutions have increasingly participated with federal agencies in communicating their concerns regarding geospatial information management, data sharing, and coordination. The National Geospatial Advisory Committee directly advises the FGDC. The National States Geographic Information Council and private sector geospatial organizations, such as the Management Association for Private Photogrammetric Surveyors, provide views of state geospatial organizations and the private sector respectively. The National Geospatial Advisory Committee (NGAC) was formed in early 2008 to provide advice and recommendations to the FGDC on management of federal geospatial programs, development of the NSDI, and implementation of the OMB Circular A-16. The committee members represent the private sector, nonprofits, academia, and governmental agencies. As part of its charter, NGAC provides a forum to convey views representative of nonfederal stakeholders in the geospatial community. In its January 2009 report, The Changing Geospatial Landscape , NGAC noted that as geospatial data production has shifted from the federal government to the private sector and state and local governments, new partnerships for data sharing and coordination are needed. Specifically: the hodgepodge of existing data sharing agreements are stifling productivity and are a serious impediment to use even in times of emergency.... When the federal government was the primary data provider, regulations required data to be placed in the public domain. This policy jump-started a new marketplace and led to the adoptions of GIS capabilities across public and commercial sectors. However, these arrangements are very different when data assets are controlled by private companies or local governments. NGAC observed further that the federal government's need for land parcel (cadastral) data, which is also emphasized by the National Research Council, is missing an arrangement for acquiring the detailed property-related data necessary to make decisions during times of emergency. The report suggests that detailed land parcel data—their use, value, and ownership—are needed by FEMA, the USFS, and the U.S. Department of Housing and Urban Development for emergency preparedness, response to hurricanes and wildfires, or to monitor the current foreclosure problems. In October 2008, NGAC sent recommendations to the 2008-2009 Presidential Transition Team for improving the federal role in coordinating geospatial activities, for making changes to the U.S. C ode pertaining to non-sensitive address data, and for enhancing geospatial workforce education. Most recommendations pertained to how the federal government could better coordinate geospatial partnerships with state, local, and tribal governments; the private sector; and the academic community. Recommendations included: establish a geospatial leadership and coordination function immediately within the Executive Office of the President; the geospatial coordination function should be included in the reauthorization of the E-Government Act; require OMB and FGDC to strengthen their enforcement of OMB Circular A-16 and EO 12906; establish/designate Geographic Information Officers with each department or agency with responsibilities stipulated within OMB Circular A-16; establish and oversee an Urgent Path forward for implementation of geospatial programs necessary to support current national priorities and essential government services underpinning the NSDI; and continue NGAC. Arguably, the supplemental guidance to OMB Circular A-16, issued on November 10, 2010, and the appointment of Vivek Kundra as the Federal Chief Information Officer at OMB address aspects of the first two bullets. OMB's memorandum issued on March 3, 2006, arguably should have addressed the third bullet; however, NGAC apparently felt that OMB's guidance had not been implemented. Of the final two bullets, NGAC has continued to exist, and it is not clear what progress has been made in implementing NGAC's Urgent Path forward (one aspect of the Urgent Path, Imagery for the Nation, is discussed below). At the national level, the FGDC exists to promote the coordinated development, use, sharing, and dissemination of geospatial data. At the state level, NSGIC exists to promote the coordination of statewide geospatial activities in all states, and to advocate for the states in national geospatial policy initiatives to help enable the NSDI. NSGIC ties its activities to the NSDI by promoting the development of Statewide Spatial Data Infrastructures (SSDI), under a partnership called the 50-States Initiative, which is intended to lead to the creation of an SSDI for each state. In this vision, each state's SSDI would enable coordination between geospatial data producers and consumers at all levels within the state, and allow the state to share geospatial data with the national geospatial structure envisioned as the NSDI. The emphasis on organization and coordination of geospatial data and activities is seen as critical to reducing costs to states and the federal government by eliminating data redundancy—collecting the data once, using it many times—and by setting standards that allow different users to share geospatial data regardless of who collects it. NSGIC identified 10 criteria that define a "model" state program necessary to develop effectively coordinated statewide GIS activities, and thus reduce inefficiency and waste. These include: 1. strategic and business plans; 2. a full-time, paid, GIS coordinator and staff; 3. clearly defined authority and responsibility for coordination; 4. a relationship with the state chief information officer; 5. a political or executive champion for coordinating GIS; 6. a tie to the national spatial data infrastructure and clearinghouse programs; 7. the ability to work with local governments, academia, and the private sector; 8. sustainable funding, especially for producing geospatial data; 9. the authority for the GIS coordinator to enter into contracts; and 10. the federal government working through the statewide coordinating body. Not all states have fully embraced the need for statewide coordination of GIS activities, and states differ in their structure and organization of geospatial data among and between state, county, and local entities. For example, some states such as Arkansas share geospatial data across agencies in a very open manner; other states such as New York require more formal agreements or have restrictions to sharing data that include critical infrastructure. Nonetheless, some level of data sharing does occur, even in the more restrictive states. A priority for NSGIC is a program under development, called Imagery for the Nation (IFTN), that would collect and disseminate aerial and satellite imagery in the form of digital orthoimagery. In its description of the program, NISGIC notes that digital orthoimagery is the foundation for most public and private GIS endeavors. Further, NSGIC states that as many as 1,300 different government entities across the nation are developing digital orthoimagery products, "leading to higher costs, varying quality, duplication of effort, and a patchwork of products." IFTN represents an effort to establish one coherent set of geospatial data—arguably one of the most important layers in a GIS, orthoimagery—that is organized for the benefit of many stakeholders at the federal, tribal, regional, state, and local levels. As proposed, IFTN would involve two federal programs: (1) the existing National Agricultural Imagery Program (NAIP) administered by the U.S. Department of Agriculture, and (2) a companion program administered by the USGS. The NAIP imagery would be enhanced to provide annually updated one-meter resolution orthoimagery over all states except Hawaii and Alaska. The USGS program would also collect one-foot resolution imagery every three years for 50% of the U.S. land mass (except Alaska, which would get one-foot resolution imagery only over densely populated areas). The program would include an option for states to "buy up," or enhance, any or all of the remaining 50%. The program would also provide 50% matching funds for partnerships to acquire six-inch resolution imagery over urban areas with at least 1,000 people per square mile as identified by the U.S. Census Bureau. NSGIC states that statewide GIS coordination councils would specify their requirements through business plans, and that all the data would remain in the public domain, which would address many of the data sharing issues discussed above. In addition, the program calls for appropriate national standards for all data, which is a goal of the FGDC, a partner to NSGIC in the development of IFTN. NSGIC estimates that the program would cost $1.38 billion during the first 10 years, and argues that this would save $120 million over the 10-year period by reducing the number of contracts, contracting for larger areas, reducing overhead, and reducing other costs associated with current efforts. NSGIC considers the 50-States Initiative as one of the crucial components needed to build the NSDI and to bring consistency of geospatial information and parity to each of the states. NSGIC also considers that IFTN is the first of several initiatives creating "core data layers," or baseline data programs, required to meet federal, state, and local needs. NSGIC suggests that the NGAC be an interim step in the governance structure for NSDI, and indicates that the national effort to govern and coordinate the geospatial enterprise should not stifle the states from customizing aspects of the NSDI to suit their own needs: the federal government must not dictate the actions of state and local governments, nor should state governments dictate those of local government. However, each level of government can exert a strong influence on subordinate levels by making funding contingent on compliance with the policies and standards it establishes. NSGIC further argues that federal funding for the NSDI could be modeled on the federal highway program, similarly contingent upon compliance with collaboratively established criteria and requirements. The Census Bureau is forbidden to publish any private information—such as names, addresses, and telephone numbers. This type of geospatial information is available in the public domain for some localities in the United States; however, it is not provided by the Census Bureau. In its recommendations, NGAC calls for revising "restrictive statutory language as it pertains to non-sensitive address data in Title 13 U.S. Code and to 'geospatial' data in Section 1619 of the 2008 farm bill." Title 13 contains provisions for not disclosing or publishing private information that identifies an individual or business (Sections 9 and 214). A proposal to amend portions of Title 13 and make geospatial data collected by the Census Bureau more accessible will likely raise issues about the privacy of personal data collected by the federal government; the value of such data for emergency management; disaster preparation; other local, regional, and national needs; and the various tradeoffs between privacy concerns and the accessibility to geospatial data. As discussed above, legislation introduced in the 112 th Congress— H.R. 4233 —contains provisions to make geospatial Census data publicly available, notwithstanding Title 13 of the U.S. Code . Section 1619 of the 2008 farm bill ( P.L. 110-246 ) prohibits disclosure of geospatial information about agricultural land or operations, when the information is provided by an agricultural producer or owner of agricultural land and maintained by the Secretary of Agriculture. Certain exceptions, contained in Section 1619 of the 2008 farm bill, apply to the prohibition. NGAC has taken the position that the statutory language could be revised to enhance the value of the geospatial data while not compromising privacy. Concerns about access to geospatial information arose following the release of a draft Federal Trade Commission (FTC) report on Internet privacy. The report focused on "behavioral advertising," whereby advertisements are tailored to web users based on data collected about them across the web. The report proposed that Internet companies create a "do-not-track" mechanism that would allow Internet users to opt out of online data collection. Although the thrust of the report was not focused on geospatial information, some private-sector interests raised concerns about how access to geospatial information might be affected under a "do-not-track" mechanism. The Management Association for Private Photogrammetric Surveyors (MAPPS), an association of private geospatial firms, expressed its concern with the term "precise geolocation data," which MAPPS noted was undefined in the FTC report. In a letter to the FTC, MAPPS wrote: "The use of the term 'geolocation' or other geospatial relevant terminology, as it is used in this or possible future FTC regulation, could thwart legitimate and desirable business activities; deny consumers the products, technologies and services they are demanding in the marketplace; and impose a significant new liability on our members." In its letter, MAPPS requested that the FTC either remove any reference to the term "precise geolocation data," define the term, or exempt firms from having to obtain consent from consumers before collecting the geospatial data. MAPPS added that "it would be impractical, if not impossible, for our member firms to obtain prior approval or consent from individual citizens prior to acquiring or applying data such as satellite imagery, aerial photography, or parcel, address, or transportation data." On March 26, 2012, FTC issued the final report. The report included a footnote that provided some clarification over the issue of collecting geolocation data for the purposes of mapping: "With respect to use of geolocation data for mapping, surveying, or similar purposes, if the data cannot reasonably be linked to a specific consumer, computer, or device, a company collecting or using the data would not need to provide a consumer choice mechanism." Although the footnote seems to address the issue raised by MAPPS (as discussed above), its interpretation likely hinges on how the term "reasonably" is applied. In early 2009, several proposals were released calling for efforts to create a national GIS, or for renewed investment in the national spatial data infrastructure, or even to create a "NSDI 2.0." The language in the proposals attempted to make the case for considering such investments part of the national investment in critical infrastructure, both by directly supporting these national GIS and geospatial efforts, but also via secondary effects. For example, one proposal indicated that organizations rebuilding roads, bridges, and schools need updated online information networks "to rebuild in a smart, efficient, environmentally conscious and sustainable way." Another proposal touted a national GIS as a tool to speed economic recovery, which could also "leave the country with a public utility, a modern geospatial information system, that itself can become a foundation for new generations of industries and technologies in the future." Their call for efforts to build a "national" GIS, or a new version of the NSDI, or for an investment in a national spatial data infrastructure, raises questions about the current efforts to build the NSDI. Efforts to construct the NSDI began in 1994 with Executive Order 12906, or even earlier when OMB revised Circular A-16 in 1990 to establish the Federal Geographic Data Committee. The recent proposals imply that efforts which began 20 years ago and continue today are not sufficiently national in scope, planning, coordination, sharing, or implementation, despite the existence of the FGDC, NSGIC, or other entities such as the Coalition of Geospatial Organizations or MAPPS that are forums for organizations concerned with national geospatial issues. Congress may consider how a national GIS or geospatial infrastructure would be conceived, perhaps drawing on proposals for these national efforts as described above, and how they would be similar to or differ from current efforts. Congress may also examine its oversight role in the implementation of OMB Circular A-16, particularly in how federal agencies are coordinating their programs that have geospatial components. In 2004, GAO acknowledged that the federal government, through the FGDC and Geospatial One-Stop project, had taken actions to coordinate the government's geospatial investments, but that those efforts had not been fully successful in eliminating redundancies among agencies. As a result, federal agencies were acquiring and maintaining potentially duplicative data sets and systems. Since then, it is not clear whether federal agencies are successfully coordinating among themselves and measurably eliminating unnecessary duplication of effort. Were Congress to take a more active oversight role overseeing the federal geospatial enterprise, it could evaluate whether specific recommendations from nonfederal stakeholders have been addressed. For example, the National Geospatial Advisory Committee recommended that OMB and FGDC strengthen their enforcement of Circular A-16 and Executive Order 12906. However, enforcement alone may not be sufficient to meet the current challenges of management, coordination, and data sharing. The issuance of supplemental guidance to Circular A-16 by OMB in November 2010 may instigate new activity among and between agencies, which could spill over into better coordination with the state and local governments and the private sector. It will likely take some time, and several budget cycles, to track whether agencies are adhering to the "portfolio-centric model" of geospatial data management outlined in the supplemental guidance. It may also take time to evaluate whether the "portfolio-centric model" is the best available model for managing the federal geospatial assets. This Circular was originally issued in 1953, revised in 1967, and revised again in 1990. The Bureau of the Budget (now the OMB) issued Circular No. A-16 on January 16, 1953. Appended to this Circular were Exhibits, occasionally revised, that dealt with procedures for programming and coordinating of federal Topographic Mapping Activities, National Atlas, Geodetic Control Surveys and International Boundaries. The purpose of the 1953 Circular was "to insure (sic) that surveying and mapping activities may be directed toward meeting the needs of federal and state agencies and the general public, and will be performed expeditiously, without duplication of effort." The original Circular references Executive Order No. 9094, dated March 10, 1942. This Executive Order directs the Director of the Bureau of the Budget to coordinate and promote the improvement of surveying and mapping activities of the Government. Furthermore, it passes on functions carried out by the Federal Board of Surveys and Maps, established by Executive Order No. 3206, dated December 30, 1919. Thus, the OMB is directed to make recommendations to agencies and to the President regarding the coordination of all governmental map making and surveying. Executive Order No. 3206 superseded an Executive Order, dated August 10, 1906, that granted advisory power to the United States Geographic Board to review mapping projects to avoid duplication and to facilitate standardized mapping. A revised Circular A-16 was issued on May 6, 1967. The most significant change in this revision is the addition of a new section on Responsibility for Coordination. This section outlines the responsibilities of three federal departments (Department of the Interior (DOI), Department of Commerce (DOC) and Department of State (DOS)). Both the original and the 1967 revision of the Circular focus on providing a guide for the development of annual programs of the individual agencies and, through the Exhibits, established extensive reporting requirements. A second revised Circular A-16 was issued on October 19, 1990. This revision expanded the Circular to include not only surveying and mapping, but also the related spatial data activities. Specifically, it included geographically referenced computer-readable (digital) data. In addition, the Exhibits are no longer referenced and a short reporting requirements section is added. The 2002 updated Circular calls for continued improvements in spatial data coordination and the use of geographical data. Objectives for this revision are to reflect the changes that have taken place in geographic information management and technology, and to clearly define agency and FGDC responsibilities. The proposed revision displays an integrated infrastructure system approach to support multiple government services and electronic government. | Congress has recognized the challenge of coordinating and sharing geospatial data from the local, county, and state level to the national level, and vice versa. The cost to the federal government of gathering and coordinating geospatial information has also been an ongoing concern. As much as 80% of government information has a geospatial component, according to various sources. The federal government's role has changed from being a primary provider of authoritative geospatial information to coordinating and managing geospatial data and facilitating partnerships. Congress explored issues of cost, duplication of effort, and coordination of geospatial information in hearings during the 108th Congress. However, challenges to coordinating how geospatial data are acquired and used—collecting duplicative data sets, for example—at the local, state, and federal levels, in collaboration with the private sector, are not yet resolved. Two bills introduced in the 112th Congress, H.R. 1620 and H.R. 4322, would address aspects of duplication and coordination of geospatial information. The federal government has recognized the need to organize and coordinate the collection and management of geospatial data since at least 1990, when the Office of Management and Budget (OMB) revised Circular A-16 to establish the Federal Geographic Data Committee (FGDC) and to promote the coordinated use, sharing, and dissemination of geospatial data nationwide. OMB Circular A-16 also called for development of a national digital spatial information resource to enable the sharing and transfer of spatial data between users and producers, linked by criteria and standards. Executive Order 12906, issued in 1994, strengthened and enhanced Circular A-16, and specified that FGDC shall coordinate development of the National Spatial Data Infrastructure (NSDI). On November 10, 2010, OMB issued supplemental guidance to Circular A-16 that labels geospatial data as a "capital asset," and refers to its acquisition and management in terms analogous to financial assets to be managed as a National Geospatial Data Asset Portfolio. It will likely take some time, and several budget cycles, to track whether agencies are adhering to the "portfolio-centric model" of geospatial data management outlined in the supplemental guidance. The 112th Congress may examine its oversight role in the implementation of OMB Circular A-16, particularly in how federal agencies are coordinating their programs that have geospatial assets. The high-level leadership and broad membership of the FGDC—10 cabinet-level departments and 9 other federal agencies—highlights the importance of geospatial information to the federal government. Questions remain, however, about how effectively the FGDC is fulfilling its mission. Has this organizational structure worked? Can the federal government account for the costs of acquiring, coordinating, and managing geospatial information? How well is the federal government coordinating with the state and local entities that have an increasing stake in geospatial information? What is the role of the private sector? State-level geospatial entities, through the National State Geographic Information Council, also embrace the need for better coordination. However, the states are sensitive to possible federal encroachment on their prerogatives to customize NSDI to meet the needs of the states. In early 2009, several proposals were released calling for efforts to create a national Geospatial Information System (GIS). Language in the proposals attempted to make the case for considering such efforts part of the national investment in critical infrastructure. Congress may consider how a national GIS or geospatial infrastructure would be conceived, perhaps drawing on proposals for these national efforts and how they would be similar to or differ from current efforts. |
The International Monetary Fund, conceived at the Bretton Woods conference in 1944, is the institutiondesigned tosupport global trade and economic growth by helping maintain stability in the international financial system. Initially, theIMF served primarily industrialized countries by supporting currency convertibility and providing them withshort-termfinancing when needed to defend their pegged exchange rates. With the demise of the fixed exchange-rate systemin 1973,and the huge growth and liberalization of the private international capital markets, industrial countries soon foundlittleneed to draw on the Fund. At this point, the IMF increased its assistance to developing countries, some of whichwerefinding themselves increasingly embroiled in financial problems. (1) Most IMF lending draws from the Fund's permanent assets (some $283 billion), provided by member countries (the capitalsubscription or quota) as part of their commitment when they join the fund. In addition to being the financialresources ofthe Fund, the quota is important because it determines a country's voting power and borrowing capacity. The IMFmaintains two borrowing arrangements with selected member countries, as well, for times when the Fund may notbesufficiently liquid to meet all borrowing needs. The General Arrangements to Borrow (GAB) is a $23 billion creditlineestablished by 11 industrialized countries in 1962. The New Arrangements to Borrow (NAB) was establishedfollowing the1994-95 Mexican peso crisis as a supplemental line of credit by 25 member countries, adding another $23 billionofcurrency borrowing authority. IMF lending involves providing hard currencies to member countries with balance of payments problems based on need,willingness to adjust policies, and ability to repay. Three types of financing facilities are available under the generalresources account: 1) the stand-by arrangement; 2) the extended arrangement (these two constitute most IMFassistance);and 3) special facilities. Two programs created since December 1997, the Supplemental Reserve Facility (SRF) andtheContingent Credit Line (CCL), amount to special access policies to stand-by and extended arrangements underextenuatingcircumstances. As part of the IMF's evolving sense of mission, it has developed lending facilities to address theneeds ofthe poorest developing countries: the Poverty Reduction and Growth Facility (PRGF) - renamed in November 1999fromthe Enhanced Structural Adjustment Facility (ESAF); and the Heavily Indebted Poor Countries (HIPC) initiative. Although the IMF has operated for over half a century in an evolving and at times volatile global economy, it was theseverity and frequency of the 1990s financial crises that rekindled the recent debate over its core mission. Manycompetingperspectives have developed, but there are some common starting points to consider. First, since the end of theBrettonWoods era in 1973, the IMF has redirected its attention towards the developing world. Second, IMF arrangementshavegrown in size and maturity, as it has taken on increasingly larger financial "bailouts." Third, the Fund has expandedits roleas a development organization through concessional loan programs to very poor countries. Fourth, short-termbalance ofpayments lending has given way to global financial crisis management. For roughly the first three decades, total IMF outstanding credit was small by historical standards, peaking at SDR (2) 13.7billion in 1977, much of the increase related to financing severe, but temporary balance of payments deficits of oilimporting countries during the mid-1970s oil price shocks. Data for the past two decades point to two additionaldistinctperiods documenting the IMF's elevated exposure to broader global financial troubles. First, the debt crisis in LatinAmerican during the 1980s required vastly greater resources as the IMF took the lead in coordinating the responseamongthe private banks, multilateral financial institutions, and individual bilateral creditors to avoid massive default. TheIMF'sexposure is clearly visible in its increased lending, peaking at SDR 37.6 billion in 1985 (nearly three times theprevioushigh in 1977). Second, beginning in 1995, a series of individual country financial crises resulted in unprecedented IMF lending. First, theMexican peso crisis unfolded abruptly in December 1994. As Mexico's problems began to wind down, a largerAsianfinancial crisis erupted in 1997, with Russia and Brazil following on its heels in 1998 and 1999, respectively. Theseincidents collectively drained IMF funds, with total credit outstanding rising over six fold from SDR 10 billion in1980 toSDR 67 billion in 1999. Liquidity concerns, along with new policies developed to make access quicker and pleasforadditional resources (in both the quota and borrowing limits), pushed the IMF debate to center stage. (3) During the 1990s, the concentration of IMF lending was particularly evident. Table 1 shows the percentage of total IMFpurchases (draws) to the major crisis countries since 1995. It includes those made through the SupplementalReserveFacility after 1997 and comprises roughly 90% of the SDR value of IMF purchases for any given fiscal year. (4) As may beseen, Russia has been a significant user of IMF funds since 1995. In 1995 and 1996, when the Mexican peso crisishit,Russia and Mexico together accounted for 56.8% and 67.4% of IMF purchases, respectively. In fiscal 1997, Russiawas theonly major borrower, constituting 42.6% of total draws. With the advent of the Asian and Brazilian problems, themajorcrisis countries collectively accounted for 89.8% and then 82.9% of IMF purchases during fiscal 1998 and 1999,respectively. Table 1. IMF Purchases by Major Crisis Countries, 1995-99 (percent of total IMF purchases or draws by fiscal year) Source: International Monetary Fund, Annual Report , various years. * Includes all Supplemental Reserve Fund commitments beginning in 1998; does not include PRGFconcessional loanfacility data. If the mission of the IMF were to be defined by its lending portfolio, table 1 would suggestthat its primary purpose is tolend to countries with major currency crises rather than those with short-term, non-crisis balance of paymentsproblems. Among the fundamental questions that have arisen from this global posture of the IMF are: is the Fund "succeeding"inmeeting its core mission of supporting international financial stability, and does the expectation that crisis lendingwilloccur contribute to the possibility of future runs on currencies? In appropriating funding in the fall of 1998 to increase the U.S. quota in the IMF, Congress required that anindependentcommission be created to evaluate the international financial institutions, giving particular attention to the IMF. TheInternational Financial Institutions Advisory Commission (hereafter the Meltzer Commission) was given six-monthstopresent a detailed report to Congress. Professor Allan H. Meltzer of Carnegie Mellon University, historically astaunchcritic of the IMF, was named commission chair. (5) The final report reflects the overarching view that the IMF has overstepped its mission of supporting international financialstability by increasingly undertaking large bailouts of countries in severe economic and financial crisis. Not allcommissioners agreed, as reflected in the split 8-to-3 vote approving the final report and in its publication withdetaileddissenting opinions. There was consensus on two issues, however, both pointing to reducing the size and scope oftheFund. First, the Commission proposed that the IMF restrict its lending to only short-term liquidity needs of membercountries and eliminate its role as a long-term lender, particularly for purposes of reducing poverty or promotingdevelopment. Second, the IMF, the World Bank, and the regional development banks should write-off all the debtfrom theso-called Heavily Indebted Poor Countries (HIPCs). (6) The Meltzer Commission report builds its case for redefining the IMF mission based on the following arguments: 1. Since the IMF's creation in 1944, its core mission of supporting global financial stability remains, but an internationalfinancial system based on a gold/dollar standard of pegged but adjustable exchange rates and capital controls nolongerexists. Since 1973, most industrial countries have adopted flexible exchange rates and strengthened their centralbanks(lenders of last resort), effectively eliminating their need for IMF assistance; 2. The IMF, in response, adjusted its mission by turning to the developing world, where it has made increasingly large andlonger-term loans to crisis countries, and in some cases, has provided concessional loans to the poorest developingcountries. According to the report, "mission creep" has led to requests by the IMF for additional financial resourcesandpowers; 3. IMF assistance and conditionality have led to an "unprecedented" amount of influence for a multilateral institution overborrowing countries and fostered their increased dependence on the Fund. Overall economic and developmentresults,however, have been disappointing; 4. The IMF has proven to be poorly suited to anticipate financial crises, slow in dispensing financial assistance, and proneto pushing pro forma policy advice that can compound rather than alleviate problems. The severity and recurrenceof theseproblems suggests that the preventative and coping mechanisms as currently practiced by the IMF are not adequate; 5. The most significant problem related to IMF programs, particularly since the Mexican bailout in 1995, has been the riseof moral hazard, or the over commitment of particularly short-term financing by private investors and lenders todevelopingcountries in part because of an expectation, based on previous experience, that the IMF will provide the foreignexchangeliquidity that will allow them to exit the country in time of crisis and without bearing their full losses (Russia is themostprominent example); 6. The report lists a number of other problems internal to the IMF including: failure to enforce IMF conditions uniformly;poor transparency; political manipulation of the IMF by G-7 countries; lack of independent oversight; and overlapofmission with other international financial institutions. (7) The Meltzer Commission makes the case for restructuring the IMF to as part of a more targeted and much reduced mission,with redefined obligations for members of the Fund, as well. At the heart of the proposal is a strong conviction thatdeepstructural reforms, particularly of developing country financial systems, would go a long way toward reducing thepotentialfor currency crises and the related need for large, costly IMF bailouts. Specific report recommendations are groupedbelow. Redefine the IMF's Mission. The IMF should be restructured as a smaller organization with three distinctresponsibilities: 1) act as a "quasi-lender" of last resort that would restrict lending to short-term liquidity assistance;2)collect and disseminate country financial and economic data on a timely basis; and 3) provide advice on economicpolicyrather than impose conditions. Loans would be made only to those countries that had met"preconditions" of financialsoundness, except under "unusual" circumstances where stability of the international financial system is at stake. All otherlong-term lending should cease, particularly long-term concessional lending to the poorest countries, to differentiateclearlythe IMF's mission from that of the development banks. As a result, the Commission sees no need to consider anyadditional quota increase in the foreseeable future. Participation in IMF Programs. All member countries should provide accurate and timely economic and financialinformation for all market participants to use, both private and public. IMF lending would not be extended to largeindustrial countries because Fund resources are inadequate to cover their potential needs; in any case they shouldnot beneeded in countries with flexible exchange rates and the means to act as their own lenders of last resort. Neitherwouldthere be any need to conduct Article IV consultations with developed countries. The IMF could offer policy advice,but theprecondition of prudent standards would theoretically obviate the need for the current elaborate conditions forlending. Rules (preconditions) for Lending. To become eligible for IMF assistance, member countries would need to meet fourpreconditions or minimum prudential standards: 1) allow entry of foreign financial institutions to deepencompetitiveness,reduce corruption, and diversify risk in the banking system; 2) require that domestic banks be adequately capitalizedtoestablish market discipline; 3) publish the maturity structure of outstanding sovereign and guaranteed debt, andoff-balancesheet liabilities to encourage safe and sound behavior; and 4) meet a "proper" fiscal requirement so the IMF wouldnot beused to support irresponsible budget deficits. The IMF should not lend to salvage insolvent financial institutions. TheCommission believes that adopting higher IMF-set financial standards and discouraging short-term borrowing canreducethe potential for moral hazard. Terms for Lending. To support the basic mission of liquidity lending, IMF loans should have short maturities (not toexceed 120 days and one roll-over period), a graduated penalty rate (above sovereign yield), and an explicit legalpriorityfor repayment. Defaulting countries would not be eligible for additional lending by any multilateral agency or IMFmembercountries, and credit limits would be clearly defined and strictly observed. The new rules could be phased in overthree tofive years to allow countries time to meet new requirements, with IMF supporting crises in the mean time, but athigh loanpenalty rates. Extraordinary circumstances for borrowing such as natural disasters, political turmoil, or emergencyassistance should be done through the relevant multilateral development institutions (United Nations, World Bank)orbilateral arrangements. Exchange Rate Policy. To permit the greatest latitude for adjusting to changes in both domestic policy choices andexternal economic events and to avoid costly attempts to stave off devaluations, countries should shun any ofvariousadjustable peg exchange rate systems, relying instead on either a firmly fixed or flexible exchange rate regime. Moreimportantly, countries should be strongly encouraged to adopt appropriate "stabilizing monetary and fiscal policies"toreduce the possibility of economic shocks that might require dramatic adjustment in either the exchange rate(devaluation)or price level (interest rates). Debt Issues. IMF arrangements historically (e.g. the 1980s Latin American debt crisis and 1994 Mexican pesodevaluation) have kept private lenders and investors from realizing their full losses and having to implement debtrestructuring on their own. Sovereign borrower and lender conflicts should be worked out by the participantswithoutresorting automatically to IMF assistance. In the case of the so-defined Heavily Indebted Poor Countries (HIPCs),however, all IMF (and other) debt should be written off because of their inability to repay "under any foreseeablefuturedevelopments." Debt relief would be contingent upon debtor countries implementing broad reforms and adoptingan"effective" development strategy. (8) IMF Finance and Accounting Reforms. The Fund's accounting system should be simplified and rationalized to improvetransparency and better approximate standard accounting procedures that reflect assets and liabilities in meaningfulways(such as distinguishing between the usefulness of various currency holdings.) In concert with the proposed reducedrole ofthe IMF, no further quota increases should be considered in the foreseeable future. Four members of the Meltzer Commission dissented from the report and three formally voted against it,although they wereagreed on the need for IMF reform. They supported the report's call to differentiate clearly the responsibilities ofthe IMFand development banks and its conclusions that stronger banking systems in developing countries are imperative,thatgreater transparency mitigates abuse by all parties, and that the poorest countries need debt forgiveness and grantsfromindustrial countries to help cover basic public goods. The dissenting opinion disagrees, however, with the detailson how toachieve these goals. Dissenting commissioners had varied opinions, but the collective dissenting statement challenges the report on its analysis,interpretation, and recommendations regarding the role of the IMF in the international economy. The dissenterssuggestthat the report's analysis mischaracterizes the effects of international financial institutions over the past five decades. Theycontend that the international economy, despite periods of volatility, has performed well since World War II andcountrieswith severe financial problems have all been helped by IMF assistance. These include most of those that facedcrises in the1990s (Indonesia and Russia being the exceptions), which have since "experienced rapid V-shaped recoveries." The dissenters also point out that while the report criticizes the international financial institutions for underminingdemocracy by dictating policies that should be domestically determined, the past decade has witnessed anunprecedentedtransition to democracy in much of the world. The dissenting commissioners argue that the Commissionrecommendations,if implemented, might actually worsen rather than improve the prospect for global financial stability and therebypotentiallyundermine the fight against poverty and underdevelopment. They also maintain that the recommendations are notwellsupported by evidence in the report. Promoting Financial Instability. Dissenters argue that the report's key recommendation that the IMF restrict itsoperations only to countries that prequalify for assistance based on reforming their financial systemsand do so without IMFauthority to impose policy conditions is a flawed strategy because: a) the authority to impose policy changes isnecessary toencourage macroeconomic corrections, such as insisting huge fiscal deficits be reduced; otherwise, IMF assistancemightfuel rather than fight the crisis; and b) those countries that would not or could not meet IMF standards would be atevengreater risk of turmoil if a financial problem arose. To the extent that this might include large developing countries,theinternational economy may be at greater risk of systemic financial upheaval. Dissenters found fault with five of the reports key "lines of analysis." These are listed below, with the dissenters responsefollowing in parentheses: the main problem is moral hazard, (for which dissenters claim there is little empirical evidence); "penalty" rates will deter excessive borrowing (dissenters assert that borrowing will not be tempered by higher costs during a liquidity crisis); the IMF fails to require banking reform in crisis countries (when it actually does); literature on the effectiveness of IMF "conditionality" has been represented as negative (when actually it is more balanced); and there is no discussion of what would happen in the absence of IMF assistance (which some argue could lead to worse outcomes). Undercutting the Fight Against Poverty. The dissenting opinion argued against the report's recommendation toterminate long-term poverty lending at the IMF as it could militate against poverty reduction efforts, as wouldrelying onlyon appropriations from rich countries to fund assistance to poor countries. The IMF's Poverty Reduction andGrowthFacility (PRGF) is represented as helping millions of the world's poorest people and worthy of continued support. Further,the report's recommendation that advanced developing countries rely only on private capital markets for externalfinancecould hurt them during times of financial market volatility or panic. Unsubstantiated Proposals. Dissenters also criticized the lack of detailed evidence in support of pursuing many of theCommissions' proposals, suggesting that without more thorough documentation, the report presents opinion as muchasreasoned analysis. Other questions were raised regarding the wisdom of: 1) precluding the IMF from assistinghigh-incomecountries; 2) requiring countries to adopt only selected exchange rate systems; 3) insisting on separate new rulesor ideasfor developing country banking systems when the Basel Core Principles have been agreed to and serve the samepurpose. Dissenters also argued that the report failed to address some key issues, such as: 1) advocating for a better "early warning"system to respond in an anticipatory manner to future financial crises; 2) outlining an adequate role for private sectorburden sharing in times of financial trouble; and 3) giving more attention to detailed exchange rate options. Responding to the Meltzer Commissions recommendations, the U.S. Treasury issued a formal report supportingthe overallmission and effectiveness of the international financial institutions, acknowledging the need for reform, butdisagreeingwith "the bulk of the Commission's reform prescriptions." (9) The Treasury report expresses the need to evaluate IMFreform in the context of how it can be done best to ensure that global economic challenges are met that are "criticalto U.S.interests." This perspective is decidedly different from others regarding how to assess benefits and direction of IMFreform. Although the U.S. Treasury makes its own detailed recommendations, they would not result in anysignificantchanges from the way the IMF operates today based on continuing reform efforts largely designed with U.S.influence. Treasury is sympathetic to the call for developing countries to improve their financial sectors, to become more transparentin reporting financial and economic data, to adopt exchange rate regimes and the related policies that lend credibilityandstability to their economies, and to improve market incentives and avoid undue use of the IMF. Treasury disagreeswith theMeltzer Commission's strategy for achieving these goals. Treasury's central concern is that the recommendationswouldnot allow the IMF to respond to future financial crises adequately, perhaps deepening and protracting their effectsabroadand in the United States, as stated in its summary of the Meltzer Commission report: The majority report outlines a set of recommendations for reform of the IMF that would fundamentally change the nature ofthe institution. The main objective of the commission's proposals is to limit IMF lending to very short-term,essentiallyunconditional liquidity support for a limited number of relatively strong emerging market economies that wouldprequalifyfor IMF assistance. (10) The Treasury finds fault with this approach suggesting that: 1) it would potentially restrict the IMF from responding tofinancial emergencies in many large countries that did not prequalify, including the weaker countries that needassistancemost, perhaps aggravating broader systemic problems; 2) prequalification criteria are too narrow, focusing onfinancialsector issues, which alone are not sufficient to "significantly reduce" risk of crisis; 3) prequalified lending couldincreaserather than decrease moral hazard if countries targeted policy reform for the express purpose of meeting only IMFguidelines; 4) eliminating conditions for lending would reduce leverage for policy change, as well as increase thepossibility of financial assistance being misused; 5) very short loan maturities and excessive interest penalties wouldforcerepayment prematurely at excessive cost, worsening borrowing countries already tenuous financial position; and6)eliminating poverty assistance lending would remove IMF and its macroeconomic expertise from the developmentadjustment process involving the international financial institutions. While recognizing a mutuality of concern between the Treasury's perspective and that of the Meltzer Commission, and thatsignificant progress has been made in reforming the IMF, Treasury proposes a different agenda for altering IMFpolicies toimprove its responses to financial emergencies. The general thrust of these recommendations is in line with manyothers,but differs in detail. There are five major categories of improvement suggested: 1) Improve information flow from governments to markets, not just the IMF "club of nations." Treasury emphasizesimportance of IMF's new Special Data Dissemination Standard (SDDS), with some modifications; 2) Give more attention to financial vulnerabilities, with IMF surveillance emphasizing key liquidity indicators (e.g. debtmanagement guidelines) and identifying unsustainable exchange rate regimes; 3) Use IMF financing facilities more strategically, focusing on crisis prevention and emergency situations in emergingeconomies. Treasury calls for adjusting the Contingent Credit Line (CCL), using a graduated scale of lending ratesbasedon size of the draw to discourage excessively large or extended lending arrangements. It is presented as the bestanticipatory response to crises that would serve better than the narrow prequalification scheme advocated by theMeltzerCommission. The Supplemental Reserve Facility (SRF), which provides IMF financing at higher rates than normalstand-by arrangements, is a successful tool for higher loan pricing and so would encourage early repayment andjudiciousborrowing (Brazil being the most recent case). Treasury would not remove the PRGF from IMF managementbelieving ithas a role to play in helping countries enact necessary macroeconomic adjustment policies in addition todevelopment bankexpertise in other critical policy areas. 4) Emphasize market-based solutions to crises to lessen moral hazard and facilitate return of crisis countries to "normalmarket access." It believes the call for 100% debt relief of HIPC countries is too high to be financed by the IFIs anddeveloped countries. In addition, it would increase potential for moral hazard. The idea behind the HIPC initiativeis toreduce the debt burden of very poor countries to levels of other developing countries. Full debt relief mightencourageincreased indebtedness to qualify as a HIPC country. In addition, funds forgiven are not available for re-lendingto othercountries in need of borrowing, especially from concessional facilities at the World Bank and IMF. 5) Modernize the IMF by establishing a permanent independent evaluation office and create a liaison group of privatefinancial market participants to improve its understanding of global market trends. Other recommendations counterto theMeltzer Commission included leaving future quota increase decisions to the long-established quota review process,requiring all countries to continue undergoing Article IV consultations (to emphasize the "universal nature ofFund"), andsuggesting that the IMF already has priority for repayment among public and private creditor institutions. In a separately issued study prior to release of the Meltzer Commission report, the Council on Foreign Relationspresentedthe recommendations of another panel of experts on the global financial system. (11) In agreement that many of the keyproblems identified by the Meltzer Commission exist, this report, the "broad thrust" of which was supported by all29members, takes a complementary overall approach to resolving these concerns. Believing that markets provide theclearestsignals of problems in the international financial system, the Council on Foreign Relations report recommends thatamarket-based approach guide reform efforts in borrowing countries. The "broad thrust," therefore, is to "place theprimaryresponsibility for crisis avoidance and resolution in emerging economies back where it belongs: on emergingeconomiesthemselves and their private creditors, which dominate today's international capital markets." (12) The Council report also agrees with the Meltzer Commission on some broad policy directions including: 1) strengtheningcrisis prevention management; 2) discouraging pegged exchange rates, to the point of having the IMF refuseassistance tocountries with "unsustainable" pegs; 3) refocusing the IMF toward monetary and financial policies and away fromstructural reform and development needs, which are better handled by the World Bank; 4) enhancing IMFoperationaltransparency, including expanded use of its Special Data Dissemination Standard (SDDS); and 5) ensuring thatindividualcountries take political responsibility for their economic and financial policies and actions. It goes one step furtherincalling for using transparent and nondiscriminatory tax measures as a way to control short-term capital movements,whichare viewed as a potential leading factor of financial instability. The Council report differs from the Commission, however, on how to accomplish specific market-based reform of IMFoperations. First, rather than force countries into a narrowly defined reform structure, the lack of which wouldprohibitreceiving IMF assistance, the Council on Foreign Relations report advocates an incentive system to encourage "goodhousekeeping" ranging from insisting on sound policy decisions such as fiscal responsibility, prudent debtmanagement,and avoidance of overvalued exchange rates, to making deeper structural changes, such as financial sector reform,withparticular attention to developing bank deposit insurance systems. This could be accomplished, the reportconcludes, bylending on more favorable terms to countries that meet these goals rather than forsaking noncomplying countriesalltogether, as recommended by the Meltzer Commission. Second, IMF assistance should not be used simply to bail out private sector lending and investment. To promote privatesector burden sharing (address the moral hazard issue), borrowing countries should use "collective action clauses"in bondcontracts, for example, to ensure that all parties, public and private, are compensated on the same terms and holdoutscannot impede attempts at orderly debt rescheduling when widely accepted as the appropriate course of action. Where debtrescheduling is considered necessary, the IMF should lend only if "good faith" discussions on rescheduling are beingpursued with private lenders. Third, the Council report also recommends that the IMF not pursue large bailouts by limiting credit to levels defined inexisting Fund guidelines. (13) Combined withcharging higher rates of interest for riskier loans, limiting lending will reducethe risk of moral hazard. In addition, when a financial crisis threatens the international financial system, the Councilrecommends the IMF use its credit lines (the GAB and NAB) for when countries are largely responsible for theirownproblems. If a country's financial problems are deemed largely externally driven, a separate special "contagionfacility"should be used in place of the CCL and SRF to respond to the threat of systemic crisis. These provisions differsignificantly from the Meltzer Commission's narrower view that only very short-term liquidity lending is neededif reformefforts are embraced. The Council on Foreign Relations anticipates that future speculative financial crises mayrequiredeeper, longer-term assistance, but not to the extent that has been offered in the 1990s. Reducing the number and severity of financial crises is a universally desired goal, but determining how best toaccomplishthis task and defining the IMF's role in this process is a hotly disputed matter. A broad range of solutions are beingproposed to improve IMF operations within the context of a changing and frequently volatile international economy(see appendix 1 for a side-by-side comparison). Most observers support some type of IMF reformincluding clarifying itsmission relative to the development banks, reconsidering how it can emphasize prevention and greater private sectorparticipation in negotiating more orderly workouts of financial crises, and determining how the Fund can best serveas acatalyst for financial reform in developing countries. There is also broad agreement that the IMF should operate as a monetary institution focusing on fiscal, exchange rate, andmonetary policies and leave long-term structural reform to the development banks. Less agreement exists on thedisposition of the Poverty Reduction and Growth Facility (PRGF). The Meltzer Commission would close it, thedissentersresist this idea, the U.S. Treasury actively supports its continuation, and the Council on Foreign Relations makesnospecific recommendation. Operational changes at the IMF that are widely embraced include promoting greatertransparency in virtually all aspects of information gathering and dissemination including adopting a standardizedpresentation of accounting and financial data to improve market decision-making ahead of potential crises. Beyond these general considerations, there is much disagreement over specific courses of action. The Meltzer Commissionargues that having the IMF "bailout" countries experiencing large financial crises is a losing proposition. It hasneither thefinancial resources nor the clout to avert a currency run once begun, nor has its conditionality requirements beeneffectivein bringing about the structural reforms in countries that many argue are needed to help avert future crises. Theassuranceof IMF lending further exacerbates the problem by encouraging moral hazard, considered the single most criticalproblemthat can be solved in the public policy process. Its fundamental stand hinges on the belief that reform must precede(if notbe held hostage to) IMF assistance, otherwise the cycle of excessive lending and sudden withdrawal of capital willnot bebroken. The Meltzer Commission believes the IMF should return to short-term liquidity lending, where financial assistance can bedisbursed quickly, unencumbered by extensive conditionality requirements. This is why it strongly advocatescountriesmeeting preconditions for IMF eligibility. If reform has already proceeded to a certain level, conditionality of IMFassistance is unnecessary. In cases where countries either cannot or will not comply with IMF preconditions, theywilleventually be subjected to the unfettered actions of the international capital markets. Experience would instructpolicymakers as to which produces the least desirable outcome. As such, the IMF would have a much reduced mission,eliminating all long-term assistance, particularly for development purposes, and focus on very short (four months),butquickly disbursed lending arrangements at "penalty rates." The Meltzer Commission dissenters agree with the need for structural reform of developing country financial sectors, thepreference for short-term IMF lending, greater transparency, and the need for debt forgiveness for the poorestcountries. They argue, however, that the role of moral hazard is overplayed and that IMF conditionality can reduce themagnitude of acrisis and is necessary to enforce reform efforts. In this light, dissenters question the specific recommendations oftheMeltzer Commission report, particularly the strong stands on prequalifying for assistance, reducing IMF policyleverage byeliminating conditionality, and lending at very short maturities at above market (penalty) rates, which wouldpotentiallyeliminate assistance to some large countries, "increasing the risk of global economic disorder." These reservations have been reiterated by both the U.S. Treasury and the Council on Foreign Relations. The Councilreport argues that developing countries should adopt sound economic policies, but rather than make them aprequalifyingcondition for IMF assistance, a graduated lending rate scale should be used to encourage reform. The Council alsosupportsthe use of some type of capital control to discourage over-reliance on short-term investment capital, which is thefirst toleave if economic conditions deteriorate, hastening financial crises. Avoiding large bailouts is possible by adheringto theIMF-imposed lending limits already in existence and by relying more on market discipline to bring in greater privatesectorburden sharing, while restraining IMF assistance if there is no good prospect for resolving a country's balance ofpaymentsproblem. The U.S. Treasury argues that changes are needed in the IMF to meet new challenges of the global economy, but that theIMF is in the process of addressing many of the concerns that have been raised by the Meltzer Commission. Treasuryasserts that the Commission's specific recommendations, taken together, would deter the IMF from doing its job,whichwould not further U.S. interests. It argues that reform of the financial sector and other areas is critical, but thatmaking itpart of preconditions for IMF eligibility would likely deepen and prolong financial crises for countries not assisted. In itsview, other avenues for encouraging reform are available and IMF conditionality has been a necessary part of theprocess. Limiting loan maturities to four months, when, for the average crisis, it has taken a minimum of eight months torestoreconfidence in the private capital markets, indicates that the Meltzer Commission suggestion is too restrictive. Treasury alsoargues that the Poverty Reduction and Growth Facility (PRGF) has a constructive role to play in assisting thedevelopmentbanks by offering IMF macroeconomic expertise. The U.S. Treasury presents the IMF's ongoing reform efforts as essentially meeting most of the concerns raised by theMeltzer Commission report. Specifically it points to: 1) transparency goals being met by the increasing number ofIMFdocuments released to the public; (14) 2) crisisprevention improving by the ongoing implementation of the IMF's SpecialData Dissemination Standard (SDDS) and adoption of the "preventative" Contingent Credit Line (CCL); 3)emphasis onimproving country financial standards to Basel Core Principles; 4) enhanced government oversight of IMF resourceuse andother anti-corruption guidelines; and 5) continuing review of IMF operations in light of ongoing criticism. These specific Treasury recommendations reflect the IMF's perspective rather closely and although the Fund has notaddressed specifically the Meltzer Commission suggestions, it has continued to respond to the internationalcommunity'scritique of its operations. The IMF has acknowledged the need to improve core areas of concern raised by thevariousreports, including: transparency, accountability, unified reporting standards, domestic financial systems, crisispreventionearly warning methods, clearly defined private sector involvement, and internally consistent macroeconomic andexchangerate policies. It has responded with a detailed Code of Good Practices on Transparency in Monetary andFinancialPolicies , which incorporates guides such as the Special Data Dissemination Standard. The current IMFManaging Directorviews this as a "work in progress," however, entailing adapting the Fund to the changing world economy rather thanremaking it from scratch and has not suggested reducing any of its current programs. (15) Clearly, there are differences of opinion regarding the best path to achieve IMF reform despite a generalagreement that itshould happen. There are also differences in how to bring about reform of developing country financial systems,despiteuniversal agreement that some level of minimally acceptable standards are needed and that the IMF is unlikely tobesuccessful at managing this on its own. The overall question may become not whether the IMF should exist, buthow it canbest support international financial stability along with a host of other official and private sector organizations. In considering the merits of these reports, (16) much can be learned from a historical analysis of financial crises. Mostretrospective discussions of the IMF begin with its creation at Bretton Woods in 1944. Financial crises, both in theUnitedStates and abroad, however, have a much longer history. One study points to the lessons from past financial crises,comparing the troubled nineteenth and early twentieth century period with the1990s. The author documents howtheUnited States endured a financial crisis on average every eight years before making sweeping changes to its financialoperations, such as creating the Federal Reserve System in 1913. Further serious banking reform was delayed untilafterthe Great Depression hit. This experience points to the difficulty in making such deep structural reform that manydeveloping countries now face, which they often resist, as did the United States a century ago, and the apparentseriouslevel of motivation, both politically and economically, needed to spur such change. (17) Three insights emerge from this study. First, financial sector reform is not needed for capital to return to a country that hasundergone some type of financial crisis. Financial capital, for various reasons, has repeatedly found its way backtotroubled countries, including the United States in the nineteenth century, despite numerous setbacks. The need forfinancialsector reform, however, may be more compelling because of this trend; that is, financial sector reform is necessarynotbecause capital will fail to return to crisis countries, but precisely because it will return and hence be a disincentiveforreform, setting the stage for the next crisis. (18) Thissupports the universal call for financial sector reform, but notnecessarily the Meltzer Commission's implication that market discipline can force it. Second, the IMF is not the cause of financial crises. Crises were a part of the financial landscape long before BrettonWoods, when capital moved relatively freely among countries and in similar volumes relative to the size ofeconomies atthe time, and continued through history regardless of the international monetary system in place. Whether the IMFhasbeen an agent aggravating financial crises is less clear, but this research suggests that solutions, such as closing theIMF,would appear to have little effect on deterring future financial crises in and of themselves. (19) There is some evidence thatinternational "bailouts" may have some effect on hastening recovery in financially troubled countries, which canbe thoughtof as a "benefit" to counter the "cost" of moral hazard. (20) Still, there is broad preference to find a better, more orderly, wayto manage crisis situations. Third, in comparing the exchange rate problems of the 1990s with those of a century earlier (the gold standard), it hasbecome clear that there are solid benefits associated with firmly fixed exchange rates. Such fixing, however,requires acommitment to policies that will support the exchange rate. In today's world of pegged exchange rates with less thancredible promises given the proclivity of governments to reverse policy when international pressures mount, itappearsthere is little reason to believe that any of various alternatives to floating exchange rates or some extreme form offix(dollarization) is possible. This is in keeping with most current exchange rate analyses. In light of these insights, if there is a central conclusion that can be gleaned from the varied approaches to IMF reformdiscussed in this report, it may be that it is too much to ask the Fund to tame an international financial system wherecapitalmoves freely and speculatively, capable of causing severe macroeconomic problems. The Council on ForeignRelationsidea that limited capital controls be reconsidered, for example, may garner broader support in this context. This isnot todeny the benefits of increased oversight of the IMF, of continuing to emphasize adopting changes already in progressat theIMF, or of more stringent Fund advocacy for improving borrowing country policies. It may suggest, however, thatbecausemany players with far more resources and clout than the IMF are involved (governments and financial institutions),thatreform of more than the IMF may be needed to improve the prospect for greater stability to the internationalfinancialsystem. In particular, there is a growing body of literature seeking to find a middle path between continuing large IMF bailouts andleaving financially troubled countries to be disciplined by panicked capital markets, both of which frequently resultinturmoil. One thrust argues for changing lending rules to include specific contractual obligations that requirecreditors topursue a collective orderly debt workout if a crisis hits. This might diminish the frequency of future crises byincorporatinga more appropriate level of risk into lending arrangements and thereby reducing the amount of capital flowing intodeveloping countries. It could also lessen the depth of crises by reducing the amount of capital that could leave thecountryat the IMF's expense. The IMF could serve as an active proponent of this approach through its consultation andconditionality efforts, as well as, by lending into arrears as a support mechanism for keeping all parties to the debtrenegotiation table. (21) It appears that oversight actions by the U.S. Congress and institutions representing the international community have beencritical in fostering the many changes that are taking place within the IMF. Congress has its most leverage,however, whenconsidering appropriations legislation involving IMF funding increases. Since the quota review occurs only onceevery fiveyears and does not always result in a recommendation for an increase, in the interim, Congress must rely on thepublicforum and exerting policy pressure through U.S. representation at the IMF as its primary options for making itsvoice heard. Continued oversight surely will be necessary to keep the reform process moving, but more time may be needed tosort outprecisely which policy options will suit the collective, but competing needs of the IMF member countries and otherconstituents of the global economy. | In the fall of 1998, financial crises in Asia, Russia, and Brazil were unfolding, though in different stages, as the 105thCongress was in the process of passing the Omnibus Consolidated and Emergency Supplemental AppropriationsAct forFY1999 ( H.R. 4328 , P.L. 105-277 ). This legislation increased the U.S. quota of the International MonetaryFund (IMF), but attached a number of conditions to dispersal of the funds. Among them was creation of theInternationalFinancial Institutions Advisory Commission (the Meltzer Commission), which Congress chartered to evaluate andrecommend future U.S. policy toward the global financial institutions, particularly the IMF. The Commission released its report on March 8, 2000, calling for changes in the mission and operations of the IMF and thedevelopment banks. The 11 commissioners were unanimous only in generally recommending that: 1)the IMF restrict itslending to short-term liquidity needs, and 2) that it forgive debt to the poorest developing countries. The reportmakes thecase for restructuring the IMF to reduce and define clearly its mission, and clarify obligations for members of theFund, aswell. At the heart of the proposal is a strong conviction that deep structural reforms, particularly of developingcountryfinancial systems, would go a long way toward reducing the potential for currency crises and the related need forlarge,costly IMF bailouts. It also focuses heavily on the role of moral hazard. These concerns led to specific policyprescriptions, not unanimously embraced, including requiring financial sector reforms as a precondition for IMFassistance,lending for no longer than 120 days (with one rollover period) and at "penalty" rates, and eliminating any long-termlendingfor structural adjustment or poverty reduction. Four members of the Meltzer Commission dissented from the report. They supported the call to differentiate clearly theresponsibilities of the IMF and development banks, the need for stricter banking systems in developing countries,greatertransparency to mitigate abuse by all parties, and debt forgiveness for the poorest countries. They disagreed withthe detailslisted above, arguing that they would conceivably worsen rather than improve the prospect for global financialstability andthereby undermine the fight against poverty and slow development. A number of respondents to the Commission report also disagreed with what some consider its "narrow" prescriptions,including the U.S. Treasury and the Council on Foreign Relations, which offer alternative reform programs. Inaddition,financial crises have been a part of the international economic landscape long before the IMF was established,suggestingthat too much emphasis on this one institution may not bring the desired stability to the international financialsystem. Still, the IMF is responsible for addressing the concerns raised by Congress and other government institutionsaround theworld, which have served as a critical impetus for change. Continued oversight will be necessary to keep the reformprocess moving and more time may be needed to sort out precisely which policy options will suit the collective, butcompeting, needs of IMF member countries and the broader participants of the global economy. |
Second chance homes (SCHs, also referred to as maternity group homes) for unwed teenage mothers are not a new concept in the nation. They are a revival of an old institution, called the "maternity home," in a new form to provide a safe, stable environment for teen mothers and their children who cannot live at home. Such teens are assisted in becoming self-sufficient, developing job skills, learning how to become good mothers, obtaining help in gaining access to child care, and in planning for the future. Renewed interest in such homes occurred in 1995 during the welfare reform debate. With the passage of the welfare reform bill in 1996, the state block grant for Temporary Assistance for Needy Families (TANF) was created. TANF allowed the use of SCHs as a form of adult-supervised setting for unwed teenage mothers in which they could live apart from their parents and still be eligible for cash assistance. In the 109 th Congress, legislation has been introduced that would amend the Runaway and Homeless Youth Act (RHYA) to explicitly authorize funding for maternity group homes through its Transitional Living Program, and to evaluate such homes. When the 108 th Congress reauthorized the RHYA, maternity group homes were added as an allowable use of funds under TLP. This report describes second chance homes, discusses legislation that was introduced in the 109 th Congress related to such homes, and describes federal funding provided through TANF and other programs to assist needy teen mothers who live in second chance homes. Evaluations of the effectiveness of a SCH also are discussed. There is no one definition for second chance homes because, according to the Department of Health and Human Services (HHS), second chance homes "can refer to a group home, a cluster of apartments, or a network of homes that integrate housing and services for teen mothers and their children who cannot live at home because of abuse, neglect or other extenuating circumstances." TANF law defines a second chance home as "an entity that provides individuals ... with a supportive and supervised living arrangement in which such individuals are required to learn parenting skills, including child development, family budgeting, health and nutrition, and other skills to promote their long-term economic independence and the well-being of their children." The law lists a "maternity home" as a distinct entity from a second chance home and requires state welfare agencies to assist unwed teen mothers in locating such a home. It does not, however, define a maternity home or indicate how one differs from a second chance home. The Social Policy Action Network (SPAN), which was a private nonprofit national resource center for these homes, defined second chance homes as "places of refuge for the most vulnerable teen mothers and their children. They are community-based institutions that build social capital." Depending on a community's need, such homes can be located in both urban and rural areas of a state. The purpose of a second chance home is to assist and support young teen mothers in becoming self-sufficient by completing high school and developing job skills, to learn how to become good mothers by properly caring for their child, to help them gain access to child care, and to provide advice in planning for the future. According to SPAN, the main criteria for second chance homes is that they serve parenting teens (some will accept pregnant teens and allow them to remain in the residence with their infants for at least six months or longer after birth), and that they are residential. SPAN indicated that second chance homes not only provided a stable, nurturing atmosphere for teen mothers, but safe, nurturing environments for their offspring. Second chance homes were said to be unique because most offered access on site "to child care, education, job training, counseling, and advice on parenting and life skills." Staff also assist the residents in obtaining outside social services, child care and in making future plans. Second chance homes can be individually operated or can be operated and funded by agencies with broader missions and services. Churches and nonprofit organizations across the nation have operated group homes for teen mothers for a number of years. After the passage of the 1996 welfare reform law, several states joined the effort to create and operate second chance homes by supporting programs that were community-based or conducted by faith-based groups using TANF or state funds. Second chance homes provide a substitute living arrangement for unwed teenage mothers and their children who cannot live at home due to extenuating circumstances, such as violence, physical abuse, or unsafe living conditions. Earlier versions of this concept can be traced back to the mid-1880s. Before that time, support for unwed teen mothers was primarily provided by family, friends, and churches. In 1883, however, Charles Crittenton, a wealthy businessman and philanthropist, founded the first "rescue home" (named for his daughter Florence) that eventually became a chain of what later were called private maternity homes, to better support such mothers. Through moral and religious instruction, directors of these establishments tried to ensure that the mother did not bear more out-of-wedlock children. Subsequently, an extensive network of private maternity homes for "women in crisis" was established across the nation. The Florence Crittenton homes, described as one of the best known networks of maternity homes in 19 th century America, "shielded mothers from psychological or material worries during and after their confinement; ... provided nutritional and medical services that encouraged healthy deliveries; ... helped stressed individuals become better prepared to mother; and ... helped arrange adoptions" for mothers who lacked the means to raise their offspring. The average length of stay in the homes was about 20 months, and 60% of the mothers put their children up for adoption. In 1935, when the Aid to Families with Dependent Children (AFDC) program was enacted, primarily to help widows care for their children, federal funding to assist unwed mothers was established for the first time. George Liebmann, an attorney and former counsel to the Maryland Department of Social Services, reports that as a result of the AFDC program, the framework of the local maternity homes began to disintegrate. Through the AFDC program, cash aid was extended to unwed mothers to support and care for children in their own homes. Eventually, and also as a result of changing social attitudes toward non-marital births, maternity homes were widely viewed as obsolete. Around 1980, Liebmann indicates in a 1995 article, the number of maternity homes "bottomed out," and since that time the number of homes has been struggling upward. A survey of maternity homes conducted in the mid-1990s revealed that 215 such residences were located across the nation. In September 1995, during the Senate's welfare reform debate, there was support for the SCH concept, with passage of an amendment to provide $150 million (over six years) as seed money for states to support community-based homes for teen mothers under the age of 18. The SCH concept differed from the maternity home by requiring young mothers from unstable families to live with their children under adult supervision in the SCH as a condition for receiving welfare. Although included in two versions of the welfare reform bills that subsequently were vetoed by President Clinton, the SCH concept and principles attracted support in states and communities and revived interest in the concept. On August 22,1996, the welfare reform bill (the Personal Responsibility and Work Opportunity Reconciliation Act) was enacted into law ( P.L. 104-193 ). The law established block grants to states for Temporary Assistance for Needy Families and replaced the AFDC program. Funds may be used through TANF for second chance homes at state discretion. In addition, TANF (1) prohibits cash assistance to unmarried teen parents (under 18) unless they live with their own parents, guardians, or another adult relative, or other appropriate adult supervised living arrangement; (2) requires states to provide or assist unwed teen parents, who are on welfare and because of extenuating circumstances cannot live at home, in locating a second chance home, maternity home, or other appropriate supervised living arrangement; and (3) defines second chance homes. SPAN reported that a renewal of interest in second chance homes could be attributed to three factors—(1) a decrease in state welfare caseloads directed more attention to the needs of young teen mothers and their need for secure, stable housing; (2) state welfare surpluses brought attention to options, such as second chance homes, which initially appeared to be too expensive at the beginning of welfare reform; and (3) President George W. Bush made second chance homes one of the mainstays of his philosophy of compassionate conservatism. Second chance home providers may set various kinds of goals for their residents and the program in general to attain. SPAN suggested that a primary goal should be understood and supported by the entities funding the program, state and local social service agencies, community groups, and the teen mothers. For example, Massachusetts administrators chose safety as the state's primary goal for SCH providers. Consequently, state officials made contracts with private agencies to establish 27 second chance homes to provide safe and stable housing for unwed teen mothers and their children. New Mexico chose education as its primary goal and focuses on providing secure housing for teen mothers and assistance in preventing additional pregnancies, so that they can complete high school and strive to go to college. Proponents maintain that short- and long-term goals that might be established for second chance homes include stressing the importance of protecting and nurturing the children of the mothers, reuniting teens with and stabilizing their families, building the self-esteem of the mothers, suggesting alternatives to abortion, and keeping foster care mothers united with their children, among others. Most teen mothers who live in and are assisted by second chance homes have experienced troubled lives. Many such mothers have undergone difficulties, which might include living in poverty stricken and oftentimes abusive families, suffering persistent neglect, and possibly using drugs. A new challenge they must confront is parenthood. Living in a structured second chance home might not be easy for some teen mothers because in a large number of cases, such a setting might be the first time they are required to follow strict rules and meet certain expectations. Because of such backgrounds of potential residents, not all second chance homes are qualified to serve all teen mothers. SPAN noted that generally, teen mothers under age 14 might be better suited for foster care because of their inability to assume primary responsibility for the care of their offspring. Consequently, second chance home providers have to determine whether there are teen mothers that they will not serve. SPAN gave several tips that second chance home providers could consider when deciding which teen mothers can or cannot be assisted. These tips included—determining the age range of teens to admit; deciding what time limits, if any, will be set for periods spent at the home; deciding whether teen fathers will be provided residential services; and determining how to handle custody issues (that is, whether minor teen mothers living in such residences will remain in the custody of their parents, or be in the custody of the state). Because of the criteria that most second chance homes apply, some teen mothers will not be accepted. In such instances, SPAN advised, program providers should be aware of alternatives that are available to such teens. Information in SPAN's Second Chance Homes National Directory indicated that of the 95 second chance home providers who responded to their survey, all (except two, which specifically indicated that they also assist pregnant teens) served teen families (which consist of a mother and child ), and assisted such mothers of ages that ranged from as young as 12 to as old as 29. The time limit of stay ranged from no limit, to one or no more than two years. Some of the providers precisely indicated certain limits, such as, when the mother completed high school and found permanent housing, or when the child turned three years of age. Others indicated the time limit as it related to the type of housing or the specific program in which the mother was involved, such as two years for those living in group homes, and two years for those involved in a foster care Independent Living program. HHS reports that in some cases, second chance home providers involve the fathers of the offspring and assist them in obtaining access to services that they might need in becoming good parents, and in acquiring skills that will lead to employment. The SPAN Second Chance Homes National Directory lists 54 second chance homes that provide services to teen fathers. SPAN reported in its Second Chance Homes National Directory that "a growing number of states and communities have found a way to break the cycle of poverty and abuse for ... teen mothers" through creating second chance homes. Although funds for second chance homes were not specifically provided in the 1996 welfare reform law, several states decided to provide their own funding or use TANF funds to establish second chance homes. No state or community, however, directly operates a SCH, but instead contracts with nonprofit organizations to operate the homes. Among the first states to allow funding for a network of such homes were Massachusetts, Maryland, Michigan, and New Mexico. In 1999, statewide networks for such homes began in Texas, Rhode Island, and Nevada. In 2001, Georgia began a statewide program to operate second chance homes. Several communities in Missouri, Connecticut, Oregon, Texas, Washington, and Vermont have used Department of Housing and Urban Development (HUD) funding to open second chance homes. On the other hand, SPAN stated that because of a lack of funding, some second chance homes have been closed in various states. SPAN listed information about 95 second chance homes that were operating throughout the nation in its November 2001 National Directory (the latest data available). Such information includes what was described as "vital statistics" for the homes (that is, whether families and/or pregnant teens are helped, time limit of residency, if any, age of persons helped, etc.), services that residents receive, budget information, and contact information. Also listed were 37 additional second chance homes that currently were operating but where similar information about the homes could not be obtained. Information was gathered from the homes through a written survey distributed in summer and fall 2001 and provided through telephone interviews. The directory listed a total of 132 second chance homes that were operating in 30 states in the nation. SPAN did not claim that the list was exhaustive, but planned to produce annual updated editions to include information about additional second chance home providers as it became available. As far as it is known, annual updates to the directory were not produced. Legislation was enacted to reauthorize the Runaway and Homeless Youth Act for FY2004 through FY2008, and to authorize funding for maternity group homes through TLP, as previously mentioned. On May 1, 2003, H.R. 1925 , the Runaway, Homeless, and Missing Children Protection Act, was introduced by Representative Phil Gingrey to reauthorize programs under the Runaway and Homeless Youth Act and the Missing Children's Assistance Act. On October 10, 2003, the measure was signed into law ( P.L. 108-96 ). Title I of the law amends the Runaway and Homeless Youth Act's section regarding eligibility for assistance to establish a Transitional Living Program (TLP), by specifying that plans to establish group homes include maternity group homes, and that services provided include, as appropriate, parenting skills. A definition for maternity group homes was included as a new subsection. For FY2004, $105 million was authorized for RHYA, and such sums as necessary for FY2005 through FY2008. No specific funding, however, was recommended for maternity group homes. RHYA is up for reauthorization in the 110 th Congress. Between FY2002 and FY2006, congressional funding for the Runaway and Homeless Youth Program has fluctuated between $88 million to a high of nearly $90 million in FY2003. For an appropriations history of the Runaway and Homeless Youth Program, see CRS Report RL31933, The Runaway and Homeless: Administration, Funding, and Legislative Action , by [author name scrubbed]. For FY2007, the President requested the same amount enacted for the program in FY2006, that is, $87,837,000. The President, however, did not request separate funding for maternity group homes. The Administration proposes awarding 193 TLP grants for FY2007 that would include maternity group homes to provide transitional living opportunities for pregnant and parenting homeless teens. Furthermore, the Administration for Children and Families (ACF) announced that it will begin using vouchers to provide maternity group home services in order to reach more vulnerable youth. ACF estimates that $4 million will be used to support about 100 vouchers to pregnant and parenting homeless teens. It states further that a competitive grant would be awarded to a national organization for issuing the vouchers. Also, that national group would be responsible for recruiting and accrediting various maternity group home programs throughout the nation and for working with existing grantees to identify youths seeking those types of specialized services. The Runaway and Homeless Youth Program is currently funded at FY2006 levels under a continuing resolution, (CR, P.L. 109-383 ) through February 15, 2007. On January 24, 2005, S. 6 , the Marriage, Opportunity, Relief, and Empowerment Act of 2005 (MORE Act), was introduced by Senator Rick Santorum and referred to the Senate Finance Committee. Title III, Subtitle H of the bill would have amended RHYA to require an evaluation of maternity group homes and require the evaluator to submit a report to Congress regarding the status, activities, and accomplishments of such homes (supported by grant funds) no later than two years after the date in which the Secretary of HHS entered into a contract for the evaluation, and biennially thereafter. The bill would have authorized $33 million for FY2006 for maternity group homes eligible under RHYA, and such sums as necessary for FY2007. Identical provisions were included in S. 1780 , introduced by Senator Santorum on September 28, 2005, and referred to the Senate Finance Committee. No further action occurred. On September 27, 2005, Representative Roy Blunt introduced H.R. 3908 , the Charitable Giving Act of 2005, which not only would have amended the Internal Revenue Code to provide incentives for individuals and businesses to increase contributions to charities, but also would have amend RHYA to include maternity group homes for homeless youth within TLP. Referred to the House committees on Ways and Means and Education and the Workforce, no further action occurred. This provision, however, was similar to language already enacted in P.L. 108-96 . There is no single primary federal funding source for second chance homes. There are a variety of federal, state, and local programs, however, through which funding can be obtained for second chance homes. SPAN indicated that second chance homes were expensive to operate. It reported that such costs ranged from $8,000 to $65,000 per year per teen family, depending on the location of the home, the ability of the providers to coordinate services in a community, and the level of care needed by teen families. Not all SCH providers receive federal funding to operate second chance homes. For example, in Massachusetts, funding for some SCHs is received only from the state Department of Social Services, the United Way and/or state grants and contracts, while other homes receive funding from various sources, including individual donors, non-profits and foundations, faith-based groups, county or city governments, as well as federal grants. Major federal sources for second chance homes are available via programs administered by HHS and the Department of Housing and Urban Development (HUD). How much funding is being used for second chance homes through these avenues, however, cannot be determined. Such decisions are made according to the discretion of the agency administering the program. As mentioned above, some second chance homes have been closed in various states because of a lack of funding. Selected HHS and HUD programs that can be used as funding sources for second chance homes are discussed below. For FY2007, all federal programs are operating under a CR until February 15, 2007. Programs administered by HHS that may provide assistance to unwed teen mothers through second chance homes include the Runaway and Homeless Youth Transitional Living Program, TANF, Social Services Block Grants, Child Welfare Services Program (Title IV-B of the Social Security Act), and the Foster Care Program (Title IV-E, of the SSA). According to HHS, the two largest federal funding sources for second chance homes within the department are TANF and the Social Services Block Grant. These two programs, HHS states, "provide funds to states that may be important sources of support for young parents and can be used to fund second chance homes." Each program is discussed below. The Runaway and Homeless Youth Program (RHYP) is authorized under Title III of the Juvenile Justice and Delinquency Prevention Act of 1974. Amended by the Runaway, Homeless, and Missing Children Protection Act ( P.L. 108-96 ) in the 108 th Congress, the program authorizes the HHS Secretary to make grants to states that would assist public and private entities in creating and operating a community-based care system for runaway and homeless youth and their families. As previously stated, the Runaway and Homeless Youth Act is up for reauthorization in the 110 th Congress. For FY2002, the Administration proposed a new Maternity Group Homes (or SCH) initiative as a program component of TLP to allow young single mothers to participate in transitional living opportunities. Concern that such mothers are vulnerable to abuse and neglect, often end up on welfare, in foster care, in homeless shelters or on the streets, and that their children are at risk of becoming teen parents themselves, prompted this proposal. Competitive grants would have been offered to faith-based and community-based groups to provide a safe and nurturing adult-supervised living environment for unwed teen mothers (aged 16 to 21) and their children who cannot live safely with their own families. For FY2002, the Administration requested $33 million specifically for maternity group homes as a component of TLP. Congress appropriated, however, a total of $39.7 million for TLP, without specifying funds for maternity group homes but including an additional $19 million over the FY2001 TLP appropriation to ensure that pregnant and parenting homeless teens would be able to access transitional living opportunities and support through their communities. Since FY2002, funding for the needs of pregnant and parenting teens has been given to various organizations that already were receiving TLP funds and were directly serving that teen population. When the 108 th Congress reauthorized the Runaway and Homeless Youth Act, maternity group homes were explicitly added as an allowable use of funds under TLP. For FY2003 through FY2006, the President requested annual funding of $10 million for maternity group homes, separate from TLP funding. Congress, however, never appropriated specific funding for such homes. Both pregnant and parenting teens would have been assisted through community- or faith-based maternity group homes. Congress was aware of the need for funding residential services for young mothers and their children, and that pregnant and parenting teens were eligible for and served by TLP. Congress expected that the Family and Youth Services Bureau would continue providing technical assistance to enable TLP grantees and their community partners to address the unique needs of young mothers and their children, as well as to assist interested entities in identifying funding sources currently available to provide residential services to this population. For FY2007, the President did not request separate funding for Maternity Group Homes. As mentioned above, there are certain restrictions on the use of federal TANF funds for unwed teen parents. TANF funds cannot assist unwed teen mothers under 18 unless they live with their own parents, adult relatives, or live under adult supervision. Also, teen parents who have not completed high school must go to school, or enter a GED program, or participate in a state-approved alternative education or training program. Furthermore, states may use TANF funds for operating a SCH and maternity group home (TANF makes a distinction between the two homes), but not for constructing the living quarters. Other restrictions on the use of TANF funds include prohibiting their use for remodeling such buildings, or paying for medical services. Teen mothers living in such homes may be given cash assistance or vouchers through TANF funds. Also, funds may be used for financing any service that states want to provide in second chance homes. Such services might include pre-pregnancy family planning services, including abstinence education and birth control. There is no limit on the amount of TANF funding a state may use for a SCH. There is a federal five-year time limit for receiving TANF assistance for teen parents who are heads of households or who are married to a head of household. Some states as well have their own shorter time limits on recipients receiving TANF funds; however, states also have discretion in implementing time limit policies. According to Kathy Reich who worked for SPAN, States could exempt teens from time limits while they are living in Second Chance Homes by declaring that the home provider acts as head of household. Even if states decide against this, they will have discretion under TANF to exempt up to 20 percent of their welfare caseloads from the lifetime limit for reasons related to family hardship or domestic violence. The definition of "hardship" is left to the states to determine and could encompass teens living in Second Chance Homes. The Social Service Block Grant (SSBG), Title XX of SSA, is "designed to reduce or eliminate dependency; achieve or maintain self-sufficiency for families; help prevent neglect, abuse or exploitation of children and adults; prevent or reduce inappropriate institutional care; and secure admission or referral for institutional care when other forms of care are not appropriate." States are free to designate eligible populations, which typically include low-income children and families, the disabled, and the elderly. SSBG funds can be used for any services related to second chance homes at the discretion of the state. Funds are provided to states by formula based on total population. There are no limitations on how much states can earmark for SCH or any other use, and no time limit on assistance. States must report to HHS, however, about how SSBG funds are spent and who is served. There are several federal restraints on how SSBG funds can be used. Similar to TANF restrictions, these include no use for construction, purchasing facilities, or major capital improvements. Neither can SSBG funds be used for medical care, other than for family planning; cash assistance; unlicenced child care; education services that are generally available in the public schools; or social services provided by hospitals, nursing homes, or prisons, except services to help drug or alcohol dependent persons and individuals in rehabilitation for those problems. In addition, funds cannot be used to purchase food or pay for housing, except in short-term emergencies. The goal of the Child Welfare Services program is to assist state public welfare agencies in protecting children from abuse or neglect. These state services include—interventions that will allow children to remain in their homes, if possible; services that provide alternative placements, such as foster care or adoption, if children cannot remain at home; and services to reunite children with their families, if appropriate. All such services are available to children and their families regardless of income. States have wide discretion over Title IV-B funds and can use them to provide services for teen mothers in a SCH, if the state considers it appropriate (that is, in the best interest of the teen mother). The purpose of the Foster Care Program is to assist states to provide proper care for children who are removed from their families because of abuse, neglect, or abandonment. Through the Title IV-E program, funds are provided to states for foster care maintenance payments; administrative costs to manage the program, including costs for statewide automated information systems; and training of staff and foster and adopting parents. If a teen mother meets federal eligibility criteria (that is, she has been removed from a welfare eligible family) and the state and the court decide that a licensed second chance home is the appropriate placement, the state may be reimbursed for part of the costs for maintaining a teen mother and her child in a SCH. This program operates as an open-ended entitlement to states. In 1999, the Independent Living program, which was originally authorized in 1986 under Section 477 of Title IV-E of SSA, was replaced with the John H. Chafee Foster Care Independence Program (CFCIP, P.L. 106-169 ). Under CFCIP, states have more flexibility and extra resources for child welfare services that are designed to assist teens in foster care with making a transition to an independent productive adulthood. Services are provided to foster children under 18 and to former foster care youth who are 18 to 21. Various services are provided such individuals to assist them in making the transition to independent living, including, but not limited to, "educational assistance, career exploration, vocational training, job placement, life skills training, home management, health services, substance abuse prevention, preventive health activities, and room and board." Mandatory funding for CFCIP is $140 million. States can use CFCIP funds, which are disbursed through formula grants, to provide second chance homes for 18- to 21-year-old unwed mothers who have been in foster care. Also, funds can be used to support foster care teens who live in a SCH. States are restricted from using more than 30% of the program's funds for room and board. Second chance homes provide housing as well as programs and services. There are several funding sources through HUD programs that can be used for second chance homes—the Community Development Block Grants (CDBG) program, the Supportive Housing Program, and the Emergency Shelter Grants (ESG) program. They are discussed below. The CDBG program, authorized as Title I of the Housing and Community Development Act of 1974, as amended ( P.L. 93-383 ), provides assistance to state and local governments by awarding formula grants to cities, urban counties, and states for community and economic development that will assist low- and moderate-income individuals. Such development might be broadly used by states and communities for acquiring, constructing, or revitalizing permanent housing for low-income families, temporary and transitional housing, developing community and economic activities, creating and retaining jobs, reviving neighborhoods, and public services, among other activities. CDBG funds may be used for second chance homes. SPAN reported that many such homes nationwide received CDBG funds. Furthermore, it stated that there were no limits on how much funding states and eligible communities could allocate for a SCH, but there were some federal restrictions related to the program. States and grantees were required to prepare an action plan that determined how funds are to be spent and that allowed communities to participate in the program. The annual action plan had to include the local community's objectives and indicate how the funds would be used. Also, grantees were required to certify that at least 70% of the funds received during either a one, two, or three-year period that it indicated, would primarily benefit low- and moderate-income families. The Supportive Housing Program (SHP), authorized as Title IV, Subtitle C of the McKinney-Vento Homeless Assistance Act of 1987, as amended ( P.L. 100-628 ), is administered by HUD's Community Planning and Development office, which generates supportive housing and services for the homeless, through the Homeless Assistance Grant. Stable housing is provided for the homeless while they increase their job skills and income to enable them to live as independently as possible. SHP funds may be used for (1) transitional housing within a 24-month period, and up to six months of follow-up assistance for former residents to help them adjust to living independently; (2) permanent housing for homeless persons with disabilities to maximize their ability to live independently; (3) supportive services to help meet the immediate or long-term needs of homeless persons and families; (4) supportive services that are not provided in conjunction with supportive housing for homeless persons; and (5) "safe havens" for homeless mentally ill persons who live on the streets and are not yet ready for supportive services. Funding for SHP, which is awarded as competitive grants, is provided through the Homeless Assistance Grants account. Consequently, SHP funding assistance is restricted only to homeless persons and to homeless families with children. SPAN indicated that SHP funding could be used to acquire, rehabilitate, or lease housing (that is, second chance homes), for homeless unmarried teenage mothers. Also, SHP funding could be used to provide supportive services for such mothers including "child care, employment assistance, outpatient health services, food, and case management." Furthermore, agencies could use the funds to assist these homeless teen mothers with permanent housing, counseling concerning employment and nutrition, security services, and ways to find additional help at the federal, state, and local levels. Grants can be awarded to state and local governmental organizations and other governmental entities, to private nonprofit groups, and to community mental health organizations that are public nonprofit groups. The following limitations are placed on financial assistance received through SHP grants: (1) SHP grant awards for acquiring or rehabilitating buildings cannot exceed $200,000 (but can be increased up to $400,000 for high-cost areas and for new construction); (2) SHP grant awards for operating costs cannot exceed 75% of the funds awarded; (3) SHP grant awards for supportive services costs cannot exceed 80% of the funds awarded; (4) SHP grant awards for administrative costs cannot exceed 5% of the funds awarded; and (5) SHP grant awards for leasing costs cannot exceed three years. Grants may be made available for operating and supportive services costs for up to three years. Grant recipients must match an equal amount of funds from other sources for acquiring, rehabilitating, and building new structures. If persons live in substandard housing, live with friends or relatives, or are wards of the state, HUD does not consider them to be homeless. In order to continue to receive SHP assistance, individuals must remain homeless. The purpose of the Emergency Shelter Grants Program (ESG), authorized as Title IV, Subtitle B of the McKinney-Vento Homeless Assistance Act of 1987, as amended ( P.L. 100-628 ), is fivefold—(1) to assist in improving the quality of emergency shelters and transitional housing for the homeless; (2) to make more shelters available to such persons; (3) to cover the costs of operating shelters; (4) to provide fundamental social services to homeless persons; and (5) to help prevent homelessness. Funding for ESG is provided through the Homeless Assistance Grant (see the " Supportive Housing Program " above). Formula grant allocations are distributed to states, cities, urban counties, and territories, which receive funds based upon population. States must distribute ESG funds to local governments, or to nonprofit groups with local government approval, including second chance home providers. ESG funds for second chance homes can be used to convert and rehabilitate structures, cover operating expenses for the homes, encourage homelessness prevention, and provide necessary services, such as employment, health care, drug abuse, and education to homeless unwed teen mothers. No more than 30% of such funds can be used by state and community grantees for prevention and essential services, unless waived by HUD, and no more than 5% of funds can be used for administering the grant. To date there have been very few rigorous evaluations on the effectiveness of second chance homes. HHS reports, however, that there have been several analyses regarding service delivery approaches of different programs that documented how the programs worked and provided descriptions of the teen mothers and their children. As a result, insights have been gained regarding the needs of the mothers and their children, as well as in some cases, program outcomes, such as subsequent employment, education or subsequent pregnancies. Successful outcomes have been reported, according to HHS, by several states or programs related to reductions in repeat pregnancies, compared with the state average, higher rates of mothers completing school, lower rates of child abuse and neglect, improvements in the health of mothers and children, higher rates of mothers becoming employed, and a reduction in their dependency upon welfare. New Mexico, which began its state-sponsored second chance homes project in 1990 and has the oldest operation of such homes in the nation, operates 10 second chance homes with the capacity to serve 80 teen families. All needy teen mothers and their children are served (as long as the mothers stay in school). New Mexico has had less than 1% of its residents experience repeat pregnancies while living in the homes. The mothers are allowed to stay until they are 22 years of age. Services provided include supervision, case management, family planning, educational assistance, job training, health care, counseling, life skills training, and child care. Massachusetts, which was one of the first states to create a network of second chance homes (beginning in December 1995), operates 15 such homes statewide through state centralized services and assists pregnant and parenting teens ages 13 to 19. Data collected through its Department of Transitional Living Programs indicate that there were fewer repeat pregnancies (about 2% ) among teen mothers living in second chance homes than the statewide average. Furthermore, SPAN reported that over half of the teen mothers in Massachusetts who left second chance homes in 1998 made notable progress in school, in learning to manage their personal budgets, maintaining the health requirements of their children, such as immunizations, and in mastering good parenting methods. The homes provide services such as counseling, case management, and some on-site GED training, and child care. Massachusetts once had 21 second chance homes across the state and had the capacity to help 120 teen families on TANF and 16 teen families in the child welfare system. SPAN reported, however, that because of a lack of funding, Massachusetts closed some of its second chance homes. Consequently, the housing capacity to assist such teens might have diminished. It remained, however, the state with the largest network of such homes and, according to SPAN, was a good model of how state-run homes should work. Texas, which began operating second chance homes in 1999 and has four sites, serves teen mothers on TANF under age 18 and their children as well as pregnant teens eligible for Medicaid. Services provided include case management, counseling, mentoring, parenting classes, child care, school-to-work services, and transportation. Its home located in San Antonio reports that 90% of babies born to residents weigh more than the average birth weight for teen births, which are expected to be high risk for low birth-weight. HHS cautions that there are limitations in using these results to make informed policy decisions about designing programs to assist such mothers because: (1) results were based upon the participants' self-reports that were not independently validated for accuracy, (2) information was based on the reports of a very small number of mothers; and (3) results reflected the outcomes of mothers who remained with the programs or were tracked after leaving the programs. HHS found that in nearly all cases, there was no other group used to compare outcomes in order to determine whether participating in second chance homes specifically made a difference compared with what could have otherwise occurred. The need for evaluation, HHS concluded, is being recognized as a fundamental part of a new program's design. Such information, HHS believed, not only could inform program operators and sponsors about the general success of a second chance home in accomplishing intended outcomes, but could be useful in informing others interested in starting or redesigning a second chance home. HHS suggests four key issues and challenges that might be considered as more program administrators try to conduct accurate program evaluations. They are: "Program size and capacity"—Most second chance homes accommodate a very small number of teen mothers and their children at one time, usually six or eight. Because of the small numbers, rigorous impact evaluations are more difficult. "Measurements"—Determining certain outcomes for mother and child, such as acquiring a high school diploma or GED, might be easily quantified. Other outcomes, such as good parenting skills or increased self-esteem, might not be easily or quickly determined and might not surface for extended periods of time. "Comparison"—For rigorous impact evaluation, there is a need to use two comparable groups. Second chance homes participants, however, would be difficult to separate into two distinct groups. "Neither program operators nor researchers," HHS states, "would support the denial of services to teens and their children for purely research purposes." Often, however, there are places where there is more demand for service than the ability to serve. In such instances, applicants who are not selected, HHS suggests, could be included in a study to compare outcomes. "Follow-up and tracking"—Certain key outcomes needed to determine the effectiveness of second chance homes can be measured only after an extended period of time. These outcomes include long-term employment, subsequent higher earning and self-sufficiency, and child development outcomes. Many of the evaluations of second chance homes have data collected about participants while in the program. Tracking such teens after they have left a program, however, has proven to be very difficult. | Second chance homes for unwed teenage mothers are not a new concept in the nation. Before the mid-1880s, support for unwed teen mothers was primarily provided by family, friends, and churches. In 1883, Charles Crittenton founded the first "rescue home" (named for his daughter Florence) that eventually became a chain of what later were called private maternity homes, to better support such mothers and ensure that no repeat out-of-wedlock pregnancies occurred. Subsequently, an extensive network of private maternity homes was established across the nation. In 1935, with the passage of the Aid to Families with Dependent Children (AFDC) program, financial support and other services through federal funding were established primarily to help widows care for their children, and for the first time to assist unwed mothers. After the framework of the private maternity home began to disintegrate, a renewed interest in such homes occurred during the 1995 Senate welfare reform debate when agreement was made to support the "second chance home" concept. With the passage of the welfare reform bill in August 1996, a block grant program to states for Temporary Assistance for Needy Families (TANF) was created to replace AFDC. States were given the flexibility to use their TANF funds to assist unwed teen mothers under 18 and their children who lived in a second chance home. Although TANF is a significant source of funds for second chance homes, there is no single primary federal funding source for such homes. On October 10, 2003, the Runaway, Homeless, and Missing Children Protection Act, in which maternity group homes (that is, second chance homes) were added as an allowable activity under the act's Transitional Living Program projects, was signed into law (P.L. 108-96). This act reauthorized programs under the Runaway and Homeless Youth Act (RHYA) and Missing Children's Assistance Act. RHYA is up for reauthorization in the 110th Congress. In the 109th Congress, three bills were introduced that would have amended RHYA to include provisions related to maternity group homes—S. 6 (the Marriage, Opportunity, Relief, and Empowerment Act of 2005), H.R. 3908 (the Charitable Giving Act), and S. 1780 (the CARE Act of 2005). Each was referred to the appropriate committee. No further action occurred. To date there have been very few rigorous evaluations of the effectiveness of second chance homes. HHS reports, however, that there have been several analyses regarding service delivery approaches of different programs that documented how the programs worked and provided descriptions of the teen mothers and their children. As a result, insights have been gained regarding the needs of the mothers and their children, as well as in some cases, program outcomes, such as subsequent employment, education, or subsequent pregnancies. |
In the past several Congresses, critics of the Environmental Protection Agency (EPA) have focused much of their attention on the agency's regulatory actions under the Clean Air Act (CAA). (For a summary of those actions, see CRS Report R41561, EPA Regulations: Too Much, Too Little, or On Track? , by [author name scrubbed] and [author name scrubbed].) During this time, the Obama Administration promulgated numerous CAA regulations. In general, these regulations came in response to congressional authority or mandates under the Clean Air Act Amendments of 1970, 1977, and 1990. A number were also in response to court decisions that remanded to the agency regulations that the agency had promulgated—often under previous administrations. Critics have maintained that many of these regulatory actions would be too costly, harming a wide range of industries, and would not be justified by the benefits obtained. The Clean Air Act is not consistent in whether it allows or requires the consideration of costs and benefits in setting standards. (See " Clean Air Act Authorities ," below.) The act requires or authorizes the EPA Administrator to promulgate regulations or set standards in more than 60 sections or subsections. In 25 of these sections or subsections, cost is not mentioned or implied as a factor to be considered. In the remaining sections and subsections where the Administrator is required or authorized to promulgate regulations—more than 40 of them in all—cost is either identified explicitly or implied as a factor to be considered. Whether or not the statute requires a consideration of cost, EPA has prepared cost estimates for all economically significant rules since the Carter Administration as the result of executive orders. Under Executive Order (E.O.) 12866, each economically significant regulatory action taken by Executive Branch agencies (under any statutory authority) must include estimates of the cost and benefits of the action in a Regulatory Impact Analysis (RIA) before it is proposed, and again before it is promulgated. RIAs play a major role in the interagency review process overseen by the Office of Management and Budget, which precedes the publication of significant rules in the Federal Register . Thus, there is a process for considering the costs and benefits of all Clean Air Act (and other) economically significant regulations. How well this process works is the question. One issue raised by EPA's critics is whether the agency underestimates the cost and other negative impacts of rules in these RIAs by considering them individually, and not considering cumulative impacts. A second criticism is that the agency relies for most of its CAA benefit assessments on the effects of reducing a single category of pollutants, particulate matter (PM). Research has tied PM to tens of thousands of premature deaths, and EPA often finds that reductions in PM emissions justify regulation, even where the target of the regulations is a different pollutant. A third issue critics raise is whether the methodology used to place monetary value on the avoidance of premature death—a technique referred to as calculating the "value of a statistical life"—inflates the estimated benefits of regulation. A fourth issue, not generally raised by critics, but often noted by regulators, concerns the difficulty of identifying and estimating the full range of costs and benefits of environmental regulations. This report examines these issues in the context of Clean Air Act (CAA) regulations. It begins with a review of EPA's CAA authorities and the role of cost considerations in CAA standard-setting. The Clean Air Act, originally enacted in 1955 and amended numerous times since then, gives EPA sweeping powers to "protect and enhance the quality of the Nation's air resources so as to promote the public health and welfare and the productive capacity of its population." In the statute, Congress directs the EPA Administrator to, among other things set national ambient air quality standards; set emission standards for both stationary and mobile sources of air pollution; reduce emissions of 187 hazardous air pollutants that Congress itself listed in the statute; protect air quality in relatively pristine areas from significant deterioration; regulate fuels and fuel additives, both to protect public health and welfare and to prevent the impairment of emission control devices; require the use of renewable transportation fuels; control acid deposition; protect the stratospheric ozone layer by requiring the phase-out of ozone-depleting substances; issue permits and enforce the act's emission limits; and develop and enforce Federal Implementation Plans in states that fail to implement the act's requirements. The specific authorities given to the Administrator are established in more than 60 different sections and subsections of the act, which range from broad authority to protect public health with an adequate margin of safety to detailed requirements that specify numerical emission limits or require that standards be at least as stringent as the emission limitation achieved by the best controlled similar source. Because the act's authorities are so fragmented, it can be difficult to generalize regarding the role of cost considerations in setting air quality standards. Many of the act's authorities allow or require the Administrator to "take into account" or "take into consideration" the cost or technical feasibility of specific emission requirements. A review of 67 sections, subsections, or provisions of the act that authorize regulations indicates that about half (34) specifically mention cost or economic considerations. Among the 34 sections are several major regulatory authorities, including the authority to set emission standards for new stationary sources (power plants, refineries, etc.) in Section 111; go "beyond the floor" in emission standards for sources of 187 hazardous air pollutants, under Section 112(d); set emission standards for motor vehicles (beyond the standards specifically listed in the act), under Sections 202(a) and 202(i); control mobile source air toxics, under Section 202(l); control or prohibit the manufacture and sale of fuels and fuel additives under Section 211(c); require the sale of reformulated gasoline in nonattainment areas, under Section 211(k); set emission standards for nonroad vehicles and engines, including construction equipment, recreational equipment, agricultural machinery, electric generators, and other sources, under Section 213; and set emission standards for locomotives, buses, and aircraft, under Sections 213, 219, and 231. In eight other cases, consideration of cost is implied by the act, e.g., where it requires a standard that is "practicable" or "reasonably achievable." These sections of the act direct the EPA Administrator to consider the "remaining useful life of the existing source" to which an emission standard will apply, under Section 111(d); provide for the use of "generally available control technologies" to control area sources of hazardous air pollutants, under Section 112(d)(5); promulgate "reasonable regulations and appropriate guidance to provide, to the greatest extent practicable, for the prevention and detection of accidental releases" of extremely hazardous substances and take into consideration "the concerns of small business," under Section 112(r)(7); consider "the availability and feasibility of pollution control measures" in classifying nonattainment areas under Section 172; consider "such other factors as he [the Administrator] deems pertinent" and take into consideration "the restraints of an adequate leadtime for design and production" in setting vapor recovery standards for gasoline under Section 202(a)(5) impose emissions standards or emissions control technology requirements that "reflect the best retrofit technology and maintenance practices reasonably achievable" for retrofit of urban buses under Section 219(d); decide whether a requirement is "practicable, taking into account technological achievability, safety, and other relevant factors" in establishing an accelerated schedule for phasing out production and consumption of ozone-depleting substances under Section 606; and consider "the purpose or intended use of the product, the technological availability of substitutes ..., safety, health, and other relevant factors" in regulating nonessential products that release class I ozone depleting substances under Section 610 (except for two specific categories of products that are listed in the statute). A full list of the 42 provisions that mention or imply consideration of cost is provided in Table 1 . In 25 CAA sections or subsections where regulatory authority is conferred on the Administrator (identified in Table 2 ), cost is not mentioned or implied as a factor to be considered. These statutory authorities tend to fall into one of four categories: (1) provisions in which Congress itself set the standards; (2) provisions where Congress directed the agency to set health-based standards, without mentioning cost; (3) provisions in which Congress gave the agency broad authority to promulgate regulations to achieve an objective that Congress determined was necessary (generally protecting public health directly or indirectly, or protecting the environment), but the specifics of which Congress could not anticipate; or (4) a provision requiring EPA to promulgate federal requirements in cases where states have failed to develop or implement adequate regulations to meet a federal mandate. These authorities are discussed briefly in the sections that follow. In the late 1980s, when the most recent major CAA amendments were being drafted, Congress, frustrated with the slow progress being achieved under earlier versions of the statute and by the delays caused by litigation, limited EPA's discretion in setting emission standards in a number of cases by writing detailed regulatory requirements into the statute. Perhaps the most specific of these requirements appear in Section 202 of the act, which addresses motor vehicle emissions. Here, Congress listed the pollutants to be controlled, mandated specific numerical standards for their emission, and set schedules for implementation. EPA still needed to promulgate regulations to implement these standards, but the standards themselves were set by Congress to take effect on a date certain. Another major example can be found in Section 112, where Congress addressed emissions of hazardous air pollutants. Here, Congress listed 187 pollutants the emissions of which were to be controlled; defined the threshold quantity of emissions that would require sources to meet the most stringent standards; and required that sources meet emission limits at least as stringent as the emissions of the best controlled similar sources. The act mandated a 10-year schedule for promulgating standards. The cornerstone of the Clean Air Act consists of health-based standards for widespread air pollutants identified by EPA under Sections 108 and 109 of the act. These standards, termed National Ambient Air Quality Standards (NAAQS) are for air pollutants that, in the Administrator's judgment, "endanger public health or welfare" and "the presence of which in the ambient air results from numerous or diverse mobile or stationary sources." The primary (health-based) NAAQS must be designed to protect public health with an adequate margin of safety. Using this authority, EPA has promulgated NAAQS for six air pollutants or groups of pollutants: sulfur dioxide (SO 2 ), particulate matter (PM 2.5 and PM 10 ), nitrogen dioxide (NO 2 ), carbon monoxide (CO), ozone, and lead. The act requires EPA to review the scientific data upon which the standards are based, and revise the standards, if necessary, every five years. NAAQS do not directly regulate emissions or directly compel actions by sources of pollution. In essence, they are standards that define what EPA considers to be clean air for the specified pollutants. Once a NAAQS has been set, the agency, using monitoring data and other information submitted by the states, identifies areas that exceed the standard and that must, therefore, reduce pollutant concentrations to achieve it. After these "nonattainment" areas are identified, state and local governments have up to three years to produce State Implementation Plans that outline the measures they will implement to reduce the pollution levels and attain the standards. The issue of cost is a perennial one in NAAQS decisions. For 45 years, EPA has interpreted Section 109 as prohibiting the Administrator from considering costs in setting the standards. In 2001, this interpretation was affirmed in a unanimous Supreme Court decision, Whitman v. American Trucking Associations . The Court pointed to numerous other CAA sections where Congress had explicitly allowed consideration of economic factors, concluding that if Congress had intended to allow such factors in the setting of a primary NAAQS, it would have been more forthright—particularly given the centrality of the NAAQS concept to the CAA's regulatory scheme. The court concluded that Section 109(b)(1) "unambiguously bars cost considerations from the NAAQS-setting process." A third group of Clean Air Act standards are the result of Congress giving EPA authority to promulgate regulations to achieve an objective (generally, protecting public health directly or indirectly, or protecting the environment) that Congress determined was essential, but the specifics of which it might not have been able to anticipate. This authority is similar to that for health-based standards, but broader: it can be used to protect the environment or what the act defines as "welfare," in addition to public health, and it authorizes controls of specific substances and activities. For example, under Title VI of the Clean Air Act, Congress directed the EPA Administrator to phase out the production and consumption of chemicals identified as Class I Ozone Depleting Substances (ODS). ODS affect the stratospheric ozone layer, which protects the Earth from harmful radiation. A list of ODS was provided in the statute. In addition, EPA was directed in Section 602(a) to add to the list "any other substance that the Administrator finds causes or contributes significantly to harmful effects on the stratospheric ozone layer." A schedule for the phase-out of these chemicals is provided in Section 604(c). There is no discussion of economic impact or cost in these sections. Section 615 of the act is even broader: If, in the Administrator's judgment, any substance, practice, process, or activity may reasonably be anticipated to affect the stratosphere, especially ozone in the stratosphere, and such effect may reasonably be anticipated to endanger public health or welfare, the Administrator shall promptly promulgate regulations respecting the control of such substance, practice, process, or activity, and shall submit notice of the proposal and promulgation of such regulation to the Congress. There is no mention of cost or economic impact in the section. The fourth group of regulations for which the Clean Air Act does not require consideration of cost is the result of backup authority that Congress gave EPA. In general, the act envisions that states will be responsible for adopting regulations to attain National Ambient Air Quality Standards. Section 110 of the act discusses in great detail the implementation plans that states are to submit to EPA, describing how they will attain or maintain compliance with the NAAQS. EPA cannot compel a state to submit a State Implementation Plan. Rather, if a state fails to submit a satisfactory plan by the statutory deadline, or fails to correct a deficiency identified by the EPA Administrator, EPA is required to promulgate a Federal Implementation Plan for the state under Section 110(c) of the act. The statute provides that The Administrator shall promulgate a Federal implementation plan at any time within 2 years after the Administrator— (A) finds that a State has failed to make a required submission or finds that the plan or plan revision submitted by the State does not satisfy the minimum criteria established under subsection (k)(1)(A) of this section, or (B) disapproves a State implementation plan submission in whole or in part, unless the State corrects the deficiency, and the Administrator approves the plan or plan revision, before the Administrator promulgates such Federal implementation plan. There is no directive for the Administrator to consider cost or economic impact in developing such a plan. Although the statute prohibits the consideration of cost in setting some standards, EPA is subject to executive orders that require the estimation of costs and benefits any time an agency develops "economically significant" regulations. Executive Order 12866 defines an "economically significant" regulation as any rule that may "have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities." The term "effect on the economy" means that a rule may be considered economically significant if it has costs or benefits of over $100 million. The cost and benefit estimates are to be provided by the regulatory agency before rules are proposed for public comment, and again before they are issued in final form. E.O. 12866 states that, "Each agency shall assess both the costs and the benefits of the intended regulation and, recognizing that some costs and benefits are difficult to quantify, propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs." OMB has issued a number of guidance documents that agencies are required to follow when estimating costs and benefits of regulations. OMB's most significant guidance document is Circular A-4 on "Regulatory Analysis." The circular states that it was "designed to assist analysts in the regulatory agencies by defining good regulatory analysis ... and standardizing the way benefits and costs of Federal regulatory actions are measured and reported." EPA's agency-specific document, "Guidelines for Preparing Economic Analyses (2010)," is built on the analytical framework of Circular A-4. Circular A-4 states that a "good regulatory analysis should include the following three basic elements: (1) a statement of the need for the proposed action, (2) an examination of alternative approaches, and (3) an evaluation of the benefits and costs—quantitative and qualitative—of the proposed action and the main alternatives identified by the analysis." With regard to analytical approaches, the circular states that agencies should use both cost-benefit analysis (CBA) and cost-effectiveness analysis. Cost-benefit analysis, in this context, involves the systematic identification of all of the costs and benefits associated with a forthcoming regulation, including nonquantitative and indirect costs and benefits, and how those costs and benefits are distributed across different groups in society. Cost-effectiveness analysis seeks to determine how a given goal can be achieved at the least cost. When all benefits and costs can be expressed in monetary units, CBA can clearly indicate which approach is most efficient in terms of net benefits. However, in many (and perhaps most) cases, agencies are not able to express all of the benefits or costs in monetary units. In such cases, cost-effectiveness analysis is available to consider the most economically efficient approaches. In ideal circumstances, regulations should be designed to maximize "net benefits" (that is, maximizing the value of "total benefits" minus "total costs"). To better assess net benefits, it is important to understand the market failures and economic externalities for which environmental regulations (including air emissions regulations) try to correct. Analyzing environmental regulations in terms of market theory can help show that the consideration of costs and benefits are often the opposite side of the same coin (See Text Box). OMB's circular and EPA's guidelines summarize a variety of methods the agency can use to determine the total costs and total benefits of a regulation—including those which are difficult to quantify and monetize. In measuring costs, the guidance documents ask the agency to assess the direct costs to the regulated firms, including pollution control equipment, record keeping and reporting requirements and labor for equipment installation, operation, maintenance, and monitoring. Further, the agency should attempt to analyze additional and/or indirect impacts on consumers, small businesses, government entities (including administrative cost and savings), international trade, and energy and employment effects. In measuring benefits, the guidance documents ask the agency to use the best reasonably obtainable scientific, technical, economic, and other information available to quantify—and, if possible, monetize—the impacts of regulations. For example, the benefits of a regulation that reduces emissions of air pollution might be quantified in terms of a variety of health, climate, visibility, and ecosystem effects. Such benefits may include the number of premature deaths avoided each year; the number of prevented nonfatal illnesses and hospitalizations; the number of prevented lost work or school days; improvements in visibility in specific regions; and improvements in ecosystem health as measured by specific indicators (e.g., lake acidification). These quantified benefits may be monetized using a number of tools and indicators, including EPA's Environmental Benefits Mapping and Analysis Program and various metrics such as Value of Statistical Life, Quality-Adjusted Life Years, and Social Cost of Carbon, among others. Some benefits are difficult to quantify and monetize. In such cases, the guidance documents ask the agency to include a qualitative discussion of benefits results. The discussion should explain why a quantitative analysis was not possible and the reasons for believing that these non-quantified effects may be important for decision making. CRS looked at the RIAs prepared by EPA under the G. W. Bush and Obama Administrations. From 2001-2016, EPA completed RIAs for 55 CAA rules under the executive order. Information concerning these rules is provided in Table 3 . In general, the agency concluded that the benefits of these rules would exceed the costs: 46 of the 55 RIAs reached this conclusion. Two rules, one promulgated in 2005 and the other in 2011, projected costs greater than benefits. In the other seven cases, either ranges of cost and benefit had a substantial overlap, or the agency was unable to quantify or monetize the costs or benefits. In addition to E.O. 12866, the Clean Air Act itself, in Section 317, requires the EPA Administrator to prepare an economic impact assessment for several types of air quality standards, including section 111 new stationary source performance standards and regulations for existing stationary sources, title I, part C, prevention of significant deterioration standards, section 202, mobile source standards, section 211(c) fuel and fuel additive standards, and section 231, aircraft standards. The assessment is to contain an analysis of (1) the costs of compliance with any such standard or regulation; (2) the potential inflationary or recessionary effects of the standard or regulation; (3) the effects on competition of the standard or regulation with respect to small business; (4) the effects of the standard or regulation on consumer costs; and (5) the effects of the standard or regulation on energy use. The standards listed in section 317 generally mention or imply cost as a consideration in the statute; thus, the economic impact assessment is to inform that consideration. However, section 317 also states that "nothing in this section shall be construed to provide that the [assessment] affects or alters the factors which the Administrator is required to consider in taking any action [when promulgating or revising the listed standards]." The section is limited in two other respects. In subsection (d), it gives the Administrator discretion to limit the time and resources devoted to the required analyses: The assessment required under this section shall be as extensive as practicable, in the judgment of the Administrator taking into account the time and resources available to the Environmental Protection Agency and other duties and authorities which the Administrator is required to carry out under this Act. And in subsection (e), it provides that Nothing in this section shall be construed ... to authorize or require any judicial review of any such standard or regulation, or any stay or injunction of the proposal, promulgation, or effectiveness of such standard or regulation on the basis of failure to comply with this section. A number of issues have been raised regarding EPA's cost-benefit analyses for Clean Air Act rules. Four issues are discussed below. A frequent criticism of EPA's Clean Air Act regulations is that the agency underestimates the cost and other negative impacts of rules by considering them individually, and thus potentially ignoring cumulative impacts. Other critics assert that, by considering rules individually, EPA cost-benefit analyses may double count the benefits of simultaneous regulations. EPA's RIAs do focus on individual rules, because both the statute—in the many places that it requires consideration of cost or economic factors—and E.O. 12866 require the agency to weigh costs and economic factors and consider options for individual rules. The agency starts RIAs with a baseline of state and federal regulatory requirements already promulgated. The RIA then estimates the additional costs and benefits of the proposed or final rule under consideration. In both proposed rule and final rule RIAs, the agency generally considers more stringent and less stringent options in order to provide analysis of the costs and benefits of each. In some cases, there may be more than one rule addressing pollution from a specific industry under development simultaneously. This happens when the agency is implementing congressional directives found in different sections of the act. For example, in the past five years, fossil-fueled power plants have been the subject of rules addressing interstate transport of sulfur dioxide and nitrogen oxides (under Section 110(a)), emissions of hazardous air pollutants (under Section 112(d)), and emissions of the greenhouse gas carbon dioxide (under Sections 111(b) and (d)). As individual rules are promulgated and implemented, their requirements are added to the baseline, but when several rules are proposed simultaneously, each rule's impact must be examined in isolation in order to comply with statutory and executive order directives. Addressing the rules in isolation means that the cost-benefit analysis may ignore the cumulative economic impact of new regulations. It can also mean that adding the costs and benefits of simultaneous proposals might lead to double counting and over-estimating both costs and benefits. Although developing required rules simultaneously may pose analytical issues, it has practical advantages for the regulated entities. It can allow a regulated facility to choose pollution control approaches that address several problems at once, e.g., installing a scrubber that will both reduce sulfur dioxide emissions and address hazardous air pollutants, or switching to cleaner fuels that eliminate or reduce the pollution problems addressed by all of the proposed regulations. It may also save on compliance costs by permitting the affected entities to address multiple regulations during a single outage. Although most cost-benefit analyses have focused on individual rules, EPA has conducted three analyses of the cumulative impact of Clean Air Act regulations, as required by Section 812 of the Clean Air Act Amendments of 1990. Each of the three analyses found that the benefits of Clean Air Act regulations far exceed the cost. The first of the studies, a retrospective study entitled, The Benefits and Costs of the Clean Air Act, 1970 to 1990 , was completed in 1997. It estimated that the cumulative cost of Clean Air Act regulations between 1970 and 1990 was $523 billion (in 1990 dollars). The benefits of those regulations outweighed the costs by more than an order of magnitude, according to the agency. The estimated economic value of benefits ranged from $5.6 to $49.4 trillion over the 20-year period, depending upon the assumptions employed, with a mean value of $22.2 trillion. Human health effects accounted for the vast majority of this economic value: the agency concluded that the regulations reduced premature mortality by 205,000 persons annually. The agency noted a number of limitations and uncertainties in the data. On the cost side, the agency noted that the estimate " ... does not include several potentially important indirect costs which could not be readily quantified, such as the possible adverse effects of Clean Air Act implementation on capital formation and technological innovation." On the benefit side, the agency noted, "... it is important to recognize the substantial controversies and uncertainties which pervade attempts to characterize adverse human health and ecological effects of pollution in dollar terms." In addition, the estimates " ... do not include a number of other potentially important benefits which could not be readily quantified, such as ecosystem changes and air toxics-related human health effects." Nevertheless, the agency concluded, "Given the magnitude of difference between the estimated benefits and costs, ... it is extremely unlikely that eliminating these uncertainties would invalidate the fundamental conclusion that the Clean Air Act's benefits to society have greatly exceeded its costs." The second study, a prospective study entitled The Benefits and Costs of the Clean Air Act , 1990 to 2010 , was released in November 1999. The study estimated the cost of compliance for regulations under the 1990 amendments to Titles I through V of the Clean Air Act at $19 billion annually in the year 2000 (in 1990$), rising to $27 billion annually in 2010. The estimated economic value of benefits ranged from $16 billion to $160 billion annually in 2000, and $26 billion to $270 billion in 2010. Although costs slightly exceeded benefits at the low end of the benefit estimate, EPA concluded that benefits exceeded cost by more than 4 to 1 for the central estimate. The study estimated costs and benefits separately for Title VI, which deals with protection of the stratospheric ozone layer. The benefits and costs for this title were estimated for a 175-year period, reflecting the slow nature of repairing the ozone layer. The agency estimated benefits of $530 billion over that time, with costs of $27 billion. The third study, another prospective study, is entitled The Benefits and Costs of the Clean Air Act , 1990 to 20 2 0 . This study was released in March 2011. The study estimated the annual cost of compliance for regulations under the 1990 amendments to the Clean Air Act at approximately $65 billion in 2020, with a central estimate of benefits of $2 trillion. Using the central estimates, benefits exceed costs by 31 to 1. As with the earlier studies, "Most of these benefits (about 85%) are attributable to reductions in premature mortality associated with reductions in ambient particulate matter.... " The agency estimated that "cleaner air will ... prevent 230,000 cases of premature mortality" in 2020, at a cost of $280,000 per premature mortality avoided. The Office of Information and Regulatory Affairs (OIRA) in the President's Office of Management and Budget (OMB) is the office that conducts interagency reviews of proposed and final regulations under E.O. 12866. In addition, OIRA prepares annual reports to Congress on the cost and benefit of regulations. The latest such final report, for 2015, includes estimates of the aggregated annual benefits and costs of regulations reviewed by OMB over the last 10 years. In a section on "EPA Air Rules," the report states: "Across the Federal government, the rules with the highest estimated benefits as well as the highest estimated costs, by far, come from the Environmental Protection Agency and in particular its Office of Air and Radiation. Specifically, EPA rules account for 61 to 80 percent of the monetized benefits and 44 to 55 percent of the monetized costs." The OMB report stated that EPA Office of Air rules in the 10-year period had benefits that were 4 to 21 times as great as their cost. A second criticism of EPA cost-benefit analyses is that the estimated benefits often rely on the effects of reducing a single category of pollutants, particulate matter (PM). Research has tied PM to tens of thousands of premature deaths, and EPA often finds that reductions in PM emissions justify regulation, even where the target of the regulations is a different pollutant. In many of these cases, the RIAs do not monetize the benefits of controlling the emissions that were the primary target of the regulation. For example, an RIA that accompanied the 2004 National Emission Standards for Hazardous Air Pollutants from Industrial, Commercial, and Institutional Boilers and Process Heaters (the "2004 Boiler MACT") estimated that there would be $16 billion of annual benefits due to reductions in sulfur dioxide and particulate matter emissions. But it also stated This analysis does not quantify the benefits associated with reductions in hazardous air pollutants (HAP). The magnitude of the unquantified benefits associated with omitted categories and pollutants, such as avoided cancer cases, damage to ecosystems, or materials damage to industrial equipment and national monuments, is not known. Of the 22 EPA air rules considered in the 2015 OIRA report cited above, the highest estimated benefits were for three rules promulgated in 2005, 2007, and 2012. For these rules, and others promulgated under the Clean Air Act, OIRA notes the large estimated benefits of EPA rules issued pursuant to the Clean Air Act are mostly attributable to the reduction in public exposure to fine particulate matter (referred to in many contexts as PM). While some of these rules monetize the estimated benefits of emissions controls designed specifically to limit particulate matter or its precursors, other rules monetize the benefits associated with ancillary reductions in particulate matter that come from reducing emission of hazardous air pollutants which are difficulty (sic) to quantify and monetize because of data limitations. For example, in the case of the Utility MACT, particulate matter "co-benefits," make up the majority of the monetized benefits, even though the regulation is designed to limit emissions of mercury and other hazardous air pollutants. The consideration of co-benefits, including the co-benefits associated with reduction of particulate matter, is consistent with standard accounting practices and has long been required under OMB Circular A-4. There are hundreds of air pollutants that Congress required or authorized EPA to regulate under the Clean Air Act. Congress directed EPA to set emission standards for sources of 187 hazardous air pollutants that are listed in the statute. Many of these are categories of pollutants (e.g., arsenic compounds, fine mineral fibers, polycyclic organic matter) rather than individual substances, so there are more than 187 pollutants to consider. Although there is research indicating that these pollutants are carcinogenic, mutagenic, teratogenic, neurotoxic, cause reproductive dysfunction, or are otherwise acutely or chronically toxic, in most cases there are not data regarding the concentrations to which populations are exposed, or epidemiological data regarding illness or mortality associated with exposure to the individual pollutant. The agency proceeds with regulation because it was directed by the statute to do so, but it may not be able to quantify or monetize the benefits of regulating emissions of a specific substance. The agency does, however, have an established, peer-reviewed methodology for estimating the benefits of reductions in emissions of particulate matter, which have been linked to increased mortality in numerous scientific studies. Most air pollutants are particulates, and most EPA air quality regulations reduce particulate emissions, either as the targeted pollutant, or as a co-benefit of reducing emissions of some other pollutant. Another reason that particulates play such an important role in RIAs is that they are linked to premature mortality. When premature mortality is avoided, the monetization of that benefit, using what is called "the value of a statistical life," generally is greater than the value of all other benefits combined. This raises another issue: the role played by the methodology used to value lives saved. The value of statistical lives saved (VSL) has played an important role in RIAs for many years. EPA adopted guidelines under President Reagan that, in updated form, have guided its VSL analyses since 1983. The guidelines were most recently updated in 2010. In general, the VSL is estimated by using one of two methodologies: "willingness to pay" (stated preference), or "willingness to accept" (revealed preference). The first of these methods uses surveys in which respondents are asked how much they would be willing to pay to avoid particular risks or outcomes. For example, if 100,000 people are each willing to pay an average of $50 to reduce a 1 in 100,000 risk of dying from exposure to a particular risk, then the value of a statistical life for the population relative to that risk is $5 million ($50 times 100,000). Revealed preference studies, on the other hand, use data from market transactions or observed behavior to estimate the value of certain risks. One example is wage-risk studies, in which researchers compare workers' earnings in occupations with varying levels of on-the-job risks. The Office of Management and Budget's Circular A-4, which more fully delineates the regulatory analysis requirements in Executive Order 12866, was "designed to assist analysts in the regulatory agencies by defining good regulatory analysis ... and standardizing the way benefits and costs of Federal regulatory actions are measured and reported." It states that economists tend to view willingness-to-pay as "the most appropriate measure of opportunity costs," and that the willingness-to-pay approach is "the best methodology to use if reductions in fatality risks are monetized." In monetizing health benefits, the circular states that a willingness-to-pay measure is "the conceptually appropriate measure as compared to other alternatives (e.g., cost of illness or lifetime earnings), in part because it attempts to capture pain and suffering and other quality-of-life effects," and also because it "allows you to directly compare your results to the other benefits and costs in your analysis." Released in 2003, the circular noted that academic studies had identified VSLs from $1 million to $10 million, but it did not recommend that agencies use any particular VSL. A 2010 EPA guidance reported academic estimates of VSL ranging from $0.85 million to $19.8 million in 2006 dollars. The guidance states that EPA uses a 1997 estimate of VSL, updated to current dollars by applying the Gross Domestic Product price deflator. In recent RIAs, the agency has used an estimate of $9.9 million in 2015 dollars. A fourth issue, recognized by both proponents and opponents of cost-benefit analysis, is the difficulty of quantifying both costs and benefits. Cost-benefit analysis is an imperfect tool that may fail to provide accurate projections in both cases. At least three factors contribute to or help explain the difficulty: a) the key role played by assumptions in making projections; b) the paucity of retrospective studies that might provide better methods or data; and c) particularly for benefits, the inability to quantify or monetize effects in light of existing information. On the cost side, assumptions need to be made regarding the control technology or production methods that will be used to achieve compliance, and the costs of various inputs, such as energy, the price of which may be subject to substantial volatility. New technologies may encounter unforeseen implementation difficulties that result in cost overruns. On the other hand, control options have often benefitted from technology improvements or economies of scale that result in lower costs than predicted. Varying assumptions can lead to large differences between EPA's cost-benefit estimates and those of affected stakeholders. Often the assumptions, whether made by stakeholders or by EPA, fail to foresee broad economic factors that end up determining how industry will comply with the standard being promulgated. For example, when EPA promulgated the Mercury and Air Toxics Standards (MATS) for electric power plants in 2012, the RIA concluded that coal-fired power would increase its share of total electric power, rising 14% from its 2009 level to 1,982 billion kilowatt-hours in 2015, while natural gas-fired power would decrease 16% to 710 billion kilowatt-hours. Given this reliance on coal-fired plants, the power sector would need to make an enormous investment in pollution control equipment to clean up their emissions. A major factor in the RIA's analysis was the price of natural gas: the analysis concluded that natural gas would cost $5.32 per million Btu in 2015 after the rule took effect. (The price was expressed in 2007 dollars, which would be $6.07 in 2015 prices.) With gas at this price—and projected to increase further —it would make sense to invest in keeping coal-fired power plants running. By 2015, however, the cost of natural gas had fallen to $2.63, and most analysts concluded that prices would remain low. As a result, rather than spend the money to control emissions from coal-fired power plants (which the RIA estimated at $9.6 billion per year), many utilities found it easier and cheaper to retire coal-fired plants and increase the use of natural-gas-fired plants; in many cases, these plants were available and underutilized. The result was that coal-fired power declined to 1,352 billion kilowatt-hours (32% below the RIA projection) in 2015, and natural gas-fired power increased to 1,333 billion kilowatt-hours (88% above the RIA projection). The MATS rule RIA illustrates another issue related to the cost of regulations. While EPA and other agencies churn out dozens of RIAs annually as they develop regulations, there are few studies of the actual cost of rules once they've been implemented (what economists refer to as "ex post" costs, as opposed to the "ex ante" costs estimated in RIAs). EPA recognizes this issue. A 2014 agency study states: In 2010, then Deputy Administrator Bob Perciasepe inquired about research on retrospective cost analysis, particularly of past EPA regulations. An investigation of the literature revealed that the collection of retrospective analyses of EPA regulations is thin and no generalized conclusions could be drawn. Bob Perciasepe asked the National Center for Environmental Economics (NCEE) to design and launch a retrospective cost analysis with the goal of improving EPA's cost assessments. The result was Retrospective Study of the Costs of EPA Regulations: A Report of Four Case Studies . The report states: "The literature posits a number of hypotheses for why one might expect ex ante and ex post cost estimates to differ, yet ex post cost case studies are too few in number and narrow in scope to lend strong support for one hypothesis over another." The report produced four case studies: For each case study, we assessed whether it would be possible to collect sufficient ex post compliance cost information using only publicly-accessible data sources. In general, we found that while data for some necessary components are readily available, the cost information is generally lacking. ... While several of the case studies are suggestive of overestimation of costs ex ante, we do not consider the current evidence to be conclusive. Most rules also have benefits that cannot be quantified or monetized in light of existing information. It is common for EPA to list in its RIAs benefits that it believes will result from a rule, but that it was unable to quantify or monetize. In the RIA for the Cross-State Air Pollution Update Rule, promulgated in October 2016, for example, EPA stated: "Data, time, and resource limitations prevented the EPA from quantifying the impacts to, or monetizing the co-benefits from several important benefit categories.... " The agency listed seven categories of health benefits and 25 categories of welfare benefits that it did not quantify. OMB's Circular A-4 recognizes these difficulties. It states: It will not always be possible to express in monetary units all of the important benefits and costs. When it is not, the most efficient alternative will not necessarily be the one with the largest quantified and monetized net-benefit estimate. In such cases, you should exercise professional judgment in determining how important the non-quantified benefits or costs may be in the context of the overall analysis. Although many parts of the Clean Air Act require the EPA Administrator to promulgate regulations without mentioning consideration of cost, EPA is bound by the statute in some cases and by executive orders in the case of each economically significant rule to provide estimates of the costs and benefits during the rulemaking process. The agency has indicated that benefits exceed costs, usually by a wide margin, for the vast majority of its CAA rules: as noted earlier, according to EPA, the estimated cumulative benefits of CAA regulations during the period 1990-2020 will exceed the estimated costs by more than 30 to 1. Projecting that benefits will exceed costs may not be sufficient under the Trump Administration, however. The President has spoken repeatedly of the need to reduce the cost of regulation, which he believes has restrained the growth of the economy and "killed" jobs. On January 30, 2017, he signed Executive Order 13771, "Reducing Regulation and Controlling Regulatory Costs." A second Executive Order, E.O. 13783, "Promoting Energy Independence and Economic Growth," signed March 28, 2017, addressed specific Clean Air Act regulations. The first of these two executive orders addressed regulations promulgated by all federal agencies. Press coverage focused on its requirement that " ... whenever an executive department or agency ... publicly proposes for notice and comment or otherwise promulgates a new regulation, it shall identify at least two existing regulations to be repealed." Other elements of the order are also worth noting: First, the executive order does not mention the benefits of regulation. It focuses exclusively on costs. Second, it establishes a process under which agencies shall be given an annual regulatory budget, with the Director of OMB identifying "a total amount of incremental costs that will be allowed for each agency in issuing new regulations and repealing regulations for the next fiscal year." For FY2017, the E.O. directs that "the total incremental cost of all new regulations, including repealed regulations, to be finalized this year shall be no greater than zero, unless otherwise required by law or consistent with advice provided in writing by the Director of the Office of Management and Budget.... " Third, it requires the Director of OMB to "provide the heads of agencies with guidance on the implementation of this section. Such guidance shall address, among other things, processes for standardizing the measurement and estimation of regulatory costs; standards for determining what qualifies as new and offsetting regulations; standards for determining the costs of existing regulations that are considered for elimination; processes for accounting for costs in different fiscal years; methods to oversee the issuance of rules with costs offset by savings at different times or different agencies; and emergencies and other circumstances that might justify individual waivers of the requirements of this section." Guidance was issued on April 5, 2017. Fourth, it states that, "Nothing in this order shall be construed to impair or otherwise affect ... the authority granted by law to an executive department or agency, or the head thereof.... " How this order will affect CAA rules remains to be seen. It gives the OMB Director new authority in tasking him with the provision of guidance, the identification of regulatory budgets, and the discretion to grant waivers from the order's requirements. The April 5, 2017, guidance reinforces this, stating in numerous places that OMB (in the form of the Director of its Office of Information and Regulatory Affairs (OIRA)) will address issues "on a case-by-case basis." Some rules under the Clean Air Act might be exempt from the executive order's requirements. Whether this is the case will depend on what interpretation is given to the order's language exempting from the regulatory budgets regulations that are "otherwise required by law." The authority granted by law to the EPA Administrator in at least 25 sections or subsections of the CAA (identified in Table 2 ) directs the Administrator to set or review standards without subjecting that authority to cost considerations. In many other cases—whether or not the CAA allows consideration of costs—binding deadlines for EPA rulemaking have been established by the courts. The OMB guidance describes such cases as "judicially required rulemaking," and includes in this category rules for which deadlines have been established by a settlement agreement or consent decree. This might cover a substantial number of CAA rules. The second of the two orders, E.O. 13783, requires reviews of all agency actions "that potentially burden the development of domestically produced energy resources, with particular attention to oil, natural gas, coal, and nuclear energy resources." The order addresses specific CAA regulations, including the Clean Power Plan for existing fossil-fueled electric generating units (EGUs) and two proposed rules related to it, the New Source Performance Standards for new and modified EGUs, and the New Source Performance Standards for the Oil and Natural Gas Sector. Each of these rules would control emissions of greenhouse gases from an energy-producing sector. The E.O. directs EPA to review these rules "for consistency with the policy set forth in section 1 of this order," and, if appropriate, to "suspend, revise, or rescind" them. Section 1 lists many goals, including to "promote clean and safe development of our nation's vast energy resources," "ensure that the Nation's electricity is affordable, reliable, safe, secure, and clean," "take appropriate actions to promote clean air and clean water," and ensure that "necessary and appropriate environmental regulations comply with the law, are of greater benefit than cost, when permissible, achieve environmental improvements for the American people, and … employ the best-available peer-reviewed science and economics." Most of the commentary on this executive order has presumed that the purpose of the reviews will be to rescind the rules in question; but the rules were originally justified by EPA as measures that would achieve most of Section 1's listed goals. Rescinding the rules would likely require a new justification that can withstand judicial scrutiny. Thus, "review" of the rules does not automatically equate with "rescind." Whatever becomes of these specific rules, EPA's administration of the Clean Air Act under the Trump Administration is likely to function differently than it did in the Obama Administration. The CAA gives the EPA Administrator broad discretion in deciding whether regulations are necessary and how stringent they should be: many sections of the act, even some that don't allow consideration of cost, include phrases such as "in the judgment of the Administrator" or "as determined by the Administrator." Such language would seem to allow the Administrator a measure of discretion that will continue to shape Clean Air Act and other EPA regulations—both in deciding on the stringency of new regulations and in deciding whether new regulations are warranted. Unless this language is modified, it will also continue to provide fertile ground for legal arguments regarding the power that Congress delegated to EPA when it fashioned the various authorities that the act provides. | The Clean Air Act (CAA) gives the Environmental Protection Agency (EPA) broad authority to set ambient air quality standards to protect public health and welfare. It authorizes emission standards for both mobile and stationary air pollution sources, including cars, trucks, factories, power plants, fuels, consumer products, and dozens of other source categories. Since 1970, EPA has used this authority to require emission controls for these sources. Emissions of the most widespread ("criteria") pollutants have been reduced by 72% during that period. As directed by Congress and by executive orders, EPA has estimated the costs and benefits of major CAA (and other) regulations for the last four decades. Its most comprehensive recent studies and studies by the Office of Management and Budget (OMB) have concluded that the benefits of clean air regulations outweigh the costs by substantial margins. EPA's cost-benefit analyses of individual regulations, required by Executive Order 12866, show similar results: a review of the 55 economically significant CAA regulations promulgated from 2001 to 2016 found only two in which estimated costs exceeded benefits. Nevertheless, many in Congress have expressed concern that Clean Air Act and other environmental regulations harm the nation's economy. One issue raised by critics is whether EPA underestimates the cost and other negative impacts of CAA rules—in part, by considering them individually, and not considering cumulative impacts. Another criticism is that the agency relies for most of its benefit assessments on the effects of reducing a single category of pollutants, particulate matter (PM). Research has tied PM to tens of thousands of premature deaths, and EPA often finds that reductions in PM emissions justify regulation, even where PM reductions are a "co-benefit" of reducing another targeted pollutant. A third issue critics raise is whether the methodology used to place monetary value on the avoidance of premature death—a technique referred to as calculating the "value of a statistical life"—inflates the estimated benefits of regulation. This report examines these issues in the context of Clean Air Act regulation. It reviews EPA and Office of Management and Budget (OMB) studies of the cost and benefit of CAA regulations, and addresses the issues raised by agency critics. The report finds that The Clean Air Act authorizes EPA to set standards in multiple sections of the act: about half of the act's major regulatory authorities mention costs or economic considerations explicitly, and several others imply that costs may be considered; but other authorizing sections, including some key sections, make no mention of cost considerations. Where the statutory authorities do not mention cost consideration, they tend to fall into one of four categories: provisions in which Congress itself set the standards; provisions where Congress directed the agency to set health-based standards, without mentioning cost; broad authority to promulgate regulations to achieve an objective that Congress determined was necessary, but the specifics of which it could not anticipate; or authority to promulgate federal requirements in cases where states have failed to develop or implement adequate regulations on their own to meet a federal mandate. In all cases, even where the statute would prohibit consideration of cost in setting standards, EPA is bound by executive orders to provide estimates of costs and benefits if the rule would be economically significant. According to EPA, the estimated benefits of CAA regulation will exceed the estimated costs by more than 30 to 1 in the period 1990-2020. CAA regulations prevent 230,000 premature deaths annually, according to the agency. The estimated benefits of CAA regulations rely heavily on the effects of reducing particulate emissions, and on the value placed on the avoidance of premature death as a result of such controls. Many rules have benefits or costs that cannot be quantified or monetized in light of existing information. President Trump has issued two executive orders that address the cost of EPA regulations: Executive Order (E.O.) 13771, signed January 30, 2017, and E.O. 13783, signed March 28, 2017. The former directs OMB to set regulatory "budgets" for executive branch departments and agencies and, in general, to rescind two regulations for every new one issued. The latter requires EPA to review—and, if appropriate, suspend, revise, or rescind—several CAA regulations affecting energy production, with an eye to avoiding regulatory burdens. At present, the effect of the two orders on future CAA regulations is unclear. The report discusses some of the possible implications. |
As the debate surrounding health care reform continues, there has been considerable discussion about creating a new, independent entity to determine Medicare policy. Currently, Medicare policy is made largely by Congress and, to varying degrees, the Centers for Medicare and Medicaid Services (CMS). CMS, housed within the Department of Health and Human Services (DHHS), is the federal agency responsible for administering the Medicare, Medicaid, and Children's Health Insurance (CHIP) programs. The proposals being debated would essentially create an independent body of health care experts with the power to make fundamental decisions affecting Medicare. Advocates of these types of proposals argue that creating an independent, policymaking entity in Medicare is necessary if we hope to achieve any real health care reform. Supporters claim that members of Congress are easily influenced by special interests and lobbyists when making Medicare policy decisions, particularly those related to provider reimbursement. As a result, some of the decisions that are made may not be fiscally sustainable or in the best interest of beneficiaries. Advocates also contend that lawmakers do not have the necessary technical or operational expertise required to govern a program as complex as Medicare. Every year lawmakers, many of whom have limited experience in health care financing or delivery, make detailed operational decisions related to Medicare's provider payment systems. The perception, at least by some, is that an independent body of experts, insulated from politics, would produce more fiscally responsible and efficient policy decisions. Opponents of these proposals express concern about reducing Congress's role in the policymaking and oversight process. The proposals being discussed would establish a new policymaking body with the authority to make changes in the program without congressional approval. By delegating certain lawmaking functions to an independent entity, Congress would be ceding some of its oversight responsibilities. For example, today, when it examines the merits of a particular policy, Congress can hold hearings and debates, both of which are open to the public. Although these proposals include certain oversight mechanisms, such as annual reports and studies, the day-to-day deliberations of the new entity or council would not necessarily be available to the public. On June 25, 2009, Senator Jay Rockefeller introduced S. 1380 , the Medicare Payment Advisory Commission (MedPAC) Reform Act of 2009, which would elevate MedPAC, a congressional advisory commission, to an executive branch agency with the authority to determine Medicare payment and coverage policies. The Obama administration submitted a similar proposal to Congress, titled the Independent Medicare Advisory Council Act (IMAC) of 2009, on July 17, 2009. The Administration's proposal would create an independent five-member executive council charged with issuing recommendations on Medicare payment policy to the President. Finally, the Senate Finance Committee included a provision to establish an independent Medicare advisory board in its health reform legislation, the Patient Protection and Affordable Care Act ( H.R. 3590 ), which passed the Senate on December 24, 2009. Although different in structure and scope, all of these proposals would alter the role Congress has traditionally played in the Medicare policymaking process. This report introduces readers to the concept of creating an independent, policymaking entity in Medicare. The report begins with a discussion of the types of policymaking entities that have been proposed in the current health care reform debate, as well as in Medicare. The report then provides an overview of the role that Congress and CMS play in determining Medicare policy. The report concludes with a comparison of some of the key features of S. 1380 , the Administration's draft IMAC proposal, and H.R. 3590 . The current health care reform debate has included discussions about creating new independent entities to conduct certain administrative and policymaking functions in the health care system. In addition to proposals to establish this type of entity in Medicare, the concept has been offered as a tool for performing research on comparative effectiveness, managing the private health insurance market, making payment and coverage decisions, and proposing broader reforms to the health care system. At least one of the rationales for creating independent entities with policymaking authority is the assumption that, because these organizations are insulated from both the congressional and executive decision-making processes, they can make better policy decisions. Independent entities typically share certain characteristics. First, they are usually governed by boards or commissions composed of members who are appointed by the President and confirmed by the Senate. Representatives are usually appointed for long, fixed terms to reduce the likelihood that they will be influenced by either the White House or congressional politics. Additionally, terms are usually staggered to ensure that not all of the members are appointed during one presidential administration. Other features associated with independence include requiring the President to consider political orientation when appointing members and mandating that the membership represent a diverse mix of professional experience or expertise. One prominent model of an independent health care entity discussed throughout the current reform debate is the Federal Health Board. Endorsed by former Senator Tom Daschle, a Federal Health Board would be modeled after the Federal Reserve Board and have broad authority over private and public health care programs. The Federal Reserve, which establishes the nation's monetary policy, is composed of a national Board of Governors consisting of seven members and 12 regional banks. The Board of Governors has significant authority to oversee and regulate the banking system. As envisioned by Daschle and others, a Federal Health Board would play a substantial role in making benefit and coverage recommendations, regulating the private health insurance market, conducting research, and improving the quality of care. Some of the other models that have been discussed are more modest in scope. For example, in addition to including a provision establishing a Medicare advisory board, H.R. 3590 would establish a private, non-profit corporation titled the Patient-Centered Outcomes Research Institute to conduct comparative clinical effectiveness research. The corporation, which would be overseen by a Board of Governors composed of 17 members appointed by the Comptroller General, would be charged with identifying national priorities for performing comparative effectiveness research and contracting with public and private organizations to conduct such research. Another proposal would create an organization or entity to oversee the market for private health insurance. These entities, which are referred to as health insurance exchanges, would be responsible for establishing and enforcing standards for private health plans related to benefits, coverage, enrollment, and beneficiary cost-sharing. Proposals to establish an independent entity in Medicare also vary in scope and structure. Some measures would create an independent commission, board, or entity with the authority to determine specific Medicare policies, particularly those related to provider reimbursement and benefit coverage. Others would create a governance structure with a broader scope of authority. For example, in a recent paper for the New America Foundation on reforming Medicare's governance, certain health experts advocate creating a new independent board called the Medicare Guardians. Under this proposal, the Medicare Guardians would function like a board of directors for Medicare with broad authority to enact policies directed at restructuring how the program pays for and delivers health care. Congress has debated the merits of creating a new administrative entity in Medicare several times throughout the program's history, most recently in the Medicare reform discussions of 2000 and 2001. At that time, Congress was considering adding a new prescription drug benefit to the program and exploring options to foster competition among private Medicare plans. However, there were concerns that CMS (at that time the Health Care Financing Administration, or HCFA), already overwhelmed with new responsibilities, would not be able to manage an increase in its workload. Various reform proposals recommended a number of solutions to rectify the agency's management problems, including expanding its authority to perform its responsibilities, increasing the agency's annual budget, creating separate agencies to administer parts of the program, and establishing a Medicare Board to manage competition among private plans and traditional Medicare. Currently, Medicare policy is determined largely by Congress and the three congressional committees that have jurisdiction over the program: the House Committee on Ways and Means, the House Committee on Energy and Commerce, and the Senate Committee on Finance. These committees regularly propose and draft legislation to modify all aspects of the Medicare program, including payment policy, benefits, coverage, and program administration. In some areas, Congress has created legislative language that is very detailed and prescriptive. For example, policymakers have established sophisticated payment systems and methodologies for reimbursing providers participating in Medicare Parts A and B. Congress has also mandated specific criteria for benefit coverage (i.e., beneficiary co-insurance and cost sharing amounts, day limits on coverage, and patient eligibility requirements). In other areas, congressional involvement in Medicare policy is less developed. For example, although Congress has outlined broad benefit categories for Medicare coverage in Title XVIII of the Social Security Act (SSA), it has given CMS substantial discretion and flexibility to make individual coverage determinations. CMS executes this authority by implementing both national and local coverage determinations, otherwise known as NCDs and LCDs. NCDs and LCDs grant, limit, or exclude Medicare coverage for a specific medical service, procedure, or device. To date, CMS has issued approximately 308 NCDs. The vast majority of Medicare coverage decisions, however, are LCDs, which are made at the local level by private contractors. To assist with its policymaking efforts, Congress relies on the analytic and research support of its legislative branch agencies: the Congressional Budget Office (CBO), the Congressional Research Service (CRS), the Government Accountability Office (GAO), and the 17-member Medicare Payment Advisory Commission, otherwise known as MedPAC. Congress established MedPAC with the Balanced Budget Act of 1997 ( P.L. 105-33 ). Specifically, Congress charged the commission with reviewing and making recommendations to Congress regarding Medicare payment policies, including payments to private Medicare+Choice health plans (now called Medicare Advantage plans). The statute also requires the commission to examine other issues affecting the Medicare program, such as changes in the health care delivery system, changes in the market for health care services, Medicare payment policies and their relationship to quality and access, and factors affecting the efficient delivery of health care services in different sectors (e.g., hospitals, skilled nursing facilities). The commission issues the majority of its policy recommendations through two annual reports to Congress: a March report on Medicare payment policy and a June report on other policy issues affecting the Medicare program. The types of recommendations range from broad, long-term policies such as implementing pay for performance and quality measurement programs to detailed payment update recommendations for Medicare's fee-for-service (FFS) providers. When formulating its recommendations, the commission takes into account the adequacy of current provider payments and the efficiency of providers. For example, in its March 2009 report, the commission recommended eliminating or reducing payment updates for skilled nursing facilities, home health services, and inpatient rehabilitation facilities in FY2010. The commission also testifies regularly for various congressional committees on its findings and recommendations. In establishing MedPAC, Congress merged two previous Medicare advisory commissions: the Prospective Payment Assessment Commission (ProPAC) and the Physician Payment Review Commission (PPRC). Congress created ProPAC in 1983 to provide guidance on implementing the hospital prospective payment system and the PPRC in 1985 to make recommendations to Congress on reforming Medicare's physician payment system. ProPAC and PPRC were established, at least in part, because Congress had become increasingly distrustful of the executive branch and HCFA. By creating an independent advisory body to assist lawmakers in their policymaking efforts, Congress was able to obtain its own source of objective expertise on Medicare payment policy and buffer members of Congress from pressures from interest groups. MedPAC, like its predecessor agencies, does not have the authority to actually implement its recommendations without congressional approval or regulatory action by CMS. Although the actual number of MedPAC recommendations implemented by Congress is difficult to measure, the perception is that the commission has been relatively influential in shaping Medicare policy. According to the commission's FY2010 budget request, MedPAC assesses its impact on the policymaking process by publicly reporting its outputs (e.g., number of requests for information from Congress, number of policy briefs published, and number of testimonies) and qualitatively describing the outcomes of its recommendations. On June 25, 2009, Senator Rockefeller introduced S. 1380 , the Medicare Payment Advisory Commission (MedPAC) Reform Act of 2009. S. 1380 would establish the MedPAC as an executive branch agency with broad policymaking authority in the areas of Medicare payment and coverage. July 17, 2009, the President submitted a draft proposal to Congress titled the Independent Medicare Advisory Council Act of 2009, otherwise known as the IMAC proposal. The IMAC proposal would establish a five-member council to advise the President on Medicare payment rates for certain providers. Although the proposal provides the council with the authority to recommend broader policy reforms, its authority outside of Medicare payment policy would be limited. Finally, the Senate Finance Committee included a provision (Sec. 3403) to establish an independent Medicare advisory board in its health reform legislation, the Patient Protection and Affordable Care Act ( H.R. 3590 ). Under this option, an independent board would be required to develop and submit detailed proposals to Congress and the President to reduce Medicare spending. In the sections that follow, more detailed information comparing these proposals across key categories such as membership, scope of authority, presidential and congressional review procedures, cost control mechanisms, and funding are presented. See Table 1 for highlights from these sections. All three proposals would create an independent entity composed of members appointed by the President, with the advice and consent of the Senate. S. 1380 , however, would replace the current 17-member MedPAC advisory commission with an 11-member executive commission, essentially elevating MedPAC to an executive branch agency. This is in contrast to the Administration's proposal that would create a new five-member executive council, and H.R. 3590 , which would establish a new 15-member independent Medicare advisory board. Members would serve staggered six-year terms in S. 1380 and H.R. 3590 , and five-year terms under the Administration's proposal. Under all three options, the President, with the advice and consent of the Senate, would appoint a Chair for the entity from among its members. H.R. 3590 includes an additional requirement that the Senate Majority Leader, Speaker of the House, Senate Minority Leader, and House Minority Leader each present three recommendations for appointees to the President for his consideration. The Secretary, the Administrator of CMS, and the Administrator of the Health Resources and Services Administration (HRSA) would serve as ex-officio, non-voting members of the Board. For the entities that would be established by S. 1380 and H.R. 3590 , qualifications for membership would be the same or similar to those currently authorized for MedPAC. The only qualifications for membership stipulated in the Administration's proposal are that appointees be physicians or have specialized expertise in medicine or health care policy. All three proposals would provide a new independent entity with the explicit authority to make decisions related to provider payment. S. 1380 , however, is the only proposal to provide the Commission with the authority to make Medicare coverage decisions. Under all three proposals, CMS would retain its responsibility for issuing regulations to implement the entity's recommendations. S. 1380 would elevate MedPAC from a legislative advisory body to an executive branch agency and provide the new commission with broad authority in the areas of Medicare payment and coverage. The Commission would be responsible for developing payment policies, methodologies, and reimbursement rates (including payment updates) for all Medicare providers and suppliers. The Commission would also be responsible for developing Medicare coverage policy, a function currently executed by CMS and its private contractors. To assist in its policymaking functions, S. 1380 requires that the Commission establish three advisory councils: a Council of Health and Economic Advisors, a Consumer Advisory Council, and a Federal Health Advisory Council. The Administration's proposal would establish a separate independent entity with a narrower scope of authority. The IMAC's primary responsibility would be recommending annual payment updates for certain Medicare providers. Although the proposal provides the Council with the authority to recommend broader Medicare reforms, the legislation specifies many exceptions to this authority. Among these are recommendations relating to Medicare financing, capital payments to inpatient hospitals, certain Medicare administrative activities such as claims processing and fraud control, conditions of participation, and physician and hospital quality reporting. The proposal does not explicitly exclude Medicare coverage policy from the Council's jurisdiction. The Independent Medicare Advisory Board established by H.R. 3590 would have the authority to develop and submit recommendations, in certain years, to Congress and the President to reduce Medicare spending. The provision lays out specific criteria for the Board to meet when making its recommendations. For example, when developing and submitting proposals, the Board would be required to develop recommendations that would reduce spending in Medicare Parts C and D; prioritize recommendations that would extend Medicare solvency; improve the health care delivery system and health outcomes by promoting integrated care, care coordination, prevention, wellness, and quality improvement; protect beneficiary access to care (including in rural and frontier areas); and consider the effects of changes in provider and supplier payments on beneficiaries. H.R. 3590 also clearly exempts certain areas from the Board's authority. Specifically, the Board would be prohibited from making recommendations that would ration care, raise revenues, increase beneficiary premiums, increase beneficiary cost-sharing, restrict benefits, or modify eligibility. Additionally, prior to 2020, the Board could not make any recommendation that would reduce payments to providers and suppliers scheduled to receive a reduction in their payment updates in excess of a reduction due to productivity (i.e., hospitals and physicians). The Administration's proposal is the only proposal of the three that requires explicit presidential approval or disapproval of the Council's recommendations. Specifically, the Administration's proposal would require that the Council submit two annual reports to the President containing its recommendations for payment updates to Medicare providers. The President would have 30 days to approve or disapprove of the Council's report in its entirety. The President would not have the authority to disapprove individual recommendations. H.R. 3590 requires the transmission of the Independent Medicare Advisory Board's proposals to the President but does not stipulate specific procedures for the President to review and comment on the Board's recommendations. However, the Board would be required to submit a copy of the proposal to the Secretary for the Secretary's review and comment. Further, if the Board fails to submit a proposal to the President and Congress by January 15, the Secretary would be required to submit a contingent proposal, meeting the same fiscal policy requirements. Under all three options, the Commission or Board's recommendations would automatically go into effect without congressional action. Congress would need to pass legislation that would either supersede the entity's recommendations or block their implementation. Each proposal specifies different procedures for Congress to follow to initiate this process. For example, under S. 1380 , Congress would need a three-fifths majority in the House or Senate (67 in the Senate or 290 in the House) to consider a measure that would overrule a payment or coverage determination made by the Commission. To prevent the implementation of recommendations proposed by the IMAC, the Administration's proposal would require that Congress enact a joint resolution of disapproval within 30 days from the date the President approves the Council's recommendations. All joint resolutions of disapproval are required to be approved and signed by the President. Given that the IMAC proposal would require presidential approval of the Council's recommendations, it is unlikely that the President would then approve a congressional resolution to nullify those recommendations. To prevent the proposal from becoming law, Congress would then need two-thirds majorities in both Houses of Congress to override the President's veto of the resolution. H.R. 3590 is the only proposal that includes expedited or "fast track" procedures for congressional consideration of the Board's recommendations. Expedited procedures help ensure that Congress take action on particular legislation that might otherwise never make it out of committee. Under this option, the Board would be required to submit its annual recommendations to Congress and the President by January 15. By April 1, the Senate Finance Committee, the Committee on Ways and Means, and the Committee on Energy and Commerce would be required to report out either the Board's proposal or an amended version of the proposal or be discharged from further consideration of the proposal. If Congress does not enact legislation that supersedes the Board's proposal by August 15, the Secretary would be required to automatically implement the Board's proposal, subject to certain conditions. To discontinue the automatic implementation of the Board's recommendations beyond 2019, Congress would have to pass a joint resolution of disapproval no later than August 15, 2017. S. 1380 would require that the Commission propose its first set of payment recommendations by December 1, 2012, for implementation beginning in 2013. Under the Administration's proposal and H.R. 3590 , the first set of recommendations would be required in 2014 for implementation in 2015. All proposals contain mechanisms designed to control spending in the Medicare program. Under S. 1380 , the new MedPAC Commission would be required to reduce Medicare expenditures by at least 1.5% annually. If the Chief Actuary of CMS concludes that the Commission's policies would not reduce expenditures by this amount, the Secretary would be required to implement an automatic reduction in payment to Medicare providers and suppliers to achieve the 1.5% savings, subject to certain requirements. H.R. 3590 specifies annual savings targets that the Board would be required to meet. Specifically, the Board would be required to develop recommendations that would reduce projected Medicare spending by the lesser of 0.5 percentage points in 2015, 1.0 percentage points in 2016, 1.25 percentage points in 2017, and 1.5 percentage points in years 2018 and beyond, and the amount by which the rate of growth in Medicare spending exceeds a rate of inflation (as defined in statute). The bill also includes a budget neutrality provision. The Board's recommendations could not increase Medicare expenditures, over the next 10-year period, over and above what they would have been without the recommendations. In its estimate of the Patient Protection and Affordable Care Act released on December 19, the Congressional Budget Office (CBO) predicted that the provision would reduce Medicare spending by $28.2 billion between years 2015-2019, taking into account reductions anticipated for other provisions in the legislation. The Administration's proposal also includes a 10-year budget neutrality provision. Proposals that did not meet this budget neutrality requirement could not be implemented. The CBO analysis of the President's IMAC proposal estimated minor savings from the proposal, $2 billion in savings over 2010-2019 with all of the savings realized in fiscal years 2016 through 2019. To achieve larger savings, the agency recommended including explicit targets for reductions in spending, similar to S. 1380 and H.R. 3590 , as well as providing the Council with broader authority to make other changes in the program. Both S. 1380 and the Administration's proposal would authorize funding, in such sums as necessary, for the Commission or Council's activities. Sixty percent of the appropriation would be payable from the Medicare Part A Trust Fund and 40% from the Part B Trust Fund. H.R. 3590 would appropriate $15 million for the Board's activities beginning in 2012. This amount would increase by the rate of inflation annually thereafter. In the current health care reform debate, the idea of creating an independent, policymaking entity in Medicare has gained prominence. This report illustrates some of the key characteristics for three of the legislative options that have been proposed. Although not a new concept, the idea of creating an independent commission or governing entity in Medicare has garnered attention in recent months because it is perceived as a viable approach for containing health care spending. However, as this comparison demonstrates, determining the appropriate size, scope of authority, cost control mechanisms, and level of independence for a new policymaking body presents challenges for lawmakers and health care experts. As policymakers continue to debate options for health reform, examining and assessing the various approaches for creating these types of entities will become increasingly important. | Current health care reform discussions have included debates about the merits of creating an independent entity in Medicare to make changes in the program. Currently, Medicare policy is made largely by Congress and, to varying degrees, the Centers for Medicare and Medicaid Services (CMS), the federal agency responsible for administering the program. The proposals being debated would essentially create an independent body of experts with the power to set provider payment rates and make other Medicare policy decisions. Advocates of these types of proposals argue that creating a new independent entity or governance structure in Medicare is necessary if we hope to achieve any real health care reform, particularly reductions in overall spending. According to supporters, members of Congress are easily influenced by special interests and lobbyists when developing Medicare policies, particularly those related to provider reimbursement. As a result, some of the decisions that are made may not be fiscally sustainable or in the best interest of beneficiaries. Additionally, proponents argue that members do not have the technical expertise or professional experience required to manage a health insurance program as complex as Medicare. They contend that the public would be better served by having independent experts, insulated from political pressures, responsible for making Medicare policy. Opponents of these proposals express concern about reducing Congress's role in the Medicare policymaking and oversight process. Under the proposals being discussed, recommendations made by the new commission or decision-making entity would automatically become law without congressional action. Critics contend that giving too much power to an entity composed of unelected officials would reduce its accountability to Congress and the public. Over the past year, several proposals have been introduced by Congress to create a new administrative or governing structure in Medicare. On June 25, 2009, Senator Jay Rockefeller introduced S. 1380, the Medicare Payment Advisory Commission (MedPAC) Reform Act of 2009, which would elevate MedPAC, a congressional advisory commission, to an executive branch agency. The Obama Administration submitted a similar proposal to Congress titled the Independent Medicare Advisory Council Act (IMAC) on July 17, 2009. The Administration's draft proposal would create an independent five-member executive council to make recommendations to the President. Finally, the Senate Finance Committee included a provision establishing an independent Medicare advisory board in its health reform legislation, the Patient Protection and Affordable Care Act (H.R. 3590), which passed the Senate on December 24, 2009. All proposals would transfer certain Medicare oversight and decision-making responsibilities to an independent, policymaking entity. This report introduces readers to the concept of creating an independent, policymaking entity in Medicare. The report begins with a discussion of the types of policymaking entities that have been proposed in the current health care reform debate, as well as in Medicare. The report then provides an overview of the role that Congress and CMS play in determining Medicare policy. The report concludes with a comparison of some of the key features of S. 1380, the Administration's draft IMAC proposal, and H.R. 3590. |
Congress has long expressed interest in supporting democratic governance and related rights in other countries as a means of projecting American values, enhancing U.S. security, and promoting U.S. economic interests. More than $2 billion annually has been allocated from foreign assistance funds over the past decade for democracy promotion activities, including support for good governance (characterized by participation, transparency, accountability, effectiveness, and equity), rule of law, and promotion of human rights. While there has been bipartisan support for the general concept of democracy promotion assistance, policy debates in the 116 th Congress may question the consistency, effectiveness, and focus of such foreign assistance. With President Trump indicating in various ways, including in proposed funding cuts for democracy promotion assistance, that promoting democracy and human rights are not top foreign policy priorities of his Administration, this debate has taken on new vigor. The 116 th Congress may consider the impact of the Trump Administration's requested foreign assistance spending cuts on U.S. democracy promotion assistance, review the effectiveness of democracy promotion activities, evaluate the various channels available for democracy promotion, and consider where democracy promotion ranks among a wide range of foreign policy and budget priorities. This report provides information on the history of democracy promotion as a foreign assistance objective, the role of the primary U.S. agencies administering such programs, and funding details and trends, as well as issues of potential relevance to Congress. Democracy promotion may be defined in many ways, but it generally encompasses foreign policy activities intended to encourage the transition to or improvement of democracy in other countries. U.S. foreign aid to promote democracy may focus on electoral democracy, with a narrow emphasis on free and fair elections, or reflect a more liberal concept of democracy, which includes support for fundamental rights and standards that some argue make democracy meaningful. U.S. democracy promotion assistance refers to U.S. program descriptions and funding levels for democracy promotion activities funded through the international affairs (function 150) budget, as reported under the Governing Justly and Democratically (GJD) objective in the annual International Affairs Congressional Budget Justification (CBJ) submitted by the Administration to Congress. The GJD objective (also sometimes called Democracy, Human Rights and Governance—DRG) is defined as including activities to advance freedom and dignity by assisting governments and citizens to establish, consolidate and protect democratic institutions, processes, and values, including participatory and accountable governance, rule of law, authentic political competition, civil society, human rights, and the free flow of information. Congress has used a similar if somewhat more detailed definition in annual appropriations legislation, in which it frequently includes directives related to democracy assistance. The Consolidated Appropriations Act, 2018, defines "democracy programs" as programs that support good governance, credible and competitive elections, freedom of expression, association, assembly, and religion, human rights, labor rights, independent media, and the rule of law, and that otherwise strengthen the capacity of democratic political parties, governments, nongovernmental organizations and institutions, and citizens to support the development of democratic states, and institutions that are responsive and accountable to citizens. The following examples of democracy promotion assistance reflect the broad range of activities that fall within this category: Election Support. Through the Support for Increased Electoral Participation (SIEP) project in Afghanistan, the U.S. Agency for International Development (USAID) has supported training for party poll watchers and candidate agents to effectively participate in election activities; implemented in-depth, multi-month civic education initiatives for women advocates and youth leaders on the electoral system, good governance, and the importance of political participation; and developed a national and local debate series between university students, among other activities. Judicial Reform. In Jordan, USAID recently supported judicial reform by installing computer automation in Jordan's courts with a customized Arabic-language case management system; partnered with the Ministry of Education to launch a program to involve high school students in sessions on democracy, human rights, and elections; and promoted election reform by supporting the establishment of an Independent Election Commission and a national coalition of civil society organizations to campaign for improved election procedures and monitoring. Law Enforcement Reform. After the 2014 revolution in Ukraine, Ukraine's Ministry of Internal Affairs sought to establish a new first-responder police force rather than rehire police officers from within an existing system that the Ukraine public widely saw as corrupt. The State Department's Bureau of International Narcotics and Law Enforcement Affairs (INL) worked with Ukraine to create a transparent and competitive recruitment process, including a public awareness campaign carried out by INL's implementing partners focused on inclusion of women, who made up 25% of applicants. Municipal Governance. USAID's Office of Transition Initiatives is helping municipal governments in Colombia to execute recently signed peace accords and mitigate destabilizing tensions that threaten to derail the peace process. Activities include aligning municipal plans with accord priorities and disseminating best practices from public and private sector leaders in other regions emerging from conflict; training members of community action boards to manage resources and understand accord implications to ensure that implementation reflects local realities and priorities; and providing technical assistance to four government ministries to improve their capacity for accord implementation. Human Rights and Rule of Law. In Ethiopia, National Endowment for Democracy (NED) grants have supported workshops for judicial and security officials and religious and civic leaders to improve understanding of human and democratic rights, assess the main challenges within their communities, and strengthen their ability to prevent rights violations in their individual and professional capacities. NED also supports workshops, forum discussions, and competitions among secondary school students in Addis Ababa to promote awareness of cultural factors that foster democratic development. The Foreign Assistance Act of 1961 (FAA), which is the basis of U.S. foreign assistance, cites "democratic participation" and "effective institutions of democratic governance" among the principles on which U.S. foreign assistance policy should be based. The FAA authorizes activities to promote good governance by combatting corruption and promoting transparency and accountability, and conditions some assistance on compliance with human rights standards. The law has also been amended over the years to add more explicit democracy promotion authorization for specific regions through legislation such as the Central America Democracy, Peace, and Development Initiative (FAA §461; 22 U.S.C. 2271), the Support for East European Democracy (SEED) Act of 1989 (22 U.S.C. 5401 et seq.), and the FREEDOM Support Act of 1992 ( P.L. 102-511 ; 22 U.S.C. 2295). In addition, State Department democracy activities are guided by the various authorities compiled in the U.S. Code chapter on Advancing Democratic Values (22 U.S.C. CHAPTER 89 §8211-12), and NED activities are authorized through the 1983 National Endowment for Democracy Act ( P.L. 98-164 ; 22 U.S.C. 4411-4416). As with many foreign assistance programs, authorizations related to democracy promotion may have expired, but annual appropriations language designating funds for this purpose is used by Congress in lieu of new authorizing legislation. Democracy promotion assistance may generally be implemented "notwithstanding" other provisions of law that otherwise restrict foreign assistance, allowing it to be implemented in countries where other types of foreign assistance may by prohibited. There are laws and related agency policies, however, that specifically restrict the scope of democracy assistance activities. The FAA section authorizing development assistance for human rights promotion, for example, states that "none of these funds may be used, directly or indirectly, to influence the outcome of any election in any country." Similarly, USAID's Political Party Assistance Policy states that such assistance must support representative, multiparty systems and not seek to determine election outcomes. NED is also prohibited by provisions in its authorization from using funds for partisan political purposes, including funding for national party operations and support for specific candidates. Resources and attention to U.S. democracy promotion assistance have varied among Administrations and Congresses—with other interests, including U.S. security concerns, variously bolstering and competing with democracy promotion objectives. In the aftermath of World War II, the United States supported democratization efforts in Germany and Japan, but also supported the overthrow of democratically elected regimes in Iran and Guatemala. As one scholar described this period, "stability took precedence over values and the fight against communism over the promotion of democracy." Stability was the primary foreign policy objective of the Lyndon B. Johnson, Nixon, and Ford Administrations, during which it was perceived that stable dictators were better for U.S. interests than countries in democratic transition, which may be susceptible to communism. Democracy and human rights promotion gained traction in U.S. foreign policy in the 1970s. Congress took a lead on this issue, amending the Foreign Assistance Act in 1975 to restrict aid to the governments of countries that engaged in a consistent pattern of "gross violations" of human rights, as detailed in the legislation, and creating the position of Coordinator for Human Rights and Humanitarian Affairs at State in 1976. Elected during a Cold War thaw, President Carter emphasized democracy promotion as part of a broader human rights agenda, particularly with respect to Central and South America. With the support of Congress, the Carter Administration used foreign assistance to promote this human rights agenda primarily through use of negative conditionality—reducing aid to human rights violators, especially military aid to Latin America, in the early years of his Administration. Stability was still a concern, however, and President Carter sought reform within existing regimes, not the overthrow of totalitarians. Upon taking office in 1981, President Reagan immediately resumed the assistance to Latin America on which Carter had put conditions (this assistance was later sharply curbed by Congress) and focused on the existential threat it saw in communism rather than promoting democracy or human rights. However, the Reagan Administration adopted its own approach to democracy promotion that was distinct from its predecessor, distancing democracy from human rights, promoting democracy as part of an anticommunist agenda, and using democracy assistance, rather than punitive restrictions on aid, as a primary tool. In a famous 1982 speech before the United Kingdom Parliament, President Reagan stated No, democracy is not a fragile flower. Still, it needs cultivating. If the rest of this century is to witness the gradual growth of freedom and democratic ideals, we must take action to assist the campaign for democracy. The Reagan Administration emphasized a structural rather than a rights-based view of democracy, emphasizing free and fair elections. It also called for the creation of a private but government-funded entity to support foreign prodemocracy organizations, which was established in 1983 as the National Endowment for Democracy and authorized by Congress as a federal grantee. Using a nonstate entity to support democracy promotion activities had the benefit of allowing the Administration simultaneously to support dictatorships and strengthen democratic successor movements and to replace once-covert programs with activities that were overt but arguably independent of U.S. policy. President Reagan is viewed by some as having solidified a bipartisan consensus within Congress and the American public that the United States had a strategic interest in promoting a transition to electoral democracy among its autocratic allies. With the end of the Cold War and the dismantling of the Soviet Union, the focus of democracy promotion efforts in the late 1980s and early 1990s shifted from Latin America to Eastern Europe and former Soviet states. The United States had a clear interest in promoting stability in this region, home to a vast nuclear arsenal and adjacent to Western European allies, and Congress and the George H. W. Bush Administration saw the opportunity to bring an end to communist expansion by supporting successful transitions to democratic governance and free markets. During this period, Congress enacted the Support for East European Democracy (SEED) Act of 1989 ( P.L. 101-179 ; 22 U.S.C. 5401), primarily to assist Poland and Hungary but later expanded to assist a dozen countries, and the FREEDOM Support Act of 1992 ( P.L. 102-511 ; 22 U.S.C. 2295), geared toward assisting the newly independent states of the former Soviet Union. These efforts continued and expanded under the Clinton Administration, which faced a post-Cold War landscape and had to find a new focus around which to shape foreign policy. President Clinton made democracy promotion one of the pillars of his foreign policy, titling his early security strategies "National Security Strategy of Engagement and Enlargement," asserting that enlarging the community of democratic and free market nations served all U.S. strategic interests. The 1990s saw tremendous growth in democracy promotion activities, which experts have attributed to a low threat perception, a global wave of democratic transitions that provided many windows of opportunity, and no strong ideological rival to Western liberal democracy. The global spread of democracy seemed inevitable to many at the time, and democracy promotion and support became deeply integrated into the U.S. foreign policy structure. Clinton created a Democracy and Governance Office at USAID, and the Office of Transition Initiatives, to take advantage of opportunities for democracy in countries in transition. Congress, meanwhile, established the State Department's Human Rights and Democracy Fund in 1998, which State describes as its "venture capital fund for democracy and human rights." U.S. democracy promotion activities took a new tone following the 9/11 terrorist attacks in 2001. The George W. Bush Administration asserted that lack of democracy in the Arab world created a breeding ground for terrorism, and that democracy promotion could help contain Islamist extremism as it once had sought to contain Marxist rebels. The Administration established the Middle East Partnership Initiative (MEPI) to support democracy proponents in the Middle East, and established the Millennium Challenge Corporation (MCC) as a model of foreign assistance conditioned on good governance, among other criteria. Secretary of State Condoleezza Rice outlined her vision for "transformational diplomacy" in 2006, which aimed to elevate democracy-promotion activities inside countries and "to work with our many partners around the world to build and sustain democratic, well-governed states that will respond to the needs of their people and conduct themselves responsibly in the international system." Secretary Rice also established a Foreign Assistance Framework, still operational today, which includes Governing Justly and Democratically (GJD) as one of its key objectives. Notably, the Bush Administration, with the support of Congress, channeled significant resources toward efforts to establish democratic processes and institutions in Iraq and Afghanistan following on and concurrent with U.S. military activities in these countries. The lack of clear success with these broadly supported and highly resourced efforts led many to question not only the specific strategies employed, but the whole concept of foreign-led democracy promotion and whether it was an appropriate use of taxpayers' dollars. The Bush Administration "Freedom Agenda" was undermined, some argue, by the association of democracy promotion with military intervention, the use of counterterrorism measures that "undercut the symbolism of freedom," and free elections in the Middle East in which Islamist parties made gains, in conflict with U.S. interests. Some also assert that Western support for civil society groups behind the "color revolutions" in Georgia, Kyrgyzstan, and Ukraine started a backlash against democracy promotion in Russia and elsewhere, leading many governments to restrict aid and civil society activities related to democracy and human rights, which they viewed as interfering with domestic politics. The later years of the Bush Administration saw a growing resistance to democracy promotion activities in many countries, often manifested in increasing restrictions on civil society and nongovernmental organizations affiliated with U.S. and other foreign entities, a trend which continues today. The Obama Administration appeared to step back from the mixed George W. Bush legacy on democracy promotion when it took office in 2009, making efforts to improve relationships with nondemocratic governments in Iran, Russia, and elsewhere. When the 2011 "Arab Spring" gave hope for a new wave of democracy across the region, but also threatened U.S. security and economic interests, the Obama Administration and Congress provided democracy assistance where democratization seemed most promising and continued relations with authoritarian regimes that seemed stable, even though human rights was still an issue with some countries. At the same time, USAID expanded its democracy and governance efforts in 2012, putting new emphasis on program evaluation and learning in an effort to identify which type of democracy promotion activities are most effective and in what circumstances. USAID also released a new Strategy on Democracy, Human Rights and Governance in 2013. The Trump Administration thus far has indicated a preference for dealing with foreign governments on the basis of U.S. economic and security interests, not necessarily levels of democratic governance, and commentators have suggested that the United States has become "an ambivalent actor on the global democratic stage." This is discussed further in the " Issues for Congress " section. Some analysts argue that democracy promotion as a U.S. foreign policy objective is at a crossroads. According to Freedom House, a total of 71 countries suffered net declines in political rights and civil liberties in 2017, compared with 35 that registered gains, marking the 12 th consecutive year in which declines outnumbered improvements. Some question whether democracy promotion efforts make sense, given the instability, sectarian conflict, and anti-Western sentiment that political change has unleashed in some places. Political polarization, economic recession, a rise in extremism, populism, nationalism, and other challenges in the United States and Europe, some argue, have diminished the appeal of Western-style democracy. Others assert, however, that concerns about the declining appeal of democracy and a surge of authoritarianism are overstated. Democracy promotion has now been integrated and institutionalized in U.S. foreign policy over several successive Administrations, making a sharp policy change less likely. As one democracy expert asserts, while less attention may be paid to democracy promotion on the diplomatic level, "tearing out the many threads of democracy support from the institutional fabric of U.S. foreign policy would not be a simple or quick task." The notion that democratic expansion was inevitable has faded over the past decade; however, Congress continues to support democracy promotion aid, with a particular focus on human rights. In recent years concern has grown about the viability of democracy promotion activities in countries with restrictive political environments, or "closed spaces." Many countries have placed restrictions on NGOs and civil society organizations that engage on a range of issues of public interest or concern in a country. For example, in 2014, CIVICUS, an international association of civil society groups, documented attacks on the fundamental civil society rights of free association, free assembly, and free expression in 96 countries. Another organization that tracks civil society issues, the International Center for the Not-for-Profit Law (ICNL), stated that more than 60 laws, regulations, and other initiatives that restrict the influence of civil society organizations have been adopted around the world since 2015. While supporting civil society and democracy advocates in repressive countries may continue to be an element of U.S. foreign policy, programs in such environments can create tension when oversight and transparency requirements conflict with efforts to protect implementing partners and beneficiaries who may face significant risks from association with the United States. Programs in closed societies may also have significant diplomatic implications. In 2015, USAID issued guidance on programming in closed spaces, which it defined as nonhumanitarian programs in foreign countries in which the government (1) is politically repressive, (2) has explicitly rejected USAID assistance, or (3) has an adverse relationship with the United States such that USAID cannot partner with such government on development assistance or place direct hire staff in country. The guidance stated that all such programs would be reviewed with the intention of revising or discontinuing programs that require implementing organizations to go to "undue lengths" to minimize their association with USAID. It also stated that adequate transparency requires that program documents and briefings be unclassified, programmatic information be included in congressional notifications and online, and that implementing partners, including subcontractors and subgrantees, be fully aware of a project's USAID funding. It also noted that an initial review suggested that the great majority of USAID's portfolio in closed spaces is adequately balanced in this respect. In such cases, USAID "will continue to abide by existing Agency guidelines, including ensuring that the programs are not advancing an explicit political agenda beyond the promotion of basic principles of human rights and democratic governance, and operating with as much transparency a possible while protecting the security of implementing partners and beneficiaries." The challenge of closed spaces, some argue, is a justification for U.S. support of NED, which as a nongovernmental organization may be better suited than USAID or State to work in politically restricted environments. As the organization explains on its website, "NED's NGO status allows it to work where there are no government-to-government relations and in other environments where it would be too complicated for the U.S. Government to work," and "NED's independence from the U.S. Government also allows it to work with many groups abroad who would hesitate to take funds from the U.S. Government." NED continued to support programs in Bolivia, for example, even after President Evo Morales expelled USAID and the U.S. ambassador to the country in 2013. Democracy promotion falls within the purview of several agencies and organizations that manage foreign assistance activities. This section describes the role of the primary entities implementing democracy promotion funds. USAID is the lead U.S. government manager of most foreign assistance programs. State Department and USAID share primary responsibilities for democracy promotion and human rights assistance. Programs are generally designed, managed, and monitored by USAID officials at the mission level, using nongovernmental partners for implementation. These activities are integrated into the broader development strategy for each country and may be closely linked with U.S. assistance in health, education, economic growth, and other development sectors. Democracy promotion activities of the missions are supported in USAID's Washington office by the Center for Excellence on Democracy, Human Rights and Governance (DRG, established in 2012 to replace the Office of Democracy and Governance, which was established in 1985), within the Bureau of Democracy, Conflict, and Humanitarian Assistance (DCHA). DRG is the hub of USAID democracy promotion and focuses on advancing policy changes, working with field missions to develop and evaluate programs, and sponsoring research to develop best practices. The establishment of DRG in 2012 coincided with a doubling of staff resources and the addition of new divisions focused on human rights, learning, and integration of democracy promotion elements throughout USAID programs. DRG produced the 2013 USAID Strategy on Democracy, Human Rights and Governance, which guides USAID programs at the country and global level. The Office of Transition Initiatives (OTI), established in 1994, also plays a significant role in USAID's democracy promotion efforts. The office was created to offer flexible, rapid response peace and democracy promotion assistance in countries in political crisis. In contrast with the ongoing DRG work in most countries, OTI programs are intended to be short-term, usually two to five years. The office is staffed primarily by personal service contractors, allowing it to expand and contract quickly, as well as standing contracts allowing for rapid procurement. OTI's niche is situations in which an opportunity for political change arises in a country of strategic significance to the United States and where other entities, including DRG, are not able to engage due to lack of presence or time pressure. As of early 2018, OTI was operating in Bosnia and Herzegovina , Burma , northern Cameroon , Chad , Colombia , Honduras , Libya , Macedonia , Niger , Nigeria , Pakistan , Somalia , Syria , and Ukraine . The State Department democracy promotion activities complement those of USAID. State implements programs to advance democracy, good governance, and human rights around the world primarily through its Bureau of Democracy, Human Rights, and Labor (DRL). DRL programs generally differ from those of USAID in two ways. First, they are focused on short-term or emergency assistance, rather than sustained programming. Second, DRL primarily serves as a Washington, DC-based grant-making entity, providing funds to U.S. nonprofit organizations involved in promoting human rights and democracy, as well as religious freedom, labor rights, transitional justice, and Internet freedom. DRL is not active at the embassy level, but it monitors grantee performance through annual reports and site visits. The bureau addresses human rights and democracy primarily through its Human Rights and Democracy Fund, which targets support to international and local NGOs to build demand for accountable, rights-respecting governance and rule of law. DRL works primarily in countries with closed societies and little political will to reform, as well as countries where USAID does not operate. It also maintains public-private partnerships that address gender-based violence, anticorruption, and embattled civil society organizations. The bureau is under the authority of the Under Secretary for Civilian Security, Democracy, and Human Rights, a position created at the recommendation of the 2010 QDDR as a means of elevating efforts to address threats to civilians within State policies and operations. Several other offices reporting to the Under Secretary do work related to democracy promotion. The International Narcotics and Law Enforcement Affairs (INL) office, for example, supports anticorruption, law enforcement, and justice sector strengthening activities that may be part of democracy promotion efforts. INL advances the rule of law and human rights primarily through support to criminal justice institutions such as ministries of justice to promote accountable, rights-respecting institutions. This complements INL's work with civilian law enforcement that emphasizes the importance of security provision that respects human rights. Regional and functional bureaus within the State Department also program and manage DRG activities, or have programs that contribute to furthering DRG efforts, such as programming on atrocity prevention and countering violent extremism conducted by the Bureau of Conflict and Stabilization Operations (CSO). In addition, State's Bureau of Educational and Cultural Affairs (ECA) manages exchange and information programs that often have democracy promotion elements. The NED, established in 1983, is a Washington, DC-based private nonprofit organization that is funded almost exclusively through annual direct appropriations and designated State Department funds. Much like the State Department's DRL, NED does not design or carry out its own programs, but rather provides grants to organizations involved in human rights and democracy promotion. About 40%-50% of NED grants are awarded in equal amounts to its four affiliated organizations—International Republican Institute, National Democratic Institute, the American Center for International Labor Solidarity, and the Center for International Private Enterprise—while the rest go to nongovernmental organizations indigenous to the countries in which the programs are implemented. Because NED is not a government agency, it can support activities in places where USAID or other official entities are limited by law or diplomatic considerations. The organization's activities are generally viewed as more independent of U.S. foreign policy considerations than USAID or State democracy and human rights activities. NED grants are reviewed and approved or rejected on a case-by-case basis by the NED board of directors. Program areas funded by NED include freedom of information, political processes, democratic ideas and values, strengthening political institutions, accountability, human rights, rule of law, civic education, NGO strengthening, freedom of association, developing market economy, and conflict resolution. NED reports annually to Congress on its activities, and reports to State quarterly on the use of funds it receives from State. MCC was establish in 2004 to implement foreign assistance compacts (five-year assistance contracts) in close partnership with countries that have been selected based on their scores on a variety of indicators suggesting competent and just governance. Human rights and democracy promotion activities are not usually part of MCC country compacts, which are designed to reduce poverty through economic growth. However, one could argue that the MCC selection process incentivizes and promotes democracy and human rights, as MCC compact eligibility depends in part on specific must-pass indicators related to civil liberties and political rights. MCC aims to hold its partners accountable for maintaining good democratic governance during their compact, and in cases where problems have emerged, MCC has suspended or terminated compact programs; the threat of losing an MCC program has created strong leverage for the U.S. government in policy promotion discussions. The MCC threshold program, until 2012, had a more direct role in democracy promotion—for example, the threshold program in Jordan focused on broadening public participation in the electoral process and increasing government accountability and transparency—but now does so only when the lack of democratic progress is shown to be a constraint to economic growth. Threshold programs do still often work to address specific policy issues that prevent compact eligibility, such as control of corruption. While the abovementioned agencies are the primary managers of U.S. democracy assistance, other U.S. government entities play a role as well. The Department of Justice implements international programs on rule of law and administration of justice (with State Department funding). The Department of Labor's worker rights activities extend internationally. Various Department of Defense programs include respect for human rights and the subordination of military to civilian authority as part of military training or civil affairs activities. International broadcasting activities overseen by the Broadcasting Board of Governors, such as Voice of America broadcasting and Radio Martì broadcasts to Cuba, have a strong democracy promotion element. Aside from NED, there are a few smaller nonprofit organizations that receive direct annual appropriations, such as The Asia Foundation and the U.S. Institute of Peace, whose programs include elements of democracy promotion. It is difficult to determine how much is spent on these democracy promotion activities, as the agencies do not necessarily categorize and report them as a discrete type of activity. U.S. intelligence agencies also may participate in activities that could be considered democracy promotion, but information on these activities is not publicly available. In addition to bilateral democracy and human rights promotion activities, the United States supports multilateral institutions and organizations that are active in this field. These include the United Nations (U.N.) Development Program, the U.N. Democracy Fund, the Community of Democracies, and Freedom House, as well as the World Bank, the Organization of American States (OAS), and the Organization for Security and Co-operation in Europe (OSCE). Some of these organizations, such as the OAS, explicitly support democracy promotion, while others, such as the World Bank, focus on good governance, which it defines in ways that overlap significantly with standard features of democracy promotion. According to the Organization for Economic Co-operation and Development, multilateral donors committed $17.47 billion in official development assistance for governance and civil society development programs in 2016, though data on actual disbursements, which may be lower, are not available. In recent years, 95%-99% of U.S. democracy promotion assistance has been funded within the Department of State and USAID budgets, with 11 other agencies providing the rest. Funding for U.S. democracy promotion activities is channeled primarily through the Economic Support Fund (ESF), International Narcotics and Law Enforcement (INL), Democracy Fund (DF), Development Assistance (DA), Assistance to Europe, Eurasia, and Central Asia (AEECA), Transition Initiatives (TI), and National Endowment for Democracy (NED) accounts within the annual State, Foreign Operations, and Related Programs (SFOPS) appropriations bill. Congress typically includes a provision in annual appropriations directing that a certain amount of funds in the bill be used for "democracy programs," but allocation by account is largely unspecified in legislation. While the NED and DF accounts are focused on democracy promotion, the ESF, DA, INL, and AEECA accounts support a wide range of activities, and the proportion of these accounts allocated to democracy promotion activities is not known until Administration reporting after the fact. Table 1 shows funding categorized by Administrations as supporting the aid objective of Governing Justly and Democratically (GJD) from FY2015 through the FY2019 request, broken out by State, Foreign Operations, and Related Programs appropriations account. FY2018 account allocations for this objective are not yet available. Since establishment of the Foreign Assistance Framework in 2006, Administrations have tracked both requested and obligated foreign assistance funds using a framework that categorizes funding across appropriations accounts into four subcomponents of the Governing Justly and Democratically (GJD) objective: Civil Society, Political Competition, Good Governance, and Rule of Law/Human Rights. Prior to that time, funding was reported under the general heading, Government & Civil Society. Figure 1 and Table 2 show funding levels for these reporting categories from FY2002 through the FY2019 request. FY2018 data are only currently available in total, not by sub-objective. "Good governance" and "rule of law/human rights" have generally been the highest-funded subcategories of democracy promotion assistance over the past decade, accounting for 35% and 32%, respectively, of democracy promotion aid in FY2015 ( Figure 1 and Table 2 ). "Political competition" has consistently been the lowest-funded subcategory within the GJD framework, representing less than 8% of democracy promotion funding in FY2015. NED funding, which is not included in GJD reporting, has comprised between 3%-7% of annual democracy promotion assistance each year since FY2002. The Trump Administration budget request for FY2018 includes $1,689 million for overall democracy promotion assistance, which is about a 32% cut from the enacted FY2017 funding level. This includes $1,595 million for GJD activities and $107 million for NED. The proposed reductions are consistent with proposed cuts to foreign assistance funding as a whole in the FY2018 budget proposal, and so do not necessarily suggest that democracy promotion is a greater or lesser priority for the Trump Administration relative to other foreign assistance sectors. Within subobjectives, the request shows a shift in favor of good governance activities (more than 50% of the GJD request, compared to 40% in FY2016) and away from rule of law and human rights activities (27% of the FY2018 request comparted to 35% of the FY2016 funding). The United States funds Democracy, Human Rights, and Governance programs across the globe (DRG obligations were reported in more than 70 countries in FY2017, excluding NED funding), but the majority of assistance funds are concentrated in a small group of countries and regional offices. In recent years, Afghanistan has been the top recipient ($302 million estimated for FY2017), along with the State Department's Western Hemisphere Regional Office ($235 million in FY2017). Other top GJD recipients in FY2017 include Syria ($161 million), Ukraine ($100 million), Mexico ($77 million), Colombia and Iraq ($66 million each) and Jordan ($63 million). NED funding is provided annually through a NED appropriations account, which is in the State Operations and Related Accounts section of the SFOPS appropriation, and often not considered foreign assistance. Report language accompanying the NED appropriation typically calls for the account to be allocated in the customary manner to the core institutes, with a portion designated for discretionary grants. Country allocations for NED assistance are not specified in legislation but are publicly available through annual reports to Congress. Table 3 provides a detailed breakdown of NED funding by primary grantee and discretionary grant funds over the past 10 years. NED grants are often much smaller than the assistance levels provided through USAID and government agency programs. Top country recipients of NED funding in FY2017 and FY2018 follow in Table 4 below. Democracy promotion efforts have been met with a range of criticism, some specific to particular activities, but they generally fall into a few general themes. Below are key arguments made by critics, and corresponding responses by democracy promotion advocates. Imposing American Values . Some argue that it is arrogant for the United States to assert that its form of liberal democracy, and accompanying values, should be held by all. Some go further to assert that this effort to reform the world in the U.S. image, as they see it, has helped to stoke the resentment that fuels terrorism. Proponents of democracy promotion counter that democracy and participatory government are not American concepts, but broadly held values, and U.S. activities are not imposed, but support organizations and individuals abroad who are fighting for these freedoms and seek help. Sovereignty . Foreign leaders who feel threatened by democracy promotion often argue that democracy promotion efforts, which may be viewed as interfering with local politics, are inappropriate interference with the domestic politics of a foreign country. This argument is often the basis for the efforts to restrict civil society organizations that promote democracy, sometimes with U.S. or other foreign funding. Critics of this argument counter that these leaders, if not selected through free and fair elections, lack the legitimacy to be the representative of sovereign people. Inconsistency . Democracy promotion sometimes conflicts with other foreign policy priorities, and critics argue that when the United States exerts pressure on some regimes for undemocratic practices while ignoring similar practices among strategic partners against terrorism, or major oil suppliers, the moral authority of the United States is undermined. Others assert that, as with any foreign intervention, it is appropriate and necessary for the United States to pick and choose situations in which the greatest opportunities for positive change exist. Ineffectiveness and Unintended Consequences . Recent democracy promotion efforts in Afghanistan and Iraq, and in several countries in the wake of the Arab Spring, have led some to conclude that these efforts are destined to fail because they attempt to induce social and structural changes in societies that U.S. policymakers do not fully understand. The results may not only be ineffective, but may have unintended consequences such as regional instability. Democracy promotion advocates argue that it is a mistake to focus on the Iraq and Afghanistan examples, which reflect the shortfalls of military intervention more than democracy promotion, and cite positive results in less publicized situations such as Colombia, Indonesia, Myanmar (Burma), Slovakia, and Tunisia. Congress plays an important role in determining the shape, scope, and priorities of U.S. democracy assistance programs. Following are some issues Congress may consider as it carries out related legislative and oversight responsibilities. Many Members of Congress have expressed concern about actions by the Trump Administration that they perceive as undermining U.S. democracy promotion efforts. President Trump's frequent praise for authoritarian leaders, including Russia's Vladimir Putin, Kim Jong-un of North Korea, and Rodrigo Duterte of the Philippines, combined with intermittent criticism of democratic leaders and allies, have raised concern that the Administration is emboldening foreign nondemocratic behavior. Moreover, President Trump's statements valuing the U.S. economic relationship with Saudi Arabia over acute concerns about the Saudi Crown Prince's role in the October 2018 murder of U.S.-based journalist Jamal Khashoggi have heightened this concern. At the same time, the Trump Administration has taken a hard line on some authoritarian leaders, with National Security Advisor John Bolton referring to Cuba, Venezuela, and Nicaragua as a "troika of tyranny." Conflict between Congress and the Administration on whether, how and when the United States should promote democracy and condemn authoritarian regimes may be an issue throughout the 116 th Congress. For both FY2018 and FY2019, the Trump Administration proposed cuts to democracy promotion aid of more than 40% compared to prior year funding. The proposed funding cuts exceed those proposed by the Administration both years for foreign assistance programs as a whole, for which proposed cuts would average about 30%. The Administration has also indicated its intent to focus foreign assistance generally on countries of greatest strategic significance; this would not necessarily change democracy promotion allocations, which are already heavily concentrated in such countries. For FY2018, Congress did not enact cuts to the degree proposed by the Administration, but did reduce funding for democracy promotion assistance by 16% compared to FY2017. While a final appropriation for FY2019 has not yet been enacted, both the House and Senate committee-approved bills include slightly more funding for democracy promotion than they approved for FY2018, making Administration-requested funding reductions in FY2019 unlikely. Nevertheless, Congress may continue to scrutinize of the costs versus benefits of various democracy promotion activities and the foreign assistance budget, in general, if the Administration continues to call for significant foreign affairs budget cuts. Most democracy promotion assistance is subject to the same monitoring and evaluation, auditing, and oversight as other foreign assistance, including the contracting, auditing, and reporting requirements of the State Department and USAID, review by agency Inspectors General, and investigations by the Government Accountability Office (GAO). As with other foreign assistance programs, tracking resources and monitoring outputs and contract performance for democracy aid is well-established practice, while evaluating program effectiveness remains challenging. Documenting the impact of democracy promotion activities may be particularly difficult because of the sometimes abstract objectives, political sensitivity, need for timely and flexible response in many situations, length of time to produce certain results (possibly generations), and potential backsliding that can occur in any country at any time. A 2006 study commissioned by USAID to determine the effects of its democracy assistance programs between 1990 and 2003 found that even when controlling for a variety of other factors, USAID democracy and governance aid had "a significant positive impact on democracy, while all other U.S. and non-U.S. assistance variables are statistically insignificant." However, no comparable study of U.S. democracy assistance has been carried out in the past decade, even as much attention has been paid to disappointing results of U.S. democracy promotion aid in such strategically significant places as Egypt and Russia. USAID has stepped up efforts to evaluate its democracy and human rights programs in recent years, with an emphasis on learning which activities are most effective. Congress may wish to use its oversight authority to bring more attention or resources to examining the effectiveness of this type of assistance. There are both advantages and disadvantages to implementing democracy assistance directly, through USAID, or indirectly through NED or multilateral entities. NED was established to make overt and accountable certain democracy promotion activities that had previously been largely covert; but it is structured to keep policymakers at arm's length, giving political cover on both ends, and to limit the ability of policymakers to control NED activities. Providing assistance through multilateral democracy promotion channels, such as the U.N. Democracy Fund, further limits the ability of U.S. policymakers to direct and oversee activities and ensure alignment with U.S. foreign policy priorities. At the same time, these indirect implementation channels are viewed by some as having more legitimacy precisely because they are removed from a specific foreign policy agenda inherent to direct U.S. government action. In some situations, affiliation with the United States can be detrimental or dangerous to implementing partners and create conflict between security measures and requirements for transparency and branding. Historically, less than 10% of annual U.S. democracy and human rights assistance has been allocated for NED and multilateral programs. As the 116 th Congress considers policy and funding related to democracy promotion, Members may consider the merits and limitations of various aid channels and whether the current allocation of resources best meets policy objectives. As the history of democracy promotion in U.S. foreign policy indicates, the emphasis placed on human rights and democracy at a given time or in a particular bilateral relationship depends significantly on competing security and economic interests (such as stabilizing a country or region with the potential of becoming a U.S. trading partner). As noted above, the Trump Administration has prioritized U.S. national security and economic gains as the focus of U.S. bilateral relationships, suggesting that democracy and human rights promotion are secondary issues when it comes to Administration negotiations with foreign governments. Congressional advocates of human rights, however, may push back on any move to bolster nondemocratic regimes in the name of security, or a view of democratic systems as representing a competitive disadvantage in global trade. As Congress considers the myriad interests at stake in various foreign policy decisions, it may weigh the importance of projecting democratic values against potentially conflicting security and economic interests, and the impact of those choices on U.S. global leadership. Some experts argue that liberal democracy promotion was once effective because the United States was viewed by many around the world as exemplifying the type of government they would like to live under, but that the American "brand" has been tarnished by problems within American democracy. Furthermore, as new democracies struggle with economic and security challenges, as in Eastern Europe and Iraq, global perceptions of the relationship between democracy, peace, and prosperity have changed. While these challenges lead some to question ongoing U.S. efforts to promote democracy abroad, others assert that these activities are more important than ever because diminished U.S. leadership with respect to promoting democratic values could leave a void that other countries could fill, with detrimental consequences for the United States in the long term. China's system of authoritarian capitalism, in particular, is seen as a potential "post-democratic" model that appeals to many who prioritize stability and economic growth. As Congress and the Trump Administration deliberate on the appropriate role of democracy and human rights promotion within U.S. foreign policy, the implications of alternative models gaining prominence and legitimacy may be an important consideration. | Promoting democratic institutions, processes, and values has long been a U.S. foreign policy objective, though the priority given to this objective has been inconsistent. World events, competing priorities, and political change within the United States all shape the attention and resources provided to democracy promotion efforts and influence whether such efforts focus on supporting fair elections abroad, strengthening civil society, promoting rule of law and human rights, or other aspects of democracy promotion. Proponents of democracy promotion often assert that such efforts are essential to global development and U.S. security because stable democracies tend to have better economic growth and stronger protection of human rights, and are less likely to go to war with one another. Critics contend that U.S. relations with foreign countries should focus exclusively on U.S. interests and stability in the world order. U.S. interest in global stability, regardless of the democratic nature of national political systems, could discourage U.S. support for democratic transitions—the implementation of which is uncertain and may lead to more, rather than less, instability. Funding for democracy promotion assistance is deeply integrated into U.S. foreign policy institutions. More than $2 billion annually has been allocated from foreign assistance funds over the past decade for democracy promotion activities managed by the State Department, the U.S. Agency for International Development, the National Endowment for Democracy, and other entities. Programs promoting good governance (characterized by participation, transparency, accountability, effectiveness, and equity), rule of law, and promotion of human rights have typically received the largest share of this funding in contrast to lower funding for programs to promote electoral processes and political competition. In recent years, increasing restrictions imposed by some foreign governments on civil society organizations have resulted in an increased emphasis in democracy promotion assistance for strengthening civil society. Despite bipartisan support for the general concept of democracy promotion, policymakers in the 116th Congress may continue to question the consistency, effectiveness, and appropriateness of such foreign assistance. With President Trump indicating in various ways that promoting democracy and human rights are not top foreign policy priorities of his Administration, advocates in Congress may be challenged to find common ground with the Administration on this issue. As part of its budget and oversight responsibilities, the 116th Congress may consider the impact of the Trump Administration's FY2020 foreign assistance budget request for U.S. democracy promotion assistance, review the effectiveness of democracy promotion activities, evaluate the various channels available for democracy promotion, and consider where democracy promotion ranks among a wide range of foreign policy and budget priorities. |
P.L. 112-29 , the Leahy-Smith America Invents Act, or "AIA," arguably made the most significant changes to the patent statute since the 19 th century. Among other provisions, the statute introduced into U.S. law a first-inventor-to-file priority rule, an infringement defense based upon prior commercial use, and assignee filing. The legislation prevented patents from claiming or encompassing human organisms, limited the availability of patents claiming tax strategies, and restricted the best mode requirement. The AIA also made notable reforms to administrative patent challenge proceedings at the U.S. Patent and Trademark Office (USPTO) and to the law of patent marking. Along with numerous other changes to patent laws and procedures, these reforms were intended to modernize the U.S. patent system and to improve its fairness and effectiveness. Congressional interest in patent reform was evidenced by sustained legislative activity that led to enactment of the AIA. There is broad agreement that more patents are sought and enforced than ever before; that the attention paid to patents in business transactions and corporate boardrooms has dramatically increased; and that the commercial and social significance of patent grants, licenses, judgments, and settlements is at an all-time high. As the United States becomes even more of a high-technology, knowledge-based economy, the importance of patents may grow even further in the future. Most experts agree that patent ownership is an incentive to innovation, the basis for the technological advancement that contributes to economic growth. It is through the commercialization and use of new products and processes that productivity gains are made and the scope and quality of goods and services are expanded. Award of a patent is intended to stimulate the investment necessary to develop an idea and bring it to the marketplace embodied in a product or process. Patent title provides the recipient with a limited-time monopoly over the use of his discovery in exchange for the public dissemination of information contained in the patent application. This is intended to permit the inventor to receive a return on the expenditure of resources leading to the discovery but does not guarantee that the patent will generate commercial benefits. The requirement for publication of the patent is expected to stimulate additional innovation and other creative means to meet similar and expanded demands in the marketplace. Passage of the AIA was preceded by several years of legislative debate about the current workings and future direction of the U.S. patent system. Although the discussion was wide-ranging, several points of concern were frequently mentioned. One was the recognition that differences between U.S. patent laws and global patent norms might increase the difficulty of domestic inventors in obtaining rights abroad. Another was that poor patent quality and high costs of litigating patent disputes might encourage speculation, or "trolling," by entrepreneurs that acquire and enforce patents. Congress also recognized that individuals, universities, and small entities play a role in the technological advancement and economic growth of the United States. A number of provisions of the AIA addressed these issues and concerns in different ways. As ultimately enacted, the AIA also reflects the reality that the courts have been active in making changes to important patent law principles. Some observers believe that several court decisions addressed the same concerns that had motivated earlier legislative reform proposals, thereby obviating or reducing the need for congressional action. For example, judicial opinions issued in the past several years have addressed the availability of injunctive relief against adjudicated patent infringers, the standards for deciding which venue is appropriate for conducting a patent trial, and the assessment of damages in patent infringement cases. As a result of these and other developments, several provisions found in predecessor versions of the AIA were not included in the final version of the statute. This study provides an overview of the AIA. It begins by offering a brief overview of the patent system. The specific components of this legislation are then identified and reviewed in greater detail. The report closes with further considerations. The patent system is grounded in Article I, Section 8, Clause 8 of the U.S. Constitution, which states that "The Congress Shall Have Power ... To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries...." As mandated by the Patent Act of 1952, U.S. patent rights do not arise automatically. Inventors must prepare and submit applications to the U.S. Patent and Trademark Office (USPTO) if they wish to obtain patent protection. USPTO officials known as examiners then assess whether the application merits the award of a patent. The patent acquisition process is commonly known as "prosecution." In deciding whether to approve a patent application, a USPTO examiner will consider whether the submitted application fully discloses and distinctly claims the invention. In addition, the application must disclose the "best mode," or preferred way, that the applicant knows to practice the invention. The examiner will also determine whether the invention itself fulfills certain substantive standards set by the patent statute. To be patentable, an invention must consist of a process, machine, manufacture, or composition of matter that is useful, novel, and nonobvious. The requirement of usefulness, or utility, is satisfied if the invention is operable and provides a tangible benefit. To be judged novel, the invention must not be fully anticipated by a prior patent, publication, or other state-of-the-art knowledge that is collectively termed the "prior art." A nonobvious invention must not have been readily within the ordinary skills of a competent artisan at the time the invention was made. If the USPTO allows the patent to issue, the patent proprietor obtains the right to exclude others from making, using, selling, offering to sell, or importing into the United States the patented invention. Those who engage in these acts without the permission of the patentee during the term of the patent can be held liable for infringement. Adjudicated infringers may be enjoined from further infringing acts. The patent statute also provides for the award of damages "adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer." The maximum term of patent protection is ordinarily set at 20 years from the date the application is filed. At the end of that period, others may employ that invention without regard to the expired patent. Patent rights are not self-enforcing. Patentees who wish to compel others to observe their rights must commence enforcement proceedings, which most commonly consist of litigation in the federal courts. Although issued patents enjoy a presumption of validity, accused infringers may assert that a patent is invalid or unenforceable on a number of grounds. The U.S. Court of Appeals for the Federal Circuit (Federal Circuit) possesses national jurisdiction over most patent appeals from the district courts. The U.S. Supreme Court enjoys discretionary authority to review cases decided by the Federal Circuit. The AIA shifted the U.S. patent priority rule from the previous "first-to-invent" principle to the global norm of the "first-inventor-to-file" principle. Within the patent law, the priority rule addresses the circumstance where two or more persons independently develop the identical or similar invention at approximately the same time. In such cases the patent law must establish a rule as to which of these inventors obtains entitlement to a patent. Prior to the enactment of the AIA, the United States was the only patent-issuing state to follow the first-to-invent rule. Under this principle, when more than one patent application was filed claiming the same invention, the patent would be awarded to the applicant who was the first inventor in fact. This conclusion would hold even if the first inventor was not the first person to file a patent application directed towards that invention. Within this first-to-invent system, the timing of real-world events, such as the date a chemist conceived of a new compound or a machinist constructed a new engine, is of significance. In contrast, priority of invention under the first-inventor-to-file principle is established by the earliest effective filing date of a patent application disclosing the claiming invention. Stated differently, the inventor who first files an application at the patent office is presumptively entitled to the patent. Whether or not the first inventor applicant is actually the first individual to complete the invention in the field is irrelevant. This priority system follows the first-inventor-to file principle. A simple example illustrates the distinction between these priority rules. Suppose that Inventor A synthesizes a new chemical compound on August 1, 2012, and files a patent application on November 1, 2012, claiming that compound. Suppose further that Inventor B independently invents the same compound on September 1, 2012, and files a patent application on October 1, 2012. Inventor A would be awarded the patent under the first-to-invent rule, while Inventor B would obtain the patent under the first-inventor-to-file principle. The first-inventor-to-file rule established by the AIA became effective on March 16, 2013; applications filed prior to that date remain subject to the earlier, first-to-invent principle. Notably, the AIA does not allow one individual to copy another's invention and then, by virtue of being the first to file a patent application, be entitled to a patent. All patent applicants must have originated the invention themselves, rather than derived it from another. In order to police this requirement, the new legislation provides for "derivation proceedings" that allow the USPTO to determine which applicant is entitled to a patent on a particular invention. The AIA continues to provide inventors with a one-year period to decide whether to pursue patent protection after disclosing their inventions to the public. Prior to enactment of the AIA, U.S. patent law essentially provided inventors with a one-year period to decide whether patent protection is desirable, and, if so, to prepare an application. Specified activities that occur before the "critical date"—patent parlance for the day one year before the application was filed—will prevent a patent from issuing. If, for example, an entrepreneur first discloses an invention by publishing an article in a scientific journal, she knows that she has one year from the publication date in which to file a patent application. Importantly, uses, sales, and other technical disclosures by third parties will also start the one-year clock running. As a result, inventors have a broader range of concerns than merely their own activities. Suppose, for example, that an electrical engineer files a patent application claiming a new capacitor on February 1, 2010. While reviewing the application, a USPTO examiner discovers an October 1, 2008, journal article by another author disclosing the identical capacitor. Because the article was published prior to the critical date of February 1, 2009, that publication will prevent or "bar" the issuance of a patent on that capacitor. Under the AIA, the grace period operates similarly, in essence protecting the patent positions of individuals who disclosed their inventions up to one year before they filed a patent application. The grace period also encourages early public disclosure of new inventions, placing that information before the public. The AIA provides that as of March 16, 2013, the grace period will operate as follows: § 102. Conditions for patentability; novelty (a) NOVELTY; PRIOR ART.—A person shall be entitled to a patent unless— (1) the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention; .... (b) EXCEPTIONS.— (1) DISCLOSURES MADE 1 YEAR OR LESS BEFORE THE EFFECTIVE FILING DATE OF THE CLAIMED INVENTION.—A disclosure made 1 year or less before the effective filing date of a claimed invention shall not be prior art to the claimed invention under subsection (a)(1) if— (A) the disclosure was made by the inventor or joint inventor or by another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor; or (B) the subject matter disclosed had, before such disclosure, been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor.... An example may clarify the operation of the grace period post-AIA. Suppose that on June 1, 2013, Inventor X publishes an article disclosing a new invention consisting of three components, A+B+C. On July 1, 2013, Inventor Y publishes an article disclosing the identical technology, A+B+C. Assume that Inventor Y did not derive the invention from Inventor X. Inventor X then files a patent application on August 1, 2013, claiming A+B+C. Under those circumstances, Inventor Y's publication would seemingly be patent-defeating under AIA §102(a)(1)—except that Inventor X's earlier publication excludes Inventor Y's work as prior art under AIA §102(b)(1)(B). As a result, Inventor X's patent application would not be barred by Inventor Y's publication. Some observers have expressed concerns over the scope of the post-AIA grace period with respect to the patenting requirement of nonobviousness. Recall that in order to be awarded a patent, an invention must be both novel and nonobvious. A novel invention is one that differs from the state of the art, while an invention is considered to be nonobvious unless "the differences between the claimed invention and the prior art are such that the claimed invention as a whole would have been obvious before the effective filing date of the claimed invention to a person having ordinary skill in the art to which the claimed invention pertains." The prior art definition provided in 35 U.S.C. §102 applies to both of these determinations. Although the grace period established by the AIA 35 U.S.C. §102(b)(1) seemingly operates straightforwardly for purposes of novelty, its scope with respect to obviousness may be less certain. This issue is best illustrated through the use of a second example. Suppose that on June 1, 2013, Inventor X publishes an article disclosing a new invention consisting of three components, A+B+C. On July 1, 2013, Inventor Y publishes an article disclosing a highly similar technology, A+B+D. Once more, assume that Inventor Y did not derive the invention from Inventor X. Inventor X then files a patent application on August 1, 2013, claiming A+B+C. Under those circumstances, Inventor Y's publication qualifies as prior art against Inventor X's application under AIA §102(a)(1). The question is then whether Inventor X's earlier publication excludes the Inventor Y publication as prior art under AIA §102(b)(1)(B). The USPTO recently took the following view of the matter: The exception in 35 U.S.C. 102(b)(1)(B) applies if the "'subject matter' disclosed [in the prior art disclosure] had, before such [prior art] disclosure, been publicly disclosed by the inventor or a joint inventor * * * ." Thus, the exception in 35 U.S.C. 102(b)(1)(B) requires that the subject matter in the prior disclosure being relied upon under 35 U.S.C. 102(a) be the same "subject matter" as the subject matter publicly disclosed by the inventor before such prior art disclosure for the exception in 35 U.S.C. 102(b)(1)(B) to apply. Even if the only differences between the subject matter in the prior art disclosure that is relied upon under 35 U.S.C. 102(a) and the subject matter publicly disclosed by the inventor before such prior art disclosure are mere insubstantial changes, or only trivial or obvious variations, the exception under 35 U.S.C. 102(b)(1)(B) does not apply. Thus, under the USPTO's interpretation, Inventor Y's publication qualifies as prior art against Inventor X—possibly defeating Inventor X's application for failing to meet the nonobviousness requirement. Once more, the precise scope of the AIA grace period will likely await future judicial resolution. The AIA introduced reforms to the legal rules governing the practice of "marking" articles with the numbers of particular patents. The U.S. patent laws have long encouraged patent proprietors that manufacture their patented inventions to notify the public of their patent rights. Section 287(a) of the Patent Act of 1952 provides that patent owners should place the word "patent," or the abbreviation "pat.," along with the number of the patent, on patented goods. If the nature of the article does not allow this notice to be placed directly upon it, then a label may be placed on its packaging. This practice is commonly termed "marking." There is no absolute duty to mark. If a patent proprietor fails to mark in the specified manner, however, then it may receive damages only for infringing acts that occur after the infringer receives actual notice of infringement. Filing an infringement lawsuit is considered to provide such actual notice. Less severely, a patent owner may issue a specific charge of infringement, commonly by sending a cease and desist letter to the infringer. The marking statute is said "to give patentees the proper incentive to mark their products and thus place the world on notice of the existence of the patent." The Patent Act also addressed the issue of "false marking." Section 292 prohibits marking a product with the number of another's patent, the name of another patent owner, or a patent or application number where no such patent or application exists. Prohibited marks also include the number of expired patents and patents that do not cover the marked product, provided such marks were affixed for the "purpose of deceiving the public." The Patent Act mandates a maximum fine of $500 for "every such" offense. According to the statute, "any person may sue for the penalty, in which event one-half shall go to the person suing and the other to the use of the United States." The AIA altered the Patent Act's false marking provision by stipulating that the statute may only be privately enforced by a "person who has suffered a competitive injury as a result of the violation...." Damages in such cases would also be limited to those "adequate to compensate for the injury." This amendment would change previous law, which allows any private person to bring a civil action for false marking, whether or not they have been negatively affected. These provisions do not apply to the U.S. government. Under the provisions of the AIA, the U.S. government would continue to bring false marking suits without regard to competitive injury, and also would retain the ability to recover a maximum fine of $500 per each falsely marked article. The AIA also allowed for "virtual marking." Under this proposal, the marking standard would be fulfilled if the product or its packaging included the word "patent" or the abbreviation "pat.," together with an Internet address that provided the number of the patent associated with the patented article. The American Inventors Protection Act of 1999, P.L. 106-113 , allowed an earlier commercial user of a "method of doing or conducting business" that was later patented by another to claim a defense to patent infringement in certain circumstances. The AIA expanded the range of individuals who may assert this defense in court. Even more significantly, the new legislation eliminated the restriction of the prior commercial use defense to business method patents. Under the AIA, a patent claiming any type of invention may be subject to the prior commercial user defense. The prior commercial user defense accounts for the complex relationship between the law of trade secrets and the patent system. Trade secrecy protects individuals from misappropriation of valuable information that is useful in commerce. One reason an inventor might maintain the invention as a trade secret rather than seek patent protection is that the subject matter of the invention may not be regarded as patentable. Such inventions as customer lists or data compilations have traditionally been regarded as amenable to trade secret protection but not to patenting. Inventors might also maintain trade secret protection due to ignorance of the patent system or because they believe they can keep their invention as a secret longer than the period of exclusivity granted through the patent system. The patent law does not favor trade secret holders, however. Well-established patent law provides that an inventor who makes a secret, commercial use of an invention for more than one year prior to filing a patent application at the USPTO forfeits his own right to a patent. This policy is based principally upon the desire to maintain the integrity of the statutorily prescribed patent term. The patent law grants patents a term of 20 years, commencing from the date a patent application is filed. If the trade secret holder could make commercial use of an invention for many years before choosing to file a patent application, he could disrupt this regime by delaying the expiration date of his patent. Settled patent law principles established that prior secret uses would not defeat the patents of later inventors. If an earlier inventor made secret commercial use of an invention, and another person independently invented the same technology later and obtained patent protection, then the trade secret holder could face liability for patent infringement. This policy is based upon the reasoning that once issued, published patent instruments fully inform the public about the invention, while trade secrets do not. Between a subsequent inventor who patented the invention, and thus had disclosed the invention to the public, and an earlier trade secret holder who had not, the law favored the patent holder. An example may clarify this rather complex legal situation. Suppose that Inventor A develops and makes commercial use of a new manufacturing process. Inventor A chooses not to obtain patent protection, but rather maintains that process as a trade secret. Many years later, Inventor B independently develops the same manufacturing process and promptly files a patent application claiming that invention. In such circumstances, Inventor A's earlier, trade secret use does not prevent Inventor B from procuring a patent. Furthermore, if the USPTO approves the patent application, then Inventor A faces infringement liability should Inventor B file suit against him. The American Inventors Protection Act of 1999 somewhat modified this principle. That statute in part provided an infringement defense for an earlier user of a "method of doing or conducting business" that was later patented by another. By limiting this defense to patented methods of doing business, Congress responded to the 1998 Federal Circuit opinion in State Street Bank and Trust Co. v. Signature Financial Group . That judicial opinion recognized that business methods could be subject to patenting, potentially exposing individuals who had maintained business methods as trade secrets to liability for patent infringement. Again, an example may aid understanding of the prior commercial user defense. Suppose that Inventor X develops and exploits commercially a new method of doing business. Inventor X maintains his business method as a trade secret. Many years later, Inventor Y independently develops the same business method and promptly files a patent application claiming that invention. Even following the enactment of the American Inventors Protection Act, Inventor X's earlier, trade secret use would not prevent Inventor Y from procuring a patent. However, should the USPTO approve Inventor Y's patent application, and should Inventor Y sue Inventor X for patent infringement, then Inventor X may potentially claim the benefit of the first inventor defense. If successful, Inventor X would enjoy a complete defense to infringement of Inventor Y's patent. Prior to the AIA, the prior commercial user defense could "be asserted only by the person who performed the acts necessary to establish the defense...." The AIA also allowed the defense to be asserted by "any other entity that controls, is controlled by, or is under common control with such person...." In addition, the AIA eliminated the restriction of the prior commercial user defense to business method patents. As a result, any type of patented invention may be subject to the prior commercial user defense. The new legislation also exempted patents held by universities from the prior commercial user defense when it stipulates that this is not available if "the claimed invention ... was made, owned or subject to an obligation of assignment to either an institution of higher education ... or a technology transfer organization whose primary purpose is to facilitate the commercialization of technologies developed by one or more such institutions of higher education." As the law stood prior to enactment of the AIA, a patent application had to be filed by the inventor—that is, the natural person or persons who developed the invention. This rule applied even where the invention was developed by individuals in their capacity as employees. Even though rights to the invention usually have been contractually assigned to an employer, for example, the actual inventor, rather than the employer, must be the one that applies for the patent. In particular, Section 115 of the Patent Act obliges each applicant also to submit an oath or declaration stating that he believes himself to be the "original and first inventor" of the subject matter for which he seeks a patent. Section 118 of the Patent Act allowed a few exceptions to this general rule. If an inventor cannot be located, or refuses to perform his contractual obligation to assign an invention to his employer, then the employer may file the patent application in place of the inventor. The AIA modified these rules by incorporating the exceptions found in current Section 118 into Section 115 of the Patent Act. This reform appears to be primarily technical in nature, although a few differences between the new statute and prior law exist. First, the new law requires inventors to declare only that they are the "original inventor"—rather than the "original and first inventor"—in keeping with the proposed shift to a first-inventor-to-file priority system. Second, the new law allows an "individual who is under an obligation of assignment for patent [to] include the required statements ... in the assignment executed by the individual, in lieu of filing such statements separately." This provision comports with the allowance of the filing of patent applications by employers and other assignees of patent rights. The AIA further stipulated that a "person to whom the inventor has assigned or is under an obligation to assign the invention may make an application for patent." Individuals who otherwise make a showing of a "sufficient proprietary interest in the matter" may also apply for a patent on behalf of the inventor upon a sufficient show of proof of the pertinent facts. Under the new law, if the USPTO "Director grants a patent on an application filed under this section by a person other than the inventor, the patent shall be granted to the real party in interest and upon such notice to the inventor as the Director considers to be sufficient." The patent law of the United States allows a court to "increase the damages up to three times the amount found or assessed." An award of enhanced damages, as well as the amount by which the damages will be increased, is committed to the discretion of the trial court. Although the statute does not specify the circumstances in which enhanced damages are appropriate, the Federal Circuit recently explained that "a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent." This circumstance is termed "willful infringement." Courts will not ordinarily enhance damages due to willful infringement if the adjudicated infringer did not know of the patent until charged with infringement in court, or if the infringer acted with the reasonable belief that the patent was not infringed or that it was invalid. Prior to the 2007 decision in In re Seagate Technology , Federal Circuit decisions emphasized the duty of someone with actual notice of a competitor's patent to exercise due care in determining if his acts will infringe that patent. In Seagate Technology , however, the Federal Circuit opted to "abandon the affirmative duty of due care." The court of appeals instead explained that "proof of willful infringement permitting enhanced damages requires at least a showing of objective recklessness." Prior to 2004, the Federal Circuit held that when an accused infringer invoked the attorney-client or work-product privilege, courts should be free to reach an adverse inference that either (1) no opinion had been obtained or (2) an opinion had been obtained and was contrary to the infringer's desire to continue practicing the patented invention. However, in its decision in Knorr-Bremse Systeme fuer Nutzfahrzeuge GmbH v. Dana Corp. , the Federal Circuit expressly overturned this principle. The Court of Appeals further stressed that the failure to obtain legal advice did not occasion an adverse inference with respect to willful infringement either. Following the Knorr-Bremse opinion, willful infringement determinations are based upon "the totality of circumstances, but without the evidentiary contribution or presumptive weight of an adverse inference that any opinion of counsel was or would have been unfavorable." The AIA included language specifying that the "failure of an infringer to obtain the advice of counsel ... may not be used to prove that the accused infringer willfully infringed the patent...." This provision appears essentially to codify the holding of Knorr-Bremse described above. The AIA made a number of changes to the post-grant review proceedings administered by the USPTO. In particular, the AIA (1) replaced the previous inter partes reexamination system with inter partes review proceedings; (2) introduced a new proceeding titled "post-grant review"; (3) established a new supplemental examination procedure; and (4) created a new transitional post-grant review proceeding for the review of the validity of certain business method patents. Each of these post-grant proceedings will be reviewed in turn. Perhaps most significantly, the AIA replaced the existing inter partes reexamination system with inter partes review proceedings and introduced a new proceeding titled "post-grant review." Both inter partes and post-grant reviews are patent revocation proceedings administered by the USPTO. They would operate similarly to the so-called "reexamination" system which has been part of U.S. law since 1981. Prior to the September 16, 2012, effective date established by the AIA, the USPTO had administered two types of reexamination proceedings, termed ex parte and inter partes . Under the reexamination statute, any individual, including the patentee, a competitor, and even the USPTO Director, may cite a prior art patent or printed publication to the USPTO. If the USPTO determined that this reference raised a "substantial new question of patentability" with respect to an issued patent, then it would essentially reopen prosecution of the issued patent. Traditional reexamination proceedings were conducted in an accelerated fashion on an ex parte basis—that is to say, as a dialogue between applicant and examiner without extended participation by others. Following the American Inventors Protection Act of 1999, an inter partes reexamination allowed the requester to participate more fully in the proceedings through the submission of arguments and the filing of appeals. Either sort of reexamination may have resulted in a certificate confirming the patentability of the original claims, an amended patent with narrower claims, or a declaration of patent invalidity. The AIA established a new proceeding termed a "post-grant review." Unlike previous reexamination proceedings, petitioners may challenge validity based upon on any ground of patentability in a post-grant review. A post-grant review must be filed within nine months of the date of patent grant. To initiate a post-grant review, the petitioner must present information that, if not rebutted, would demonstrate that it is more likely than not that at least one of the claims is unpatentable. A post-grant review must be completed within one year of its commencement, with an extension of six months possible for good cause shown. As well, the individual who commenced the proceeding, along with his privies (people who have a legal interest in the patent), are barred in the future from raising issues that were "raised or reasonably could have been raised" during the post-grant review. Although the AIA retained ex parte reexamination, it replaced the predecessor inter partes reexamination proceedings with a similar system termed " inter partes review." A notable difference between the old and new proceedings is that the USPTO will be required to complete the proceeding within one year of its commencement, with an extension of six months possible for good cause shown. In broad outline, the law allows a person who is not the patent owner to file a petition requesting inter partes review nine months after a patent issues or reissues, or the conclusion of any post-grant review, whichever occurs later. In contrast to the post-grant review, the basis for requesting an inter partes review is restricted to patents or printed publications. As a result, patent challenges under inter partes review are limited to the patentability issues of novelty and nonobviousness. Post-grant reviews allow a patent challenger to raise additional patentability issues, such as unpatentable subject matter or lack of enablement, that are not based upon a patent or printed publication. Under the AIA, the petitioner must demonstrate that there is a "reasonable likelihood" that he would prevail with respect to at least one claim in order for the inter partes proceeding to begin. Under the time frames established, the effective result is that a patent may be challenged at the USPTO on any basis of any patentability issue within nine months from the date it issued (via post-grant review). Thereafter, and throughout its entire term, the patent may be challenged at the USPTO on the grounds of novelty and nonobviousness (via inter partes review). The AIA stipulated that an accused infringer may not seek inter partes review if he has already filed a lawsuit challenging the patent or more than six months have passed since the date the accused infringer was served with a complaint alleging infringement of that patent. The law afforded the patent proprietor a single opportunity to amend its patent during the proceeding, with further opportunities available with good cause shown. Should the patent survive the inter partes review proceeding, the individual who commenced the proceeding, along with his privies, are barred in the future from raising issues that were "raised or reasonably could have been raised." The AIA established a new post-issuance administrative proceeding termed "supplemental examination." This proceeding appears to be based upon a need to address concerns over the legal doctrine of inequitable conduct, a topic that bears some explanation. The administrative process of obtaining a patent from the USPTO has traditionally been conducted as an ex parte procedure. Stated differently, patent prosecution involves only the applicant and the USPTO. Members of the public, and in particular the patent applicant's marketplace competitors, do not participate in patent acquisition procedures. As a result, the patent system relies to a great extent upon the applicant's observance of a duty of candor and truthfulness towards the USPTO. An applicant's obligation to proceed in good faith may be undermined, however, by the great incentive applicants might possess not to disclose, or to misrepresent, information that might deleteriously impact their prospective patent rights. The patent law therefore penalizes those who stray from honest and forthright dealings with the USPTO. Under the doctrine of "inequitable conduct," if an applicant intentionally misrepresents a material fact or fails to disclose material information, then the resulting patent will be declared unenforceable. Two elements must exist before a court will decide that the applicant has engaged in inequitable conduct. First, the patentee must have misrepresented or failed to disclose material information to the USPTO in the prosecution of the patent. Second, such nondisclosure or misrepresentation must have been intentional. To limit the use of inequitable conduct in patent litigation, the AIA permitted patent owners to request a "supplemental examination" in order to "consider, reconsider, or correct information believed to be relevant to the patent." If the USPTO Director believes that this information raises a substantial new question of patentability, then a reexamination will be ordered. The AIA provides that a "patent shall not be held unenforceable ... on the basis of conduct relating to information that had not been considered, was inadequately considered, or was incorrect in a prior examination of the patent if the information was considered, reconsidered, or corrected during a supplemental examination of the patent." The supplemental examination request and resulting reexamination must be concluded prior to the start of litigation for the patent to obtain this benefit. The statute stipulates that if there is evidence of "material fraud," the Director of the USPTO is authorized to notify the Attorney General for "such further action as the Attorney General may deem appropriate." The AIA created a transitional post-grant review proceeding for the review of the validity of certain business method patents. This transitional proceeding is limited to patents that claim "a method or corresponding apparatus for performing data processing operations utilized in the practice, administration, or management of a financial product or service, except that the term shall not include patents for technological inventions." Only individuals who have been either sued for infringement or charged with infringement of a business method patent may petition the USPTO to commence such a proceeding. The transitional program applies to all business method patents issued before, on, or after the date of enactment of the legislation. The AIA stipulated that a party may seek a stay of litigation related to the transitional proceeding, and that the district court's decision may be subject to an immediate interlocutory appeal to the Federal Circuit. This transitional program is subject to a sunset provision that would repeal the program after eight years. In addition, the statute provided that its business method patent provisions shall not be construed as amending or interpreting categories of patent-eligible subject matter. The USPTO has long allowed any person at any time to bring to the agency's attention "patents or printed publications" believed to "have a bearing on the patentability of any claim of a particular patent." That person may also include a written statement explaining the relevance of the cited document to the patent. This sort of "prior art citation" does not provoke any sort of administrative proceeding. However, the USPTO will place these submissions within the official file of the relevant patent, where they are accessible to the public. Prior art that potentially has a negative impact upon the patent's validity may be of considerable interest to the patent owner, its customers and competitors, and possibly others. The name of the person who files a prior art citation may be kept confidential by request. The ability of members of the public to cite to the USPTO information that may be pertinent to the validity of a granted patent has been augmented under the provisions of the AIA. The AIA also allowed the citation of written statements that the patent owner has filed before a federal court or the USPTO regarding the scope of the patent's claims. The AIA expanded the possibilities for members of the public to comment upon pending applications at the USPTO. Prior to this legislation, interested individuals could file a "protest" at the agency. Such a protest was required to identify the application specifically and be served upon the applicant. The protest had to include a copy and, if necessary, an English translation, of any patent, publication, or other information relied upon. The protester was required to explain the relevance of each item. Protest proceedings have traditionally played a small role in U.S. patent practice. Until Congress enacted the American Inventors Protection Act of 1999, the USPTO maintained applications in secrecy. Therefore, the circumstances in which members of the public would learn of the precise contents of a pending patent application were relatively limited. Following the 1999 legislation, the USPTO began to publish many pending patent applications. Seemingly aware of this possibility, the 1999 Act provided that the USPTO shall "ensure that no protest or other form of pre-issuance opposition ... may be initiated after publication of the application without the express written consent of the applicant." Of course, the effect of this provision was to eliminate the possibility of protest in exactly that class of cases where the public was most likely to learn of the contents of a pending application. Through rulemaking, the USPTO had nonetheless established a limited mechanism for members of the public to submit information they believe is pertinent to a pending, published application. The submitted information must consist of either a patent or printed publication, and it must be submitted within two months of the date the USPTO published the pending application. Nondocumentary information that may be relevant to the patentability determination, such as sales or public use of the invention, will not be considered. In addition, because Congress stipulated that no protest or pre-grant opposition may occur absent the consent of the patent applicant, the USPTO had explained that it will not accept comments or explanations concerning the submitted patents or printed publications. If such comments were attached, USPTO staff would redact them before the submitted documents were forwarded to the examiner. The AIA expanded the possibility for preissuance submissions. Under the legislation, any person may submit patent documents and other printed publications to the USPTO for review. Such prior art must be submitted within the later date of either (1) the date the USPTO issues a notice of allowance to the patent applicant; or (2) either six months after the date of pre-grant publication of the application, or the date of the first rejection of any claim by the USPTO examiner. Such a submission must include "a concise description of the asserted relevance of each submitted document." The AIA altered the venue provisions that apply to suits where the USPTO is a party—for example, appeals from inventors whose patent applications have been rejected. Such cases are currently heard by the District Court for the District of Columbia. Under the AIA, the District Court for the Eastern District of Virginia will hear such cases. This change in venue may reflect the fact that the headquarters of the USPTO is no longer located within Washington, DC, but rather in Alexandria, VA. The USPTO enjoys certain rulemaking authority provided by law. The USPTO may establish regulations that "govern the conduct of proceedings" before it, for example, as well as regulations that "govern the recognition and conduct" of patent attorneys. However, the fees charged by the USTPO currently were determined by Congress. The AIA granted the USPTO additional authority "to set or adjust by rule any fee established or charged by the Office" under certain provisions of the patent and trademark laws. This provision appears to provide the USPTO with greater flexibility to adjust its fee schedule absent congressional intervention. The new law requires that "patent and trademark fee amounts are in the aggregate set to recover the estimated cost to the Office for processing, activities, services and materials relating to patents and trademarks, respectively, including proportionate shares of the administrative costs of the Office." The AIA additionally stipulated fees for patent services provided by the USPTO. In general, the new law raises the fees slightly. For example, the fees for filing a patent application and for the issuance of an approved application were $300 and $1,400 respectively; the new fees are $330 and $1,510. As previously discussed, each of these fees would then presumably be subject to adjustment by the USPTO. The legislation created within the Treasury a "Patent and Trademark Fee Reserve Fund" into which fee collections above that "appropriated by the Office for that fiscal year" will be placed. These funds will be available to the USPTO "to the extent and in the amounts provided in appropriations Acts" and may only be used for the work of the Office. The AIA also established a new "micro entity" category of applicants. A micro entity must make a certification that it qualifies as a small entity, has not been named on five previously filed patent applications, does not have a gross income exceeding three times the average gross income, and has not conveyed an interest in the application to another entity with an income exceeding that threshold. Micro entities would be entitled to a 75% discount on many USPTO fees. The USPTO Director is given authority to limit those who qualify as a micro entity if such limitations "are reasonably necessary to avoid an undue impact on other patent applicants or owners and are otherwise reasonably necessary and appropriate." The USPTO must inform Congress at least three months in advance of imposing such limitations. In recent years, the USPTO has issued patents on financial, investment, and other methods that individuals might use in order to minimize their tax obligations. Under the AIA, for the purpose of evaluating whether an invention meets the requirements of novelty and nonobviousness, "any strategy for reducing, avoiding, or deferring tax liability, whether known or unknown at the time of the invention or application for patent, shall be deemed insufficient to differentiate a claimed invention from the prior art." Under this rule, unless a tax strategy patent claimed an additional component that met the novelty and nonobviouness requirements—such as new computer hardware—then the invention could not be patented. The new law stipulates that this provision does not apply to that part of an invention "used solely for preparing a tax or information return or other tax filing...." The AIA stipulated that the tax strategy patent provision does not apply to "a method, apparatus, technology, computer program product, or system used solely for financial management, to the extent it is severable from any tax strategy or does not limit the use of any tax strategy by any taxpayer or tax adviser." The statute also stated that "[n]othing in this section shall be construed to imply that other business methods are patentable or that other business method patents are valid." The U.S. patent statute requires inventors to "set forth the best mode contemplated by the inventor of carrying out his invention." Failure to disclose the best mode known to the inventor is a ground for invalidating an issued patent. The courts have established a two-part standard for analyzing whether an inventor disclosed her best mode in a particular patent. The first inquiry was whether the inventor knew of a way of practicing the claimed invention that she considered superior to any other. If so, then the patent instrument must identify, and disclose sufficient information to enable persons of skill in the art to practice that best mode. The AIA continued to apply the best mode requirement to all patents. However, violation of the best mode requirement no longer forms the basis for an accused infringer's defense to a charge of patent infringement during enforcement litigation or post-grant review proceedings. Compliance with the best mode requirement remains subject to review by USPTO examiners during the initial prosecution of a patent, although USPTO rejection of applications based upon failure to comply with the best mode requirement is reportedly a rare circumstance. The AIA confirms that state courts do not possess jurisdiction to hear claims for relief under the patent, plant variety protection, and copyright laws. The statute further provides that the Federal Circuit possesses jurisdiction over appeals relating to patent and plant variety protection cases. In addition, cases are allowed to be removed from courts that do not possess jurisdiction and transferred to those that do. The AIA also stipulated that accused infringers may only be joined in a single lawsuit by the patent proprietor if the allegations of infringement arise out of "the same transaction, occurrence, or series of transactions or occurrences...." Furthermore, "accused infringers may not be joined in one action as defendants ... based solely on allegations that they each have infringed the patent or patents in suit." The new joinder provision appears to prevent patent owners from suing multiple firms in one lawsuit based merely on the allegation that they infringe the same patent through similar products. The patent owner would instead have to sue each accused infringer in a separate lawsuit. The AIA joinder statute does not apply to patent cases pursued under the auspices of the Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch-Waxman Act. In addition, an accused infringer may waive the joinder limitation with respect to itself. The USPTO has long been required to maintain its principal office in the metropolitan Washington, DC, area. The Patent Act further allowed the USPTO to "establish satellite offices in such other places in the United States as it considers necessary and appropriate in the conduct of its business." The AIA required the USPTO to establish three or more additional satellite offices in the United States subject to available resources. The satellite offices are intended to increase inventor outreach activities, enhance patent examiner retention, improve recruitment of patent examiners, decrease the number of unexamined patent applications, and improve the quality of patent examination. The USPTO is required to ensure the geographic diversity of its satellite offices. The AIA also designates the Detroit satellite office as the "Elijah J. McCoy United States Patent and Trademark Office." The USPTO has announced that the agency would open satellite offices in Dallas, Denver, Detroit, and Silicon Valley. The AIA provided for other reforms relating to the USPTO. Among them is the creation of a patent ombudsman program for small business concerns, subject to available resources. In addition, the legislation allowed the USPTO to prioritize examination of patent applications relating to technologies that are "important to the national economy or national competitiveness." The new law proposed that studies be undertaken in the following areas: patents on genetic testing; diversity of patent applicants; international patent protection for small businesses; consequences of litigation by non-practicing entities; and implementation of the legislation. The USPTO has interpreted the Thirteenth Amendment, which bans human slavery, as barring patents claiming human beings. The AIA gave statutory footing to this policy by stipulating that "no patent may issue on a claim directed to or encompassing a human organism." The Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch-Waxman Act, provides holders of patents on pharmaceuticals and other regulated products with an extended term of protection to compensate for delays experienced in obtaining marketing approval. Under prior law, a petition to receive such a term extension "may only be submitted [to the USPTO] within the sixty-day period beginning on the date the product received permission under the provision of law under which the applicable regulatory review period occurred...." The AIA stipulated that if regulatory approval is transmitted after 4:30 PM Eastern time on a business day, or is transmitted on a day that is not a business day, then the product shall be deemed to have received such permission on the next business day. The AIA was the product of years of discussion and debate, but some observers believe that Congress did not address certain issues of pressing concern to the patent system. One of these issues involves the propriety of current judicial assessments of damages in patent infringement cases. Some observers believe that judges and juries have tended to overcompensate patent holders when they make damages awards, particularly in cases where the accused infringement includes additional features not covered by the patent. Other commentators found the level of compensation to be appropriate and expressed concerns that legislative reforms might reduce damages awards to such a degree as to diminish the value of patent ownership. A number of recent judicial opinions, including Lucent Technologies, Inc. v. Gateway, Inc. , appear to have recognized expressed concerns about damages awards in patent cases and the Federal Circuit has issued rulings designed to increase their fairness and predictability. Perhaps because of these judicial developments, the AIA ultimately did not address the award of damages in patent cases. For some, however, concerns linger concerning the damages issues. Some observers believe that Congress should have required the USPTO to publish all patent applications during their pendency. When enacting the American Inventors Protection Act of 1999, Congress for the first time introduced the concept of pre-grant publication into U.S. law. Since November 29, 2000, U.S. patent applications have been published 18 months from the date of filing, with some exceptions. The most significant of these exceptions applies where the inventor represents that he will not seek patent protection abroad. In particular, if an applicant certifies that the invention disclosed in the U.S. application will not be the subject of a patent application in another country that requires publication of applications 18 months after filing, then the USPTO will not publish the application. As a result, inventors who do not wish to seek foreign patent rights retain the possibility of avoiding pre-grant publication. Congress had previously considered eliminating this exception, and some observers continue to believe this was the preferable option. On the other hand, many commentators believe that this exception is more fair to individuals, small firms, and other innovators that may be especially vulnerable to piracy of their products. Another concern that some observers argue has not been sufficiently addressed is that of patent fee "diversion." Under that practice, the USPTO is not provided the budget authority through the appropriations process to spend all fees collected within a fiscal year. Beginning in 1990, appropriations measures have, at times, limited the ability of the agency to use the full amount of fees collected in each fiscal year. Some observers believe that "fee diversion" has limited the ability of the USPTO to discharge its statutory duties effectively. On the other hand, others believe that the agency obtains sufficient financial support and point to the need to support other governmental programs. The approach embodied in the AIA keeps USPTO use of fees within the appropriations process, but mandates that any excess fees be used only to fund USPTO activities. The AIA is by any reasonable measure a watershed event in the field of intellectual property law. The numerous reforms introduced by the legislation, intended to improve, update, and adopt global best practices, will undoubtedly bring immediate changes to patent practice by the USPTO, the private bar, and innovative firms. Experience will inform us whether the legislation meets its intended goals of increasing patent quality, making patent dispute resolution more fair and efficient, improving the environment for innovation, and enhancing the economic growth of the United States. | Following several years of legislative discussion concerning patent reform, the Congress enacted P.L. 112-29, signed into law on September 16, 2011. The Leahy-Smith America Invents Act, or "AIA," made significant changes to the patent system, including: First-Inventor-to-File Priority System. The AIA shifted the U.S. patent priority rule from a "first-to-invent" system to the "first-inventor-to-file principle" while allowing for a one-year grace period. Prior User Rights. The legislation established an infringement defense based upon an accused infringer's prior commercial use of an invention patented by another. Assignee Filing. Under the AIA, a patent application may be filed by the inventor's employer or other entity to which rights in the invention are assigned. Post-Grant Review Proceedings. The AIA changed the current system of administrative patent challenges at the U.S. Patent and Trademark Office (USPTO) by establishing post-grant review, inter partes review, and a transitional program for business method patents. Public Participation in USPTO Procedures. The legislation allowed members of the public to submit pertinent information to the USPTO concerning particular applications both before and after patent issuance. USPTO Fees. The AIA stipulated fees for USPTO patent services and allows the agency to adjust the fees in order to cover its costs. It also required that fees collected above the amount provided for in the appropriations process be used only for the USPTO. Patent Marking. The AIA limited lawsuits challenging patent owners with false patent marking and allowed for virtual, Internet-based marking. Patentable Subject Matter. The AIA prevented patents claiming or encompassing human organisms and limited the availability of patents claiming tax strategies. Best Mode. The statute maintained the requirement that patents describe the best mode, or superior way for practicing the claimed invention, but eliminated failures to do so as a basis for invalidating the patent. The AIA introduced a number of additional changes to the patent law, including changes to the venue and joinder statutes, the introduction of supplemental examination, and a clarification of the law of willful infringement. Although the AIA arguably made the most significant changes to the U.S. patent statute since the 19th century, the legislation did not reflect all of the issues that were the subject of congressional discussion including the assessment of damages during infringement litigation and the publication of all pending patent applications prior to grant. |
RS21772 -- AGOA III: Amendment to the African Growth and Opportunity Act Updated January 19, 2005 After two decades of economic stagnation and decline, some African countries began to show signs of renewed economic growth in the early 1990s. Thisgrowth was generally due to better global economic conditions and improved economic management. However,growth in Africa was also threatened by newfactors, such as HIV/AIDS and high foreign debt levels. The African Growth and Opportunity Act (AGOA) ( P.L.106-200 - Title I) was enacted to encouragetrade as a way to further economic growth in Sub-Saharan Africa and to help integrate the region into the worldeconomy. AGOA provided trade preferencesand other benefits to countries that were making progress in economic, legal, and human rights reforms. Currently,37 of the 48 Sub-Saharan African countriesare eligible for benefits under AGOA. AGOA expands duty-free and quota-free access to the United States as provided under the U.S. Generalized System of Preferences (GSP). (1) GSP grantspreferential access into the United States for approximately 4,600 products. AGOA extends preferential access toabout 2,000 additional products by removingcertain product eligibility restrictions of GSP and extends the expiration date of the preferences for beneficiaryAfrican countries from 2006 to 2015. Otherthan articles expressly stipulated, only articles that are determined by the United States as not import-sensitive (inthe context of imports from AGOAbeneficiaries) are eligible for duty-free access under AGOA. Beyond trade preferences, AGOA directs the President to provide technical assistance and trade capacity support to AGOA beneficiary countries. Various U.S.government agencies carry out trade-related technical assistance in Sub-Saharan Africa. The U.S. Agency forInternational Development funds three regionaltrade hubs, located in Ghana, Kenya, and Botswana, that provide trade technical assistance. Such assistance includes support for improving Africangovernments' trade policy and business development strategies; capacity to participate in trade agreementnegotiations; compliance with WTO policies and withU.S. phytosanitary regulations; and strategies for further benefiting from AGOA. AGOA also provides for duty- and quota-free entry into the United States of certain apparel articles, a benefit not extended to other GSP countries. This hasstimulated job growth and investment in certain countries, such as Lesotho and Kenya, and has the potential tosimilarly boost the economies of other countries,such as Namibia and Ghana. In order to qualify for this provision of AGOA, however, beneficiary countries mustdevelop a U.S.-approved visa system toprevent illegal transshipments. Of the 37 AGOA-eligible countries, 24 are qualified for duty-freeapparel trade (wearing-apparel qualified). These countriesmay also benefit from Lesser Developed Country (LDC) status. Countries that have LDC status for the purpose ofAGOA, and are wearing-apparel qualified,may obtain fabric and yarn for apparel production from outside the AGOA region. As long as the apparel isassembled within the LDC country, they mayexport it duty-free to the United States. Some LDC AGOA beneficiaries have used this provision to jump-start theirapparel industries. This provision was dueto expire on September 30, 2004. The AGOA Acceleration Act extends the LDC provision to September 30, 2007,with a reduction in the cap on the allowablepercentage of total U.S. apparel imports beginning in October 2006. Countries that are not designated as LDCs butare wearing apparel qualified must use onlyfabric and yarn from AGOA-eligible countries or from the United States. The only wearing apparel qualifiednon-LDC countries is South Africa, althoughMauritius only qualifies for LDC status under AGOA for one year ending September 30, 2005, per theMiscellaneous Trade and Technical Corrections Act of2003 ( P.L. 108-429 ). AGOA was first amended in the Trade Act of 2002 ( P.L. 107-210 ), which doubled a pre-existing cap set on allowable duty-free apparel imports. The cap wasonly doubled for apparel imports that meet non-LDC rules of origin; apparel imports produced with foreign fabricwere still subject to the original cap. Theamendment also clarified certain apparel rules of origin, granted LDC status to Namibia and Botswana for thepurposes of AGOA, and provided that U.S.workers displaced by production shifts due to AGOA could be eligible for trade adjustment assistance. U.S. duty-free imports under AGOA (excluding GSP) increased dramatically in 2003 -- by about 58%, from $8.36 billion in 2002 to $13.19 billion in 2003-- after a more modest increase of about 10% in 2002. (2) However, 70% of these imports consisted of energy-related products from Nigeria. ExcludingNigeria, U.S. imports under AGOA increased 30% in 2003, to $3.84 billion, up from $2.95 billion in 2002. Theincrease in AGOA imports since the law'senactment is impressive, but it must be viewed in the broader context of Africa's declining share of U.S. trade overmany years. AGOA has done little to slowor reverse this trend -- the growth in AGOA trade can be explained by a greater number of already-traded goodsreceiving duty free treatment under AGOA. One industry has grown substantially under AGOA: the textile and apparel industry. Much of the growth in textileand apparel imports has come from thenewly emerging apparel industries in Lesotho, Kenya, and Swaziland. Apart from the apparent success of the emergent apparel industries in some African countries, the potential benefits from AGOA have been slowly realized. There has been little export diversification, with the exception of a few countries whose governments have activelypromoted diversification. Agriculturalproducts are a promising area for African export growth, but African producers have faced difficulties in meetingU.S. regulatory and market standards. Manycountries have been slow to utilize AGOA at all. Others, such as Mali, Rwanda, and Senegal, have implementedAGOA-related projects, but have madeinsignificant gains thus far. In addition to lack of market access, there are substantial obstacles to increased exportgrowth in Africa. Key impediments includeinsufficient domestic markets, lack of investment capital, and poor transportation and power infrastructures. Othersignificant challenges include low levels ofhealth and education, protectionist trade policies in Africa, and the high cost of doing business in Africa due tocorruption and inefficient governmentregulation. Furthermore, the apparel industry in Africa now faces a challenge in the dismantled MultifibreArrangement quota regime, which ended as ofJanuary 1, 2005. As a result, Africa must now compete more directly with Asian apparel producers for the U.S.market. AGOA beneficiaries retain theirduty-free advantage, but they have lost their more significant quota-free advantage. Apparel producers havereportedly already left Lesotho, with a loss of 7,000jobs. (3) This makes export diversification in Africaall the more vital. AGOA III extends the preference program to 2015 from its previous 2008 deadline. AGOA III supporters claimed that many AGOA beneficiaries had onlyrecently begun to realize gains as a result of AGOA, and that extending AGOA benefits would improve the stabilityof the investment climate in Africa. AGOA III also provides for apparel rules of origin and product eligibility benefits; it extends the third-country fabricrule for LDCs, and encourages foreigninvestment and the development of agriculture and physical infrastructures. Extension of Lesser Developed Country Provision. One of the more controversial aspects of AGOA III wasthe extension of the LDC provision. If the LDC provision had not been extended, LDCs would no longer haveduty-free access to the United States for apparelmade from third-country fabric after September 30, 2004. Supporters of the extension claimed that if the LDCprovision was not extended, the apparel industrymay have contracted significantly, causing a loss of many of the gains from AGOA, as apparel assembly plants wereshut down. This might have occurredbecause all AGOA beneficiaries would need to source their fabric and yarn from within the AGOA region or fromthe United States in order to get duty-freeaccess under AGOA, and the regional supply of fabric and yarn would likely be insufficient to meet the demand. (4) Sourcing materials from the United Stateswould not be a viable option because it would entail greater costs. Some analysts argued for the LDC provision tobe extended to allow more time to develop atextile milling industry to support the needs of the apparel industry in Africa, and to prevent the collapse of theemerging apparel industry. Opponents of extending the LDC provision claimed that the expiration of the LDC provision would provide an incentive for further textile milling investmentsin Africa. They argued that the LDC provision has slowed fabric and yarn production investment in Africa, becausethese materials could be imported cheaplyfrom Asia for use in AGOA-eligible apparel with no need for costly investments. They feared that an extension ofthe LDC provision would provide adisincentive to textile milling investment in Africa, because the deadline would lose its credibility as investorsanticipated further extensions. However,supporters of the extension argued that investment in the textile industry would continue because of its inherentprofitability, despite the availability ofthird-country fabric. Others worried that looser rules of origin under the LDC provision might allow companies touse Africa as a transshipment point betweenAsia and the United States. The outlook for the development of a textile industry in Sub-Saharan Africa is clouded by the phase-out of the Multifibre Arrangement (MFA) quota regime inJanuary 2005. (5) Now that quotas have beeneliminated, Africa will be competing more directly with Asia for the U.S. apparel and textile market, though theyremain eligible for tariff preferences. Apparel plants are particularly sensitive to price conditions as they do notrequire large capital investments and can easilyand rapidly be shifted to areas outside Africa. Textile plants are more capital-intensive and more costly to move,and are therefore likely to remain in Africa inthe long-term. Thus, it is argued that the promotion of vertical integration between apparel, textile, and cottonproducers is necessary to keep apparel plants inAfrica, along with the jobs they provide. Vertical integration is a challenging prospect regardless of the LDCprovision extension. Some investment in textilemilling has occurred in Africa, but investors have found it difficult to consistently source high quality cotton in largevolumes. While there is agreement thatvertical integration is the key to a thriving African textile and apparel industry, the question is how to facilitate thisprocess. (6) Agricultural Products. The growth of agricultural trade holds potential for improved economic growth inAfrica. Most Africans rely on agricultural production for their income. It is estimated that 62% of the labor forcein Africa works in agriculture, and in thepoorer countries, that portion is as high as 92%. (7) By exporting to the U.S. market, African agricultural producers could receive higher prices for their goods. In order for this to occur, the United States may need to further open its market to African agricultural products, andprovide technical assistance to help Africanagricultural producers meet the high standards of the U.S. market. AGOA III seeks to improve African agricultural market access to the United States by providing assistance to African countries to enable them to meet U.S.technical agricultural standards. African agricultural producers have previously faced difficulties in meeting thesestandards. The AGOA Acceleration Actcalls for the placement of 20 full-time personnel to at least 10 countries in Africa to provide this assistance. Someobservers are skeptical about theeffectiveness of technical assistance without increased market access. Others are concerned that U.S. technicalassistance is hindered by laws restrictingagricultural technical assistance to products that would compete with U.S. farm products. However, technicalassistance proponents point to the lowinstitutional capacity in Africa as the main obstacle to African export-led development. They feel that U.S.-providedtechnical assistance can be an importantfactor in improving Africa's agricultural development and export performance. Table 1. Provisions from the AGOA Acceleration Act of 2004 | On July 13, 2004, the "AGOA Acceleration Act of 2004" was signed by the Presidentand became P.L.108-274. This legislation amends the African Growth and Opportunity Act (AGOA; P.L. 106-200, Title I), extending it to2015. AGOA seeks to spur economicdevelopment and help integrate Africa into the world trading system by granting trade preferences and other benefitsto Sub-Saharan African countries that meetcertain criteria relating to market reform and human rights. Congress first amended AGOA in 2002 (P.L. 107-210)by increasing a cap on duty-free apparelimports and clarifying other provisions. The new AGOA amendment, commonly referred to as "AGOA III," extendsthe legislation beyond its currentexpiration date of 2008 and otherwise amends existing AGOA provisions. For further information on AGOA, seeCRS Report RL31772, U.S. Trade andInvestment Relationship with Sub- Saharan Africa: The African Growth and Opportunity Act and Beyond. This report will be updated as needed. |
Section 956 of Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) requires financial regulators to adopt new rules placing certain limitations on the use of incentive or incentive-based compensation at financial firms. Section 956 was a response to the widely held but contested notion that incentive-based compensation (i.e., variable performance-based compensation) at financial firms, including commercial and investment banking firms, helped encourage executives and various operatives to take excessive risks that ultimately contributed to financial setbacks at individual firms, which contributed to the 2007-2009 financial crisis and since. As an example, in September 2016, Wells Fargo Bank, N.A. was fined $185 million for illegal sales practices, which might have been motivated by incentive-based compensation arrangements. In addition to the fine, at issue is whether the Wells Fargo incident highlights the potential usefulness of the Dodd-Frank incentive-based compensation clawback provision. An initial 2011 proposal to implement Section 956 was issued by financial regulators (collectively, the Agencies ): the National Credit Union Association (NCUA), the Board of Governors of the Federal Reserve System (Fed), the Federal Deposit Insurance Corporation (FDIC), the Federal Housing Finance Agency (FHFA), the Office of the Comptroller of the Currency (OCC), the Securities and Exchange Commission (SEC), and the Office of Thrift Supervision (OTS, later disbanded and merged into the OCC). The 2011 proposal, which was not adopted, met with substantial criticism from both investor interests and entities connected to the financial industry. Five years later, in April 2016, the Agencies issued a new proposal (also known as the re-proposal) for implementing Section 956. This report provides an overview of the 2016 incentive compensation proposal. It (1) explains incentive compensation; (2) discusses the two key opposing views on the role that incentive compensation may or may not have played in the financial crisis; (3) examines the Section 956 incentive compensation mandate in the Dodd-Frank Act and briefly describes the earlier 2011 proposal; (4) describes key elements of the 2016 proposal; and (5) highlights some of the early comments on the 2016 proposal's perceived impact. Incentive compensation or incentive-based compensation refers to the portion of an employee's pay that is not guaranteed (as is the salary). Incentive compensation takes the form of variable compensation that is contingent on the performance of designated metrics with respect to the employing firm, the employee's departmental unit, the employee, or some combination of these. The role that incentive compensation arrangements played in contributing to the financial crisis of 2007 to 2009 has been highly scrutinized by financial regulators, financial-sector practitioners, and academics. Some have found little evidence that the compensation structures directly affected financial firms' performance during the crisis. For example, Martin Conyon, a senior fellow at the Center for Human Resources at the University of Pennsylvania's Wharton School of Business, observed, There's been plenty of consultant research and academic research that has looked at the structure of incentives, in banking in particular, and whether there was a cause or link between those incentives and the subsequent financial crisis. And it's not clear—it hasn't been demonstrated in ways that pass muster. If structured properly, incentive compensation arrangements, often in the form of bonuses, stocks, or stock options, can serve as an employee recruitment, retention, and performance motivational tool while also helping to align a company's goals with those of its executives, employees, and shareholders. Moreover, after surveying research on the role of financial-sector compensation structures on the financial crisis, the SEC staff observed, [T]here are also studies that argue that compensation structures were not responsible for the differential risk-taking and performance of financial institutions during crises. In particular, a study argues that the differential risk culture across banks determines the differential performance of these institutions. For example, banks that performed poorly during the 1998 crisis were also found to perform poorly, and had higher failure rates, during the recent financial crisis. Another recent study argues that, prior to 2008, risk-taking was inherently different across financial institutions and the fact that high-risk financial institutions paid high amounts of compensation to their executives was not an indicator of excessive compensation practices but represented compensation for the additional risk to which executives' wealth was exposed. The presence of a number of mitigating factors may explain why evidence is inconclusive on the effects of incentive-based compensation on inappropriate risk-taking. One such factor is corporate governance and, more specifically, the board of directors oversight over executive compensation. Others, however, have found a causal connection and concluded that the prevalence of poorly structured incentive-based compensation arrangements at various financial institutions encouraged excessively risky behavior that contributed to financial firms' problems, which ultimately helped lead to the crisis. For example, during the crisis, Sheila Bair, then chair of the Federal Deposit Insurance Corporation, observed, The crisis has shown that most financial-institution compensation systems were not properly linked to risk management. Formula-driven compensation allows high short-term profits to be translated into generous bonus payments, without regard to any longer-term risks…. A similar dynamic was at work in the mortgage markets. Mortgage brokers and bankers went into the subprime and other risky markets because these markets generated high returns not just for investors but also for the originators themselves. The standard compensation practice of mortgage brokers and bankers was based on the volume of loans originated rather than the performance and quality of the loans made…." The Financial Crisis Inquiry Commission was a congressionally created panel charged with examining the causes of the financial crisis. Among other things, the majority view on the panel's 2011 study concluded that "compensation structures were skewed all along the mortgage securitization chain, from people who originated mortgages to people on Wall Street who packaged them into securities." Others have made similar observations: Non-executive [pay] incentives .… significantly affected bank risk-taking prior to the 2007 financial crisis; and the structure, as well as the level of those incentives, was determined largely by the market's demand for talent…. Among banks, however, combining performance-based pay with competition, where employees can move from one employer to the next, has had perverse results. Greater risk-taking can increase short-term bank profits and, in turn, the amount a non-executive is paid, potentially at the expense of long-term bank value. In greater detail, various financial regulators collectively spoke of a nexus between incentive compensation and potential financial loss: Some compensation arrangements rewarded employees—including non-executive personnel like traders with large position limits, underwriters, and loan officers—for increasing an institution's revenue or short-term profit without sufficient recognition of the risks the employees' activities posed to the institutions, and therefore potentially to the broader financial system. Traders with large position limits, underwriters, and loan officers are three examples of non-executive personnel who had the ability to expose an institution to material amounts of risk. Significant losses caused by actions of individual traders or trading groups occurred at some of the largest financial institutions during and after the financial crisis. An attendant observation spoke of the corrosive long-term corporate impact that poorly designed bonus-based incentive compensation schemes were believed to have had on various financial institutions, another observer noted, "[T]he revenues that [often] served as the basis for calculating bonuses were generated immediately, while the risk outcomes might not have been realized for months or years after the transactions were completed." Section 956 of the Dodd-Frank Act represents an attempt to reduce the presence of problematically risky financial-sector incentive-based compensation arrangements. The section requires the Agencies to jointly prescribe regulations or guidelines aimed at prohibiting incentive-based payment arrangements in financial institutions that they determine encourage inappropriate risks by providing excessive compensation or that could lead to a material financial loss. Those regulations or guidelines must also require the financial institutions to disclose information about the structure of their incentive-based compensation arrangements with enough detail to permit the financial regulators to ascertain whether the arrangements amount to excessive compensation or could result in a material financial loss to a financial institution. In April 2011, the Agencies issued an initial proposal to implement Section 956 of the Dodd-Frank Act. The proposal would have banned incentive-based compensation plans that encouraged inappropriate risks at a range of financial firms. Financial institutions with $1 billion or more in consolidated assets would have been required to have policies and procedures necessary for ensuring compliance with the proposal. They also would have been prohibited from providing incentive compensation that encouraged inappropriate risk-taking, which could lead to material financial losses to applicable employees, including executive officers and non-executives employees whose activities could expose the firms to material financial loss. In addition, the financial firms would have been required to adopt incentive compensation practices that (1) provided an appropriate balance between risk and financial rewards; (2) were compatible with effective risk management and controls; and (3) were bolstered by a robust corporate governance mechanism. Also under the proposal, large financial institutions , generally defined as firms with $50 billion or more in total consolidated assets, but also including credit unions and all Federal Home Loan banks with total consolidated assets of $1 billion or more, would have been required to adopt policies that ensured that executive officers and other key employees deferred at least half of their annual incentive compensation awards for at least three years. In addition, the proposal would have required the large financial institutions to have policies implemented and overseen by a firm's board of directors that identified non-executive employees with the ability to expose the institution to potentially substantial losses relative to its size, including securities traders with relatively large position limits. The large financial institution boards would have also been required to review and approve such non-executive employees' incentive-based compensation. The 2011 proposal elicited some 10,000 responses, most in the form of a few types of largely identical form letters. According to the Agencies, the respondents included an array of community organizations groups, labor unions, and pension funds that generally advised the Agencies to strengthen the proposal, including increasing the duration of or the amount of incentive pay subject to the mandatory deferral provision. By contrast, several financial institutions and financial industry trade groups reportedly recommended that the Agencies issue guidelines instead of rules for implementing Section 956. Many financial industry-based commenters also reportedly expressed opposition to the proposal's mandatory deferral provision with several arguing that it would potentially undermine a firm's ability to both attract and retain vital employees. The Agencies did not adopt the 2011 incentive compensation proposal. In the roughly seven years between the end of the financial crisis in 2009 and 2016, the Agencies report that the entities that they supervise have implemented incentive-based compensation plans that are generally in agreement with guidelines provided by the bank regulators such as the Fed. The regulators, however, also indicated that "[n]ot withstanding the recent progress, incentive-based compensation practices are still in need of improvement." In an October 2015 overview of the securities industry in New York City, the Office of the New York State Controller (OSC) spoke of changes in Wall Street incentive compensation practices to mitigate excessive risk taking and noted the continued salience of bonus-based incentive compensation payments: In recent years, the securities industry has changed its compensation practices in response to new regulations and other compensation reforms designed to discourage excessive risk-taking. Firms have raised base salaries for some employees, and now pay a smaller share of bonuses in the current year while a larger share is deferred to future years (usually for a period of three to five years) in the form of cash, stock options or other types of compensation. Clawback provisions [which authorize firms to confiscate earlier incentive compensation payments] are also more frequently being adopted, and a larger share of bonuses is now being paid outside the traditional bonus period, making it harder to distinguish bonuses from base salaries. Despite these actions, bonuses remain an important part of total compensation packages paid to securities industry employees. In March 2015, OSC estimated that the bonus pool paid to the City's securities industry employees for work performed in 2014, including bonus payments deferred from prior years, reached $28.5 billion …. This was the third-highest level ever and the highest level since the financial crisis. In April 2016, the Agencies issued a new incentive compensation proposal (or re-proposal) to implement Section 956 of the Dodd-Frank Act. Various reports have indicated that at least part of the regulators' challenge for the Agencies in formulating incentive compensation standards for the 2016 proposal involved the marked differences in compensation arrangements between banks and some of the entities overseen by the SEC, including hedge funds and private equity funds: Bank compensation tends to entail a fixed salary, equity in the company, and bonuses awarded at year's end. Although asset managers at SEC-regulated entities earn salaries, they are also typically paid through fees based on a fund's asset size and its investment performance. The re-proposal expands the more restrictive incentive compensation requirements in the 2011 proposal for senior employees, including the chief executive officer, to a larger group of financial institutions and to a new group of non-senior executive employees defined as significant risk-takers , who are non-senior employees in a position to subject their employer to significant risk or who are among the higher paid firm employees. The six regulators who comprise the Agencies will receive public comments on the proposal through July 22, 2016. To be finalized and adopted, the proposal will require the approval of each of them. Martin J. Gruenberg, chairman of the FDIC, one of the six regulatory agencies involved in issuing the 2016 proposal, said that it was "perhaps the most important Dodd-Frank rulemaking remaining to be implemented." A financial institution with average total consolidated assets of at least $1 billion that provides incentive-based compensation would be considered a covered financial institution (CFI). In addition to the $1 billion threshold, the Dodd-Frank Act specifically identifies the following types of institutions as CFIs: a depository institution or depository institution holding company, as defined in Section 3 of the Federal Deposit Insurance Act (FDIA); a broker-dealer registered under Section 15 of the Securities Exchange Act of 1934; a credit union, as described in Section 19(b)(1)(A)(iv) of the Federal Reserve Act; an investment adviser as defined in Section 202(a)(11) of the Investment Advisers Act of 1940; the Federal National Mortgage Association (Fannie Mae); the Federal Home Loan Mortgage Corporation (Freddie Mac); and any other financial institution that the appropriate federal regulators, jointly, by rule, determine should be treated as a CFI. The reporting requirements and the percentage of incentive compensation that is required to be deferred increase as the average consolidated assets threshold reaches higher limits. Also, the 2016 proposed rule includes more detailed disclosure and record-keeping requirements for larger institutions, Level 1 and Level 2, than did the 2011 proposed rule. The CFIs are grouped into three categories based on average total consolidated assets: Level 1—$250 billion or more in consolidated assets; Level 2—$50 billion or more and less than $250 billion in consolidated assets; and Level 3—$1 billion or more and less than $50 billion in consolidated assets. The proposed rule defines incentive-based compensation as "any variable compensation, fees, or benefits that serve as an incentive or reward for performance." Compensation, fees , or benefits mean "all direct and indirect payments, both cash and non-cash, awarded to, granted to, or earned by or for the benefit of, any covered person in exchange for services rendered to the CFI." The form of payment would not affect whether such payment meets the definition of compensation, fees, or benefits. The forms of payment would include, among other things, payments or benefits based on an employment contract, compensation, pension, or benefit arrangements, fee arrangements, perquisites, options, post-employment benefits, and other compensatory arrangements. Compensation that is solely awarded for, and the payment of which is solely tied to, continued employment (e.g., salary or retention award) would not be considered incentive-based compensation. Similarly, signing bonuses or compensation related to professional certification or higher-level educational achievement would not be considered incentive-based compensation. Neither would contributions to retirement plans be considered incentive-based compensation. In their proposal, the financial regulators appear to have recognized that incentive-based compensation arrangements are critical tools in the management of financial institutions. On the one hand, the regulators argue that incentive-based compensation can promote the health of financial institutions by aligning the interests of executives and employees with those of the institution's shareholders and other stakeholders. On the other hand, the regulators believe that poorly structured incentive-based compensation can lead executives and employees to take inappropriate risks that adversely affect the financial institutions and the long-term health of the U.S. economy. Larger financial institutions that are interconnected with one another or with many other companies or markets can be negatively affected from inappropriate risk-taking and can have broader consequences. The 2016 proposal would prohibit incentive-based compensation arrangements at CFIs that could encourage inappropriate risks by providing excessive compensation or that could lead to a material financial loss. Compensation, fees, and benefits will be considered excessive when amounts paid are unreasonable or disproportionate to the value of the services performed by a covered person, which take into consideration the following factors: the combined value of all compensation, fees, or benefits provided to a covered person; the compensation history of the covered person and other individuals with comparable expertise at CFIs; the financial condition of the CFI; compensation practices at comparable institutions, based upon such factors as asset size, geographic location, and the complexity of the CFIs' operations and assets; for post-employment benefits, the projected total cost and benefit to the CFI; and any connection between the covered person and any fraudulent act or omission, breach of trust or fiduciary rule, or insider abuse with regard to the CFI. Further, an incentive-based compensation arrangement would be considered to encourage inappropriate risks that could lead to material financial loss to the CFI, unless the arrangement appropriately balances risk and reward; is compatible with effective risk management and controls; is supported by effective governance; includes financial and non-financial measures of performance; is designed to allow non-financial measures of performance to override financial measures of performance, when appropriate; and is subject to adjustment to reflect actual losses, inappropriate risks taken, compliance deficiencies, or other measures or aspects of financial and non-financial performance. The 2016 proposed rule also places certain requirements on the CFI's board of directors: conduct oversight of the CFI's incentive-based compensation; approve incentive-based compensation arrangements for senior executive officers, including amounts of awards and, at the time of vesting, payouts under such arrangements; approve material exceptions or adjustments to incentive-based compensation policies or arrangements for senior executive officers; and annually create and maintain for at least seven years records that document the structure of incentive-based compensation arrangements and that demonstrate compliance with the proposed rule. The records would be required to be disclosed to the appropriate federal regulator upon request. The 2016 proposal contains specific disclosure and record-keeping requirements for Level 1 and Level 2 CFIs. All Level 1 and Level 2 institutions are required to create annually and maintain for at least seven years records that would allow for an independent audit of the compensation arrangements, policies, and procedures by federal regulators. There are specific requirements for how the records should be maintained: the CFI's senior executive officers and significant risk-takers, listed by legal entity, job function, organizational hierarchy, and line of business; the incentive-based compensation arrangements for senior executive officers and significant risk-takers, including information on the percentage of incentive-based compensation deferred and form of award; any forfeiture and downward adjustment or clawback reviews and decisions for senior executive officers and significant risk-takers; and any material changes to the CFI's incentive-based compensation arrangements and policies. The proposed rule would also require that incentive-based compensation arrangements for senior executives and significant risk-takers at Levels 1 and 2 CFIs include four mechanisms for deferring, withdrawing, or reducing such payments to them when they are associated with certain events or conduct. Those mechanisms are incentive-compensation deferrals, clawbacks, downward adjustments, and forfeitures. Under the proposed rules, a Level 1 institution would be required to defer at least 60% of a senior executive officer's and 50% of a significant risk-taker's qualifying incentive-based compensation for at least four years. Further, senior executive officers' and significant risk-takers' incentive-based compensation awarded under the long-term incentive plan would be deferred by 60% and 50%, respectively, for at least two years. Deferred compensation may vest no faster than on a pro-rata annual basis, and, for CFIs or their subsidiaries that issue equity, the deferred amount would be required to consist of substantial amounts of both deferred cash and equity-like instruments throughout the deferral period. Options-based compensation may not exceed 15% of the total incentive-based compensation for the performance period. A Level 2 institution would be required to defer at least 50% of a senior executive officer's and 40% of a significant risk-taker's qualifying incentive-based compensation for at least three years. Further, a senior executive officer's and a significant risk-taker's incentive-based compensation awarded under the long-term incentive plan would be deferred by 50% and 40%, respectively, for at least one year. Deferred compensation may vest no faster than on a pro-rata annual basis, and, for CFIs or their subsidiaries that issue equity, the deferred amount would be required to consist of substantial amounts of both deferred cash and equity-like instruments throughout the deferral period. Options-based compensation may not exceed 15% of the total incentive-based compensation for the performance period. The proposed rule would subject Level 1 and Level 2 CFIs' senior executive officers' and significant risk-takers' deferred but unvested incentive-based compensation to potential forfeiture. Similarly, deferred but unvested incentive-based compensation could also be subject to downward adjustments if any of the following occur: poor financial performance attributable to a significant deviation from the covered institution's risk parameters outlined in its policies and procedures; inappropriate risk-taking, regardless of the impact on financial performance; material risk management or control failures; noncompliance with statutory, regulatory, or supervisory standards resulting in an enforcement or legal action by a federal or state regulator or agency, or a requirement that the covered institution restates a financial statement to correct a material error; and other aspects of conduct or poor performance as defined by the CFI. The Sarbanes-Oxley Act of 2002 (SOX), a wide-ranging public company accounting reform, was enacted in the wake of widespread accounting scandals at companies such as Enron and WorldCom. Section 304 of SOX generally requires chief executive officers and chief financial officers to reimburse their employer for bonuses and other incentive compensation and stock sale profits if the company is required to restate its financial statements, as a result of their misconduct due to material noncompliance with the financial reporting requirements of the federal securities laws. Section 954 of the Dodd-Frank Act expanded on those SOX clawback provisions. Section 954 required the SEC to adopt rules directing national securities exchanges and associations to proscribe the listing of the security of a public company that is noncompliant with new requirements regarding the recovery of erroneously awarded incentive-based compensation and the disclosure of a company's clawback policy. In July 2015, the SEC proposed rules to implement Section 954. The proposal, which has yet to be finalized, lays out a public company's obligations regarding recovering incentive compensation awarded to its executive officers (basically the chief executive officer, the principal chief financial officer, and the principal accounting officer or the controller). Specifically, if a company is required to prepare an accounting restatement because of a material noncompliance with the financial reporting requirement under the federal securities laws, it would be required to recover from current or former executive officers awarded incentive-based compensation during the preceding three-year period based on the erroneous accounting data. The amount of that compensation would be in excess of what would have been paid to the employees under the restated accounting results. Recovery of the compensation would be required to be on a "no-fault" basis, meaning that it should not be contingent on whether any misconduct occurred or an executive officer's actual responsibility for the financial misstatements. The 2016 rules proposed to implement Section 956 of the Dodd-Frank Act expand on the aforementioned clawback provisions in the Sarbanes-Oxley Act and the SEC's proposed 2015 rules to implement Section 954 of the Dodd-Frank Act. Under the proposal, Level 1 and Level 2 CFIs would be required to claw back incentive-based compensation paid to senior executive officers or significant risk-takers that at the minimum provides for recovery of any vested incentive-based compensation from those employees for seven years after the applicable vesting date. The clawbacks would be triggered in the event that a senior executive officer or a significant risk-taker engages in (1) misconduct that resulted in significant financial or reputational harm to the covered institution; (2) employee fraud; or (3) intentional misrepresentation of information used to determine such individual's incentive-based compensation. Under the proposal, Level 1 and Level 2 CFIs would also have to consider adopting corporate protocols that would allow for the downward adjustment and forfeiture of senior executives' and significant risk-takers' incentive compensation when certain events occur, including poor financial performance that is attributable to a significant deviation from risk parameters in the CFI's policies and procedures; inappropriate risk-taking; material risk management or control failures; and failure to comply with statutory, regulatory or supervisory standards resulting in an enforcement or legal action or a requirement that the CFI report a financial restatement to correct a material error; other trigger events as defined by the CFI. The proposed rule contains a number of behavioral prohibitions for Level 1 and Level 2 CFIs. These prohibitions would apply to hedging, maximum incentive-based compensation opportunity, relative performance measures, and volume-driven incentive-based compensation. There are specific requirements for CFIs to have a risk management framework for their incentive-based compensation programs that is independent of any lines of business; includes an independent compliance program that provides for internal controls, testing, monitoring, and training with written policies and procedures; and is commensurate with the size and complexity of the CFI's operations. The proposal also requires Level 1 and Level 2 CFIs to provide individuals in control functions with appropriate authority to influence the risk-taking of the business areas they monitor and ensure covered persons engaged in control functions are compensated independently of the performance of business areas they monitor. The proposal requires independent monitoring of incentive-based compensation. Independent monitoring is expected to identify (1) whether the incentive plans appropriately balance risk and reward; (2) if the events related to forfeiture and downward adjustment and decision of forfeiture and downward adjustment reviews are consistent with the proposed rule; and (3) if the incentive-based compensation program is compliant with the CFI's policies and procedures. Level 1 and Level 2 CFIs would also be required to establish a compensation committee composed solely of directors, who are not senior executive officers, to assist the board of directors in carrying out its responsibilities under the proposed rule. The compensation committee would be required to obtain input from the CFI's risk and audit committees on the effectiveness of risk measures and adjustments used to balance incentive-based compensation agreements. In addition, management is required to submit to the compensation committee on an annual or more frequent basis a written assessment of the effectiveness of the CFI's incentive-based compensation program and related compliance and control processes in providing risk-taking incentives that are consistent with the CFI's risk profile. The committee would also be required to obtain an independently written assessment from internal audit or risk management function on the effectiveness of the CFI's incentive-based compensation program and related compliance and control processes in providing risk-taking incentives that are consistent with the risk profile of the particular CFI. The Agencies will accept formal public comments on the perceived impact of the incentive-compensation proposal through July 22, 2016. Pending those completed comments, this section describes some SEC staff observations on the proposal's potential impact on SEC-regulated entities and various observers' media comments on the proposal's potential impact on the banking sector. The proposal's clawback provision would require public disclosure when a financial institution acts to retrieve employee incentive compensation awards. In 2015, speaking about the value of such a policy change, New York City Comptroller Scott M. Stringer reportedly observed that "while many banks now have strong clawback policies on paper, absent disclosure, it's impossible for investors to know when and how they are being applied." By contrast, Alan Johnson, head of the compensation consultant firm Johnson Associates, cautioned that the proposal's clawback provision could drive personnel away from segments of the financial sector that would be significantly affected by it to less affected parts of the sector. Citing risk-mitigating incentive compensation practices that have been embraced by large numbers of banking institutions, Shearman & Sterling, a corporate law firm, predicted that if adopted, the proposal would likely not lead to "wholesale changes" for senior executive officers at many of the banks categorized as Level 1 institutions. However, in other areas such as the four-year deferral for yearly bonuses, the two-year deferral for long-term incentives, and the seven-year clawback, the law firm indicated that the proposal was "stricter" than are the current mechanisms that are employed by most banks. Shearman also predicted that because of such new risk-taker requirements, many financial institutions would find that "adjustments are necessary to the structure of incentive-based arrangements for a large number of employees, which may affect the fixed costs [such as salaries over a certain period] and governance structures of the organization." Bloomberg queried a number of executive recruiting firms on the proposal's potential impact. The consensus response to the inquiries was that if the proposal were adopted, the largest domestic banks would likely be providing larger salaries and smaller-sized bonuses for some "senior officials, dealmakers, and traders." A Wall Street Journal article discussed the potential scope of the employee impact at the six largest banks, all presumably Level 1 entities. It calculated that for J.P. Morgan Chase, Bank of America, Wells Fargo, Citigroup, Goldman Sachs, and Morgan Stanley combined, the top earning 5% of employees under that protocol would collectively amount to a little less than 52,000 workers. However, the actual number of subject employees if the proposal is enacted could be less than that because it is unclear what proportion of those workers would meet the other requirement of having at least a third of their total compensation in incentive-based pay. In addition to the applicable banking institutions, certain SEC-regulated broker-dealers under the Securities Exchange Act of 1934, and investment advisers under the Investment Advisers Act of 1940, are also likely to be under the proposal's regulatory ambit if enacted. The agency estimated that 131 registered broker-dealers and about 669 investment advisers would likely be CFIs under the implemented proposal. It then projected that 49 of those 131 broker-dealers would likely be Level 1 or Level 2 CFIs and 82 would be Level 3. Of the agency's estimated 669 CFI investment advisers under the proposal, 18 were projected to be in Level 1, 21 were projected to be in Level 2, and 630 were projected to be in Level 3. Many of those 18 projected Level 1 investment advisers are reportedly bank-owned entities. In this context, there are indications that a number of investment advisers to private equity funds or hedge funds who manage asset levels that exceed the Level 1 CFI asset threshold ($250 billion) in the proposal could avoid that more rigorous classification level. This is because under the proposal, advisers would be able to exclude "non-proprietary" assets on their balance sheets, including assets that they hold on their clients' behalf. For example, the large private equity, the Blackstone Group, reportedly manages about $350 billion in assets, but only has about $20 billion in proprietary assets. Reports say that this would mean that Blackstone would likely face a considerably less rigorous incentive compensation regulatory regime under an adopted proposal than would likely Level 1 bank-based CFIs such as J.P. Morgan Chase, Bank of America, Wells Fargo, Citigroup, Goldman Sachs, and Morgan Stanley. Accordingly, some observers say that this regulatory disparity could result in venture capital funds, hedge funds, or private equity firms such as BlackRock, that largely handle other people's money, facing less restrictive limits on their pay practices than large banks. As such, they caution that this could lead to a scenario in which large banks have a competitive disadvantage in the recruitment and retention of senior executives and other key personnel vis-à-vis less affected financial entities like hedge funds, private equity funds, and venture capital funds. Peter Wallison, an economist at the American Enterprise Institute, has raised concerns over the proposal's potentially negative impact on the overall volume of bank loans. He has argued that if the proposal were adopted, various bank officers would have personal incentives not to take on the risk of approving the loan, noting that "it isn't just the bank's financial health but also the bank officer's—the contemplated new house, the kids' college tuition—on the line." Under such a regulatory regime, Mr. Wallison noted that the bank officer could decide to place his own "financial well-being" over that of his business customers. Ultimately, Mr. Wallison warned that similar behavior by a multitude of loan officers across the nation would translate into a reduction in financial risk-taking and as a result, a large contraction in available credit. Others, however, question the plausibility of the aforementioned scenarios in which an adopted proposal would result in significant changes at large banks regarding their attractiveness to certain key personnel and the volume of loans that they might make. Instead, they argue that the proposal would probably not have a significant impact because bank compensation practices have been moving steadily in the direction of the proposal's provisions since the end of the financial crisis more than a half decade ago. | Incentive compensation or incentive-based compensation refers to the portion of an employee's pay that is not fixed in contrast to an annual or monthly salary. Incentive compensation takes the form of variable contingent compensation, particularly cash bonuses, that are based on the attainment of certain firm or employee performance metrics. Such pay has been a significant component of compensation for executives and other key personnel at many firms in the financial sector. Many argue that such compensation contributed to the 2007-2009 financial crisis by incentivizing pivotal financial firm personnel to take excessive, and in retrospect, dangerous risks that were financially problematic for their firms. They argue that such compensation could still potentially pose problems and encourage firm personnel to take excessive risks. As an example, in September 2016, Wells Fargo Bank, N.A. was fined $185 million for illegal sales practices, which might have been motivated by incentive-based compensation arrangements. In addition to the fine, at issue is whether the Wells Fargo incident highlights the potential usefulness of the Dodd-Frank incentive-based compensation clawback provision. In July 2010, in response to the financial crisis of 2007 to 2009, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act, P.L. 111-203). Section 956 of the law directed financial regulators to adopt new rules that jointly prescribe regulations or guidelines aimed at prohibiting incentive compensation arrangements that might encourage inappropriate risks at financial institutions. These regulators, the Agencies, are the National Credit Union Association, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission. In April 2016, after releasing an ultimately unimplemented proposal in 2011, the Agencies proposed new rules to implement Section 956. The proposal has a three-tiered protocol in which the stringency of incentive compensation limits grow as an entity's consolidated asset total increases: Level 1, $250 billion and up; Level 2, $50 billion to $250 billion; and Level 3, $1 billion to $50 billion. Public comment period for the proposal was through July 22, 2016. The proposal will then require the approval of each agency in order to be finalized and adopted. Level 1 and Level 2 institutions must comply with enhanced requirements as to the structure of their incentive compensation for senior executive officers (i.e., various top corporate leaders, including the president, the chief executive officer, and the chief operating officer) and significant risk-takers (i.e., top paid non-senior employees). For example, a Level 1 institution would be required to defer at least 60% of a senior executive officer's qualifying incentive-based compensation and 50% of a significant risk-taker's qualifying incentive-based compensation for up to four years. Senior executive officers' and significant risk-takers' incentive-based compensation awarded under the long-term incentive plan would be deferred by 60% and 50%, respectively, for at least two years. A Level 2 institution would be required to defer at least 50% of a senior executive officer's qualifying incentive-based compensation and 40% of a significant risk-taker's qualifying incentive-based compensation for at least three years. Senior executives and significant risk-takers at Level 1 and 2 institutions would also be subject to reductions in previously earned incentive compensation (i.e., forfeiture and downward adjustment) in the event of certain behaviors, including when (1) deviation from risk parameters causes a firm's poor financial performance, or (2) inappropriate risk-taking occurs regardless of the impact on the firm's financial performance. Those employees could also have their vested incentive compensation clawed back by their employer under conditions determined by the employer, including (1) the existence of significant financial or reputational harm caused by the employee's actions; (2) fraudulent conduct by the employee; or (3) intentional misrepresentations on the part of the employee. |
This report provides an overview of appropriations for the Department of Homeland Security (DHS). The first portion of this report provides an overview and historical context for reviewing DHS appropriations, highlighting various aspects including the comparative size of DHS components, the amount of non-appropriated funding the department receives, and trends in the timing and size of the department's appropriations legislation. The second portion of this report outlines the legislative chronology of major events in funding the department for FY2014. The third portion of this report provides detailed information on DHS appropriations. The DHS appropriations bill includes funding for all components and functions of the department. For FY2013, pre-sequester DHS discretionary appropriations were $46.2 billion, with $12.1 billion in supplemental appropriations (see Table 1 ). For FY2014, the total request was $44.7 billion. House-passed and Senate-reported DHS appropriations legislation had similar total funding levels, $44.6 billion and $44.7 billion, respectively. Totals represent net discretionary budget authority, taking into account impacts of rescissions, and include emergency spending and disaster relief. Analyses that include the impact of fees and mandatory spending are found later in this report. Past CRS reports on DHS appropriations have carried detailed comparisons with previous years' funding levels. However, due to the impact of sequestration on budget authority available to the federal government under P.L. 113-6 and the Disaster Relief Appropriations Act of 2013 ( P.L. 113-2 ), official post-sequestration numbers are not available at the program, project, and activity level that would be directly comparable to the data provided in previous and future years' reports. While DHS released an FY2013 Post-Sequestration Operating Plan on April 26, 2013, that report did not include the funding provided through P.L. 113-2 , and press reports have indicated that reprogramming and transfer activity took place to address the impact of the nearly across-the-board cut administered through the sequestration process on priority programs. As there is no detailed comprehensive statement of post-sequestration resources available, the charts in this report contain information on pre-sequester funding levels for FY2013. In all cases, the data from P.L. 113-6 account for the two across-the-board cuts included in the general provisions of the act. Breaking down the DHS bill by title provides limited transparency into how DHS's appropriated resources are being used. Thus, looking at funding by component can be more instructive. The components of DHS vary widely in the size of their appropriated budgets. The largest component is Customs and Border Protection (CBP), with an FY2014 request of $10,833 million and final appropriation of $10,420 million. Table 2 and Figure 1 show DHS's discretionary budget authority broken down by component, from largest to smallest. Table 2 presents the raw numbers, while Figure 1 presents the same data in a graphic format, with additional information on the disaster relief adjustment to the allocation allowed under the Budget Control Act ( P.L. 112-25 ). For each set of appropriations shown in Figure 1 , the left column shows discretionary budget authority provided through the legislation, while the right column shows that amount plus resources available under the adjustments. This comparison looks only at the new budget authority requested or provided—not budget authority rescinded to offset the cost of the bill—so the totals will differ from Table 1 , which includes the impact of prior-year rescissions. Figure 1 , even with its accounting for discretionary cap adjustments, does not tell the whole story about the resources available to individual DHS components. Much of DHS's budget is not derived from discretionary appropriations. Some components, such as the Transportation Security Administration (TSA), rely on fee income or offsetting collections to support a substantial portion of their activities. U.S. Citizenship and Immigration Services (USCIS), for example, obtains less than 4% of its funding through direct appropriations—the bulk of the component's funding is derived from fee income. Figure 2 highlights how much of the DHS budget is not funded through discretionary appropriations. It presents a breakdown of the FY2014 budget request, showing the proposed discretionary appropriations, mandatory appropriations, and adjustments under the Budget Control Act, in the context of the total amount of budgetary resources available to DHS, as well as other non-appropriated resources. For FY2014, 67% of the proposed DHS gross budget was funded through discretionary appropriations. The remainder of the proposed budget was funded through fees, mandatory appropriations, BCA adjustments, and other non-appropriated resources. The amounts shown in this graph are derived from the Administration's budget request documents, and therefore do not exactly mirror the data presented in congressional documents, which are the source for the other data presented in the report, including Table 2 and Figure 1 . Table 3 presents DHS discretionary appropriations, as enacted, for FY2004 through FY2014. Generally speaking, annual appropriations for DHS rose from the establishment of the department, peaking in FY2010. However, the structural changes effected by the Budget Control Act that allowed disaster funding to be included in regular appropriations bills without being scored against the bill's allocation altered the downward trend as funding that might have been provided in a supplemental appropriations bill now was provided in the annual process. Without the impact of disaster relief funding, the nominal level of annual appropriations for the department declined each year since the FY2010 peak, until increasing in FY2014. Supplemental funding, which frequently addressed congressional priorities such as disaster assistance and border security, varies widely from year to year and as a result distorts year-to-year comparisons of total appropriations for DHS. Note the table includes two lines for FY2013. The first line for FY2013, in italics, describes pre-sequester resources provided to DHS. The second FY2013 line is derived from the post-sequester operating plan for the department, which examined only what was provided through the annual appropriations bill for DHS included in P.L. 113-6 . CRS does not have post-sequester totals for what was provided in P.L. 113-2 . Figure 3 shows the history of the timing of the DHS appropriations bills as they have moved through various stages of the legislative process. Initially, DHS appropriations were enacted relatively promptly, as stand-alone legislation. However, the bill is no longer an outlier from the consolidation and delayed timing that has affected other annual appropriations legislation. For FY2014, the Administration requested $39.028 billion in adjusted net discretionary budget authority for DHS, as part of an overall budget request of $60.0 billion (including fees, trust funds, and other funding that is not appropriated or does not score against the overall discretionary spending caps budget allocation for the bill). On June 6, 2013, the House passed H.R. 2217 with several amendments by a vote of 245-182. This report uses House-passed H.R. 2217 and the accompanying report ( H.Rept. 113-91 ) as the source for House-passed appropriations numbers. After floor action the House bill carried a net discretionary appropriation of $38.991 billion for DHS for FY2014. Several House-adopted floor amendments used management accounts as offsets, leaving funding for those activities 40% below the requested level. Increases approved by the House above the committee-recommended level for DHS activities included Customs and Border Protection's Border Security Fencing, Infrastructure, and Technology account; Coast Guard's Operating Expenses account; the Federal Emergency Management Agency's Urban Search and Rescue Response activities; and grant programs. On July 17, the Senate Appropriations Committee reported out H.R. 2217 with an amendment by a vote of 21-9. The Senate-reported bill carried a net discretionary appropriation of $39.1 billion for DHS for FY2014. Late on September 30, 2013, the Office of Management and Budget (OMB) gave notice to federal agencies that an emergency shutdown furlough would be put in place as a result of the failure to enact appropriations legislation for FY2014. On September 27, 2013, DHS released its "Procedures Relating to a Federal Funding Hiatus," which included details on how DHS planned to determine who was required to report to work, ceasing unexempted government operations, recalling certain workers in the event of an emergency, and restarting operations once an accord was reached on funding issues. More than 31,000 DHS employees were furloughed, and tens of thousands of others that were excepted from furlough and whose salaries were paid through annual appropriations worked without pay until the funding lapse was resolved. For a broader discussion of a federal government shutdown, see CRS Report RL34680, Shutdown of the Federal Government: Causes, Processes, and Effects , coordinated by [author name scrubbed]. On October 17, 2013, the Senate passed and the House of Representatives passed, and the President signed into law, a Senate-amended version of H.R. 2775 which carried a short term continuing resolution (CR) which funds government operations at a rate generally equivalent to FY2013 post-sequestration levels through January 15, 2014. The Senate passed the amended bill by a vote of 81-18, while the House passed it 285-144. This act temporarily resolved the lapse in funding, ending the emergency furlough, returning federal employees to work, and retroactively authorizing pay for both excepted and unexcepted employees for the duration of the funding lapse. Although a handful of legislative provisions are included to extend expiring authorities for the department and provide some flexibility for Customs and Border Protection (CBP) and Immigration and Customs Enforcement (ICE) in operating under the constraints of the CR, as is usually the case with this type of legislation, account-level direction for funding is not provided, and no explanatory statement of congressional intent (such as a committee report) exists. On January 14, 2014, the House passed by voice vote H.J.Res. 106 , a short term continuing resolution, that would allow for three days of continued funding under the same terms as P.L. 113-46 . On January 15, the joint resolution passed the Senate by a vote of 86-14, and was signed into law that same day, becoming P.L. 113-73 and preventing an additional lapse in appropriations funding while a consolidated appropriations act for FY2014 completed the legislative process. On January 17, 2014, the President signed into law the Consolidated Appropriations Act, 2014, which included annual appropriations legislation covering the entire discretionary budget for the federal government for FY2014. Division F of P.L. 113-76 is the Homeland Security Appropriations Act, 2014, which includes $39,270 million in adjusted net discretionary budget authority for DHS. This amount is $922 million more than DHS reportedly received in its annual appropriation for FY2013 after taking into account the impact of sequestration. The act also included an additional $5.6 billion requested by the Administration for FEMA in disaster relief funding as defined by the Budget Control Act, and an additional $227 million for the Coast Guard to pay the costs of overseas contingency operations. Those additional costs are compensated for by adjustments in the discretionary spending limits outlined through the Balanced Budget and Emergency Deficit Control Act, as amended. Title I of the DHS appropriations bill provides funding for the department's management activities, Analysis and Operations (A&O) account, and the Office of the Inspector General (OIG). The Administration requested $1,239 million for these accounts in FY2014. The House-passed bill would have provided $883 million in Title I, a decrease of 28.0% from the requested level. The Senate-reported bill would have provided $1,054 million in Title I, 14.9% below the requested level. Division F of P.L. 113-76 included $1,037 million in Title I, 16.3% below the requested level. Table 5 lists the pre-sequester enacted amounts for the individual components of Title I for FY2013, the Administration's request for these components for FY2014, and the House-passed appropriations for the same. The heavy lines in this table and in similar ones later in the report serve as a reminder that direct comparisons between the pre-sequester FY2013 funding and FY2014 proposals are not comparisons of current levels of actual spending and proposals for the coming fiscal year, as one would normally see in this type of report. Title II of the DHS appropriations bill, which includes over three-quarters of the budget authority provided in the legislation, contains the appropriations for U.S. Customs and Border Protection (CBP), U.S. Immigration and Customs Enforcement (ICE), the Transportation Security Administration (TSA), the U.S. Coast Guard (USCG), and the U.S. Secret Service (USSS). The Administration requested $30,283 million for these accounts in FY2014. The House-passed bill would have provided $30,768 million under Title II, an increase of 1.60% from the requested level. The Senate-reported bill would have included $30,289 million in Title II, an increase of less than 0.1% from the requested level. Division F of P.L. 113-76 included $30,877 million in Title II, 2.1% above the requested level. Both the Senate-reported bill and the enacted annual appropriations act also included an additional $227 million in funding for overseas contingency operations of Coast Guard, compensated for by an adjustment in the discretionary spending limits outlined through the Balanced Budget and Emergency Deficit Control Act, as amended. Table 6 lists the enacted amounts for the individual components of Title II for FY2013, the Administration's request for these components for FY2014, the House-passed and Senate-reported appropriations for the same, and the annual appropriation enacted through Division F of P.L. 113-76 . Title III of the DHS appropriations bill contains the appropriations for the National Protection and Programs Directorate (NPPD), the Office of Health Affairs (OHA), and the Federal Emergency Management Agency (FEMA). The Administration requested $5,383 million for these accounts in FY2014. The House-passed bill would have provided $5,928 million, an increase of 10.1% above the requested level. The Senate-reported bill would have provided $5,955 million, an increase of 10.6% above the requested level. Division F of P.L. 113-76 included $5,952 million in Title III, 10.6% above the requested level. In addition, all three versions of this title also include a requested $5,626 million for disaster relief that is offset by an adjustment under the Budget Control Act. Table 7 lists the enacted amounts for the individual components of Title III for FY2013, the Administration's request for these components for FY2014, the House-passed and Senate-reported appropriations for the same, and the annual appropriation enacted through Division F of P.L. 113-76 . Title IV of the DHS appropriations bill contains the appropriations for U.S. Citizenship and Immigration Services (USCIS), the Federal Law Enforcement Training Center (FLETC), the Science and Technology directorate (S&T), and the Domestic Nuclear Detection Office. The Administration requested $2,214 million for these accounts in FY2014. The House-passed bill would have provided $1,890 million, a decrease of 14.7% below the requested level. The Senate-reported bill would have provided $1,885 million, a decrease of 15.0% below the requested level. Division F of P.L. 113-76 included $1,878 million in Title IV, 15.2% below the requested level. Table 8 lists the enacted amounts for the individual components of Title IV for FY2013, the Administration's request for these components for FY2014, the House-passed and Senate-reported appropriations for the same, and the annual appropriation enacted through Division F of P.L. 113-76 . Title V of the DHS appropriations bill contains the general provisions for the bill. These typically include a variety of provisions that apply generally to the bill, as opposed to a single appropriation. However, general provisions may carry additional appropriations, rescissions of prior-year appropriations, limitations on the use of funds, or permanent legislative language as well. The Administration's request was made in relation to the general provisions for DHS included in the FY2012 appropriations act (Division D of P.L. 112-74 ), as the FY2013 appropriations process had not been concluded while the FY2014 request was being developed. The Administration proposed dropping 36 general provisions, most of which they had proposed eliminating in FY2013. Eleven of those were already eliminated in the final FY2013 appropriations bill. The Administration also proposed adding 10 provisions and modifying 10 others. While many of those modifications were simple date changes, one represented a significant change from previous practices. The Administration proposed modifying Section 503, which governs reprogramming of funds, to provide transfer authority that would allow funds to be moved between appropriations accounts within DHS to expedite response to a catastrophic event. The House concurred with the Administration's request to drop three general provisions beyond the 11 that were dropped from the FY2013 DHS appropriations act. The House Appropriations Committee did not add any of the general provisions requested by the Administration—with the exception of a rescission provision that it modified —and rejected the expansion of reprogramming authority. H.R. 2217 as reported to the House had 65 general provisions. The House added 19 general provisions to the bill during floor action, bringing the total number of general provisions in its version of H.R. 2217 to 84. Eighteen of these newly added general provisions prohibit the use of funds provided in the bill for specific activities. The Senate Appropriations Committee chose to drop a provision that the House retained, kept four proposed for removal that the House did not, and added several other provisions. It added two provisions requested by the Administration—one authorizing the use of reimbursable fee agreements to fund CBP services, and a modified provision allowing DHS to receive donations to construct, alter, operate, or maintain land ports of entry. The Senate-reported bill includes 72 general provisions in all. Division F of P.L. 113-76 included 77 general provisions in all. Seven provisions of the 74 general provisions carried in the FY2013 Homeland Security Appropriations Act were dropped, and ten were added. Section 559 of the act included a modified version of the Administration's requested authority to enter into reimburseable fee agreements and to receive donations. The act did not include the requested expansion of reprogramming authority. House-passed H.R. 2217 included $460 million in rescissions in Title V, while the Senate-reported version included $241 million in rescissions. Division F of P.L. 113-76 included $693 million in Title V. These provisions reduce the net score of the act. The House-passed bill would have provided $34 million for DHS's data center consolidation effort through a general provision, while the Senate-reported bill would have provided $54 million in the same fashion, as well as $43 million for DHS headquarters consolidation at St. Elizabeths. These are cross-cutting initiatives which have been funded in the past in the general provisions of the legislation. The Senate-reported bill also included legislative language to allow DHS to use fee revenues collected as a result of lifting a fee exemption, which adds $110 million to the overall cost of the legislation. Division F of P.L. 113-76 included $3 million for a USCIS immigrant integration grant program, as well as $42 million for data center migration, $35 million for DHS headquarters consolidation, and $30 million for financial systems modernization. The division also includes the legislative language concerning fees as proposed by the Senate. These are the only provisions in this title that impact the score of the act. | This report provides a brief outline of the FY2014 appropriations legislation for the Department of Homeland Security (DHS). The Administration requested $39.0 billion in adjusted net discretionary budget authority for DHS for FY2014, as part of an overall budget of $60.0 billion (including fees, trust funds, and other funding that is not appropriated or does not score against the budget caps). Congress did not enact annual FY2014 appropriations legislation prior to the beginning of the new fiscal year. From October 1, 2013, through October 16, 2013, the federal government (including DHS) operated under an emergency shutdown furlough due to the expiration of annual appropriations for FY2014. More than 31,000 DHS employees were furloughed. Tens of thousands of others that were excepted from furlough, and those whose salaries were paid through annual appropriations, worked without pay until the lapse was resolved by passage of a short-term continuing resolution. From October 17, 2013, to January 17, 2014, the federal government operated under the terms of two consecutive continuing resolutions: P.L. 113-46, which lasted until its successor was enacted on January 15, 2014; and P.L. 113-73, which lasted until the Omnibus Appropriations Act, 2014 (P.L. 113-76), was enacted on January 17, 2014. Division F of P.L. 113-76 is the Homeland Security Appropriations Act, 2014, which includes $39,270 million in adjusted net discretionary budget authority for DHS. This is $922 million more than DHS reportedly received in its annual appropriation for FY2013 after taking into account the impact of sequestration. The act also included an additional $5.6 billion requested by the Administration for FEMA in disaster relief funding as defined by the Budget Control Act, and an additional $227 million for the Coast Guard to pay the costs of overseas contingency operations. Those additional costs are compensated for by adjustments in the discretionary spending limits outlined through the Balanced Budget and Emergency Deficit Control Act as amended. For a more detailed discussion of policy matters and legislative details beyond funding levels, see CRS Report R43147, Department of Homeland Security: FY2014 Appropriations, coordinated by [author name scrubbed]. This report will be updated as events warrant. |
Medical malpractice and malpractice insurance continue to be issues of great concern tophysicians, consumers, legislators, and others. (1) Most of the discussion about the rising cost of malpracticeinsurance has centered on limiting the damage awards in malpractice suits. Some attention has beengiven to insurance market reforms. A third, related area that has received less consideration inmalpractice discussions is patient safety. Patient safety refers to the panoply of rules, practices, and systems related to the preventionof patient injury, also known as "adverse events." Intrinsic to patient safety efforts are strategies toprevent medical errors; i.e., the use of an incorrect medical treatment or the failure of a specifictreatment to achieve the intended result. (2) While patient safety and medical errors have generated a great dealof discussion in the media and in legislatures in the past several years, such discussion typically hastaken place separately from the vigorous debates concerning malpractice litigation. Legislationconsidered during the 109th Congress has been no exception. S. 544 , the Patient Safetyand Quality Improvement Act of 2005, established a system for the voluntary submission andanalysis of medical error data. Similar to other medical error reporting bills in recent years, itprohibited use of error data in administrative, civil, and criminal proceedings. S. 544became P.L. 109-41 on July 29, 2005. However, medical liability issues are addressed in otherlegislation -- specifically, H.R. 5 / S. 354 , the Help Efficient, Accessible,Low-Cost, Timely Healthcare (HEALTH) Act of 2005; S. 22 , the Medical Care AccessProtection Act of 2006; and S. 23 , the Healthy Mothers and Healthy Babies Access toCare Act. (3) All of thesebills focus on tort reform as the solution to increasing malpractice premiums. (4) The separation of patient safety concerns from medical malpractice issues has not alwaysbeen the case. During the first malpractice insurance "crisis" in the mid-late 1970s, California passeda pioneering bill, the Medical Injury Compensation Reform Act (MICRA), which includedprovisions not only limiting damage awards and other legal reforms, but also strengthening patientsafety and physician disciplinary activities. But the controversy over damage awards eclipsed thoseother topics, and subsequent state and federal legislative activity centered on reforming malpracticetort law. This dynamic was repeated during the second malpractice insurance "crisis" during themid-late 1980s. Another spate of malpractice tort reforms were proposed and debated, separate fromthe proposals related to health care quality and the mostly academic discussions concerning patientsafety. Through most of the 1990s, patient safety issues did not command widespread legislativeattention, despite research that found that medical errors caused significant health and financialproblems for the individuals injured, their families, and the nation as a whole. It wasn't until a 1999 Institute of Medicine study on medical errors, which avoided includingdiscussion about the malpractice insurance controversy, that the issue of patient safety finallyreached national prominence. Since publication of that report, the intense media attention helpedpropel patient safety issues to the forefront of health care debates and legislative proposals. Giventhe interest in patient safety and observations by some that the nation is in the midst of its thirdmalpractice insurance "crisis," some federal and state legislators have developed proposals to addressthese issues. Therefore, it may be appropriate to consider these issues collectively, and re-visit therole patient safety initiatives could play in the prevention of both medical errors and medicalmalpractice. The link between malpractice and medical error has its detractors. Some health careobservers refer to studies that found that the majority of malpractice claims filed do not involvenegligent medical care. (5) In other words, the majority of patients who file malpractice claims have suffered medical injuries,but not of the type that would be "legally compensable" on the grounds of provider negligence. (6) Moreover, a seminal medicalerrors study showed that many lawsuits are won by patients even though expert reviewers cannotestablish any evidence of negligence. At the same time, only a small proportion of patients whoseinjuries are caused by negligence actually end up filing a malpractice claim. Some observers citethe gap between malpractice claims and provider negligence as evidence of a faulty litigation systemin need of reform. Thus, they support solutions that target the legal system, such as malpractice tortreforms. (7) Other observers argue that the emphasis on liability and damage awards negatively impactsthe patient-provider relationship which, in turn, affects malpractice claims. A number of studieshave shown that communication breakdowns lead to patient frustration and anger, which increasesthe likelihood of litigation. (8) Some health care observers assert that the collapse incommunication and trust, in addition to a health care delivery system in which time spent providingservices has been compressed, adds an unhealthy, antagonistic component to modern medicine. They conclude that this adversarial element acts as a significant barrier to quality improvement andpatient safety efforts. Such an assessment was reflected in an editorial by several well-respected patient safetyresearchers who observed that the threat of malpractice liability to deter bad medical care has "hadlimited impact on reducing patient injuries." (9) Indeed, the variety of disciplines involved in this debate (i.e.,medicine, insurance, law, government) speaks to the complexity of the issues. It follows that anymeaningful discussion about them necessitates a thorough analysis, including an analysis of patientsafety. While concern about patient injuries is not new, data about adverse events was sparse andlimited until fairly recently. A small, pioneering study looked at a sample of 23 California hospitalsin 1974. (10) Thatanalysis found that nearly 5% of hospitalizations involved injuries to patients. Extrapolating fromthe number of hospitals in the sample to all CA hospitals, the study investigators estimated that therewere 140,000 patient injuries in that state alone in 1974. A more comprehensive study wasundertaken in 1991, largely in response to the lack of robust patient injury data, by members of theHarvard Medical Practice Study (HMPS) Group. The group analyzed 1984 data from over 30,000discharges at 51 New York hospitals and more than 67,000 litigation records, and the study isconsidered to be the most influential patient injury study. The HMPS found that the proportion ofhospitalizations involving medical injuries was around 4%. Lucian L. Leape, one of the HMPSinvestigators, later extrapolated from the NY data and estimated that 180,000 individuals diedannually in the U.S. as a result of medical injury. He noted that this was equivalent to "threejumbo-jet crashes every 2 days." (11) In 1992, a subset of the HMPS investigators conducted avalidation study by reviewing 15,000 discharges from a sample of 28 hospitals in Colorado and Utah. The findings of the CO-UT study largely corroborated those of the NY study. The analyses from the NY and CO-UT studies formed the bulk of the evidence on which theInstitute of Medicine (IOM) based its patient safety recommendations, outlined in the 1999 report, To Err is Human: Building a Safer Health System . (12) The report's findings immediately seized the attention ofmainstream news media. Along with dramatic stories about individuals seriously harmed by errors,the IOM Report placed medical errors in the forefront of health care discussions. Most of theattention focused on the IOM's estimate of the number of deaths that could be attributed to errors,between 44,000 and 98,000 annually. In addition, the report estimated that the cost to the nation ofall preventable adverse events was $17 billion a year. But beyond those dramatic statistics, the IOM Report emphasized a need to move away fromblaming individual providers and focus instead on preventing errors via safer health care systems. The IOM concluded that medical errors generally are the result of many variables. Since blaminga single person does nothing to change those contributing variables, the same error could occur overand over again. Thus, enhancing patient safety requires a systemic approach in order to makechanges to system conditions that lead to errors in the first place. In effect, this conclusionbroadened the medical errors discussion to include the characteristics of health care delivery systemsthat contribute to the prevalence of adverse events. Also, this groundbreaking approach toaddressing errors was seen as an opportunity for lessening the adversarial quality in patient-providerrelationships engendered by the malpractice liability debate. Soon after publication of the IOM's findings, strategies to reduce medical errors were putforth from both public and private sector entities. For example, 34 medical error-related bills wereintroduced in state legislatures in the year following the release of the IOM Report. The proposalsaddressed a broad spectrum of related issues, such as adverse event reporting, reduction ofmedication errors, system-wide analysis, and public disclosure of information. (13) At the federal level,then-President Clinton charged an interagency task force to inventory current federal efforts toreduce errors and outline action items for future implementation. Three months later, the task force'sreport endorsed many of the IOM's recommendations and enumerated a diverse set of strategies foraddressing them. (14) Some of those strategies included allocating funds to establish a patient safety center within theAgency for Healthcare Research and Quality (AHRQ), implementing reporting systems at a numberof federal agencies, and developing new labeling standards to prevent medication errors. In the private sector, one of the more visible responses was establishment of the voluntaryLeapfrog Group (Leapfrog). Founded by the Business Roundtable, an association of CEOs fromleading corporations, Leapfrog's mission is to mobilize purchasers of health insurance to alert healthcare providers that progress in patient safety would be rewarded with preferential use. As a first step,Leapfrog recommended three specific standards for comparing hospital performance: computerphysician order entry, evidence-based hospital referral, and intensive care unit physicianstaffing. (15) It alsodeveloped and conducted the Leapfrog Hospital Quality and Safety Survey. The survey querieshospitals about their adherence to specific quality standards, including the three original measuresrecommended by Leapfrog. (16) Some patient safety advocates point out that medical malpractice claims and awards are nota reliable gauge of an individual physician's competence. As discussed earlier, only a smallpercentage of patients who experience medical injuries end up filing malpractice claims, and of thosewho do file claims a majority did not experience injuries that meet the legal definition fornegligence. Therefore, even the most conscientious physicians face uncertainty as to whether theywill be sued, and negligent physicians may not be held accountable through the legal system. (17) In addition, questions remain as to whether the prior experience of being sued or the threatof possible litigation make physicians practice medicine more safely. Some studies point out thata "large body of research has accumulated showing that medical malpractice liability causes doctorsto practice defensive medicine." (18) The premise underpinning defensive medicine is that the fearof liability and the potential negative outcomes associated with malpractice claims lead physiciansto administer additional health care treatments or avoid high-risk services primarily to reduce theirliability risk. The implication is that defensive medicine results in either an increase in overallspending for health care that may not be medically necessary, or a decrease in access to certainservices or for certain patients. Detractors suggest that the growth of cost-conscious managed carehas limited physicians' ability to provide care that provides marginal medical benefit. They arguethat empirical studies on defensive medicine have produced mixed findings, with "most failing todemonstrate any real impacts on medical practice arising from higher malpractice premiums or priorexperience of being sued." (19) Another issue for consideration is that many physicians may notface the full financial consequences of their professional conduct. Most physicians are insuredagainst medical malpractice, and premiums for professional liability insurance are not adjusted toreflect provider experiences with malpractice claims or other disciplinary actions, (i.e., malpracticepremiums are not "experience rated"). How then can patient safety be improved with the individual provider in mind? Some havesuggested that serious deviations from quality care can be addressed by strengthening licensure andaccreditation requirements, and modifying physician disciplinary procedures. Others recommenda less-punitive, less-adversarial approach of assessment, feedback, and ongoing professionaleducation. The regulation of physician licensure and standards for appropriate physician conduct hastraditionally been the responsibility of the states. Through the licensure process states ensure thatall licensed physicians have appropriate education and training, and hold providers accountable tothe recognized standards of professional conduct. Under each state's Medical Practice Act, theresponsibility for physician licensure and discipline rests with the state medical boards. (20) State Medical Boards. Any disciplinary sanctions imposed by state medical boards are reported to the Federation of State Medical Boards, medicalcredentialing societies, and appropriate government agencies, including the National PractitionerData Bank (see below for more details). State medical boards also can assist the public by disclosingthe current status of a physician's license, any disciplinary actions, or, in some instances, any pendingcharges. Many state boards have increased consumer accessibility to this information by making itavailable online. For example, Massachusetts passed a pioneering law in 1996 making informationabout physicians' disciplinary activities, malpractice payments, and criminal convictions availableto the general public. Other states, including California, Georgia, New York, Virginia, andWashington, now offer similar online physician profiles. Some consumer groups believe, however, that the state medical boards are not doing anadequate job of protecting the public from negligent physicians, and that the number of doctorsdisciplined is low compared with the number believed to be providing substandard care. They havevoiced concern regarding the boards' reliance on consumers to bring unprofessional conduct to theirattention. Moreover, some observers question the effectiveness of state medical boards in thedisciplining of physicians because doctors themselves make up the majority of those boards. Otherobservers counter that medical boards are not given adequate resources to respond to the largenumber of complaints that they receive. They assert that boards lack sufficient funding, authority,and information to be able to act in an appropriate and timely manner. Boards also may not be ableto respond quickly, they say, because formal actions against physicians must follow a strict processof complaint, investigation, and hearing. The Federation of State Medical Boards (FSMB), a private, non-profit association of statemedical boards, has worked to improve state medical practice acts and the effectiveness of theboards. The FSMB has also developed the Federation Physician Data Center; a repository forformal actions taken and reported against physicians by regulatory and licensing entities throughoutthe United States and some other countries. Information on medical malpractice settlements orclaims is not collected. Reporting to the FSMB is voluntary and only actions that can be legallyreleased or are a matter of public record are included in the Data Center. Beginning in 2001, FSMBreports on disciplinary actions against physicians became available to the public. (21) National Practitioner Data Bank. Establishedunder the Health Care Quality Improvement Act of 1986 ( P.L. 99-660 ) and made operational inSeptember 1990, the National Practitioner Data Bank (NPDB) is a central repository for informationabout physicians, dentists, and, in some cases, other health care professionals. It contains reports on: medical malpractice payments; actions taken by a state Board of Medical Examiners to suspend orrevoke a practitioner's license; and actions taken by a hospital or other health care entity to limit orrevoke clinical privileges. The intent of the data bank is to improve the quality of health care byencouraging hospitals, state licensing boards, and other health care entities to identify and disciplinethose who engage in unprofessional conduct, and to restrict the ability of incompetent providers tomove from state to state without disclosure or discovery of prior adverse actions taken against them. While hospitals are the only health care entities with mandatory requirements for querying the databank, NPDB information is available to state licensing boards, professional societies, certain federalagencies, and others as specified in the statute. NPDB information is not available to the generalpublic. Some legislators and consumer groups have advocated for the public release of NPDBinformation. They argue that the public has the right to know about adverse actions against healthcare providers in their communities. Others, however, question the quality of the NPDB data. According to a comprehensive Government Accountability Office (GAO) report, (22) under-reporting may bea severe problem, and so the completeness and accuracy of the NPDB information are an openquestion. Health care practitioners also oppose the public disclosure of NPDB information forliability and professional reasons. They assert that the NPDB data can be easily misunderstood bylaypersons. For example, they say, a simple comparison of malpractice payments made byphysicians in different specialties would be misleading, since some medical specialties typically havehigher rates of malpractice suits than other specialities. The same can be said about certain doctorswho take on riskier cases than their colleagues. Also, a data bank entry showing a payment for amalpractice claim does not necessarily indicate negligent care. It is possible this was a case in whichthe physician was not negligent, some assert, but settled out of court in order to avoid the costs andpublicity associated with a lengthy trial. Public Disclosure of Reported Information. Theconcern that many providers voice against making NPDB data public is the same one they expressabout participating in reporting systems in general. Their concern is rooted in the assumption thatsuch information, whether it be about medical errors, adverse events, or disciplinary actions, will beused against them professionally. At a time when malpractice insurance is becoming increasinglyexpensive and difficult to find in some regions and for certain specialities, providers may believethey are being asked to disclose sensitive information with no guarantee of legal, administrative, orprofessional protection. In addition, opponents of public disclosure argue that it creates strongdisincentives for openness and candor in the reporting system, thereby reducing the value of theinformation gathered. Disclosure proponents argue that placing medical practitioners on publicnotice creates strong incentives for quality improvement and assures consumers that, at a minimum,a mechanism is in place to identify serious errors and negligent providers. Moreover, theycharacterize physicians' fear about liability as unwarranted. For example, proponents of publicreporting say that physicians in states that have posted disciplinary actions on the Internet arereporting that they have seen no negative impact from making this information public. (23) The Institute of Medicine's report, Health Professions Education: A Bridge to Quality ,emphasizes that oversight and reporting must be part of an integrated approach to improving patientsafety that includes ongoing professional development. They recommend enabling health careproviders to maintain up-to-date skills and competence through an approach that includes evaluationand feedback by peers, medical boards, certification bodies, and employers. (24) Some reporting systems, particularly those conducted by managed care organizations(MCOs), are designed to furnish performance information to the participating providers on how theirpractice compares with their peers or with accepted practice guidelines. Practice guidelines providerecommendations about appropriate medical care, and are designed to outline the range of treatmentsfor a given clinical situation. Such guidelines are developed from research findings about theeffectiveness of certain medical therapies and practices, and expertise from practicing physicians. The Omnibus Budget Reconciliation Act of 1989 ( P.L. 101-239 ) provided funding for thedevelopment of clinical practice guidelines and authorized the establishment of the Federal Agencyfor Health Care Policy and Research (AHCPR). (25) AHCPR ceased internal development of clinical practiceguidelines in 1996, and now -- as the reauthorized Agency for Healthcare Quality and Research --supports external researchers in the creation and dissemination of evidence-based medical care. Medical professional societies, research groups, and private-sector firms also have developedpractice guidelines. In addition, MCOs and other health care entities have increasingly used practiceguidelines and outcomes assessment (i.e., analysis of the impact of certain treatments or procedureson patient health) to monitor and direct the way physicians deliver health care. There is someconcern, however, about the effect of practice guidelines on changing physician behavior. One studyfound that U.S. physicians follow recommended "best practices" for diagnosis and treatment ofadults only about 55% of the time. (26) Some have urged that increased compliance with guidelinesshould be combined with other efforts to improve health care quality, such as better reporting of thequality of care, greater use of Internet technology and decision-support tools, increased patientinvolvement, and providing financial incentives for investment in quality-improvementinfrastructure. (27) Studies have shown that clinical guidelines are most effective when delivered by a "respectedpeer or 'opinion leader.'" (28) Many physicians believe that other physicians are the mostappropriate individuals to assess the quality of care delivered, and provide counseling or additionaleducation. Peer review may be conducted at different levels: peer-to-peer, at individual hospitals,or through outside organizations such as the Quality Improvement Organizations (QIOs), whichcontract with the Medicare program to monitor beneficiaries' quality of care. (29) The success of feedback to medical practitioners also depends on the confidentiality, timeliness, and quality of the feedback, as well as provider immunity from administrative and legalreprisals. Similar to the public disclosure debates, supporters of confidentiality and immunity inprovider feedback initiatives say that such assurances are necessary to move away from the "blamegame" and encourage reporting. Detractors say that such features support a solely internal systemof monitoring that is inadequate for proper intervention and enforcement. With the majority of medical error studies based on inpatient data and the IOM Report'semphasis on addressing system failures, most patient safety initiatives thus far have focused onhospitals. An abundance of solutions have been proposed, such as reporting hospital performance,disseminating clinical protocols, and adopting innovative technology to aid hospitals in the creationof a "culture of safety." This endeavor was further energized by the implementation of patient safetystandards by the nation's largest hospital accrediting body, the Joint Commission on Accreditationof Healthcare Organizations (JCAHO). The JCAHO standards stressed not only a hospital's role inthe prevention of medical errors, but also its responsibility for disclosing to patients when they havebeen harmed by such errors. Patient safety studies and initiatives emphasize the importance of "transparency" in healthcare delivery. Communication is the principal medium through which transparency concerns areaddressed, and one of the key features of a patient safety-based communication strategy is a systemfor reporting adverse events. (30) Lessons from the Airline Industry. Some of theearly thinking on this issue borrowed ideas from other industries, particularly aviation. In the airlineindustry, pilots, controllers, and others can submit information to the Aviation Safety ReportingSystem (ASRS), which is administered by the National Aeronautics and Space Administration(NASA). (31) The ASRSis a system for reporting "near misses;" that is, incidents that do not result in accidents butnonetheless violate standard practices or rules. The system also analyzes the root causes of nearmisses, and communicates the findings to those involved as well as others working under similarconditions. Such a design is considered useful for identifying possible hazards and developingsolutions to prevent accidents. Key characteristics of the ASRS are that it operates independentlyof any regulatory body, is completely confidential, and reporters are given immunity fromretribution. In more than 30 years of existence, ASRS has received and processed more than 600,000reports, and many aviation experts credit ASRS with helping to greatly increase commercial aviationsafety. However, it is important to note that the ASRS does not deal with incidents that result inpassenger injury or aircraft damage. Serious aviation accidents are investigated by the NationalTransportation Safety Board under a different system. Moreover, pilots have extra incentive toperform flawlessly since a major mistake puts them in as much immediate danger as theirpassengers. The dual-system arrangement for addressing near misses and serious errors in aviationparallels the IOM's recommendation for two-tier medical error reporting. The IOM recommendedestablishing a mandatory reporting system to hold hospitals and other health care facilitiesaccountable for errors that lead to serious injury or death. It also encouraged the development ofvoluntary, confidential systems for reporting no harm events (a medical error that has been carriedout but does not result in injury), minimal harm events, and near misses. Analysis of suchinformation could then be used to identify system vulnerabilities and develop preventive strategies. Mandatory vs. Voluntary Reporting. There aremany ideas among stakeholders regarding the design of a health care reporting system, includingwho should report and what they should report. A key area of discussion is whether a reportingsystem should mandate participation or be voluntary. (32) The primary purpose of a mandatory reporting system is to hold providers accountable byensuring that serious mistakes are reported and investigated, and that appropriate follow-up actionis taken. Medical practitioners that continue unsafe practices risk citations, penalties, sanctions,suspension or revocation of licenses, and possible public exposure and loss of business. However,the focus on collecting adverse event data and disciplining individual providers bypasses the majorityof errors; errors that are caused or exacerbated by poorly designed health care delivery systems. According to the IOM, voluntary reporting systems play a "valuable role in encouragingimprovements in patient safety." (33) Experience from ongoing voluntary reporting efforts have shownthat such systems are helpful in identifying errors that occur on such an infrequent basis that theywould be difficult to detect by any one single health organization, and error trends or patterns thatallude to system problems that may affect all health care organizations. Identification of such eventscould facilitate the development of strategies to prevent more serious errors from occurring. Nevertheless, key criticisms against voluntary systems are that due to their very design,under-reporting is a constant concern, and such systems are inadequate for addressing egregiousmedical errors. Examples of Health Care Reporting Programs. Both private and public entities have implemented patient safety reporting programs. For example,in 1996 JCAHO implemented its Sentinel Event Policy (SEP). (34) This policy outlinesJCAHO's expectations for how health care organizations should address sentinel events; i.e., medicalevents involving death or severe physical and/or psychological injury. The SEP instructsorganizations to identify sentinel events, complete a thorough analysis of the root causes of thoseevents, implement strategies to reduce their prevalence, and track the effectiveness of thosestrategies. The policy also encourages health care organizations to share their findings with JCAHO,in order for it to pass on those "lessons learned" to others. As of April 2006, JCAHO has released36 alerts that describe different types of serious medical events and suggest ways to prevent them. The alerts also include statistics on the prevalence of these medical events, but do not name specifichospitals. With respect to the states, 28 have passed legislation or issued regulations mandating thereporting of adverse events or medical errors in hospitals. (35) The reporting requirements vary widely. For instance, statemandates differ in what health facilities are required to do with reported information: review reportsabout medical violations, share information with patients, disseminate evidence-based, error-prevention protocols, etc. In general, the quality and quantity of information collected aremajor concerns. Only a few states get enough information to conduct proper analyses, and some ofthe information reported is not useful. But a few states are able to conduct analyses and use thefindings in their role as regulator. (36) "Honesty Policies". While most of the attentionpaid to better communication has centered on reporting systems, a few health care entities haveimplemented programs that directly engage individuals injured by medical errors. "Honesty policies"have been instituted in a small minority of hospital and health care systems to encourage providersand staff to admit that they have committed errors. In addition, these institutions offer compensationto injured patients to pay for medical treatment or cover lost income. Such practices, however, areuncommon. Providers typically resist disclosure of adverse medical events. (37) Supporters of honestypolicies assert that such policies help maintain openness and trust in patient-provider relationships,which may diffuse potentially volatile situations. Others argue that these policies elicit declaredadmissions of guilt, thereby exposing medical practitioners to even greater liability. Medical guidelines generally are developed with a particular health condition in mind andindividual providers as the target audience. However, given the increased awareness about medicalerrors caused by weaknesses in health care systems, there is more attention being paid to theapplication of clinical standards to hospitals. For instance, AHRQ developed a set of QualityIndicators (QIs) to measure the level of quality associated with the medical care being delivered inhospitals. One of the components that make up the QIs is a set of Patient Safety Indicators (PSIs). The PSIs provide information on potential inpatient adverse events, such as accidental puncture,obstetric trauma, transfusion reaction, etc. AHRQ encourages hospitals to use the PSIs to assesspatient safety at their facilities. IHI's 100,000 Lives Campaign: A Hospital QualityInitiative. In December 2004, the Institute for Healthcare Improvement (IHI)launched a major effort to save 100,000 lives in American hospitals over an 18-month period oftime. Dr. Donald Berwick, President and CEO of IHI, stated that this significant outcome could beachieved easily if hospitals focused on implementing only six evidence-based interventions that areknown to improve health care. The six quality improvement interventions that are a focus of the100,000 Lives Campaign include the deployment of rapid response teams, prevention of adverseevents, improved care for heart attacks, prevention of surgical site infection, prevention of centralline-associated infections, and prevention of ventilator-acquired pneumonia. Hospitals that choseto participate in the 100,000 Lives Campaign had to commit to implementing one or more of thesesix interventions. The 100,000 Lives Campaign hoped to enroll 2,000 hospitals in its effort, but to date hasenrolled more than 3,000 hospitals (this represents about 75% of all hospital beds in the UnitedStates). IHI touted its campaign as successful, and announced on June 14, 2006, that it hadsurpassed its goal of saving 100,000 lives by 22,300. Key components of this campaign include"node" hospitals, which lead the initiative at the regional or state level; national partners, whichprovide the initiative with visibility and exposure; and "mentor hospitals," those hospitals that havedemonstrated success with a specific intervention and therefore act as mentors to other hospitals bysharing what they have learned. Participation in the campaign was entirely voluntary, no financialincentives were provided, and no regulatory mandates were leveraged to achieve either participationor cooperation. (38) Another area on which a great deal of attention is focused is information technology (IT). Many observers believe that the health care system lags behind other industries in utilizing suchtechnology and should incorporate these innovations at multiple levels in order to enhance patientsafety. The IOM's report , Crossing the Quality Chasm: A New Health System for the 21st Century ,concluded that IT's role in the future of health care delivery is key, and the automation of health caretransactions is fundamental to the prevention of medical errors. (39) Proposed IT Initiatives. The applicability andpotential benefits of IT to health care are immense. Supporters recite a litany of uses:patient-physician communication via e-mail, bar-coding of pharmaceuticals, instantaneous retrievaland sharing of patient records, etc. Some e-health care pioneers tout the savings in time andresources, in addition to a reduction in medical errors, resulting from IT investments. A number of public and private-sector organizations, to varying degrees, have incorporatedIT into their policies, programs, and operations. For example, President Bush in his 2006 State ofthe Union address expressed his desire to reduce medical errors through wider adoption ofinformation technologies. Moreover, included in the President's FY2007 budget request is $169million for health IT initiatives to improve quality and reduce errors, among other objectives. (40) For more than 20 years, the Department of Veterans Affairs (VA) has developed and operatedthe Veterans Health Information Systems and Technology Architecture (VISTA). VISTA is anintegrated health information system that incorporates diverse functions ranging from managingpatient records to providing decision-support tools to handling billing. It can be accessed at each ofthe VA's 1,400 facilities. According to the VA, such connectivity and use of performance measureshave led to both increases in efficiency and reductions in medical errors. (41) The Food and Drug Administration (FDA) issued a final rule on February 26, 2004 thatrequired bar codes on labels for pharmaceuticals and biological products, in order to reduce theprobability of errors that cause adverse medical events. The FDA estimated that the rule wouldprevent nearly a half-million drug and transfusion errors over the next two decades. (42) A related strategy to reduce adverse drug events comes from the private-sector LeapfrogGroup. One of the three measures that form the core of its hospital performance monitoring effortsis implementation of computer physician order entry (CPOE) systems. Such systems allowphysicians to order medications electronically and alerts them to possible prescribing errors. In addition to government officials and health care practitioners, corporate managersrecognize the benefit of adopting technology for patient safety enhancement. For example, theHealth Information and Management Systems Society, a health care IT member organization,conducts an annual survey of chief information officers (CIOs) at integrated delivery systems,multi-hospital systems, and stand-alone healthcare facilities from around the country. The latestsurvey results revealed that half of CIOs cited reduction of medical errors and promotion of patientsafety as one of their top priorities for 2006. (43) Technology Implementation Considerations. While the potential benefits from IT are great, so are the implementation challenges. One of thechief challenges relates to the up-front investment. For instance, the FDA's drug bar code policyrequires hospitals to spend an estimated $7-plus billion on necessary equipment. (44) In addition, there are costsassociated with training staff, maintaining a technical assistance capacity, and updating systems andapplications. There also are other less tangible but nonetheless considerable barriers to IT adoption,including data privacy, system security, and overall reliability. Perceptions of value depend heavilyon how those concerns are addressed. And, lastly, culture also plays a substantial role. Familiarityand comfort with electronic systems affect how well consumers, providers, insurers, and payors willrespond to e-health care efforts. The specific challenges associated with IT adoption reflect the larger concerns regardingadoption of patient safety programs in general. Individual initiatives have resulted in promisingoutcomes, but the overall impact of these efforts has been mixed. To some degree, this is the casebecause implementation has not been as pervasive as initial intentions suggested, and also becausenot enough research has been done to identify, enumerate, and assess patient safety efforts. While it would be very difficult to provide a comprehensive, quantitative assessment of theimpact of patient safety programs, some insight can be gleaned from individual, private-sectorinitiatives, as well as public efforts. It is important to note that the results of specific programs arehighly dependent on the environment in which they operate, the target audience, and the level ofresources provided. Tracking and Reducing Medical Errors. TheAgency for Healthcare Research and Quality (AHRQ) submitted an interim report to the SenateAppropriations Committee that included how health care facilities track and record medical errors,and discussed how such information may be used to increase patient safety. (45) Hospitals and other healthcare facilities used a variety of approaches in their efforts to reduce errors. These approaches includenot only investments in technology and development of patient safety procedures, but also lesswell-known but equally important strategies, such as changes in organizational culture, involvementof key leaders, and education of providers. Such a breadth of activities underscored the necessityof implementing a comprehensive approach to reduce medical errors, instead of relying on a singlestrategy (e.g., information technology). For instance, to assist hospital efforts to enhance patientsafety, AHRQ developed a survey, with both private and public partners, to measure "organizationalconditions that can lead to adverse events and patient harm." (46) Publicizing Hospital Performance Data. Overall,the research on the impact of publicizing hospital performance measures shows mixed results. Somefindings show that patient mortality decreased after hospital performance data was released, whereasother findings showed no effect. While these studies were not necessarily focused on the preventionof medical errors, they still provide some indication of how similar programs may affect patientsafety efforts in general. One study of a hospital reporting system in Wisconsin highlighted some of the commonconcerns involved in such efforts. (47) The study assessed the impact of disclosing the findings fromthe "QualityCounts" report, which compared the performance of 24 hospitals. In this study, somehospitals' performance data was made public; other hospitals' data was not publicized. The endresults provided some evidence of the value of publicizing performance data to encourage qualityimprovement activities. For example, hospitals with low scores for obstetric and cardiac care, whoseresults were made public, were later involved in the most quality improvement efforts. In contrast,the hospitals whose performance was not made public had the lowest level of quality improvementactivity. Not surprisingly, the analysis also found that making performance data public generatedfeelings of distrust and anger among the participating hospitals. All of the hospitals had a slightlynegative view of public reporting in general, although they differed with respect to how they thoughtsuch reporting would affect their public image. As to be expected, hospitals with higher scores weremore likely to assert that their public image would be helped, while those with lower scores weremore likely to assert that their image would be hurt. Disclosing Medical Errors to Injured Patients. Anecdotal evidence suggests a positive impact of "honesty policies" on the reduction of malpracticeclaims. The Veterans Affairs medical center in Lexington, Kentucky regularly is held up as a modelfor such policies. The Lexington center chose to adopt the practice after dealing with two costlymalpractice cases. Since then center administrators claim that their policy has led to savings, partlydue to decreased legal expenses. Also, the center did not experience a deluge of malpracticelitigation as initially feared. Copic Cos., a malpractice insurer in Denver, had similar experiences.Copic's policy directs providers to report medical complications and adverse events. Copic respondswithin 72 hours with offers to compensate the patient for medical expenses related to injuries causedby errors and lost wages. According to Copic, this policy has led to a reduction in the number ofclaims and smaller claim payments. Despite these promising outcomes, some observers urge caution. They assert that patientsmay not receive adequate compensation without the assistance of legal counsel. Furthermore, thesepolicies are not adequate mechanisms for addressing very serious medical errors (e.g., patientdeaths). Others point out that it would be inaccurate to generalize the experience of the Lexingtoncenter to the general population. They assert that VA patients generally are older men with finiteresources; individuals who may have limited expectations and a lower-than-average inclination tosue. (48) Using Information Technology in Health CareDelivery. Individual efforts to utilize information technology in health caregenerally have increased the quality of health care. For example, in order to overcome the lack ofspecialists in a rural area in California, some providers use e-mail to consult with specialistselsewhere. A Spokane, Washington medical center built an IT system to provide 24-hour pharmacistcoverage for review of all medication orders. A heart institute in Kansas City, Missouri, iselectronically linked to a larger medical system that allows institute staff to remotely monitor cardiacpatients at each of the system's care locations. Specific IT initiatives also have enhanced patient safety. For instance, one study found thatthe rate of serious medication errors fell more than 50% when computerized prescribing systemswere used. (49) Yet,despite the enthusiasm expressed by some experts for the use of IT in health care, the adoption ofsuch technology has progressed slowly, especially in smaller medical settings. For example, "morethan 90 percent of medical practices with fewer than 50 doctors do not make significant use ofIT." (50) Cultural Issues. Just as there are numeroussolutions proposed to enhance patient safety, so to are there numerous barriers to implementing thosesolutions. Part of the reason why more has not been done is cultural. Some say medicine is aconservative discipline that does not change easily. Providers, especially physicians, place greatvalue on their professional autonomy and expertise. In an environment such as this, efforts to changeday-to-day practice patterns by outsiders may be met with resistance. Cultural barriers apply notonly to providers, but to other players in the health care system. For instance, proponents ofpublicizing patient safety information note the central role of the consumer. But study after studyhas shown that the vast majority of consumers generally do not seek out, use, or understand theinformation being made available to the public. (51) Limited Resources. There are also resource issuescontributing to the lack of progress in conducting patient safety efforts. The cost of investing inequipment, staff, and supplies are of paramount concern. (52) For example, state mandatory reporting systems are hamperedby insufficient funding. The budgets for many state programs are small relative to theirresponsibilities, and some recently-enacted programs have not been implemented because of lackof funds. Some observers also point out that federal reimbursement does not take into accountmedical error rates or implementation of error reduction measures, so there is little incentive forproviders to enhance patient safety. Unless a "business case" can be made for the potential savingsresulting from patient safety initiatives, cost will continue to be a substantial barrier to such efforts. Some organizations have launched individual initiatives to address the financial feasibility concernsexpressed by health care providers. For example, in April 2003, a coalition of providers, plans,purchasers, and others launched "Bridges to Excellence," whose mission is to reward high-qualityhealth care. (53) In thepublic sector, HHS announced on July 10 of that same year the launch of a demonstration that wouldprovide bonuses to hospitals that perform well on selected quality-of-care standards. (54) More recently, S. 1932 , the Deficit Reduction Act of 2005, includes provisions for the Secretary ofHHS to develop a plan for value-based purchasing under the Medicare program beginning inFY2009. (55) Theseinitiatives are indicative of the growing interest in pay for performance in health care. (56) Additional resource concerns focus on the time and effort needed to design, implement, andmaintain patient safety programs, including training staff. Some argue that this detracts from timethat could be spent on direct health care. However, others counter that these efforts are a moreefficient use of time and money in the long run. Liability and Professional Concerns. A third setof barriers are prompted by concerns about professional and legal liability. As was mentionedearlier, some of the resistance to error reporting and public disclosure is born from the fear that suchactivities would make providers more vulnerable to claims of malpractice. Therefore, individualpractitioners and hospitals remain cautious about implementing programs that potentially could beused against them in the courtroom, on the career ladder, and in the marketplace. For instance, theMassachusetts Group Insurance Commission (GIC), the entity that provides health insurancecoverage and other benefits to the state's employees, dependents, and annuitants, ordered its healthplans to collect health care quality information based on Leapfrog's safety standards. GIC's intentionwas to use this data for hospital comparisons. Most of the GIC hospitals refused to provide theinformation. Hospital administrators declared that their respective institutions were working atimproving patient safety, but were concerned about the specific questions being asked. AMassachusetts hospital association spokesman noted that hospitals thought that the Leapfrogstandards were too narrowly defined, and that they preferred an approach that took into account theprogress that had already been made at individual institutions. (57) In addition to implementation barriers, the difficulty in assessing the impact of errorprevention efforts also relates to the lack of research in this area. Three of the most highly-regardedexperts on patient safety concluded that health care studies have focused on biomedical research fordecades. In contrast, "error prevention -- especially the systems issues that underlie a greatproportion of patient injury -- is a young field, which has commanded the attention of only a smallnumber of researchers and, until recently, has received little funding." (58) To illustrate, the $84million requested in the President's FY2007 budget to support AHRQ's patient safety efforts isequivalent to the single largest investment in this area by the federal government. However, thatappropriation amounted to less than one-half of 1% of the comparable budget request for theNational Institutes of Health. Congressional interest in activities at the federal and state levels has evolved from genericquality issues to concerns related specifically to medical errors and patient safety. As part of thisevolution, the development and implementation of legislative proposals has varied in scope, focus,and purpose. Since the states traditionally play the role of regulator of provider behavior, the federalgovernment's presence historically has been small. But there was growing realization in the latter1970s and throughout the 1980s that the need for quality improvement in health care was sopervasive and severe that efforts of individual states could benefit from federal initiatives. In the1980s, Congress passed a number of legislative proposals designed to address health care qualitythrough a variety of mechanisms. Those mechanisms included state reporting systems, a nationaldata bank, Medicare peer review, and practice guidelines. In general, the proposals focused on theperformance of individual providers and generic quality issues. (59) Legislation to addresssystem problems specifically relating to patient safety issues did not come to fruition until the releaseof the IOM's To Err is Human report. Several patient safety bills were introduced in the 106th Congress to address the issues raisedin the IOM Report. Many Members from both chambers and parties expressed support for patientsafety legislation, and introduced bills to develop guidelines for error reporting, establish a federalquality improvement center, and fund demonstration projects, among other initiatives. However,patient safety was overshadowed by other legislative priorities and all six stand-alone bills failed towin passage. The only federal action taken on this issue was a $50 million appropriation to theAgency for Health Care Research and Policy (later reauthorized as AHRQ) to support medical errorsresearch. (60) Most ofthe patient safety legislation first introduced in the 106th Congress was reintroduced in the 107th. Once again, not much legislative action took place. During the 108th Congress, a number of patient safety bills were introduced. H.R. 663 , the Patient Safety and Quality Improvement Act, was the bill that receivedthe most legislative attention and enjoyed broad bipartisan support. H.R. 663 proposedthe establishment of a voluntary reporting system and provided civil and administrative protectionsfor certain types of documents and communications termed "patient safety work products." OnMarch 12, 2004, the House passed H.R. 663 by a vote of 418-6. On the Senate side, theHELP Committee took up S. 720 . The Senate bill was broadly similar to theHouse-passed legislation. S. 720 also established a voluntary system for the reporting ofmedical errors to patient safety organizations. But there were a few differences between S.720 and H.R. 663. The key difference was that the Senate bill provided greaterprotection for providers who submitted medical error information. Under S. 720, thesubmitted information was shielded from use not only in civil and administrative proceedings, butin criminal actions as well (with exception). On July 22, 2004, the Senate incorporated S.720 in H.R. 663 as an amendment, and passed H.R. 663 by unanimousconsent. During the first session of the 109th Congress, Senator Jeffords introduced S. 544 , the Patient Safety and Quality Improvement Act of 2005. S. 544 was identical to theSenate-passed patient safety bill, S. 720 . It established a system for the voluntarysubmission and analysis of medical error data, and prohibited the use of patient safety data inadministrative, civil, and criminal proceedings. The Senate amended and passed S. 544unanimously on July 21, 2005. Six days later, the House voted overwhelmingly to pass the bill. S.544 became P.L. 109-41 on July 29, 2005. (61) While the majority of patient safety and medical malpractice bills address problems relatedto only one of these issues, a few bills have included provisions that address both issues. Forexample, S. 1337 would authorize the HHS Secretary to award grants to states todevelop, implement, and evaluate alternatives to tort litigation for the purposes of resolvingmalpractice claims and utilizing patient safety data. Each state must demonstrate how the alternativeapproach encourages prompt and fair resolution of malpractice claims, promotes disclosure ofmedical errors, increases patient safety, and preserves access to medical malpractice insurance. Another bill, S. 1784 , would establish the Office of Patient Safety and Health CareQuality to administer the National Medical Error Disclosure and Compensation (MEDIC) Program. This new federal program would analyze information submitted by program participants aboutmedical errors and patient safety events, provide grants for the development and implementation ofprograms to disclose medical errors to patients, and require program participants to offer to negotiatewith individuals injured by medical errors for some level of compensation. The bill also includesprovisions for a number of separate studies to analyze provider accountability within the health caresystem, factors related to medical liability premiums, and cases that were not negotiated through theprogram. A couple of other bills also introduced during the 109th Congress ( H.R. 3359 and H.R. 3378 ) use a comprehensive approach that addresses multiple issue areas, suchas tort reform, mediation, insurance reform, medical errors reporting, and physician supply. The Secretary of Health and Human Services (HHS) was charged with promulgating rulespursuant to the Patient Safety and Quality Improvement Act of 2005 ( P.L. 109-41 ). This task wasgiven to the Agency for Healthcare Research and Quality (AHRQ) within HHS, and specifically tothe Center for Quality Improvement and Patient Safety within AHRQ. In March 2006, AHRQ helda series of public meetings to inform its rulemaking process. These meetings solicited feedback fromthe public on specific topical areas, including provider-patient safety organization (PSO)relationships, contracts and disclosures (March 8, 2006); the operation of a component PSO (62) (March 13, 2006); andsecurity and confidentiality issues (March 16, 2006). Although the meetings specifically asked forcomments relating to these topics, participants were generally encouraged to provide comments onany issue they believed was relevant to the rulemaking process. A broad range of stakeholders wasrepresented at the meetings, with an average of 200 participants at each meeting. (63) The first meeting invited comments on provider-PSO relationships, disclosures, andcontracts. (64) ThePatient Safety and Quality Improvement Act provides for extensive privilege and confidentialityprotections for certain patient safety information, deemed patient safety work products. Specifically,information is afforded these protections if it is considered to be existing within a Patient SafetyEvaluation System (PSES). (65) In other words, this information is considered to be a patientsafety work product if it is created within the boundaries of a PSES. For this reason, AHRQ needsto provide clear guidance as to the boundaries and scope of a PSES to make clear what informationfalls under its aegis and therefore is protected. In addition, the statute requires entities pursuingcertification as a PSO to provide the Secretary with relevant information regarding their existingrelationships with health care providers that might constitute a conflict of interest, and AHRQ wasinterested in gathering information from the public regarding what type of relationships specificallywould trigger concerns about an entity's ability to perform independently as a PSO. The second meeting focused on the issues arising during the operation of a component PSO(meaning an entity that is a component of another organization). Specifically, the statute hasadditional security-related requirements for component PSOs to ensure that privacy of the patientsafety work products it collects is not compromised. In particular, these requirements help to makecertain that protected information is not shared with the parent organization. Finally, the third meeting solicited comment on broader issues relating to security andconfidentiality. Specifically, the statute allows for certain exceptions to the protection ofinformation, and AHRQ was interested in learning more about how this would affect existing clinicaloperations. In addition, since it is possible that a PSO might receive information about events thatare outside of any contractual relationship it has with a provider, AHRQ wanted feedback on howPSOs should handle such information. The agency also was interested in receiving commentsrelating to standards for de-identifying data and securing identifiable health information. According to AHRQ, the information generated through these meetings has been analyzedby the agency but is not publicly available. The comments received highlighted several importantissues, which may be helpful to the agency as it moves forward. AHRQ is formulating a draft rule,and expects to release it in the immediate future. As this will be AHRQ's first operational program,and since the legislation raises a plethora of policy issues, a substantial amount of energy is beingdirected toward this effort. More information about these meetings can be found on AHRQ's websiteat http://www.ahrq.gov/about/pso06.htm . State activity in health care quality preceded the release of To Err is Human . A JCAHOsurvey found that at least a third of the states had implemented reporting systems by the late 1990s. The purpose of those reporting systems was mainly to collect information on patient injuries orissues related to health care facilities (e.g., structural problems). Most of the reports came fromhospitals and nursing homes, but some states also collected data from other facilities, such asambulatory care centers. These systems reportedly protected data confidentiality, though privacypolicies varied from state to state. Only a few states aggregated the information or conducted trendanalysis. The overall effectiveness of these programs was hampered by resource and datalimitations. (66) On the issue of patient safety specifically, many state legislatures did not wait for their federalcounterpart to act. The number of patient safety-related bills introduced in the states tripled in theyear following the release of the IOM Report, then nearly doubled in the year after that. Out of the22 states that introduced bills in 2001 -- two years after the release of the IOM Report -- half of themwere introducing medical error legislation for the first time. However, during the 2005 legislativesessions, states made limited progress. Three states (Kentucky, Virginia, and Wyoming) "enactedlegislation to address medical errors and to improve patient safety in the first quarter of 2005." (67) As previously noted, 28 states have some type of medical error reporting mandate in place. The requirements cover a spectrum of issues, such as the type of information to be reported, to whomthe information is submitted, and for what purpose. For example, Washington requires the reportingof medication-related errors, but New Jersey requires the reporting of "serious preventable adverseevents." Connecticut requires medical facilities to contract with patient safety organizations for datacollection and recommendations on improving patient safety. In contrast, New York requireshospitals to report infection rates, which are included in an annual report published by the stateHealth Department. While federal medical malpractice legislation usually did not include patient safetyprovisions, there was some evidence that the link between the two issues has been made at the statelevel. For example, Pennsylvania passed bills in 2002 and 2003 that contained provisionsconcerning malpractice tort reform, insurance reform, and patient safety enhancement. Accordingto Governor Rendell, the comprehensive approach was an attempt to address concerns aboutmalpractice insurance and medical safety. (68) A couple of other states passed or debated similar bills that alsolinked those issues. State Patient Safety Centers. A buddingmovement in the states is the creation of state patient safety centers. The common purpose of theseentities is to promote patient safety efforts within the state. Approaches, which vary by state, includeeducating consumers and providers about safety issues, developing systems for error reporting andanalysis, recommending patient safety goals to the state, and supporting collaboration among publicand private sector organizations. While it is too early to assess the impact of these centers, the statecommitment of authority and resources towards these centers lends legitimacy and expectation toefforts that primarily had been conducted on a voluntary basis (e.g., patient safety coalitions). Statepatient safety centers may yet play an active role in generating the systemic changes cited as key toenhancing patient safety. (69) | Medical malpractice and malpractice insurance continue to be issues of great concern tophysicians, consumers, legislators, and others. Most of the discussion about rising malpracticeinsurance premiums has centered on limiting the damage awards in malpractice suits, though someattention also has been given to insurance reforms. A third, related area that has received lessconsideration in malpractice discussions is patient safety. Patient safety refers to the panoply ofrules, practices, and systems related to the prevention of medical injury. Intrinsic to patient safetyefforts are strategies to prevent medical errors. While patient safety and medical errors have generated a great deal of discussion inlegislatures in the past several years, such discussion typically has taken place separately from thedebates concerning malpractice. For example, S. 544 , the Patient Safety and QualityImprovement Act of 2005, encouraged the voluntary reporting and analysis of medical error data. S. 544 became P.L. 109-41 on July 29, 2005. However, medical liability issues areaddressed in other legislation -- specifically, H.R. 5 / S. 354 , the HelpEfficient, Accessible, Low-Cost, Timely Healthcare (HEALTH) Act of 2005, S. 22 , theMedical Care Access Protection Act of 2006, and S. 23 , the Healthy Mothers andHealthy Babies Access to Care Act. The separation of patient safety concerns from medical malpractice issues has not alwaysbeen the case. Several states have passed legislation that included provisions that addressed bothmalpractice and patient safety issues. Research studies have explored the links between the twoissues, and a few bills introduced during the 109th Congress, such as S. 1337 and S. 1784 , address those links. Therefore, it is appropriate and timely to reconsider theseissues collectively, and revisit the role patient safety initiatives could play in the prevention of bothmedical errors and medical malpractice. Strategies to enhance patient safety differ according to the specific provider type targeted. For instance, physician education includes providing clinical guidelines about appropriate treatmentsfor specific medical conditions, while hospital education involves performance feedback from anexternal organization. At the same time, general approaches may apply to both physicians andhospitals. For example, medical error reporting is a key component for patient safety enhancement,regardless of the provider focus. The impact of patient safety initiatives on the quality of care provided continues to be anopen question. Individual initiatives have resulted in promising outcomes, but the overall impactof these efforts has been mixed. To some degree, this is the case because implementation has notbeen as pervasive as initial intentions suggested, and also because not enough research has been doneto identify, enumerate, and assess patient safety efforts. This report will be updated periodically. |
C ongressional redistricting involves the drawing of district boundaries from which voters elect their representatives t o the U.S. House of Representatives. Prior to the 1960s, court challenges to redistricting plans were generally considered to present non-justiciable political questions that were most appropriately addressed by the political branches of government, not the judiciary. However, in 1962, in the landmark case of Baker v. Carr , the Supreme Court held that a constitutional challenge to a redistricting plan is not a political question and is justiciable. Since then, in a series of cases and evolving jurisprudence, the U.S. Court has issued rulings that have significantly shaped how congressional districts are drawn. Recently, the Supreme Court and lower courts have focused on challenges to district maps. As the 2020 round of redistricting approaches, these decisions are likely to be of particular interest to Congress. For example, in addressing the requirement of population equality among districts, the Court has held that the standard does not require congressional districts to be drawn with precise mathematical equality, but instead requires states to justify population deviation among districts with "legitimate state objectives." During its current term, the Court has decided one case regarding the degree to which racial considerations are permitted to impact how district lines are drawn and is considering another such case. Furthermore, the Supreme Court is currently considering an appeal from a three-judge federal district court ruling involving partisan gerrymandering. This case presents the Court with an opportunity to establish a standard for determining what constitutes unconstitutional partisan gerrymandering. In addition, in 2015, the Court upheld, under the Elections Clause, an Arizona constitutional provision that was enacted by ballot initiative establishing an independent commission for drawing congressional districts. This report first discusses the constitutional and statutory framework of congressional redistricting, including the Elections Clause, the Equal Protection Clause of the Fourteenth Amendment, and the Voting Rights Act. The report then analyzes key foundational and recent Supreme Court and lower court redistricting decisions addressing four general topics: (1) the constitutional requirement of population equality among districts; (2) the intersection between the Voting Rights Act and the Equal Protection Clause, also known as claims of racial gerrymandering; (3) the justiciability of partisan gerrymandering; and (4) the constitutionality of state ballot initiatives providing for redistricting by independent commissions. Following and based on each decennial census, the 435 seats in the U.S. House of Representatives are apportioned—or divided up—among the 50 states, with each state entitled to at least one Representative. A federal statute requires that apportionment occurs every 10 years. Accordingly, in order to comport with the constitutional standard of equality of population among districts, discussed below, at least once every 10 years, most states must draw new congressional district boundaries in response to changes in the number of Representatives apportioned to the state or shifts in population within the state. In addition to various state processes, the legal framework for congressional redistricting involves constitutional and federal statutory requirements. In recent challenges to redistricting maps, constitutional provisions including the Elections Clause and the Fourteenth Amendment's Equal Protection Clause have been invoked. The Elections Clause provides that "[t]he Times, Places and Manner of holding Elections for Senators and Representatives, shall be prescribed in each State by the Legislature thereof; but the Congress may at any time by Law make or alter such Regulations, except as to the Places of chusing Senators." The Equal Protection Clause ensures that "[n]o State shall make or enforce any law which shall ... deny to any person within its jurisdiction the equal protection of the laws." In addition, redistricting maps are required to comport with the Voting Rights Act of 1965, which was enacted under Congress's authority to enforce the Fifteenth Amendment. The Fifteenth Amendment guarantees that "[t] he right of citizens of the United States to vote shall not be denied or abridged by the United States or by any State on account of race, color, or previous condition of servitude," and provides Congress with the power to enforce its requirements with appropriate legislation. Congression al district boundaries in every state are required to comply with Section 2 of the Voting Rights Act (VRA) . Section 2 authorizes the federal government and private citizens to challenge discriminatory voting practices or procedures, including minority vote dilution, (that is, the diminishing or wea kening of minority voting power ) . Specifically, Section 2 prohibits any voting qualification or practice a pplied or imposed by any stat e or political subdivision that results in the denial or abridgement of the right to vote based on race, color, or membership in a language minority . This includes congressional redistricting plans. Section 2 further provides that a violation is established if, based on the totality of circumstances, electoral processes are not equally open to participation by members of a racial or language minority group in that the group's members have less opportunity than other members of the electorate to elect representatives of their choice . Until 2013, when the Supreme Court issued its ruling in Shelby County v. Holder , Section 5 of the VRA was construed to require several states and jurisdictions covered under Section 4(b) of the VRA to obtain prior approval or preclearance for any proposed change to a voting law, which included changes to redistricting maps. In order to be granted preclearance, the state or jurisdiction had the burden of proving that the proposed map would have neither the purpose nor the effect of denying or abridging the right to vote on account of race or color, or membership in a language minority group. Moreover, as amended in 2006, the statute expressly provided that its purpose was "to protect the ability of such citizens to elect their preferred candidates of choice." Covered jurisdictions could seek preclearance from either the Department of Justice (DOJ) or the U.S. District Court for the District of Columbia. If preclearance was not granted, the proposed change to election law could not go into effect. In Shelby County , the Court invalidated Section 4(b) of the VRA, holding that the application of the coverage formula to certain states and jurisdictions departed from the "fundamental principle of equal sovereignty" among the states without justification in light of current conditions. Although the Court invalidated only the coverage formula in Section 4(b), by extension, Section 5 was also rendered inoperable. As a result of the Court's decision, nine states, and jurisdictions within six additional states, that were previously covered under the formula are no longer subject to the VRA's preclearance requirement. The covered states were Alabama, Alaska, Arizona, Georgia, Louisiana, Mississippi, South Carolina, Texas, and Virginia. The six states containing covered jurisdictions were California, Florida, Michigan, New York, North Carolina, and South Dakota. In a series of cases, the Supreme Court has evaluated disputes over redistricting maps. These rulings and evolving jurisprudence have significantly affected how congressional districts are drawn and the degree to which challenges to redistricting plans may succeed. This jurisprudence can be seen to address four general areas: (1) the constitutional requirement of population equality among districts; (2) the intersection between the Voting Rights Act and the Equal Protection Clause; (3) the justiciability of partisan gerrymandering; and (4) the constitutionality of state ballot initiatives providing for redistricting by independent commissions. The Supreme Court has interpreted the Constitution to require that each congressional district within a state contain an approximately equal number of persons. This requirement is sometimes referred to as the "equality standard" or the principle of "one person, one vote." In 1964, in Wesberry v. Sanders , the Supreme Court interpreted provisions of the Constitution stating that Representatives be chosen "by the People of the several States" and "apportioned among the several States ... according to their respective Numbers" to require that "as nearly as is practicable, one man's vote in a congressional election is to be worth as much as another's." Later in 1964, the Court issued its ruling in Reynolds v. Sims with regard to state legislative redistricting. In Reynolds , the Supreme Court held that the one person, one vote standard also applied in the context of state legislative redistricting and that the Equal Protection Clause requires all who participate in an election "to have an equal vote." In several cases since 1964, the Supreme Court has described the extent to which precise or ideal mathematical population equality among districts is required. Ideal or precise equality is the average population that each district would contain if a state population were evenly distributed across all districts. The total or "maximum population deviation" refers to the percentage difference from the ideal population between the most populated district and the least populated district in a redistricting map. It is important to note that for congressional districts, less deviation from precise equality has been held by the Court to be permissible than is permissible for state legislative districts. For example, in 1969, in Kirkpatrick v. Preisler , the Supreme Court invalidated a congressional redistricting plan where the district with the greatest population was 3.13% over the equality ideal, and the district with the lowest population was 2.84% below it. The Court considered the maximum population deviation of 5.97% to be too great to comport with the "as nearly as practicable" standard set forth in Wes berry . Subsequently, in Karcher v. Dagett , the Court held that "absolute" population equality is the standard for congressional districts unless a deviation is necessary to achieve "some legitimate state objective." According to the Karcher Court, these objectives can include "consistently applied legislative policies" such as achieving greater compactness, respecting municipal boundaries, preserving prior districts, and avoiding contests between incumbents. In Karcher , the Court rejected a 0.6984% deviation in population between the largest and the smallest district. More recently, in its 1983 decision in Tennant v. Jefferson County Commission , the Court further clarified that the "as nearly as is practicable" standard does not require congressional districts to be drawn with precise mathematical equality, but instead requires states to justify population deviation among districts with "legitimate state objectives. Relying on Karcher , the Court in Tennant outlined a two-pronged test to determine whether a congressional redistricting plan passes constitutional muster. First, the challengers have the burden of proving that the population differences could have been practicably avoided. Second, if the challengers succeed in meeting that burden, the burden shifts to the state to demonstrate "with some specificity" that the population differences were needed to achieve a legitimate state objective. The Court emphasized that the state's burden here is "flexible," and depends on the size of the population deviation, the importance of the state's interests, the consistency with which the plan reflects those interests, and whether alternatives exist that might substantially serve those interests while achieving greater population equality. In Tennant , the Court determined that avoiding contests between incumbents, maintaining county boundaries, and minimizing population shifts between districts were neutral, valid state policies that warranted the relatively minor population disparities in question. The Court also opined that none of the alternative redistricting plans that achieved greater population equality came as close to vindicating the state's legitimate objectives. Therefore, the Court upheld the 0.79% maximum population deviation between the largest and smallest congressional districts. Much of the Supreme Court's redistricting jurisprudence has been prompted by disputes concerning the interplay between the requirements of the VRA and the constitutional standards of equal protection. While the Equal Protection Clause of the Fourteenth Amendment prohibits a state from redistricting based on race without sufficient justification, compliance with the VRA simultaneously demands that "the legislature always is aware of race when it draws district lines." In an evolving line of cases, the Supreme Court has provided guidance to map drawers and the courts evaluating such maps on how to achieve the required "delicate balancing of competing considerations" in this complicated area of law. Under certain circumstances, the VRA may require the creation of one or more "majority-minority" districts in a congressional redistricting plan in order to prevent the denial or abridgement of the right to vote based on race, color, or membership in a language minority. A majority-minority district is one in which a racial or language minority group comprises a voting majority. The creation of such districts can avoid minority vote dilution by helping ensure that racial or language minority groups are not submerged into the majority and, thereby, denied an equal opportunity to elect candidates of their choice. In its landmark 1986 decision Thornburg v. Gingles , the Supreme Court established a three-pronged test for proving vote dilution under Section 2 of the VRA. Under this test, (1) the minority group must be able to demonstrate that it is sufficiently large and geographically compact to constitute a majority in a single-member district; (2) the minority group must be able to show that it is politically cohesive; and (3) the minority must be able to demonstrate that the majority votes sufficiently as a bloc to enable the majority to defeat the minority group's preferred candidate absent special circumstances, such as the minority candidate running unopposed. The Thornburg Court also opined that a violation of Section 2 is established if based on the "totality of the circumstances" and "as a result of the challenged practice or structure, plaintiffs do not have an equal opportunity to participate in the political processes and to elect candidates of their choice." The Court further listed the following factors, which originated in legislative history materials accompanying enactment of Section 2, as relevant in assessing the totality of the circumstances: 1. the extent of any history of official discrimination in the state or political subdivision that touched the right of the members of the minority group to register, to vote, or otherwise to participate in the democratic process; 2. the extent to which voting in the elections of the state or political subdivisions is racially polarized; 3. the extent to which the state or political subdivision has used unusually large election districts, majority vote requirements, anti-single shot provisions, or other voting practices or procedures that may enhance the opportunity for discrimination against the minority group; 4. if there is a candidate slating process, whether the members of the minority group have been denied access to that process; 5. the extent to which members of the minority group in the state or political subdivision bear the effects of discrimination in such areas as education, employment and health, which hinder their ability to participate effectively in the political process; 6. whether political campaigns have been characterized by overt or subtle racial appeals; [and] 7. the extent to which members of the minority group have been elected to public office in the jurisdiction. Further interpreting the Gingles three-pronged test, in Bartlett v. Strickland , the Supreme Court ruled that the first prong of the test—requiring a minority group to be geographically compact enough to constitute a majority in a district—can only be satisfied if the minority group would constitute more than 50% of the voting population in a single-member district. In Bartlett , the state officials who drew the map argued that Section 2 requires drawing district lines in such a manner to allow minority voters to join with other voters to elect the minority group's preferred candidate, even if the minority group in a given district comprises less than 50% of the voting age population. Rejecting this argument, a plurality of the Court determined that Section 2 does not grant special protection to minority groups that need to form political coalitions in order to elect candidates of their choice. To mandate recognition of Section 2 claims where the ability of a minority group to elect candidates of choice relies upon "crossover" majority voters would result in "serious tension" with the third prong of the Gingles test, the plurality opinion determined, because the third prong requires that the minority be able to demonstrate that the majority votes sufficiently as a bloc to enable it usually to defeat the minority's preferred candidate. Therefore, the plurality found it difficult to envision how the third prong of Gingles could be met in a district where, by definition, majority voters are needed to join with minority voters in order to elect the minority's preferred candidate. In sum, in certain circumstances, Section 2 can require the creation of one or more majority-minority districts in a congressional redistricting plan. By drawing such districts, a state can avoid racial vote dilution, and the denial of minority voters' equal opportunity to elect candidates of choice. As the Supreme Court has determined, minority voters must constitute a numerical majority—over 50%—in such minority-majority districts. In addition to the VRA, however, congressional redistricting plans must also conform with standards of equal protection under the Fourteenth Amendment to the U.S. Constitution. According to the Supreme Court, if race is the predominant factor in the drawing of district lines, above other traditional redistricting considerations—including compactness, contiguity, and respect for political subdivision lines—then a "strict scrutiny" standard of review is to be applied. To withstand strict scrutiny in this context, the state must demonstrate that it had a compelling governmental interest in creating a majority-minority district and the redistricting plan was narrowly tailored to further that compelling interest. These cases are often referred to as "racial gerrymandering" claims because the plaintiffs argue that race was improperly used in the drawing of district boundaries. Case law in this area has revealed that there can be tension between compliance with the VRA, previously discussed, and conformance with standards of equal protection. The Supreme Court has held that, in order to prevail in racial gerrymandering claims, plaintiffs have the burden of proving that racial considerations were "dominant and controlling" in the creation of the districts at issue. For example, in 2001, in E asley v. Cromartie , the Supreme Court upheld the constitutionality of a congressional district in North Carolina against the argument that the 47% black district was an unconstitutional racial gerrymander. In this long running litigation, the State of North Carolina appealed a lower court decision holding that the district, as redrawn by the legislature in 1997 in an attempt to cure an earlier violation, was still unconstitutional. In so doing, the Court determined that the basic question presented in Cromartie was whether the legislature drew the district boundaries "because of race rather than because of political behavior (coupled with traditional, nonracial redistricting considerations)." Applying its earlier precedents, the Court emphasized that the party challenging the legislature's plan has the burden of proving that racial considerations are "dominant and controlling." In this case, though, the Court held that the challengers had not successfully demonstrated that race, instead of politics, predominantly accounted for the way the plan was drawn. To the contrary, the Court announced that in cases such as this where a majority-minority district is being challenged and racial identification "correlates highly with political affiliation," the challenger must show that there were alternative ways for the legislature to achieve its legitimate political objectives, consistent with traditional redistricting principles. In this case, the Court determined that the appellees had failed to make such a showing. More recently, the Court provided guidance as to the method for analyzing racial predominance. In its 2015 decision in Alabama Legislative Black Caucus v. Alabama , the Court held that in determining whether race is a predominant factor in the redistricting process, and thereby triggering strict scrutiny, a court must engage in a district-by-district analysis instead of analyzing the state as an undifferentiated whole. Further, the Court confirmed that in calculating the predominance of race, a court is required to determine whether the legislature subordinated traditional race-neutral redistricting principles to racial considerations. The "background rule" of equal population is not a traditional redistricting principle and therefore should not be weighed against the use of race to determine predominance, the Court held. In other words, the Court explained, if 1,000 additional voters need to be moved to a particular district in order to achieve equal population, ascertaining the predominance of race involves examining which voters were moved, and whether the legislature relied on race instead of other traditional factors in making those decisions. The Alabama Court also determined that the preclearance requirements of Section 5 of the VRA, which the Supreme Court's subsequent decision in Shelby County rendered inoperable, did not require a covered jurisdiction to maintain a particular percentage of minority voters in a minority-majority district. Instead, the Court held that Section 5 requires that a minority-majority district be drawn in order to maintain a minority's ability to elect a preferred candidate of choice. Alabama is notable in that minority voters succeeded in their equal protection challenge to districts that the state maintained were created to comply with the VRA. The decision also represents the Court's most recent interpretation of the requirements of Section 5 of the VRA, which may be of interest to Congress should it decide to draft a new coverage formula in order to reinstitute Section 5 preclearance. Most recently, in March 2017, the Supreme Court added clarification to the standard for determining racial predominance in a racial gerrymandering claim. In Bethune-Hill v. Virginia State Board of Elections , the Court held that plaintiffs challenging a state legislative redistricting plan on racial gerrymandering grounds need not prove, as a threshold matter, that the plan conflicts with traditional redistricting criteria. As a result, the Court remanded the case to the federal district court for consideration of whether 11 of the 12 "majority-minority" districts created by Virginia in 2011 are permissible. As the Supreme Court observed in Bethune-Hill , following the 2010 census, when the Virginia legislature redrew its state legislative districts, the state was subject to preclearance under Section 5 of the VRA. Accordingly, the drafters "resolved that the new map must comply with the 'protections against ... unwarranted retrogression' contained in [Section] 5 of the Voting Rights Act" and drew 12 districts with a "black voting-age population" of at least 55%. The Virginia legislature passed the plan in April 2011, and DOJ granted preclearance in June 2011. However, in 2014, 12 registered Virginia voters—one of whom resided in each of the challenged districts—filed suit in federal district court arguing that the districts were racial gerrymanders in violation of the Equal Protection Clause. In Bethune-Hill , a majority of the Supreme Court held that the district court erred in applying, as a "threshold requirement or mandatory precondition" for establishing a claim of racial gerrymandering, that the plaintiffs demonstrate "a conflict or inconsistency" between the challenged redistricting map and traditional redistricting criteria. While acknowledging that such a conflict or inconsistency may be "persuasive circumstantial evidence" of racial predominance, the Court clarified that such a showing is not required. In so doing, the Court rejected an argument made by the Commonwealth of Virginia in defending the redistricting map that the harm of racial gerrymandering arises from grouping together voters of the same race who lack shared interests and not from racially motivated line drawing in and of itself. If an identical redistricting map could have been drawn in accordance with traditional redistricting criteria, the state argued that racial predominance has not been proven. Sharply disagreeing, the Court quoted precedent that it viewed as establishing that "the 'constitutional violation' in racial gerrymandering cases stems from the 'racial purpose of state action, not its stark manifestation.'" In other words, according to the Supreme Court, in determining racial predominance, courts must examine the "actual considerations" involved in crafting the redistricting map, not "post hoc justifications" that the legislature could theoretically have used in crafting the map, but did not. Also during its current term, the Supreme Court is considering another case that may shed further light on the complicated issue of race and redistricting, Cooper v. Harris . In this case, a three-judge federal district court held that the 2011 North Carolina congressional redistricting map was an unconstitutional racial gerrymander in violation of the Equal Protection Clause. Following the 2010 census, the North Carolina legislature redrew its congressional district map to include two new majority-minority districts, Congressional District (CD) 1 and CD 12. In July 2011, the legislature enacted the new map, and in November, DOJ granted preclearance approval. Subsequently, in 2013, the plaintiffs—one of whom is a registered voter in each of the challenged districts—filed suit in federal court, arguing that North Carolina used the VRA's preclearance requirements "as a pretext to pack African-American voters into North Carolina's Congressional Districts 1 and 12 and reduce those voters' influence in other districts." In other words, the plaintiffs maintained that CDs 1 and 12 were unconstitutional racial gerrymanders. Characterizing CD 1 as "a textbook example of racial predominance," the district court determined that traditional redistricting criteria had been subordinated to the goal of achieving a "racial quota, or floor, of 50-percent-plus-one-person." Likewise, the court found that race predominated in creating CD 12 and that its creation was not "purely political" as the state had argued. In view of its determination that race predominated in the creation of both CDs 1 and 12, the court applied strict scrutiny. Assuming, without deciding, that compliance with the VRA was a compelling state interest, the court found insufficient evidence to conclude that the creation of CD 1 was "reasonably necessary" to comply with the statute. As the court observed, Supreme Court precedent requires that in order to defend the map successfully, the defendants must demonstrate compliance with the Gingles three-prong test. Here, the court determined that the state had failed to prove the third prong of the test: "that the legislature had a 'strong basis in evidence' of racially polarized voting in CD 1 significant enough that the white majority routinely votes as a bloc to defeat the minority candidate of choice." Regarding CD 12, the court similarly determined that the defendants "completely fail[ed]" to demonstrate a compelling interest for the legislature's use of race in drawing the district, and accordingly, invalidated it. In conclusion, while the VRA may require, under certain circumstances, the creation of one or more "majority-minority" districts in a congressional redistricting plan in order to prevent the denial or abridgement of the right to vote based on race, color, or membership in a language minority, redistricting maps are also subject to the constitutional standards of equal protection. If race is the predominant factor in the drawing of district lines, above other traditional redistricting considerations, then the state must demonstrate that it had a compelling governmental interest in creating a majority-minority district and the redistricting plan was narrowly tailored to further that interest. In its most recent case law, the Court has held that in determining racial predominance in a redistricting map, a court must engage in a district-by-district analysis instead of analyzing the state as an undifferentiated whole. The Court also held that challengers to a redistricting map alleging racial gerrymandering do not need to show, as a threshold requirement, that there is a conflict or inconsistency between the redistricting plan and traditional redistricting criteria. In addition, during its current term, the Supreme Court is considering another case that may shed further light on the standards for determining unconstitutional racial gerrymandering. The Supreme Court has defined partisan gerrymandering as "the drawing of legislative district lines to subordinate adherents of one political party and entrench a rival party in power." While leaving open the possibility that a claim of unconstitutional partisan gerrymandering could be within the scope of judicial review, as discussed below, the Supreme Court has been unable to decide on a manageable standard for making such a determination. In its 2004 decision in V ieth v. Jubelirer , the Court addressed a claim of partisan gerrymandering, in which the challengers relied on the Fourteenth Amendment Equal Protection Clause as the source of their substantive right and basis for relief. In Vieth , a plurality of four Justices determined that such a claim presented a non-justiciable political question. The plurality argued that the standard previously articulated by a plurality of the Court in its 1986 decision of Davis v. Bandemer had proved unmanageable. Under that standard, a political gerrymandering claim could succeed only where the challengers showed both intentional discrimination against an identifiable political group and an actual discriminatory effect on that group. However, another plurality of four Justices in Vieth concluded that such claims are justiciable, but could not agree upon the standard for courts to use in assessing such claims. The deciding vote in Vieth , Justice Kennedy, concluded that while the claims presented in that case were not justiciable, he "would not foreclose all possibility of judicial relief if some limited and precise rationale were found to correct an established violation of the Constitution in some redistricting cases." Further, Justice Kennedy observed, that while the appellants in this case had relied on the Equal Protection Clause as the source of their substantive right and basis for relief, the complaint also alleged a violation of their First Amendment rights. According to Justice Kennedy, the First Amendment may be a more relevant constitutional provision in future cases that claim unconstitutional partisan gerrymandering because such claims "involve the First Amendment interest of not burdening or penalizing citizens because of their participation in the electoral process, their voting history, their association with a political party, or their expression of political views." In contrast, Justice Kennedy noted, an analysis under the Equal Protection Clause emphasizes the permissibility of a redistricting plan's classifications. When race is involved, Justice Kennedy reasoned, examining such classifications is appropriate because classifying by race "is almost never permissible." However, when the issue before a court is whether a generally permissible classification—political party association—has been used for an impermissible purpose, the question turns on whether the classification imposed an unlawful burden, Justice Kennedy maintained. Therefore, he concluded that an analysis under the First Amendment "may offer a sounder and more prudential basis for intervention" by concentrating on whether a redistricting plan "burdens the representational rights of the complaining party's voters for reasons of ideology, beliefs, or political association." Subsequently , in its 2006 decision , League of United Latin American Citizens v. Perry ("LULAC") , the Court was again divided on the question of whether partisan gerrymandering claims are within the scope of judicial review. In LULAC , Texas voters challenged a redistricting plan that had been enacted mid-decade, arguing that the plan was motivated by partisan objectives, served no legitimate public purpose, and burdened one group because of its political affiliation, in violation of the First Amendment and the Equal Protection Clause. However, the Supreme Court disagreed. In LULAC , a plurality of four Justices opined that claims of unconstitutional partisan gerrymandering are justiciable, but could not agree upon a standard for adjudicating such claims. An additional two Justices took the view that such claims are not justiciable. However, the two Justices who had joined the Court since its ruling in Vieth, Chief Justice Roberts and Justice Alito, generally agreed with Justice Kennedy's position, leaving open the possibility that the Court might discern a standard for adjudicating unconstitutional partisan gerrymandering claims in a future case. Therefore, in the aftermath of LULAC , it seems possible that a claim of unconstitutional partisan gerrymandering could be judicially reviewable, but the critical standard that a court could use to find such a violation and grant relief remain unresolved. Recently, in a potentially significant case, the Supreme Court was presented with another opportunity to craft such a standard. In February 2017, under a provision of federal law providing for direct appeals to the Supreme Court, the State of Wisconsin appealed a three-judge federal district court ruling involving partisan gerrymandering. In this case, Whitford v. Gill , the district court held, by a vote of 2 to 1, that a Wisconsin state legislative redistricting map constituted an unconstitutional partisan gerrymander. Following the 2010 census, the Wisconsin legislature redrew its state legislative redistricting map, which was signed into law by the governor in 2011. In the 2012 election, "the Republican Party received 48.6% of the two-party statewide vote share for Assembly candidates and won 60 of the 99 seats in the Wisconsin Assembly." In the 2014 election, "the Republican Party received 52% of the two-party statewide vote share and won 63 assembly seats." The plaintiffs—registered voters in various counties and districts throughout Wisconsin—are "supporters of the Democratic party and of Democratic candidates and they almost always vote for Democratic candidates in Wisconsin elections." The plaintiffs challenged the Wisconsin state legislative redistricting plan as treating voters "unequally, diluting their voting power based on their political beliefs, in violation of the Fourteenth Amendment's guarantee of equal protection," and "unreasonably burden[ing] their First Amendment rights of association and free speech." The district court agreed, holding that the First Amendment and the Equal Protection Clause prohibit a redistricting map that is drawn with the purpose, and has the effect, of placing a "severe impediment" on the effectiveness of a citizen's vote that is based on political affiliation and cannot be justified on other legitimate legislative grounds. While acknowledging that the law of political gerrymandering is "still in its incipient stages" and "in a state of considerable flux," the court announced that it is clear that the First Amendment and the Equal Protection Clause protect the weight of a citizen's vote against discrimination based on the political preferences of the voter. Relying on a 1968 Supreme Court ruling that had invalidated a state law that required new political parties to obtain a certain number of signatures in order to appear on the ballot, the court found a "solid basis" for considering the associational aspect of the plaintiff's claim of partisan gerrymandering: In the present situation the state laws place burdens on two different, although overlapping, kinds of rights—the right of individuals to associate for the advancement of political beliefs, and the right of qualified voters, regardless of their political persuasion, to cast their votes effectively. Both of these rights, of course, rank among our most precious freedoms. We have repeatedly held that freedom of association is protected by the First Amendment. And of course this freedom protected against federal encroachment by the First Amendment is entitled under the Fourteenth Amendment to the same protection from infringement by the States. Examining the evidence presented at trial, the court determined that one purpose of the redistricting plan was "to secure the Republican Party's control of the state legislature for the decennial period." Although the drafters had created several alternative redistricting plans that would have had a less severe partisan impact, the court found that the drafters had opted for the plan that, in comparison with the existing plan, significantly increased the number of districts containing voters who "lean[ed]" toward one political party. Based on that and other factors, including numerous reports and memoranda considered by the drafters that addressed the partisan outcomes of various maps, the court concluded that even though the redistricting plan complied with traditional redistricting principles, it nonetheless had a purpose of "entrenching" one party in its control of the legislature. Furthermore, the court determined that the redistricting plan had the effect of ensuring that one political party would maintain control of the state legislature for a 10-year period. This was accomplished, the court found, by allocating votes among the newly created districts in such a manner as to make it likely that the number of seats held by candidates of one political party would not to drop below 50% in any election scenario. Notably, in this ruling, the court embraced a new measure of calculating asymmetry among districts, proposed by the plaintiffs, termed the "efficiency gap" or "EG." As described by its creators, the EG "represents the difference between the parties' respective wasted votes in an election—where a vote is wasted if it is cast (1) for a losing candidate, or (2) for a winning candidate but in excess of what she needed to prevail." In other words, as the court observed, EG measures two redistricting methods that are designed to diminish the electoral power of the voters of one party: "cracking" and "packing." As used here, packing refers to the concentration of voters of one party into a limited number of districts so that the party wins those districts by large margins. Cracking refers to the division of voters of one party across a large number of districts so that the party is unable to achieve a majority vote in any district. EG, the court announced, is "a measure of the degree of both cracking and packing of a particular party's voters that exists in a given district plan, based on an observed electoral result." The EG, the court decided, does not impermissibly require that each party receive a share of seats in the legislature in proportion to its vote share, but instead, measures the degree to which a redistricting plan "deviat[es] from the relationship we would expect to observe between votes and seats." Relying on the results from 2012 and 2014 elections, academic analyses, and the EG measure, the court held that the plaintiffs had demonstrated that the state legislative redistricting plan created a burden, "as measured by a reliable standard, on [their] representational rights." In particular, the court found that having "actual election results" confirmed the reliability of the academic analyses so that the court was "not operating only in the realm of hypotheticals," which was a concern that Justice Kennedy voiced in LULAC . Therefore, the court concluded that neither the Constitution, nor the Supreme Court's rulings in Vieth and LULAC , precluded it from considering the EG in order to ascertain partisan gerrymandering. Finally, the court held that the discriminatory effect of the plan is not explained by the political geography of Wisconsin, nor is it justified by a legitimate state interest. Acknowledging the absence of explicit guidance on this question from the Supreme Court, the court determined it most appropriate to evaluate whether the partisan effect of a redistricting plan is justifiable, "i.e., whether it can be explained by the legitimate state prerogatives and neutral factors that are implicated in the districting process." According to the court, although the "natural political geography" of Wisconsin played some role in how the redistricting map was drawn, this political geography was inadequate to explain the significant, disparate partisan effect of the plan as evidenced by the results of the 2012 and 2014 elections. The most crucial evidence presented, the court said, was that the drafters had produced multiple alternative plans that would have achieved the same "valid" redistricting goals, but with a much smaller partisan advantage to one party, and opted not to use them. After holding that the Wisconsin state legislative plan constituted an unconstitutional partisan gerrymander, the court deferred ruling on an appropriate remedy. However, in January 2017, the court enjoined the State of Wisconsin from using the plan in all future elections and ordered the state to enact a new plan by November 1, 2017, for use in the November 2018 election. In sum, while the Supreme Court has left open the possibility that a claim of unconstitutional partisan gerrymandering could be within the scope of judicial review, it has been unable to decide on a manageable standard for making such a determination. Currently, the Supreme Court is considering an appeal that presents it with an opportunity to craft such a standard if it so chooses. In the majority of the states, the legislature has primary authority over congressional redistricting. However, partly because of concerns about partisan gerrymandering, some states have adopted independent commissions for conducting redistricting. For example, Arizona and California created independent redistricting commissions by ballot initiative, thereby removing control of congressional redistricting from the states' legislative bodies and vesting it in such commissions. The ballot initiatives specify how commission members are to be appointed, and the procedures to be followed in drawing congressional and state legislative districts. In its 2015 decision in Arizona State Legislature v. Arizona Independent Redistricting Commission , the Supreme Court upheld the constitutionality of an independent commission, established by ballot initiative, for drawing congressional district boundaries. In this case, the state legislature had filed suit challenging the constitutionality of the initiative creating the independent commission and the congressional maps adopted by the commission. Affirming a lower court ruling, the Supreme Court held that the Elections Clause of the Constitution permits a commission to draw congressional districts instead of a state legislature. As previously noted, the Elections Clause provides that the times, places, and manner of holding congressional elections be prescribed in each state "by the Legislature thereof," but further specifies that Congress may at any time "make or alter" such laws. Announcing that "all political power flows from the people," the Court stated that the history and purpose of the Elections Clause do not support a conclusion that the people of a state are prevented from creating an independent commission to draw congressional districts. According to the Court, the use of the term "legislature" in the Elections Clause does not mean that only the state's representative body may draw redistricting maps. Instead, in the Court's view, the main purpose of the Elections Clause was to empower Congress to override state election laws, particularly those that involve political "manipulation of electoral rules" by state politicians acting in their own self-interest. Thus, the Clause was not designed to restrict "the way" that states enact such legislation. In Arizona , the Court reviewed the cases in which it had previously considered the term "legislature" in the Constitution and read them to mean that the term differs according to its context. For example, in a 1916 case , the Court had held that the term "legislature" was not limited to the representative body alone, but instead, encompassed a veto power held by the people through a referendum. Similarly, in a 1932 case , the Court held that a state's legislative authority included not just the two houses of the legislature, but also the veto power of the governor. However, in a 1920 case, the Court held that in the context of ratifying constitutional amendments, the term "legislature" has a different meaning, one that excludes the referendum and a governor's veto. While acknowledging that initiatives were not addressed in its prior case law, the Court saw no constitutional barrier to a state empowering its people with a legislative function. Furthermore, even though the framers of the Constitution may not have envisioned the modern initiative process, the Court ruled that legislating through initiative is in "full harmony" with the Constitution's conception that the people are the source of governmental power. The Court further cautioned that the Elections Clause should not be interpreted to single out federal elections as the one area where states cannot use citizen initiatives as an alternative legislative process. The Court also held that Arizona's congressional redistricting process comports with a federal redistricting statute, codified at Section 2a(c) of Title 2 of the U.S. Code, providing that until a state is redistricted as provided "by the law" of the state, it must follow federally prescribed congressional redistricting procedures. Examining the legislative history of this statute, the Court determined that Congress clearly intended that the statute provide states with the full authority to employ their own laws and regulations—including initiatives—in the creation of congressional districts. For example, when Congress amended the congressional apportionment statute in 1911, it eliminated the term "legislature," replacing it with the phrase "the manner provided by the laws." The Court determined that, in making this change, Congress was responding to several states supplementing the representative legislature mode of lawmaking with a direct lawmaking role for the people through initiative and referendum. As Congress used virtually identical language when it enacted Section 2a(c) in 1941, the Court concluded that Congress intended the statute to include redistricting by initiative. While Congress retains the power under the Constitution to make or alter election laws affecting congressional elections, Arizona State Legislature clarifies that states can enact such laws through the initiative process. For example, as discussed above, California has an initiative-established independent commission for drawing congressional district boundaries similar to Arizona. The Court's ruling in Arizona State Legislature suggests that such initiative-established state constitutional provisions regulating the process of congressional redistricting are likely to withstand challenge under the Elections Clause. In addition to various state processes, congressional redistricting is governed by the limits and powers of the Constitution and requirements prescribed under federal statutes. Interpreting such requirements, in a series of cases and evolving jurisprudence, the U.S. Supreme Court has issued rulings that have significantly shaped how congressional districts are drawn and the degree to which challenges to redistricting plans may be successful. As a result, the Court's case law has had a significant impact on the process of congressional redistricting. For example, while the Supreme Court has held that each congressional district within a state must contain approximately the same number of people, the Court has also held that the standard does not require congressional districts to be drawn with precise mathematical equality if population deviations are justified with "legitimate state objectives." In addition, although the Voting Rights Act may require the creation of majority-minority districts, the Court has interpreted the Equal Protection Clause to require that if race is the predominant factor in the drawing of district lines, above other traditional redistricting considerations, then a strict scrutiny standard of review is to be applied. To withstand strict scrutiny in this context, the state must demonstrate that it had a compelling governmental interest in creating a majority-minority district and the redistricting plan was narrowly tailored to further that compelling interest. During its current term, the Court has decided one case regarding the degree to which racial considerations are permitted to impact how district lines are drawn and is considering another such case. Furthermore, the Supreme Court is currently considering a direct appeal from a three-judge federal district court ruling involving partisan gerrymandering. This case presents the Court with an opportunity to establish a standard for determining what constitutes unconstitutional partisan gerrymandering if it so chooses. Finally, a 2015 Supreme Court ruling held that the Elections Clause of the Constitution permits states to create, by ballot initiatives and referenda, nonpartisan independent commissions for drawing congressional districts. | In addition to various state processes, the legal framework for congressional redistricting involves constitutional and federal statutory requirements. Interpreting these requirements, in a series of cases and evolving jurisprudence, the U.S. Supreme Court has issued rulings that have significantly shaped how congressional districts are drawn and the degree to which challenges to redistricting plans may succeed. As the 2020 round of redistricting approaches, foundational and recent rulings by the Court regarding redistricting are likely to be of particular interest to Congress. This report analyzes key Supreme Court and lower court redistricting decisions addressing four general topics: (1) the constitutional requirement of population equality among districts; (2) the intersection between the Voting Rights Act and the Equal Protection Clause; (3) the justiciability of partisan gerrymandering; and (4) the constitutionality of state ballot initiatives providing for redistricting by independent commissions. The Supreme Court has interpreted the Constitution to require that each congressional district within a state contain approximately an equal number of persons. This requirement is sometimes referred to as the "equality standard" or the principle of "one person, one vote." In several cases, the Supreme Court has described the extent to which population equality among districts is required. For congressional districts, less deviation from precise equality has been held by the Court to be permissible than is permissible for state legislative districts. In addition, congressional districts are required to comply with Section 2 of the Voting Rights Act (VRA), which prohibits any voting qualification or practice that results in the denial or abridgement of the right to vote based on race, color, or membership in a language minority. This includes congressional redistricting plans. Under certain circumstances, the VRA may require the creation of one or more "majority-minority" districts, in which a racial or language minority group comprises a voting majority. However, under the Supreme Court's interpretation of the Equal Protection Clause of the Fourteenth Amendment, if race is the predominant factor in the drawing of district lines, then a "strict scrutiny" standard of review applies. To withstand strict scrutiny in this context, the state must demonstrate that it had a compelling governmental interest in creating a majority-minority district and the redistricting plan was narrowly tailored to further that compelling interest. These cases are often referred to as "racial gerrymandering" claims because the plaintiffs argue that race was improperly used in the drawing of district boundaries. Much of the Supreme Court's redistricting jurisprudence has been triggered by disputes involving the intersection between requirements under the VRA and the constitutional standards of equal protection. For example, during its current term, the Court has decided one case regarding the degree to which racial considerations are permitted to impact how district lines are drawn and is considering another such case. While racial gerrymandering claims have been a recent focus of litigation, the Supreme Court is also currently considering an appeal of a case involving partisan gerrymandering. In February 2017, a state appealed a three-judge federal district court ruling that invalidated a redistricting map as an unconstitutional partisan gerrymander. This case presents the Court with an opportunity to establish a standard for determining what constitutes unconstitutional partisan gerrymandering. While leaving open the possibility that such claims may be justiciable (that is, within the scope of judicial review), to date, the Supreme Court has yet not decided on a standard for assessing such claims. Finally, a 2015 Supreme Court ruling held that the Elections Clause of the Constitution permits states to create nonpartisan independent redistricting commissions for congressional redistricting by ballot initiatives and referenda. If more states adopt similar laws, it could change the process of congressional redistricting nationwide. |
RS21689 -- Federal Pay - Status of January 2004 Adjustments: A Fact Sheet Updated January 24, 2004 Under 5 U.S.C. 5303, General Schedule basic salaries, and those of other related statutory systems, are to be adjusted the first pay periodbeginning on or after January 1 of each year (January 11, 2004). The adjustments are determined by the change inthe private sector element of the EmploymentCost Index (ECI) from September to September. The percentage of change, minus 0.5%, becomes the scheduledrate of adjustment. For January 2004, the rateof adjustment was scheduled at 2.7%. Locality-based payments are determined separately, based on wage surveydata from 32 geographicareas. Under 5 U.S.C. 5303 and 5 U.S.C. 5304, President George W. Bush sent forward an alternative plan in August 2003 that called for a 1.5%increase in General Schedule, and related systems, basic pay and an average of 0.5% in locality-based payments forJanuary 2004. Barring any action by Congress to establish a different rate or effective date, the President's alternative plan willgovern. Both the House and Senate voted to establish a 4.1% pay adjustment, effective January 2004. (2) With passage of the 4.1%, the basic pay adjustment will be the scheduled ECI adjustment of 2.7% and the locality pay adjustment willaverage 1.4%. For the Washington, DC, area, the net adjustment will be 4.41%. Under Section 704, P.L. 101-194 , the Ethics Reform Act of 1989, salaries of Members and officers of Congress, federal judges, andexecutive branch officials on the Executive Schedule (collectively referred to herein as "officials") are to be adjustedannually based on December-to-Decemberpercentage changes in the private sector element of the ECI, effective in the same month as the GSadjustments. The scheduled January 2004 pay adjustment, based on the ECI, is 2.2%. Section 704, as amended, stipulates that officials' pay adjustments cannot exceed the rate of adjustment for GS basicpay. P.L. 108-167 , as required under Section 140, P.L. 97-92 , permits the judges to receive the annual adjustment. GS pay adjustment in January 2004, pending presidential approval of the FY2004 Consolidated Appropriations Act, is limited to 1.5% forbasic pay and an average of 0.5% for locality. The net adjustment for the Washington, DC, area has been 2.12%(Executive Order 13322, 69 Federal Register 231). The pay adjustment for officials has been limited to 1.5%. Upon approval of the Consolidated Appropriations Act, 2004, GS pay will be adjusted to a total of 4.1%, retroactive to the first pay periodbeginning on or after January 1, 2004, with the rate of 2.7% for basic pay. Salaries of officials will increase to the2.2% rate,retroactively. | Federal pay adjustment rates going into effect in January 2004, under Executive Order13322 (69 Federal Register231) were less than those in the pending Consolidated Appropriations Act, 2004 (H.R. 2673). The GeneralSchedule (GS) and related salarysystems were limited to 2.0%, as opposed to the 4.1% subsequently passed. Salaries of officials in the threebranches were temporarily limited, due to the lowerGS rate, to 1.5%, rather than the scheduled 2.2%, which upon Presidential approval of H.R. 2673, will go into effectretroactively. |
The effectiveness of the nation's schools is a concern at all levels of government. It is generally held that all students in elementary and secondary education should have access to quality public schools, providing all students with an opportunity to meet rigorous academic standards. Examining whether students are being held to well-defined academic standards and achievement at desired levels has become one of the primary foci of federal education policy in elementary and secondary schools. Federal policies aiming to improve the effectiveness of schools have historically focused largely on inputs, such as supporting teacher professional development, class-size reduction, and compensatory programs or services for disadvantaged students. Over the last two decades, however, interest in developing federal policies that focus on student outcomes has increased. Most recently, the enactment of the No Child Left Behind Act of 2001 (NCLB; P.L. 107-110 ), which amended and reauthorized the Elementary and Secondary Education Act (ESEA), marked a dramatic expansion of the federal government's role in supporting standards-based instruction and test-based accountability, thereby increasing the federal government's involvement in decisions that directly affect teaching and learning. The 112 th Congress may act to reauthorize the ESEA. In approaching this task, Congress may grapple with several substantial issues related to the current accountability requirements included in the ESEA and how, or if, those requirements should be altered. For example, the following issues may receive attention: exploring ways to enhance consistency across state standards and assessments while ensuring sufficient flexibility for states with respect to these decisions, modifying consequences for failure to meet academic targets, incorporating outcomes-based accountability in teacher evaluations and compensation systems, and examining the role of the federal government in improving public elementary and secondary education. The first part of this report examines the federal government's evolving role in supporting state and local accountability for elementary and secondary education and discusses how this role may continue to evolve or change during reauthorization. The discussion begins with the emergence of this role from the standards-based reform movement that gained traction in the 1980s and the resulting changes made to the ESEA during the 1994 reauthorization. This is followed by a detailed examination of the accountability requirements included in the NCLB. The discussion also examines the authority of the Secretary of Education (hereafter referred to as the Secretary) to make changes to the ESEA that some may view as effectively reauthorizing at least a portion of the ESEA. The second part of the report focuses on broad NCLB implementation issues that have arisen and how the federal role in elementary and secondary education may evolve or change in response during ESEA reauthorization. Historically, education has been the domain of state and local governments. Since the initial enactment of the Elementary and Secondary Education Act in 1965 (P.L. 89-10), federal education policy has focused on equity. For example, since its inception the ESEA has focused on serving disadvantaged students and on meeting their academic needs to close the achievement gap that exists between disadvantaged students and their more advantaged peers. Other federal education policies that were enacted after ESEA, such as the Individuals with Disabilities Education Act and Title IX, have also focused on providing equity. That is, federal education efforts in recent decades have been geared at pushing states and LEAs to provide equal educational opportunities for all students. The role of the federal government with respect to elementary and secondary education, however, began to change substantially in the early 1990s, as a focus on standards and assessments for all students was added to the traditional focus on equity. This section examines the evolution of this changing role beginning with the standards-based reform movement through the Improving America's Schools Act (IASA; P.L. 103-382 ), which reauthorized the ESEA in 1994. Subsequent sections of the report provide an in-depth analysis of the requirements of the NCLB and associated issues. During the 1980s, waves of education reform swept across the nation. The first wave included activities that were mostly characterized as "top-down" reforms, meaning that they were imposed on schools primarily from the state level. These included, among other activities, increased requirements for high school graduation, attempts to lengthen the school day or year, increased testing of students' basic skills, and establishment of higher standards for entry or continuation in teaching. Generally, this initial wave of reform is considered to have had little positive effect on student achievement. Prompted in part by the limited success of the initial wave of the 1980s reforms, policymakers pursued other approaches to reform. The second wave of reform focused on empowerment, variation, and "bottom-up" decision making where policymakers sought to achieve the conditions necessary for educational success in individual schools. Some of these efforts focused on schools as the unit of change, calling for such action as greater school-site autonomy, increased competition among schools, and a greater role for parents in making educational decisions for their children. In several states (e.g., Kentucky), a third approach that melded elements of top-down and bottom-up strategies was initiated. This course of action was premised on the need for system-wide reform, addressing the needs and problems at all levels of the system in a coherent and integrated fashion. At the heart of this reform was the premise that relevant reform action should be guided by educational goals and standards at each level of educational governance—particularly, state and local—and that reform action should occur simultaneously at these levels. According to the Consortium for Policy Research in Education (CPRE), "[m]ore state activity aimed at improving public education took place in the 1980s than ever before." This observation was based on the number of education-related bills that were introduced at the state level, increased state aid for education, and the number of state-level education-related task forces and commissions. This increase in state activity may be attributable, in part, to improved state policymaking capacities and growing state tax bases, as well as the publication of A Nation At Risk , which decried the condition of education in the nation. Not only were many states actively engaged in the standards-based reform movement, an event held in 1989 that brought together President George H. W. Bush and state governors, including then-Governor Bill Clinton of Arkansas, would mark a turning point in the federal government's involvement in the standards-based reform movement. At the first national education summit conference in the country's history, President Bush and the nation's governors endorsed the establishment of National Education Goals that would provide a framework for restructuring the federal role in elementary and secondary education. In the following year, they announced six goals. These policymakers agreed that setting goals would be an empty gesture unless progress toward the goals was measured and reported to the nation. To that end, they concluded that there should be standards defining what students need to know in each subject area, standards for performance in those subjects, and assessments to measure student performance. They also created the National Education Goals Panel (NEGP) to monitor national and state progress toward the goals. The groundwork laid at the first national education summit coalesced in the enactment of the Goals 2000: Educate America Act ( P.L. 103-227 ) in 1994. Goals 2000 represented a new, structured federal role in the education reform movement that was occurring at the state and local levels. The first three titles of P.L. 103-227 codified eight National Education Goals to be achieved by 2000 (Title I), created a National Education Goals Panel to monitor progress toward the goals (Title II), and authorized a standards-based reform state grant program (Title III). Title I of Goals 2000 enacted into law the six goals originally adopted by President Bush and the governors in 1990 and added two additional goals (the fourth and eighth goals listed below). These goals provided that by the year 2000, 1. all children will start school ready to learn; 2. the high school graduation rate will be at least 90%; 3. students will master a challenging curriculum at grades 4, 8, and 12; 4. teachers will have access to professional development opportunities; 5. U.S. students will be the first in the world in science and math achievement; 6. all adults will be literate; 7. schools will be free of drugs, violence, and firearms; and 8. every school will promote parental involvement in education. Three kinds of education standards were addressed initially by Goals 2000—curriculum content standards, student performance standards, and Opportunity-to-Learn standards. To provide national oversight and direction of the standards effort, Title II authorized the establishment of two entities—NEGP (which was created prior to the enactment of Goals 2000) and the National Education Standards and Improvement Council (NESIC). While NESIC was never established, NEGP was charged with reporting annually on state and local progress toward the National Education Goals, reporting on promising or effective measures taken to achieve the goals, and assisting in the creation of a national consensus around the reforms needed to achieve the goals. Title III authorized a formula grant program to support state standards-based reform by financing the development of state reform plans addressing such elements as teaching, learning, assessments, parental and community support for reform, and education management. Goals 2000 required that a state plan include processes for developing content and performance standards, developing state assessments, aligning curricula and assessments with state content and performance standards, and providing teachers with information about the state standards. Also authorized by Title III were two waiver authorities. The first permitted the Secretary to waive various regulations of several major U.S. Department of Education (ED) programs for periods not to exceed four years, if requested by individual states or LEAs. To receive a waiver, states or LEAs had to be receiving systemic reform funds or be undertaking comparable reform activities. Under the second waiver authority, the Education Flexibility Partnership Demonstration Act (Ed-Flex), not more than six states could receive authority to determine, on their own, which statutory and regulatory requirements to waive in relation to several major ED programs. The Goals 2000 legislation triggered widespread controversy at the state and local level. The primary concerns arose over the proper federal role in education. Traditional federal education programs focused on special populations of students, particularly those that states and localities would not, or could not, adequately serve. In contrast, Goals 2000 targeted federal funds and support on some of the central functions of state and local educational systems (e.g., standards for curriculum and student performance) and to the needs of the entire student population. Debate on these issues centered largely on whether the legislation was part of a federal effort to centralize and standardize education. Following directly on the heels of Goals 2000 was reauthorization of the ESEA. In reauthorizing the ESEA in 1994 through the Improving America's Schools Act (IASA; P.L. 103-382 ), Congress continued the federal focus on standards-based reform by inserting provisions related to standards and assessments in Title I-A. Title I-A authorizes federal grants to LEAs to provide supplementary educational and related services to low-achieving children attending schools with concentrations of students from low-income families. Title I-A is currently the largest federal elementary and secondary education program; it is funded at $14 billion and accounts for over half of the $25 billion appropriated for ESEA overall. The IASA attempted to raise the instructional standards of Title I programs, and the academic expectations for participating students, by tying Title I instruction to state-selected content and performance standards. Further, IASA attempted to make Title I tests and evaluations more meaningful and less time consuming by using state-developed or state-adopted assessments, tied to the content standard, for determining the effectiveness of Title I programs. This measure of effectiveness was based on whether schools and LEAs were making "adequate yearly progress" (AYP) toward meeting the content and performance standards. The results on these assessments were also to become the basis for implementing program improvement requirements, including financial rewards to "distinguished" schools and LEAs and corrective actions for "unsuccessful" ones. As a condition of the receipt of Title I-A funds, states were required to develop or adopt content and performance standards, as well as assessments aligned with the standards. If a state had standards and assessments that were applicable to all LEAs and students statewide, then these standards and assessments had to be used for Title I programs and students. However, the Title I statutory requirements did not require states to have standards and assessments that were applicable to all students statewide. Thus, in discussions of "state systems of standards and assessments" in reference to IASA, it should be kept in mind that the standards and assessments were not necessarily uniform for all students statewide. Under IASA, states were required to adopt standards and assessments in the subjects of reading/language arts (hereafter referred to as reading) and mathematics at three grade levels—at least once in each of the grade ranges of 3-5, 6-9, and 10-12. More specifically, in order to receive Title I-A funds, states were required to develop or adopt curriculum content standards, as well as academic achievement standards and assessments tied to the standards. The performance standards were required to establish three performance levels for all students—advanced, proficient, and partially proficient. States were also required to develop assessment systems that included all students in the grades being assessed who had attended schools in the LEA for at least one year. Limited English proficient (LEP) students were to be assessed, to the extent practicable, in the language and form most likely to yield accurate and reliable information on what they know and can do. "Reasonable" adaptations and accommodations had to be provided for students with "diverse learning needs," including LEP students and students with disabilities, where such adaptations and accommodations were necessary to measure the achievement of those students relative to state standards. The assessment system had to be capable of producing results for each state, LEA, and school that could be disaggregated by gender, major racial and ethnic groups, English proficiency status, migrant status, disability status, and economically disadvantaged status. These data were to be included in annual school profiles. Several statutory constraints were placed on the authority of the Secretary in enforcing the standards and assessment requirements. For example, state standards did not have to be linked to national standards that might be developed by any organization or entity. No state could be required to submit its content or performance standards or assessments to the U.S. Department of Education (ED). ED was prohibited from disapproving a state plan on the basis of specific content or performance standards or assessments. In addition, nothing in the act authorized ED to "mandate, direct, or control" a state's, LEA's, or school's standards, curricula, assessments, or program of instruction as a condition for receipt of Title I funds. States were given several years to meet the IASA requirements, in part because states were at widely varying stages of the process of developing instructional goals, curriculum frameworks, and assessment systems that were aligned with these goals and frameworks. States were given until the beginning of the 1997-1998 school year to develop or adopt content and performance standards for reading and mathematics. Assessments that were aligned with these standards had to be developed or adopted by the start of the 2000-2001 school year. The full system of standards and assessments was not required to be in place until the 2000-2001 school year. Under IASA, state standards developed under Title III of Goals 2000 were considered to meet the Title I-A standards requirements under IASA. Despite the increased federal emphasis on the development and implementation of state standards and assessments for all students, about half of the states failed to meet the 1997-1998 school year deadline included in Title I-A for the development of content standards. By March 2000, however, all but two states had adopted the required content standards, but only about half of the states had approved performance standards. It is important to note that IASA did not mark the beginning of federal efforts to hold states and LEAs accountable for student performance under Title I-A. Since enactment of the ESEA in 1965, the ESEA has included requirements that states and LEAs report on the academic progress of students being served under Title I-A. Subsequent evaluations of Title I found that LEAs were not effectively implementing testing systems, were using tests to draw inferences that were inappropriate based on the tests, and were measuring only basic skills. That is, LEAs essentially had low expectations for disadvantaged students, rather than high expectations for all students. The standards and assessment provisions enacted through IASA addressed three long-standing and widely shared concerns about Title I programs. In addition to believing that Title I programs had not been sufficiently challenging academically, perpetuating low expectations for the achievement of participating students, many analysts also felt that Title I programs had not been well integrated with the "regular" instructional programs of participants and had required extensive student testing that was of little instructional or diagnostic value and was not linked to the curriculum to which the students were exposed. Many of the underpinnings of the accountability requirements included in Title I-A of the No Child Left Behind Act of 2001 (NCLB; P.L. 107-110 ) are evident in the accountability requirements included in the IASA; in some cases, the requirements were substantially expanded. For example, in addition to the IASA's requirement for states to implement standards and assessments in reading and mathematics at three grade levels, the NCLB required states participating in ESEA Title I-A to develop and adopt standards and assessments in the subjects of mathematics and reading in each of grades 3-8 by the end of the 2005-2006 school year, assuming certain minimum levels of annual federal funding were provided for state assessment grants; adopt standards in science (at three grade levels—grades 3-5, 6-9, and 10-12) by the end of the 2005-2006 school year; and adopt assessments in science (at three grade levels) by the end of the 2007-2008 school year. The academic achievement standards must include at least three levels of performance: partially proficient (basic), proficient, and advanced. The same academic content and achievement standards must apply to all students. The assessments must be aligned with the state's academic content and achievement standards. State accountability systems must be based on the academic standards and assessments required above, be the same accountability system for all public schools (except that public schools and LEAs that do not receive Title I-A funds are not subject to outcome accountability requirements), and incorporate rewards and sanctions based on student performance. To the extent practicable, LEP students are to be assessed in the language and form most likely to yield accurate and reliable information on what they know and can do in academic content areas (in subjects other than English itself). However, students who have attended schools in the United States (excluding Puerto Rico) for three or more consecutive school years are to be assessed in English. In addition, "reasonable" adaptations and accommodations are to be provided for students with disabilities, consistent with the provisions of the IDEA. Similar to IASA, several statutory constraints have been placed on the authority of the Secretary to enforce these standard and assessment requirements. First, the ESEA states that nothing in Title I shall be construed to authorize any federal official or agency to "mandate, direct, or control a State, local educational agency, or school's specific instructional content, academic achievement standards and assessments, curriculum, or program of instruction." Second, states may not be required to submit their standards to the Secretary or to have their content or achievement standards approved or certified by the federal government in order to receive funds under the ESEA, other than the (limited) review necessary in order to determine whether the state meets the Title I-A technical requirements. Finally, no state plan may be disapproved by ED on the basis of specific content or achievement standards, or assessment items or instruments. A key concept embodied in the outcome accountability requirements of the NCLB—that of AYP for schools, LEAs, and (with much less emphasis) states overall —expands on earlier provisions included in the IASA. The primary purpose of AYP requirements is to serve as the basis for identifying schools and LEAs where performance is inadequate, so that these inadequacies may be addressed, first through provision of increased support and opportunities for families to exercise choice to transfer to another school or obtain supplemental educational services (SES), and ultimately through a series of more substantial consequences (described in a later section of this report, " Performance-Based Accountability "). These actions are to be taken with respect to schools or LEAs that fail to meet AYP for two consecutive years or more. AYP standards under the NCLB must be applied to all public schools, LEAs, and to states overall, if a state chooses to receive Title I-A grants. However, consequences for failing to meet AYP standards for two consecutive years or more need only be applied to schools and LEAs participating in Title I-A, and there are no sanctions for states overall beyond potential identification and the provision of technical assistance. AYP is determined based on three components: student academic achievement on the required state reading and mathematics assessments, with a focus on the percentage of students scoring at the proficient level or higher; 95% student participation rates in assessments by all students and for any subgroup for which data are disaggregated; and performance on another academic indicator, which must be graduation rates for high schools. Schools or LEAs meet AYP standards only if they meet the required threshold levels of performance on all three indicators for the all-students group and any subgroup for which data are disaggregated. AYP calculations based on assessment scores must be disaggregated; that is, they must be determined separately and specifically not only for all students but also for several demographic groups of students within each school, LEA, and state. The specified demographic groups (often referred to as subgroups) are economically disadvantaged students, LEP students, students with disabilities, and students in major racial and ethnic groups. It is generally acknowledged that one of the most positive contributions of the NCLB requirements has been the reporting of data by student subgroups, thereby making it possible to see how disadvantaged students are performing relative to other students. The results highlight substantial achievement gaps between minority students and white students, LEP students and non-LEP students, students with and without disabilities, and economically disadvantaged students and their more economically advantaged peers. Having these results echoed nationwide has spurred and may continue to spur attention at the state and local levels on meeting the academic needs of underserved students, which has been a primary goal of ESEA since its inception. Changes to the ESEA over the past two decades have also helped to ensure that all students are held to the same academically challenging standards rather than having lower academic expectations for students served by the Title I-A program. What is unclear, however, is whether the law has actually improved student achievement for the majority of disadvantaged students and whether the federal government has employed policy levers that can bring about this change through the ESEA. States must develop annual measurable objectives (AMOs) that are established separately for reading and mathematics assessments, are the same for all schools and LEAs, identify a single minimum percentage of students who must meet or exceed the proficient level on the assessments that applies to the all students group and each subgroup for which data are disaggregated, and must ensure that all students will meet or exceed the state's proficient level of achievement on the assessments based on a timeline established by the state. The timeline must incorporate concrete movement toward meeting an ultimate goal of all students reaching a proficient or higher level of achievement by the end of the 2013-2014 school year. This was adopted in response to pre-NCLB AYP requirements in most states that required little or no net improvement in student performance over time. While NCLB substantially increased federal involvement in student assessment and learning, an argument could be made that this involvement stems from the traditional federal education policy on equity. By requiring each state to ensure that all students make progress toward the ultimate goal of proficiency, that all students are held to the same content and performance standards, and that results are disaggregated and publicly reported for historically disadvantaged student groups, the federal requirements have pressured states into developing one set of expectations for all students and forced them to acknowledge when specific groups of students are not meeting those expectations. Without this federal involvement, it is impossible to know whether states would have taken similar actions. However, as discussed in a subsequent section, the expectations for students across states are anything but consistent. The NCLB requires states to identify LEAs, and LEAs to identify schools, that fail to meet state AYP standards for two consecutive years for program improvement, and to take a variety of further actions with respect to schools or LEAs that fail to meet AYP standards for additional years after being identified for improvement. Although states are encouraged to establish unitary accountability systems affecting all public schools, and some states do so to varying degrees, the Title I-A statute only requires them to apply performance-based accountability measures to schools and LEAs that receive Title I-A funds, not all schools and LEAs. The "accountability stages" are depicted in Table 1 . Title I-A schools that fail to meet AYP standards for two consecutive years must be identified for program improvement. When Title I-A schools do not make AYP for two or more consecutive years, they become subject to a range of increasingly severe performance-based accountability requirements, which are coupled with technical assistance provided by the LEA. After not making AYP for two consecutive years, a Title I-A school is identified for school improvement. Being designated for school improvement carries with it the requirement to develop or revise a school plan designed to result in the improvement of the school. LEAs are required to provide schools within their jurisdictions with technical assistance in the design and implementation of school improvement plans. Schools identified for improvement must use at least 10% of their Title I-A funding for professional development. All students attending Title I-A schools identified for school improvement must be offered public school choice—the opportunity to transfer to another public school within the same LEA. Under public school choice, students must be afforded the opportunity to choose from among two or more schools, located within the same LEA, that have not been identified for school improvement, corrective action, or restructuring, and that also have not been identified as persistently dangerous schools. LEAs are required to provide students who transfer to different schools with transportation and must give priority in choosing schools to the lowest-achieving children from low-income families. LEAs may not use lack of capacity as a reason for denying students the opportunity to transfer to a school of choice. In instances where there are no eligible schools in the student's LEA, LEAs are encouraged to enter into cooperative agreements with surrounding LEAs to enable students to transfer to an eligible public school. If a school does not make AYP for another year after being identified for an initial year of school improvement, it must be identified for a second year of school improvement. All students attending a school identified for a second year of school improvement must continue to be offered the option of attending another eligible public school within the same LEA. In addition, students from low-income families who continue to attend the school must be offered the opportunity to receive supplemental educational services (SES). SES are educational activities, such as tutoring, that are provided outside of normal school hours and which are designed to augment or enhance the educational services provided during regular periods of instruction. Supplemental educational services may be provided by a non-profit entity, a for-profit entity, or the LEA, unless such services are determined by the state educational agency (SEA) to be unavailable in the local area. The SEA is required to maintain a list of approved SES providers (including those offering services through distance learning) from which parents can select. LEAs may be required to expend up to an amount equal to 20% of their Title I-A grants on transportation for public school choice and supplemental educational services combined. If a school fails to make AYP for a total of two years after being identified for school improvement, it must be identified for corrective action by the end of the school year. For schools identified for corrective action, LEAs must continue to provide technical assistance, offer public school choice and supplemental educational services, and implement one of the following corrective actions: replacing school staff relevant to the school not making AYP, implementing a new curriculum, limiting management authority at the school level, appointing an expert advisor to assist in implementing the school improvement plan, extending the school year or the school day, or restructuring the school's internal organization. If a school does not make AYP for a third year after being identified for school improvement, by the end of the school year the LEA must begin to plan for restructuring while continuing to implement the requirements of corrective action. Restructuring of the school must involve implementation of some form of alternative governance structure, such as reopening the school as a charter school, replacing all or most of the school staff, contracting with an education management organization to operate the school, or turning the school over to the SEA. If an additional year passes without the school making AYP, the LEA must implement restructuring of the school. Any of the sanctions described above may be delayed for up to one year if the school makes AYP for a single year, or if the school's failure to make AYP is due to unforeseen circumstances, such as a natural disaster or a significant decline in financial resources of the LEA or school. Schools that make AYP for two consecutive years may no longer be identified for school improvement nor be subject to the sanctions associated with school improvement, corrective action, or restructuring. In addition, in 2008 ED announced a pilot program under which the Secretary would grant waivers to up to 10 states proposing to implement alternative performance-based accountability policies incorporating differentiated consequences. Under these policies, states could distinguish among schools identified for improvement, focusing resources upon, and applying the most significant consequences to, schools with the lowest performance levels. Among the nine states initially approved for the pilot program, the state accountability plans have three characteristics in common: (1) placement of schools identified for improvement into two or more categories, particularly a highest-priority group on which the most substantial consequences and improvement resources would be focused; (2) some adjustment of the order and/or severity of consequences for schools placed into different improvement categories, particularly with respect to school choice and SES; and (3) in many cases, narrowing of certain consequences or actions to focus more specifically on pupil groups with the lowest levels of performance. As the 2013-2014 deadline for all students to be proficient in reading/language arts and mathematics approaches, the number of schools that fail to make AYP will almost certainly increase as the percentage of students required to be at the proficient level increases. As the number of schools failing to make AYP grows, states and LEAs may become increasingly taxed with respect to their ability to help all of the schools. Procedures analogous to those for schools apply to LEAs that receive Title I-A grants and fail to meet AYP requirements. While states are encouraged to implement unitary accountability systems applicable to all students and schools, states may choose to base decisions regarding LEA status and corrective actions only on the Title I-A schools in each LEA. Further, as noted earlier, identification as needing improvement and corrective actions need only be taken with respect to LEAs that receive Title I-A grants, although this includes over 90% of all LEAs nationwide. LEAs that fail to meet state AYP standards for two consecutive years are to be identified as needing improvement. Technical assistance, "based on scientifically based research," is to be provided to the LEA by the SEA, and parents of students served by the LEA are to be notified that it has been identified as needing improvement. SEAs are to take corrective action with respect to LEAs that fail to meet state standards for a fourth year (two years of failing to meet AYP standards after having been identified for improvement without, in the meantime, meeting AYP standards for two consecutive years). Such corrective action is to include at least one of the following (at SEA discretion): reducing administrative funds or deferring program funds, implementing a new curriculum, replacing relevant LEA staff, removing specific schools from the jurisdiction of the LEA, appointing a receiver or trustee to administer the LEA, abolishing or restructuring the LEA, or authorizing students to transfer to higher-performing schools in another LEA (and providing transportation) in conjunction with at least one of these actions. Each state participating in ESEA Title I-A is required to establish an Academic Achievement Awards Program for purposes of making academic achievement awards to schools that have either significantly closed academic achievement gaps between student subgroups or exceeded their AYP requirements for two or more consecutive years. States may also give awards to LEAs that have exceeded their AYP requirements for two or more consecutive years. Under Academic Achievement Awards Programs, states may recognize and provide financial awards to teachers or principals in schools that have significantly closed the academic achievement gap or that have made AYP for two consecutive years. States may fund Academic Achievement Awards for schools and LEAs by reserving up to 5% of any Title I-A funding that is in excess of the state's previous-year allocation. Nationwide, 33.7% of all public schools and 36.3% of all LEAs failed to make AYP based on AYP determinations for the 2008-2009 school year. Table 1 provides data on the percentage of schools and LEAs failing to make adequately yearly progress, on the basis of 2008-2009 assessment results, as reported by ED, based on Consolidated State Performance Reports. These data are based on all public schools and LEAs in each state, not just those participating in Title I-A. Overall, 48 states, including the District of Columbia and Puerto Rico, had at least 10% of their public schools fail to make AYP based on AYP determinations for the 2008-2009 school year ( Table 2 ). Ten states, however, had over 50% of their public schools fail to make AYP. At the LEA level, 38 states had at least 10% of their LEAs fail to make AYP, while 19 states had at least half of their LEAs fail to make AYP. The percentage of public schools failing to make adequate yearly progress for 2008-2009 varied widely among the states, from 5% for Texas to 76.6% for Florida ( Table A-1 ). Among the states, there was even greater variation with respect to the percentage of LEAs making AYP. Two states—Maine and Wisconsin—reported that just under 1% of their LEAs failed to make adequate yearly progress, while 94.5% of the LEAs in West Virginia failed to meet AYP standards. As shown in Table 3 , most states, including the District of Columbia and Puerto Rico, had at least 10% of their Title I-A schools in some form of performance-based accountability sanction during the 2009-2010 school year, and over half of the states have at least 20% of their Title I-A schools in improvement, corrective action, or restructuring. Overall, about 28% of Title I-A schools in the nation have been identified for improvement ( Table A-2 ). However, the percentage of schools identified varies widely by state, ranging from about 3% of Title I-A schools in Oklahoma to about 85% of Title I-A schools in Georgia. While the percentages of schools identified for some type of improvement vary across the states, so too does the percentage of students taking advantage of the public school choice and SES options. For example, during the 2008-2009 school year 2.7% of all students eligible for public school choice took advantage of this option. However, the participation rate by state varied from less than 0.1% (e.g., District of Columbia) to nearly 80% in South Dakota. In addition, 15.6% of eligible students took advantage of the availability of SES. As with the school choice option, the participation rate varied substantially by state, ranging from less than 1% in Montana to over 97% in the District of Columbia and 40.2% in Maryland. ED has the ability through regulatory and waiver authority to alter the current requirements of the ESEA. As part of its role, the Secretary has the authority to issue regulations that affect program implementation. Both Section 410 of the General Education Provisions Act (GEPA) and Section 9535 of the ESEA provide the Secretary with the authority to promulgate regulations related to programs administered by the Secretary. In addition to regulatory authority, Section 9401 grants the Secretary the authority to grant waivers of any statutory or regulatory requirement of the ESEA for a SEA, LEA, Indian tribe, or school. Entities requesting waivers must meet specific requirements, such as describing for each school year the "specific, measurable education goals" in accordance with the Title I-A accountability requirements for the SEA (if applicable) and for each LEA, Indian tribe, or school that would be affected by the waiver and the methods that would be used to measure annual progress toward meeting such goals and outcomes. Since the reauthorization of the ESEA in 2002, and particularly as Congress has worked toward reauthorizing the ESEA, the Secretary has used regulatory authority to make substantive changes to ESEA program requirements. For example, former Secretary of Education Spellings took the opportunity to expand federal regulation of ESEA programs as well as allow selected, substantial forms of flexibility through the use of waiver authority provided under Section 9401. New regulations published in October 2008 substantially expanded ESEA Title I-A requirements dealing with high school graduation rates, as used in AYP determinations, as well as school choice and supplemental educational services for students in schools identified for improvement. At the same time, these regulations codify a previously initiated waiver program allowing use of growth models of AYP, and a new waiver pilot allowing a limited number of states to implement differentiated consequences for schools that fail to make AYP. With respect to the use of waiver authority, ED is required to publish an annual accounting of all waivers granted under Section 9401. The most recent announcement covers waivers granted during calendar year 2009. During calendar year 2009, the Secretary issued 351 waivers. Over half of the waivers granted (196) were provided to LEAs and schools with respect to the treatment of their Title I-A funds granted under the American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ). The majority of the remaining waivers addressed ESEA-specific issues (as opposed to issues resulting from ARRA enactment) such as the "growth model" pilot and the "differentiated accountability" pilot. Collectively, these actions reflect a trend toward influence over design elements of accountability requirements by Administration initiatives, as opposed to statutes. Using waiver authority, in particular, it is possible that the Secretary could act to expand upon the specific provisions for which he would be willing to grant waivers; thereby, further changing the accountability requirements included in Title I-A, regardless of whether Congress acts to reauthorize the ESEA. Given that a large percentage of schools and LEAs are already failing to make AYP, and a good deal more are expected to join those ranks as 100% proficiency is required by the end of the 2013-2014 school year, it has been suggested that the Secretary could act to make some adjustments to the NCLB accountability requirements through waiver authority if Congress does not act to reauthorize the ESEA. The standards-based movement and accompanying test-based accountability movement were initiated at the state and local levels. It does not appear likely that states would abandon efforts to develop rigorous content standards and implement measures to determine whether students have learned the material included in these standards. Federal involvement in public K-12 education, however, is significantly more extensive than in the past, while the aggregate federal contribution to public K-12 education revenues remains relatively small (approximately 9%). In considering the ESEA for reauthorization, Congress may decide whether to continue this active federal strategy, perhaps expanding it further through increased assessment or other requirements, or alternatively decide to place tighter limits on the scope of federal involvement in state and local K-12 education systems. A hybrid approach might involve continued or expanded federal requirements regarding student outcomes combined with fewer requirements regarding the purposes for which federal grant funds can be used. Examples of the latter might include program consolidation, an expansion of current authority to transfer funds among ESEA programs, or policies offering increased flexibility in return for reaching specified levels of performance. It is also unclear what role common standards and assessments (discussed below) might play in an ESEA reauthorization effort. It is possible that a tradeoff could be made in this area as well. For example, states that adopt the common standards and assessments could receive increased flexibility in the consequences applied to schools and LEAs that fail to make AYP. The remainder of the report highlights and examines several broad issues related to the implementation of the NCLB and possible issues to consider during the reauthorization of the ESEA. Several policy-related issues have arisen as NCLB requirements have been implemented. These include issues pertaining to the comparability of data across states and the development of state accountability systems of varying degrees of rigor, the one-size-fits all set of consequences applied to schools that fail to make AYP, the narrowing of the focus of instruction at the school level, and the evaluation of teachers. The accountability requirements included in the NCLB represented unprecedented federal involvement in school- and LEA-level accountability for student performance; however, the requirements are still broad enough that states were able to select their own content standards, and determine how those standards would be assessed (i.e., which tests would be used), and what would constitute a proficient level of performance on the tests. Thus, a byproduct (perhaps unintended) of NCLB enactment has been the creation of more than 50 different accountability systems across the nation. As state accountability systems differ so substantially, one of the tradeoffs in this approach is the lack of comparable data on student performance across states. Because states are using different standards and assessments, it is difficult to determine where students are in terms of skills and knowledge and to gauge the net effect of the NCLB. In addition, as noted by the Center on Education Policy (CEP), it is seemingly not possible to determine whether any gains observed in student achievement are directly attributable to the NCLB, as states and LEAs have implemented policies and programs of their own initiative and in response to the NCLB. It is also not possible to determine what would have happened with respect to student achievement in the absence of the NCLB, as its provisions have probably affected every public school student in the nation. A related issue is whether states have implemented challenging accountability systems. That is, questions have been raised about whether some states have implemented systems in which attaining proficiency is relatively easy, providing the appearance that the state is doing an excellent job educating students, while other states have implemented more rigorous accountability systems and results demonstrate that fewer students are succeeding academically. While the United States does not have a national test that examines what students know in a given subject area, all states that accept Title I-A funds are obligated to participate in the National Assessment of Educational Progress (NAEP), also referred to as the Nation's Report Card. While states have not written their content standards to be aligned with the NAEP standards, a comparison of NAEP test results for 4 th and 8 th grades in reading and mathematics has consistently shown that state accountability systems label substantially more students as being proficient than the results from the NAEP assessments would indicate. A recent study involving NAEP performance standards and state performance standards found that no state's reading performance standards were as high as the NAEP proficiency standards. In mathematics, Massachusetts (grades 4 and 8) and South Carolina (grade 8) were the only states where the state standards for proficiency were in the same range as the NAEP standards for proficiency. Researchers have developed a method for mapping each state's standard for proficiency in reading and mathematics onto the NAEP proficiency scale to permit a comparison of proficiency performance standards across states. Researchers found that the differences from state to state in the percentage of students scoring at the proficient level or higher could be explained by the variation in the degree of difficulty of performance standards for proficiency. States with higher performance standards based on the NAEP scale had fewer students scoring at the proficient level on the reading and mathematics assessments. This indicates that students of similar academic skill levels, but living in different states, are being evaluated against different performance standards. Similar results were found when another group of researchers compared state proficiency standards with benchmarks for two international assessments. For example, researchers compared the performance standards in Massachusetts with those of the states with the lowest standards. They found that in the latter states, the 8 th grade performance standards were equivalent to the 4 th grade performance standards in Massachusetts. Thus, it is clear that "proficient" does not carry the same meaning across states. In addition, in order to comply with the requirement that all students are proficient (however the state defines "proficient") in reading and mathematics by the end of the 2013-2014 school year, states can continue to exercise the flexibility they are granted by the NCLB to select performance standards that make it easier for more students to meet the proficiency bar. Concerns about the diversity of accountability systems across the nation have spurred a grassroots movement led by the National Governors Association (NGA) and the Council of Chief State School Officers (CCSSO) to develop common standards for reading and mathematics in grades K-12 (referred to as the common core standards) and upon which common assessments could be created to test student knowledge of the standards. Adoption and implementation of the standards and assessments is optional. Currently, 43 states and the District of Columbia have adopted the standards. It remains to be seen how many of these states will ultimately implement the standards and implement the standards as they were developed. In addition, 44 states and the District of Columbia have joined at least one of two groups currently working on developing common assessments for use by the 2014-2015 school year. A decision to participate in the development process, however, does not necessarily translate into eventual adoption and use of the assessments. The movement toward common standards and common assessments is not a federally led effort, per se. However, the movement clearly has the support of the Obama Administration. In its blueprint for the reauthorization of the ESEA, the Administration proposes requiring states to adopt and implement common standards, presumably the aforementioned standards, or to have their standards vetted by a local university system. In addition, the Administration provided additional points to states competing for Race to the Top (RTTT) grants authorized by the ARRA if they adopted the common standards by a certain date. This incentive may have resulted in many more states agreeing to adopt the standards than would have otherwise occurred. Now that RTTT grants have been awarded to 11 states and the District of Columbia, however, it is possible that some states that failed to secure a grant may reconsider their adoption of the standards. With respect to support for common assessments, the Administration used a portion of the funds available for RTTT to run a $350 million competitive grant program to support the development of common assessments based on common standards by non-federally affiliated groups. Despite these grassroots efforts and actions by the Obama Administration to support the efforts, the end result will not yield a single set of national standards in reading and mathematics nor a single set of assessments in these subject areas. For example, states that adopt the common core standards are permitted to add additional standards of their own choosing to the common core standards. Thus, each state adopting and implementing the common core standards could continue to have a unique set of state standards that share common elements with other adopting states. As a result of the RTTT common assessment competition, there will be at least two different assessments linked to the common core standards. It is unclear how the common assessments would accommodate any additional standards that states choose to add to the common core standards. Presumably, if states added additional standards to the common core standards, they would also want to determine how well students are mastering those standards. In addition, it is possible that multiple states could choose to use the same assessments to measure student performance but select different levels of performance on the assessments as indicating proficiency (e.g., one state could say that students must get 75% of the questions correct on the common assessment to be considered proficient, while another state could set the bar at 50%). It is important to note that neither the common core standards movement nor the assessments movement is proposing a common curriculum. Decisions regarding how standards are taught to students and how students are prepared for assessments would remain a state and local decision. However, if enough states that adopted the common core standards actually implement the standards, it is possible that states could work together to develop, or textbook publishers and other organizations that develop materials for classroom use may develop, materials that are clearly aligned with the common core standards; thus, these entities would possibly contribute to a de facto national curriculum. In the long term, however, if the push for more commonality gains momentum, there are several issues that remain unresolved regarding the common core standards. For example, who is responsible for maintaining and updating the standards? Who pays for this? How often should changes be made to the standards, as changes to the standards would require concomitant changes to assessments, teacher training, and curricula? If the common core standards are included in the ESEA, would there be a federal role in maintaining or updating the standards? Similar questions may apply to any common assessments that are developed, particularly with respect to the responsibility for maintaining and updating the assessments if the standards to which they are aligned change. If ESEA reauthorization includes common standards or common assessments as part of a revised accountability system, this may increase the number of states that actually implement the standards and ultimately use the assessments. This may be particularly appealing if the adoption of common standards and assessments involves some sort of tradeoff, such as increasing state and local flexibility with respect to the consequences applied to schools and LEAs that fail to meet AYP (or some other required performance target). Alternatively, Congress could choose not to incorporate common standards or common assessments into a revised ESEA, leaving the common standards and assessments movements at the grassroots level. Under this scenario, Congress could allow the common standards and assessments to be used to meet whatever accountability requirements continue to apply without actually addressing the issues of the common standards or assessments in statutory language. Under the NCLB, LEAs and states simply do or do not meet AYP standards. There is generally no distinction between those that fail to meet only one or two required performance or participation thresholds to a marginal degree versus those that fail to meet numerous thresholds to a substantial extent. Several analysts have suggested that a more nuanced grading scale be allowed (e.g., a division of schools or LEAs failing to make AYP into higher versus lower priority categories, or grades ranging from A to F), as is used in several state accountability systems. A major complication associated with such an approach is determining at what point on such a scale the current automatic consequences (e.g., school choice or SES) are invoked. An additional consideration under the NCLB's current performance-based accountability system is that the same set of consequences applies to all schools regardless of whether they failed to make AYP for one subgroup or all students. That is, there is generally no distinction between those that fail to meet only one or two required performance thresholds to a marginal degree versus those that fail to meet numerous thresholds to a substantial extent. Further, studies have determined that when otherwise-similar public schools are compared, those with a wider variety of demographic groups are substantially less likely to meet AYP standards. However, without specific requirements for achievement gains by each of the major student groups, it is possible that insufficient attention would be paid to the performance of the disadvantaged student groups among whom improvements are most needed, and for whose benefit the Title I-A program was established. As more schools fail to make AYP and are identified for improvement, the funds that LEAs must reserve for public school choice and SES may not be sufficient to help all eligible students. In addition, the public school transfer option may become a moot point, as few LEAs may have enough schools making AYP into which students can transfer. Two studies examined the availability of school choice options during the 2004-2005 school year. The first study found that 39% of LEAs that were required to offer choice failed to do so. Among LEAs required to offer choice, 20% reported that they had no non-identified schools within the LEA to which students could transfer either because they only had one school per grade level or all schools in the LEA had been identified for improvement. Other LEAs noted that a lack of space in non-identified schools or an inability to arrange inter-district transfers were major challenges to implementing the choice provision. A second study echoed these findings and noted that finding physical space and adhering to class size requirements in non-identified schools made it difficult to comply with the choice requirements. Given that more schools have been identified for improvement since the 2004-2005 school year, it is likely that it has only become more difficult for LEAs to comply with the public school choice requirements included in Title I-A. A related issue is the capacity of states and LEAs to provide assistance to schools and LEAs that fail to make AYP for two consecutive years or more. As more schools and LEAs are subject to performance-based accountability consequences, the ability of states and LEAs to provide assistance may be diminished. It has been suggested that the consequences need to be better differentiated based on the reasons for failure and that assistance may need to be focused on the lowest-performing schools. Finally, the focus of the current performance-based accountability system has been on consequences for failing to meet required levels of performance. While performance-based rewards are authorized under the NCLB, they are apparently little used, and the current focus is on a variety of performance-based sanctions. The Obama Administration's blueprint for reauthorization would place a greater emphasis on incentivizing improved performance through the use of rewards. Congress could choose to alter its approach to obtaining compliance with ESEA requirements to focus on positive incentives rather than performance-based sanctions or, perhaps, it could achieve a more equitable balance between the two approaches. Without an ultimate goal of having all students reach a proficient or higher level of achievement by a specific date, states might establish relative goals that require little or no net improvement over time. A demanding goal might maximize efforts toward improvement by state public school systems, even if the goal is not met. Nevertheless, a goal of having all students at a proficient or higher level of achievement, within any specified period of time, may be criticized as being unrealistic, if one assumes that proficiency has been set at a challenging level. It is very likely that many states, schools, and LEAs will not meet the NCLB's 2014 AYP goal, unless state standards of proficient performance are significantly lowered or states are allowed by ED to aggressively pursue the use of statistical techniques such as setting high minimum group sizes and confidence intervals. The assessment data that have been collected since the enactment of the NCLB could possibly now be used to develop new goals for student performance that are grounded in empirical evidence of what levels of growth may be achievable. For example, in reauthorizing the ESEA, Congress could rely on empirically developed thresholds for student performance. Alternatively, required progress could be benchmarked against a school or LEA that is already considered to be effective. Regardless of the strategy used to develop academic achievement goals for students, the strategy may need to recognize that as the percentage of students who are required to be proficient increases, it will be harder to realize large gains in the percentage of students who are proficient. A potentially positive outcome of the NCLB performance-based accountability system has been an increased focus on the proficiency of all students , including previously underserved groups such as disadvantaged students, students with disabilities, and LEP students. By disaggregating assessment results by subgroup, the achievement of various student groups is transparent and schools are held accountable for the achievement of these previously underserved groups. Although schools and LEAs are held accountable for the achievement of students in various student groups, they are not held accountable for students at all levels of achievement. Under the NCLB performance-based accountability system, states set targets for the percentage of students achieving proficiency in reading and mathematics. States are not currently required to set targets for the percentage of students achieving other levels of achievement, such as "basic" or "advanced." The accountability system, therefore, does not reward schools or LEAs for increasing the percentage of students moving from achievement levels that are far below basic to the "basic" level of achievement. Likewise, the system does not reward schools or LEAs for increasing the percentage of students moving from "proficient" to "advanced" levels of achievement. Because the goal of the current system is for 100% of students to become proficient by school year 2013-2014, schools and teachers may target instructional time and resources toward students who are nearing proficiency rather than distributing resources equally across students at all achievement levels. Congress could choose to alter the requirements of the current performance-based accountability system to provide a more balanced approach in rewarding gains in student achievement. For example, a performance-based accountability system could be designed to reward schools for increasing student growth in achievement, even if the ultimate level of achievement does not reach the cut-off score for proficiency. Schools and LEAs could similarly be rewarded for increasing student growth above the level of proficiency. There has been an increasing interest in implementing state accountability systems that incorporate measures of student growth rather than one end-of-year assessment that determines proficiency. Currently, a limited number of states use growth models for accountability purposes; however, ED's requirements for growth models are considered to be relatively restrictive. The current Administration has also expressed an interest in assessing student growth rather than static achievement. To date, the current Administration has not provided details on how new measures of student growth would differ from the previous Administration's growth model requirements. As such, it is difficult to gauge how this renewed interest in growth models would change current policy. If Congress chooses to expand the use of growth models in state accountability systems, the assessment requirements for the growth model must be considered. Some growth models require assessing students more than once per year; some growth models require assessments to be aligned across multiple grade levels. If states are granted the flexibility to use less restrictive growth models, Congress may want to consider implementing a review procedure that ensures that the states have the appropriate assessments in place to inform their growth model. The NCLB placed student assessment at the heart of federal education policy. One potentially positive outcome of using student assessments has been an increased focus on state content standards and teaching to those standards. There is some evidence that using content standards and assessments can help teachers focus their instruction and obtain feedback on the effectiveness of instruction. On the other hand, the use of assessments in test-based accountability systems may be affecting the curriculum in less desirable ways. Because assessments are aligned with state content standards, there may be a risk that "teaching to the standards" becomes "teaching to the test." The practice of "teaching to the test"—whether intentional or unintentional—may narrow the curriculum in several ways. For example, teachers may reallocate instructional time towards tested subjects and away from non-tested subjects. Surveys of teachers have consistently reported that their instruction emphasizes reading and mathematics over other subjects like history, foreign language, and arts. "Teaching to the test" can also lead to a narrowing of the curriculum within tested subjects. If teachers are aware that the assessments measure certain skills within the reading and mathematics standards, it is more likely that these skills would be taught—possibly at the expense of other, non-tested skills that are more difficult to measure. For example, if teachers know that a mathematics assessment typically assesses basic facts, it is less likely that higher-order skills, such as problem solving, would be adequately emphasized in the curriculum. A typical multiple-choice test that consists of 40 to 50 items per content area translates into roughly one or two test items per standard, leaving many curricular objectives within the standard untested—particularly those that are difficult to measure. A related concern is the potential for score inflation. Score inflation is a phenomenon in which scores on high-stakes assessments, such as state assessments used in accountability systems, increase at faster rates than scores on low-stakes assessments. If teachers are, in fact, "teaching to the test" (i.e., the state assessment), it is likely that scores will increase faster on the state assessment than on other tests of student achievement. Studying the prevalence of score inflation is difficult because schools and LEAs may be reluctant to give researchers access to test scores for the purpose of investigating possible inflation. Nevertheless, several studies have documented the problem of score inflation by comparing gains on state assessments (high stakes) to those made on the NAEP (low stakes). Studies have consistently reported discrepancies in the overall level of student achievement, the size of student achievement gains, and the size of the achievement gap. The discrepancies indicate that student scores on state assessments may be inflated and that these inflated scores may not represent true achievement gains. One possible way to reduce the problem of score inflation is to consistently use a low-stakes audit assessment, such as NAEP, to corroborate gains on state assessments. If gains on state assessments generalize to another audit assessment, it increases the likelihood that gains are due to true achievement gains. This type of corroboration may help policymakers separate the policies that lead to true student achievement from those that lead to score inflation. It can be argued that the assessment requirements of the NCLB accountability system have become burdensome and that more assessment decisions should be made at the state and local levels. Alternatively, it can be argued that the assessment requirements of the NCLB have the potential to drive curriculum, and that Congress should consider expanding the requirements to include subjects like writing, history, civics, and the arts. If the requirements are expanded to include additional subjects, these requirements may provide an incentive to states and LEAs to broaden school curricula. Even if the federal assessment requirements were expanded to include additional subjects, however, it is unclear whether scores from these new assessments would be included in the NCLB accountability system. For example, states are currently required to assess science, but the science score is not counted in AYP determinations. If scores from additional assessments are not counted in AYP determinations, it is unclear whether an assessment without consequences would broaden the curriculum. It can be argued that the current assessments should be redesigned to measure more higher-order thinking skills. States currently administer standardized, multiple-choice assessments, largely due to the ease of administration, scoring, and reporting; however, this practice is sometimes considered undesirable because it may not adequately measure important higher-order thinking and skills. As such, supporters of innovative assessments may argue that the federal government should support other types of assessments that are more likely to assess higher-order thinking skills, such as extended constructed response and performance-based assessments. Others may argue that the federal government should require the use of multiple measures. That is, in addition to a state assessment score, AYP determinations could include data from a portfolio of student work, a performance assessment, or observations of student behavior and achievement in the classroom. Using student assessments in performance-based accountability systems provides a method of determining whether students are meeting certain academic targets. It highlights areas of excellence and areas of need within schools, LEAs, and states. Without the use of assessments, states would not have a baseline measurement of academic achievement to gauge whether certain instructional, curricular, or policy changes led to improved student outcomes. Nevertheless, the use of assessments in performance-based accountability systems is not without limitations. For example, most states currently use one, end-of-year assessment score in reading and mathematics to inform the accountability system. Because of the emphasis placed on a single assessment score, the appropriate interpretation of that score is critical. If assessments are not used and interpreted accurately, changes in student achievement scores may be used inappropriately to support or dismiss certain school reform efforts. Given the emphasis placed on the results of these assessments, it is important that teachers, administrators, and policymakers understand the limitations of the assessment. Educational assessments can be limited by issues of technical quality, such as validity, reliability, and fairness. Validity. Validity is arguably the most important concept to understand when evaluating educational assessment; it is not a property of the assessment itself, but rather a property of the interpretation of the result of the assessment. Validity refers to the degree to which a certain interpretation of an assessment score is appropriate and meaningful. That is, from a single assessment score, one could make a valid or an invalid interpretation. For example, state assessment results from a school are a representation of what students in the school know and can do relative to the state academic content standards. Suppose a group of students in School A scored well on these assessments and a group of students in School B scored poorly. One possible valid inference from this result is that students from School A were more likely to demonstrate proficiency in the academic content than students from School B. There are, however, many possible inferences that may be less valid. For example, one could infer that School A had a better academic curriculum than School B. Or, one could infer that School A had better teachers than School B. Neither of these inferences may be valid because state assessments were designed for the purpose of determining students' mastery of the content standards of the state, not for the purposes of evaluating teachers or curriculum. The validity of an inference, therefore, is tied inextricably to the purpose for which the test was created. Reliability. Reliability refers to the consistency of measurement of an assessment. It describes the precision with which assessment results are reported and is a measure of the certainty that the results are accurate. The concept of reliability presumes that each student has a true score for any given assessment. The score on the assessment, or the observed score , is simply an approximation of a student's true score. The higher the reliability of the assessment, the more likely it is that a student's observed score reflects the true score. That is, the higher the reliability of the assessment, the more likely it is that an assessment score reflects student achievement. Fairness. Fairness is a term that has no technical meaning in assessment procedures, and the concept has multiple interpretations. In general, fairness refers to the concept of equal treatment for all students who participate in an educational assessment. For example, the assessment process may lack fairness if it is biased against certain individuals. In a reading test, unnecessarily complex vocabulary can potentially bias a test against LEP students (e.g., using the word "parakeet" where "bird" would suffice). Or, the assessment process may lack fairness if certain individuals have been provided more test preparation opportunities. Some schools may emphasize test-taking skills and expose the students to items from previous state assessments to familiarize them with the general form and content. Other schools, however, may not emphasize test-taking skills, opting instead to use the time to deliver more instruction. The extent to which test preparation boosts scores on state assessments is unknown; however, if one school conducted extensive test preparation and another did not, comparisons between the two schools may not be "fair." The results of state assessments are a major component of the NCLB performance-based accountability system. Consequences for schools and LEAs are based primarily on the results of state assessments. As such, test users have a responsibility to examine the validity, reliability, and fairness of an assessment to draw defensible conclusions about student achievement. If a subgroup of students does not make AYP based on an assessment that lacked adequate evidence of reliability or fairness, schools and LEAs would still be subjected to the increasingly severe consequences of the performance-based accountability system. If the consequences applied to schools and LEAs are based on assessment scores that are invalid, it can be argued that current school reform efforts are not targeted appropriately. Some schools or LEAs that provide relatively sound educational opportunities for students may be required to implement a series of reform efforts because the assessments used within the accountability system did not accurately and fairly measure the achievement of all students, while other schools and LEAs may fail to be identified as needing to improve their educational offerings. One of the goals of the NCLB is to improve educational outcomes for all students. Policymaking at the federal level reflects a growing awareness that improving educational outcomes depends greatly upon increasing the quality of classroom instruction. In establishing the student performance standards and accountability provisions in the NCLB, Congress recognized that the success of these reforms rests largely on teachers' knowledge and skills. Thus, in enacting the NCLB, Congress amended the ESEA to establish a requirement that all teachers be highly qualified . Furthermore, Congress required that states establish a plan for the equitable distribution of highly qualified teachers across classrooms and schools. The equitable distribution of highly qualified teachers was intended, "to ensure that poor and minority children are not taught at higher rates than other children by inexperienced, unqualified, or out-of-field teachers." The NCLB highly qualified teacher requirement has been the cornerstone of federal teacher policy for nearly a decade. In that time, the requirement has come to be seen by many as a minimum standard for entry into the profession (rather than a goal to which teachers might aspire) and a growing body of research has revealed its underlying emphasis on teachers' credentials to be weakly correlated with student achievement. Meanwhile, federal interest has begun to shift from a focus on teacher input (i.e., quality) to teacher output (i.e., effectiveness). The most recent congressional action in this area came with the passage of the American Recovery and Reinvestment Act and, in particular, enactment of the RTTT program. Within the RTTT program, ED provided the first federal definition of "effective teacher" and required applicants of this program to measure a teacher's effectiveness based on student growth in achievement. In addition, applicants of this program were to use the measurement of teacher effectiveness within an overall teacher evaluation system that would inform rewards for and recruitment, development, and retention of teachers. ED provided RTTT applicants with an incentive to become more systematic about using student data to inform teacher instruction and to measure teacher effectiveness. One specific method that is used by some school districts (and at least one state) to measure teacher effectiveness based on student achievement data is value-added modeling (VAM). VAM is a set of statistical approaches that seek to isolate a teacher's effect on student achievement. This method of modeling is seen as promising because it has the potential to promote education reform and to create a more equitable accountability system that holds teachers and schools accountable for the aspects of student learning that are attributable to effective teaching while not holding teachers and schools accountable for factors outside of their control (e.g., the potential impact of socioeconomic status on student learning). Although there are other methods for assessing the effectiveness of teachers, VAM has garnered increasing attention in education research and policy, and many states proposed VAM systems in RTTT applications. To date, the shift from input-based accountability (i.e., teacher quality) to output-based accountability (i.e., teacher effectiveness) has been an initiative led by the Administration. Congress has not enacted similar provisions, although this may receive attention during ESEA reauthorization. During reauthorization, Congress may choose to maintain the highly qualified teacher requirements as they are, replace or supplement these requirements, or include these requirements as part of a new, more comprehensive set of quality/performance requirements. In addition, Congress may revisit the requirement for the equitable distribution of highly qualified teachers to ensure that it is functioning as intended to ensure that poor and minority children are not taught by inexperienced or unqualified teachers at higher rates than other children. On the other hand, if Congress chooses to move toward outcome-based accountability, it may consider whether to codify ED's definition of "effective teacher" or whether to consider alternate definitions. If ED's definition is adopted, reauthorization legislation has the opportunity to clarify the weight that student growth in achievement should have in the definition of an effective teacher. Furthermore, if Congress chooses to adopt any definition of an effective teacher, the equitable distribution of "highly qualified teachers" may need to be revised to reflect the change to an emphasis on "effective teachers." Finally, Congress may consider whether the federal government will have a sustained role in incentivizing states to develop new teacher evaluation systems that would inform rewards for and recruitment, development, and retention of teachers. Through the Teacher Incentive Fund (TIF), Congress currently provides grants to support compensation reforms for teachers. TIF grants must consider gains in student achievement, classroom evaluations conducted multiple times during each school year, and other factors that provide educators with incentives to take on additional responsibilities and leadership roles. Through RTTT, ED required that grantees of this program go beyond TIF requirements and use evaluations to inform high-stakes decisions such as granting tenure, awarding full certification, and removing ineffective teachers. In practice, some school districts are using teacher evaluation systems based on VAM for these high-stakes decisions. Some have cautioned against using VAM for tenure, certification, and removal decisions because the measurement of teacher effectiveness may not be precise enough to support these decisions without additional corroborating evidence. If the measurement of teacher effectiveness lacks precision, Congress may consider the appropriate weight given to teacher effectiveness in an overall teacher accountability system. | Federal policies aiming to improve the effectiveness of schools have historically focused largely on inputs, such as supporting teacher professional development, class-size reduction, and compensatory programs or services for disadvantaged students. Over the last two decades, however, interest in developing federal policies that focus on student outcomes has increased. Most recently, the enactment of the No Child Left Behind Act of 2001 (NCLB; P.L. 107-110), which amended and reauthorized the Elementary and Secondary Education Act (ESEA), marked a dramatic expansion of the federal government's role in supporting standards-based instruction and test-based accountability, thereby increasing the federal government's involvement in decisions that directly affect teaching and learning. As states and local educational agencies (LEAs) have implemented the federal accountability requirements, numerous issues have arisen that may be addressed during ESEA reauthorization. Among these issues are those pertaining to the comparability of data across states and the development of state accountability systems of varying degrees of rigor, the one-size-fits-all set of consequences applied to schools that fail to make adequate yearly progress (AYP), the narrowing of the focus of instruction at the school level, and the evaluation of teachers. Commonality versus flexibility: States have had the flexibility to select their own content and performance standards, as well as the assessments aligned with these standards. This has resulted in a different accountability system in each state, making it difficult to sum up where students are in terms of skills and knowledge and to gauge the net effect of the NCLB. Absolute versus differentiated consequences: Schools simply do or do not meet AYP standards, and there is generally no distinction between those that fail to meet only one or two required performance or participation thresholds to a marginal degree versus those that fail to meet numerous thresholds to a substantial extent. Incentives to focus on proficiency: Schools and LEAs are held accountable for the achievement of all student subgroups. They are not, however, held accountable for students at all levels of achievement. Because the goal of the current system is for 100% of students to become "proficient" by school year 2013-2014, schools and teachers may target instructional time and resources towards students who are nearing proficiency rather than distributing resources equally across students at all achievement levels. Assessment and the narrowing of the curricular focus: Because assessments are aligned with state content standards, there may be a risk that "teaching to the standards" becomes "teaching to the test." The practice of "teaching to the test"—whether intentional or unintentional—may narrow the curriculum. Teacher evaluation and accountability: The NCLB added a requirement that all teachers be highly qualified. Over time, however, the requirement has come to be seen by many as a minimum standard for entry into the profession and a growing body of research has revealed its underlying emphasis on teachers' credentials to be weakly correlated with student achievement. As such, the Administration has moved toward measuring teacher effectiveness based on student achievement, and promoted a focus on output-based accountability for teachers. |
Various bills in the 114 th Congress address issues related to hunting, fishing, and recreational shooting on federal and state lands. Hunting and conservation have been linked in federal wildlife legislation since the passage the Lacey Act of 1900 (the first federal wildlife law, making it a federal crime to ship game killed in violation of one state's laws to another state) and then the Migratory Bird Treaty Act of 1918 (regulating the killing, hunting, buying, or selling of migratory birds). Currently, hunting and fishing are allowed on the majority of federal lands (as measured in acres). Some believe that federal lands are unnecessarily restricted by protective designations, barriers to physical access, or burdensome agency planning processes. Others question whether opening more lands to hunting, fishing, and recreational shooting is fully consistent with good game management, public safety, other recreational uses, resource management, and the statutory purposes of the lands. Two recent bills, S. 556 and S. 659 , address giving hunting and fishing activities a higher priority in land management. Although both bills address hunting, fishing, and other forms of outdoor recreation, S. 556 is focused on federal lands while S. 659 covers diverse topics such as the regulation of lead shot, imports of polar bear trophies, the funding of land acquisition for recreation, and the reauthorization of certain international wildlife conservation laws. Under current law, federal land managers balance hunting, fishing, and recreational shooting with good game management, public safety, resource management, and the statutory purposes of the lands. The resulting balance point will vary among agencies based on the statutory requirements of the agency, land classification, location, and other factors. The four traditional land management agencies—the Bureau of Land Management (BLM), Fish and Wildlife Service (FWS), and National Park Service (NPS), all in the Department of the Interior (DOI), and the Forest Service (FS) in the Department of Agriculture—do not maintain data on how many acres of land are currently open to hunting, fishing, and/or recreational shooting. However, BLM "estimates that over 99 percent of BLM-managed public lands are open to hunting, and 99 percent of BLM-managed public lands are open to recreational target shooting." FS estimates that more than 95% of its lands are currently open to these activities. Among the FWS's 594 wildlife refuges and waterfowl production areas, more than 360 are open to some form of hunting, and more than 300 units offer fishing opportunities. As of February 2014, hunting was permitted in 61 of the 401 NPS units, and fishing was permitted in 200 units. Other federal agencies have various policies on the activities covered in these two bills. The Bureau of Reclamation (BOR), for example, allows recreational shooting but actively discourages "repeated recreational target shooting." At the same time, BOR allows hunting, fishing, and trapping on its lands, subject to regulation. Roughly half of the Army Corps of Engineers' (Corps') land is open to hunting. In addition, many military bases offer access to hunters and fishers, including Camp Pendleton, California (hunting and fishing); Camp LeJeune, California (hunting, fishing, and trapping); and Camp Bullis, Texas (hunting, fishing, and target shooting). Various rules may limit participation at these bases to members of the military, veterans, and their families. Lands under the jurisdiction of other federal agencies may be managed for purposes that include the conservation of natural resources, including wildlife, even if conservation is not the primary purpose of these lands. Moreover, multiple executive orders direct all agencies with land to preserve the environment, and these orders apply whether the agency currently offers hunting, fishing, trapping, or even public access. (See " Definition of Federal Public Land ," below.) Examples of agencies that limit access to their lands include the Department of Energy and the National Aeronautics and Space Administration. This report focuses on two bills that have received considerable attention in the 114 th Congress: S. 556 and S. 659 . Both are titled "the Bipartisan Sportsmen's Act of 2015." S. 556 was referred to the Senate Committee on Energy and Natural Resources, and S. 659 was referred to the Senate Committee on Environment and Public Works. In addition to its provisions affecting federal lands, S. 556 contains a provision amending the Equal Access to Justice Act (EAJA; 5 U.S.C. §504) and affecting the Judgment Fund in the Department of Justice from which claims against the United States are paid (31 U.S.C. §1304). The two bills contain a number of provisions found in bills in previous Congresses. Both bills use definitions of federal land or similar terms in various sections in a manner that leaves some doubt as to the land under consideration. Table 1 shows the terms used and the land classifications that appear to be included, possibly are included, and explicitly are excluded under the definitions. S. 556 is titled the "Bipartisan Sportsmen's Act of 2015." It was referred to the Senate Committee on Energy and Natural Resources, which held hearings on the bill on March 12, 2015. The witnesses were Steve Ellis, Deputy Director for Operations, BLM; Leslie Weldon, Deputy Chief, National Forest System, FS; Jeffrey S. Crane, President, Congressional Sportsmen's Foundation; and Whit Fosburgh, President and CEO, Theodore Roosevelt Conservation Partnership. Issues raised during the hearing included the availability of hunting, fishing, and shooting opportunities on federal lands, particularly those of BLM and FS; the use of the Land and Water Conservation Fund (LWCF) to purchase lands to support access for recreation; the appropriate use of funds derived from the sale of federal land; and the effect of the bill on wilderness management, among other matters. Each of these issues is discussed below. Section 101 of S. 556 addresses hunting, trapping, fishing, and recreational shooting on federal land. It would create an "open until closed" management policy for federal lands. It specifies the factors a land management agency would need to consider to justify closing federal lands to hunting, trapping, fishing, or recreational shooting. The steps to do so would include meeting specific criteria for closure determinations, revising planning documents, and filing reports with Congress. Section 101 defines federal public land (FPL) broadly as "any land or water that is ... owned by the United States; and ... managed by a Federal agency (including the Department of the Interior and the Forest Service) for purposes that include the conservation of natural resources." The definition specifically exempts (1) lands or waters held in trust for the benefit of Indian tribes or individual Indians; (2) lands under the jurisdiction of NPS or FWS; (3) fish hatcheries; and (4) conservation easements on private land. (See Table 1 .) While there is no existing statutory definition of FPL, the Federal Land Policy and Management Act (FLPMA; P.L. 94-579 ) defines public lands as BLM lands. The Section 101 definition is broader than the FLPMA definition, and some may interpret it to include all federal lands except those explicitly excluded. As a result, even though most of the bill appears to target only BLM and FS, some provisions could be interpreted to include federal lands under other agencies, such as BOR, the Department of Defense (including the Army Corps of Engineers), the Department of Energy, and the Department of Commerce, all of which count natural resource conservation among their purposes. A similar, inclusive definition of federal lands was used in the Energy Policy Act of 2005 ( P.L. 109-58 ), which referred to a number of departments as being necessary to establish rights-of-way on federal lands: Agriculture, Commerce, Defense, Energy, and the Interior. Also, as multiple executive orders direct all agencies with land to preserve the environment, some could argue that any such agency has as one of its purposes the conservation of natural resources and could meet the standard specified in Section 101. Naming specific land management agencies in the Section 101 definition would explicitly limit the federal lands to which this legislation applies. This approach is used in other legislation; the Federal Lands Recreation Enhancement Act (FLREA; P.L. 108-447 ), for example, defines f ederal land management agency as "the National Park Service, the United States Fish and Wildlife Service, the Bureau of Land Management, the Bureau of Reclamation, or the Forest Service." Section 101(a) defines hunting to mean the "use of a firearm, bow, or other authorized means in the lawful (i) pursuit, shooting, capture, collection, trapping, or killing of wildlife; or (ii) attempt to pursue, shoot, capture, collect, trap, or kill wildlife." The definition includes trapping, an activity that traditionally is not included in the definition of hunting. Trapping currently is allowed under some circumstances on some federal lands, but the use of traps (particularly a design called leghold traps) has been controversial and is less common than traditional hunting on federal lands. Although the definition in Section 101 concerns hunting, the provision addressing licensing in Section 101(b)(9)(B)(i) refers to "fish, hunt, and trap." The reference to trapping may be unnecessary, because the bill defines hunting to include trapping. In addition, Section 101(b)(6) refers to "activities relating to fishing or hunting," potentially expanding the allowed activities. Section 101(a)(4) defines recreational fishing as "an activity for sport or pleasure that involves the lawful ... catching, taking, or harvesting of fish; or ... attempted catching, taking, or harvesting of fish; or ... any other activity for sport or pleasure that can reasonably be expected to result in the lawful catching, taking, or harvesting of fish." Section 101(a) defines recreational shooting as "any form of sport, training, competition, or pastime, whether formal or informal, that involves ... the discharge of a rifle, handgun, or shotgun, or ... the use of a bow and arrow." The definition appears to include hunting; shooting ranges; informal target practice; and war reenactments, both formal and informal. However, unlike the definition of hunting and recreational fishing, the word lawful is not included in this definition. Under Section 101(b)(1), managers are to "facilitate use of and access" to FPLs for this activity. Recreational shooting, including shooting ranges, on some lands besides those of FS and BLM that might be included in this bill likely would be controversial. Recreational shooting, generally allowed on most FS and BLM lands, has been controversial in some specific areas, due to conflicts with adjacent property owners, the presence of debris such as spent shells or damaged targets, or resource damage. Because controversy over the continued existence of shooting ranges has focused on FS or BLM lands, where shooting ranges usually have been allowed by regulation, it may be that only those lands were intended to be affected by the promotion of shooting ranges. Section 101(b) would direct the heads of FPL management agencies to facilitate use of and access to lands for hunting (defined to include trapping), fishing, and recreational shooting. Section 101(b)(2) would require that each FPL management agency act (1) in a manner that supports and facilitates hunting, fishing, and recreational shooting opportunities; (2) to the extent authorized under applicable state law; and (3) in accordance with applicable federal law. This provision may raise questions because state law does not authorize actions on federal land. Instead, federal lands generally are managed for these activities consistent with state law, which establishes hunting seasons, game species, fishing licenses, etc. Although agencies would be required to manage public lands to facilitate those activities, Section 101(b)(7) states that the title does not require "a Federal agency to give preference to recreational fishing, hunting, or shooting over other uses of Federal public land." This provision is an example of the apparent tension in the bill between directing federal agencies generally to allow more hunting, fishing, and shooting and to facilitate such activities procedurally, on the one hand, and seeking to maintain some existing management structures and policies, on the other. The sections preceding Section 101(b)(4) provide directives to all FPL agencies. However, Section 101(b)(4)(C) applies to BLM and FS lands only, and it specifies that the heads of the two agencies may use existing authorities to lease or permit use of lands for shooting ranges and to designate specific lands for recreational shooting activities. Although Section 101(b)(4) applies explicitly to BLM and FS, Section 101(b)(4)(C) also directs the "head of each Federal public land agency," the general term used in the rest of Section 101, to address recreational shooting. As a result, clarification may be needed for whether that particular provision is limited to BLM and FS. A separate management directive appears in Section 101(b)(8) that would require agency heads to consult with advisory councils established in two executive orders. The first, Executive Order 12962, established a recreational fisheries council. The second, Executive Order 13443, did not create an advisory council but referred to the Sporting Conservation Council that DOI had established a year earlier. Section 101(b)(3)(B) would direct that, on BLM and FS lands where hunting is prohibited by law, federal land planning documents must allow skilled volunteers to assist in culling and other management of wildlife populations. The existing practice uses employees of Wildlife Services of the Department of Agriculture instead of skilled volunteers. However, this section provides that the current policy can continue if the head of the agency demonstrates, based on the best scientific evidence or applicable federal law, that skilled volunteers should not be used for this purpose. S. 556 provides that lands will be open unless closed, and Section 101 would establish processes for when and how those lands can be closed to hunting, fishing, or recreational shooting. Some criteria required by Section 101(b)(3)(A) may not have been used in developing current land plans by BLM, FS, or the other federal lands that may be covered in Section 101. (See Table 1 .) As a result, S. 556 could affect existing plans that have not considered all the activities contained in the definitions of hunting, fishing, and recreational shooting. The bill is silent as to how those existing plans should be treated. For example, the plans could remain in place until they are revised; they could be required to be revised immediately; or all lands could be open to hunting, fishing, and recreational shooting upon the bill's enactment, regardless of restrictions in existing plans, until new plans are finalized using the new criteria. Section 101(b)(1) directs officials in FPL agencies to "exercise the authority of the official under existing law ... to facilitate use of and access to Federal public land." It would create a three-prong test for when agencies may close lands: existing law, "including regulation," authorizes limits for reasons of national security, public safety, or resource conservation; existing law specifically precludes recreational fishing, hunting, or recreational shooting on specific lands or waters; or discretionary limitations on hunting, fishing, and recreational shooting are determined to be necessary and reasonable as supported by the best scientific evidence and advanced through a transparent public process. The last prong, Section 101(b)(1)(C), would appear to establish new criteria for closing lands, rather than using existing statutory authority. As a result, all agencies' planning processes could require an additional step to determine land uses if limits on those activities are imposed. In addition, Section 101(b)(1) would require an evaluation to curtail activities based on three phrases: "necessary and reasonable"; "supported by the best scientific evidence"; and "advanced through a transparent public process." These three phrases would require interpretation by the agencies incorporating them into their land planning practices. They also could require interpretation by courts if groups disagree with an agency's interpretation or application. Currently, wilderness, wilderness study areas, and areas administratively classified as eligible or suitable for wilderness designation, solely as a result of such designation, are not closed to fishing, hunting, and recreational shooting. Section 101(b)(4), applying only to BLM and FS lands, explicitly directs that those lands "shall be open to recreational fishing, hunting, and recreational shooting unless the managing Federal public land agency acts to close the land to the activity." This language differs from the Section 101(b)(1) language that directs land management agencies to "facilitate use of and access to" lands for those activities. Moreover, the provision explicitly includes units of the National Wilderness Preservation System, wilderness study areas, and areas administratively classified as eligible or suitable for wilderness designation as subject to this provision. Although Section 101(b)(4)(A)(ii) further specifies that nothing in the subparagraph authorizes motorized access, it does so only for "wilderness study areas and areas administratively classified as eligible or suitable for wilderness designation" and does not apply the same savings provision to designated wilderness. In testimony regarding S. 556 , Leslie Weldon, FS Deputy Chief stated We are concerned that section 101(b)(4)(A)(ii) could be read to open [designated] wilderness areas administered by the Forest Service to temporary roads, motor vehicles, motorized equipment, motorboats, and other forms of mechanized transport in furtherance of recreational hunting, shooting, and fishing. Further, this provision only mentions motorized vehicles but is silent on other prohibited uses under section 4(c) of the Wilderness Act (16 U.S.C. 1133(c)), such as mechanical transport, structures, and installations. As a result, this provision creates uncertainty as to whether such uses, when in furtherance of recreational hunting, shooting, and fishing, would remain prohibited under the Wilderness Act. Although Section 101(b)(1) applies to FPLs generally, it may be that the more specific criteria in Section 101(b)(4) would supersede application of Section 101(b)(1) to BLM or FS. However, it also may be interpreted that Section 101(b)(4) would provide additional criteria for BLM and FS closures or give managers a choice of criteria. Unlike Section 101(b)(1), it could be found that the criteria used in Section 101(b)(4) would be consistent with existing land planning practices. Under Section 101(b)(4), the head of the agency could close or limit lands available for hunting, fishing, or shooting when it is necessary and reasonable and supported by facts and evidence. Lands may be limited for purposes including the following: resource conservation, public safety, energy or mineral production, energy generation or transmission infrastructure, water supply facilities, protection of other permittees, protection of private property rights or interests, national security, or compliance with other law. This provision appears to allow BLM and FS to base land closure decisions on something other than the "best scientific evidence" and "transparent public process" required by Section 101(b)(1). While adding the criteria listed above, Section 101(b)(4) does not repeal the existing management criteria dictated by federal land management laws—for example, FLPMA and the National Forest Management Act (NFMA; P.L. 94-588 ) —and would add to agencies' planning responsibilities. Section 101(b)(6) would require a process for the "permanent or temporary withdrawal, change of classification, or change of management status ... that effectively closes or significantly restricts 1,280 or more contiguous acres of Federal public land or water to access or use for recreational fishing or hunting." Unlike most provisions in Section 101, Section 101(b)(6) does not include recreational shooting as an activity that triggers coverage. Additionally, it would exclude closures made under Section 101(b)(4), meaning it excludes those closures on BLM and FS lands. Closures, except for emergency closures, must follow this procedure: publish appropriate notice; demonstrate that coordination has occurred with a state fish and wildlife agency; and submit written notice to the House Committee on Natural Resources and the Senate Committee on Energy and Natural Resources. Most short-term closures, such as for a day or a week, are not exempted. (See " Criteria for Closing Lands in an Emergency ," below.) Section 101(b)(6) would address aggregate effects of multiple closures for areas that are smaller than 1,280 acres each. It states that if the effect of "separate withdrawals or changes effectively closes or significantly restricts or affects 1,280 or more acres of land or water, the withdrawals and changes shall be treated as a single withdrawal or change for purposes of [Section 101(b)(6)(A)]." It does not specify whether this provision would apply to the cumulative closures among all agencies or whether a geographical link among the closures would be required. Therefore, closures of 200-acre plots in 10 different states, for example, could amount to a closure that required reporting and publication. It appears that this section may not apply to BLM or FS lands. Currently, there is no coordinating body among federal land agencies to manage the requirements of Section 101(b)(6). Section 101(b)(6)(C) would allow an agency in an emergency to close "the smallest practicable area of Federal land to provide for public safety, resource conservation, national security, or other purposes authorized by law." Emergency is not defined. The emergency closures terminate "after a reasonable period of time." Although emergency closures are allowed, Section 101(b)(6)(C) is silent as to whether agencies still must follow the notice and reporting requirements established elsewhere in the section. The bill would require that decisions affecting the opportunities for hunting, fishing, and recreational shooting be part of an agency's planning document. Section 101(b)(3) would require that each planning document "include a specific evaluation of the effects of the plans on opportunities to engage in recreational fishing, hunting, or recreational shooting." Although many federal lands, especially those of BLM, FWS, and FS, already are open to hunting and fishing, recreational shooting is somewhat less common. In addition, because of the breadth of activities included under the bill's definition of recreational shooting, agencies may not have evaluated recreational shooting in light of all of the included activities when making existing land use plans. Moreover, some of the potentially affected lands may not have planning documents analogous to those of BLM and FS. Because Section 101 would not establish any deadlines for instituting most of these practices, it is unclear if all planning documents would need to be changed immediately or if management changes could be incorporated when the document is next revised. In the case of some agency plans, those revisions may not occur for 15 years. Another interpretation is that the lands would be open upon the law's enactment regardless of the current plan. This reading appears possible in the instance of BLM and FS lands, in light of the directive in Section 101(b)(4) that those lands "shall be open ... unless the managing Federal agency acts to close lands." Additionally, it is not clear what parts of S. 556 would trigger a plan revision. For example, the definition of hunting, which includes trapping, could require revision of land management plans that allowed hunting but not trapping. Agencies would incur costs to revise existing plans because the plans are subject to public review processes. Two provisions of S. 556 would require federal land management agencies to notify Congress of restrictions on hunting, fishing, and recreational shooting. If an agency closes federal land to those activities, Section 101(b)(5) would require the agency heads to submit a report every two years to the House Committee on Natural Resources and the Senate Committee on Energy and Natural Resources. Despite the biennial reporting requirement, the bill directs the reports to describe only those closures happening in the previous year. An additional reporting mandate appears in Section 101(b)(6) and would require notice to congressional committees of closures affecting 1,280 acres or more. Although no deadline is established, the areas could not be closed until those committees are given notice. The bill does not state whether the reporting requirements within Section 101 would replace or supplement the reporting requirements in FLPMA. Section 202 of FLPMA already requires BLM to report to Congress when it closes land to principal or major uses when the land is 100,000 acres or more and if that land will be closed for two or more years. Section 101(b)(4)(C) includes a waiver of liability for the federal government for claims related to shooting ranges established under this paragraph. Because Section 101(b)(4)(C) refers to the term "Federal public land," the limitation of liability may apply to many agencies and not only to BLM and FS lands. The liability limitation does not apply to recreational shooting activities occurring elsewhere, however. Section 101(b)(9) states that nothing in the section "interferes with, diminishes, or conflicts with the authority, jurisdiction, or responsibility of any State to manage, control, or regulate fish and wildlife under State law (including regulations) on land or water within the State, including on Federal public land." Other provisions also indicate that the bill is not intended to interfere with state law, as discussed above: Section 101(b)(2)—management of federal lands would be to the extent authorized by state law; Section 101(b)(3)(B)—use of volunteers to cull animals would be in cooperation with state agencies; and Section 101(b)(6)—closures of lands with a total area of 1,280 acres or more would be made in coordination with state agencies. Section 101(b)(9) states that the section does not authorize imposing a federal "license, fee, or permit to fish, hunt, or trap" on federal lands, excluding the Migratory Bird Stamp. (Recreational shooting is not included.) This provision could prevent the creation of license or permit requirements based on this title rather than revoke existing authorizations for license, fees, and permits. Land agencies already have permit requirements for some activities mandated in Section 101. Because nearly all federal lands require a type of permit for activities that otherwise would be prohibited, this directive may require land management agencies to revise their regulations. Although Section 101(b)(9) would not authorize new fees for fishing, hunting, or trapping, it would not prohibit continued application of the Federal Lands Recreation Enhancement Act (FLREA). Applying FLREA could allow agencies to impose a type of recreation fee for activities other than fishing, hunting, or trapping—such as shooting ranges or war reenactments, for example—subject to that act's restrictions. In many cases, Section 102 of S. 556 would reduce fees and facilitate access to "Federal land and waterways" for commercial film crews of up to five people. It specifies that such crews could obtain a permit for $200, good for one year, for commercial filming in areas and times that are open to public use. No additional fees could be charged. The agency could deny access if resources might be damaged and the damage could not be mitigated; if public use would be unreasonably disrupted; if the public would face health or safety risks; or if the filming would use "models or props that are not part of the natural or cultural resources or administrative facilities of the Federal land." Currently, such fees are variable and must generate a "fair return" based on the number of days of use, size of the crew, and amount and type of equipment. The fee structure for federal agencies is being standardized across DOI and FS, as directed by P.L. 106-206 . Concerns about the measure include (1) whether it opens up wilderness areas to commercial filming; (2) whether the new fee of $200 provides access to all federal lands for a year or whether each unit or agency issues a permit; and (3) whether the proposed fee generates the fair return to the taxpayer directed by P.L. 106-206 or results in a loss to the federal government. Section 103 would amend provisions of the Equal Access to Justice Act (EAJA), a general fee-shifting statute that allows a "prevailing party" to recover costs and attorneys' fees against the United States in both administrative and judicial proceedings, if the position of the United States was not substantially justified. EAJA's provisions are codified at Title 5, Section 504 of the United States Code (agency adjudication) and Title 28, Section §2412(d) of the United States Code (judicial proceedings). EAJA contained congressional reporting requirements, both of which were eliminated in 1995. For fees awarded under agency adjudication, the Chairman of the Administrative Conference of the United States (ACUS) was required to report annually to Congress the amount of fees awarded during the preceding fiscal year. For fees awarded by the court, the Attorney General was required to report annually to Congress on such payments. Section 103 would reinstitute the reporting requirements eliminated in 1995 and make the Chairman of ACUS responsible for issuing annual reports to Congress and establishing searchable online databases of fees and other expenses awarded in both agency adjudications and judicial proceedings. The requirements for the information to be included in the congressional reports and in the online databases are similar for both agency-awarded fees and court-awarded fees. The reports must include "the number, nature, and amount of the awards, the claims involved in the controversy, and any other relevant information that may aid Congress in evaluating the scope and impact of such awards." Payments of attorneys' fees and other expenses made pursuant to a settlement also would be reported, regardless of whether the settlement agreement is sealed or otherwise subject to a nondisclosure provision. Specifically for reports on court-awarded fees, the Chairman would be required to identify (1) any amounts paid under Title 31, Section 1304 of the United States Code ; (2) the amount of the award of fees and other expenses; and (3) the statute under which the plaintiff filed suit. The online databases for agency-awarded and court-awarded fees would be required to include specific information, including the case name and number, and if available, a hyperlink to the case; the name of the agency involved; a description of the claims at issue; the name of each party to whom the award was made; the amount of the award; and the basis for finding that the position of the agency concerned was not substantially justified. The heads of each agency would be required to provide relevant information to the Chairman of ACUS in a timely manner. Section 103 also would amend Title 31, Section 1304 of the United States Code , the provision that establishes and governs payments from the Judgment Fund, which is a permanent and indefinite appropriation generally used to pay all judgments against the United States not otherwise covered by a specific appropriation. In 2011, the House Committee on Appropriations report that accompanied P.L. 112-34 directed the Secretary of the Treasury to make available online an annual report about payments made from the Judgment Fund for the fiscal year. Unless information had been prohibited by law or court order, the committee wanted the report to include (1) the name of the plaintiff or claimant; (2) the name of the counsel for the plaintiff or claimant; (3) the name of the agency that submitted the claim; (4) a brief description of the facts that gave rise to the claim; and (5) the amount paid representing principal, attorney fees, and interest, if applicable. The Bureau of the Fiscal Service within the Department of the Treasury issued reports for FY2011 and FY2012 to Congress with a majority of this information, and it has made available online in a nearly identical format all payments made from the Judgment Fund for each fiscal year beginning with FY2003. Section 103 would appear to codify this committee directive by amending Title 31, Section 1304 of the United States Code . As with the previous House committee directive, Section 103 would require the Secretary of the Treasury to post the following on a publicly accessible website: the agency; the name of the plaintiff/claimant; the name of the counsel for plaintiff/claimant; the principal amount paid and any other costs or attorneys' fees; and a summary of facts for each claim. The Secretary would be required to post this information within 30 days after the payment was made unless such information is prohibited from disclosure by law or a court order. Section 104 would allow the carrying of a bow or crossbow in a vehicle across NPS lands if the arrows are stored for transport and the crossbow is not cocked. The provision would set three conditions for this transport: the individual is not prohibited by law from possessing the bows or crossbows; the bows or crossbows remain in the vehicle while on NPS lands; and the possession of the bows or crossbows is legal in the state. By requiring that the bows or crossbows remain in the vehicle, issues arising from their possession inside a visitor center, historic building, or other structure would be avoided. The three conditions set by Section 104 appear consistent with current NPS regulations, which permit the carrying of inoperable weapons on NPS lands if the carrying is consistent with state law. Sometimes the best access to federal land is across private property. At least two federal land management agencies, BLM and FS, have authority to acquire property to provide easier access to federal lands. The authority includes eminent domain. Section 201 of S. 556 would amend the Land and Water Conservation Fund (LWCF) Act by directing the Secretaries of the Interior and of Agriculture to devote a portion of the appropriations from the fund to federal acquisitions that secure access for recreational activities. Specifically, the bill provides that the greater of $10 million or 1.5% of the annual appropriation for LWCF would go to the acquisition of lands, rights of way, or other interests from willing sellers to improve access for these activities. Section 201 does not specify how the moneys are to be divided among agencies. In contrast, annual appropriations laws typically specify an amount of acquisition funding for each of the four major federal land management agencies (BLM, FWS, NPS, and FS). The extent to which the agencies and Congress historically have prioritized appropriations for recreation access is unclear. However, for FY2016 the Administration seeks a portion of the overall acquisition budget of each of the four agencies for acquisitions that would facilitate recreational access. In addition to the explicit directive in this section, Section 101(b)(1) also could be read as encouraging agencies to exercise their statutory authority to facilitate access to federal lands by acquiring property, such as easements, from adjoining property owners. The term federal public land is not defined for this section. (See Table 1 .) Section 202 would direct federal public land management agencies to study federal lands on which hunting, fishing, and other recreation is allowed but for which the public's access is difficult or nonexistent. For this section, federal public land management agency is defined as FWS, NPS, BLM, or FS. This roster of just four agencies implies a different definition of federal public land than that provided in Section 101, where NPS and FWS lands are excluded but various other categories of federal lands are included. (See Table 1 .) The study is to be updated at intervals and must provide a priority list of lands over 640 acres with restricted public access. It also must state whether access to those lands could be resolved by gaining an easement, right of way, or fee title from a federal agency; a state, tribal, or local government; or a private landowner. The study is to consider both motorized and nonmotorized access. Section 202 also would require reports to House and Senate Committees. Section 203 of S. 556 would reauthorize and amend the Federal Land Transaction Facilitation Act (FLTFA). FLTFA expired on July 25, 2001. The law had provided for the sale or exchange of BLM land that had been identified for disposal under BLM land use plans. Proceeds were split between the state with the disposed lands (4%) and a separate Treasury account (96%). While BLM alone disposed of land, funds in the account were used by all four major federal land management agencies to acquire land. The agencies could acquire inholdings and other nonfederal lands (or interests therein) that are adjacent to federal lands and contain "exceptional resources." Under the law, BLM raised $117.4 million through sale of 330 parcels totaling 27,249 acres. Federal agencies acquired 37 parcels totaling 18,535 acres at a cost of $50.4 million. Currently, BLM retains authority to dispose of land under the FLPMA. Proceeds from these land sales are deposited in the General Fund of the Treasury. According to BLM, the agency undertook relatively few sales before the enactment of FLTFA due to the costs to the agency of selling lands. Section 203 would permanently reauthorize FLTFA. It also would allow for updated BLM land management plans to be used as the basis for identifying lands for sale and exchange, and it would allow for the acquisition of lands within or adjacent to federally designated areas regardless of when they were established. The section specifies that it does not apply to land sales in six particular locations that are governed under other laws. Finally, it would provide for an annual transfer (for each of FY2016 through FY2025) of $1 million from the FLTFA account to the General Fund of the Treasury. This bill is also titled "the Bipartisan Sportsmen's Act of 2015." Its provisions concern regulating lead shot and sinkers, funding shooting ranges, importing polar bear trophies, hunting over baited fields, carrying loaded arms at Army Corps of Engineers water resource project areas open to the public, and reauthorizing seven wildlife statutes. It was introduced on March 5, 2015, and referred to the Senate Committee on Environment and Public Works; the Subcommittee on Fisheries, Water, and Wildlife held hearings on March 17, 2015. The three witnesses represented Ducks Unlimited, supporting provisions relating to the North American Wetlands Conservation Act (16 U.S.C. §4406(c)(5)); Humane Society of the United States, opposing provisions related to lead shot and sinkers, imports of polar bear trophies, and hunting over baited fields; and Congressional Sportsmen's Caucus, supporting provisions regarding lead shot and sinkers, additional funds for shooting ranges, imports of polar bear trophies, carrying of firearms at Corps projects, and international conservation grants. Each of these provisions is discussed below. Section 2 of S. 659 would expand the existing statutory exclusion of shells and cartridges (and preserve its exclusion of pistols, revolvers, other firearms) from potential regulation as chemical substances under the Toxic Substances Control Act (TSCA; P.L. 94-469 ). The exclusion would be expanded to encompass specific components of these items including shot, bullets and other projectiles, propellants, and primers. Additionally, the exclusion would be expanded to encompass "sport fishing equipment" (primarily lead sinkers ) as referenced in the Internal Revenue Code and sport fishing equipment components. Over the past 20 years, several citizens' organizations have submitted multiple petitions to the Environmental Protection Agency (EPA) requesting that the agency evaluate the risks of lead in ammunition and in fishing sinkers for regulation under TSCA. Most recently, in 2011 and 2012, petitions were submitted again to EPA. One petition addressed lead ammunition. EPA denied that petition because of the existing statutory exclusion under TSCA. EPA's denial of that petition was later upheld in litigation. The other petition addressed lead fishing tackle. EPA denied that petition because the threshold of risk for warranting federal regulation was not demonstrated by the petitioners. Adoption of Section 2 would prevent federal regulation through TSCA but not through other statutory authorities. Lead shot has been banned in the United States for the hunting of migratory waterfowl since 1991 under authority of the Migratory Bird Treaty Act and the Endangered Species Act (ESA; P.L. 93-205 ). Although these two statutes address the use of lead shot in hunting migratory waterfowl, TSCA more broadly applies to the lifecycle of a chemical substance, excluding lead in ammunition or fishing equipment from the definition of a chemical substance. Consequently, the provision would protect continued use of lead shot in hunting of upland game birds (such as turkeys or grouse) or fishing practices that use lead sinkers, but it would not affect the use of lead shot in waterfowl hunting, where it is already banned. Section 3 of S. 659 would allow territories and states to use more of the funds allocated to them under the Pittman-Robertson Wildlife Restoration Act (16 U.S.C. §669) for projects involving land acquisition, construction, and expansion of public target ranges for firearms or archery. A state's allocation of federal funds currently may be used to support a maximum of 75% of any project, with the remainder coming from nonfederal sources. Section 3 would amend 16 U.S.C. §669h-1(a), with the effect of increasing the maximum federal share from the Pittman-Robertson (P-R) program from 75% to 90% for projects acquiring land for, expanding, or constructing target ranges. However, the bill also contains a provision stating that "a State may pay up to 90 percent of the cost of acquiring land for, expanding, or constructing a public target range." No other grant program administered by FWS places an upper limit on the fraction of funding that may be provided by the grant recipient. Instead, other FWS grant programs place upper limits only on the federal share of the grant. Section 3 would define a public target range , for the purposes of P-R, as a location identified by a government agency that is open to the public; may be supervised; and can accommodate archery or rifle, pistol, or shotgun shooting. Before May 15, 2008, when the listing of polar bears as a threatened species under the ESA took effect, it was permissible under U.S. law to import polar bear trophies legally taken in Canada. After that date, import was not allowed. Once the proposed rule to list polar bears as a threatened species was published in January 2007, FWS conducted an extensive campaign to alert hunters to the potential impact of an eventual ESA listing on their ability to import polar bear trophies. However, FWS continued to authorize the import of polar bear trophies under existing law until the ESA listing became final. The permitting process was truncated by court order, making the listing effective immediately rather than after 30 days. Section 4 would amend the Marine Mammal Protection Act (MMPA; P.L. 92-522) to allow hunters with polar bear trophies legally hunted in Canada to import these trophies to the United States. It would direct FWS to issue permits for importing these sport-hunted trophies if a permit was sought before May 15, 2008. It would further amend the MMPA to provide that the permits may be issued regardless of the polar bear's status as a depleted species under MMPA, which is the basis on which the permits were denied. In 2011, FWS testified that it did not oppose similar legislation allowing importation of polar bear trophies by hunters who both applied for an import permit and completed their legal hunt prior to the ESA listing. Others oppose allowing these permits, believing it would encourage hunting of a species when a listing is imminent. The Humane Society of the United States testified in the 112 th Congress that allowing polar bear imports would "would roll back polar bear conservation efforts and set a dangerous precedent for gutting the protections provided under the Marine Mammal Protection Act and the Endangered Species Act." A federal court has upheld the current permit ban, finding that there was no procedural flaw in blocking permits as of the day the bear was listed as threatened. Hunting migratory game birds over baited fields is forbidden by the Migratory Bird Treaty Act and its implementing regulations. There is little controversy over whether such hunting is an unsportsmanlike practice that should be prohibited. There is, however, controversy over precisely what constitutes baiting , how long hunters should wait after an agricultural field has been harvested to avoid the baiting prohibition, and whether the effects of natural disasters might affect whether a field is considered baited. Section 105 addresses these issues by allowing hunting over crops under certain circumstances. Section 5 defines a baited area as an area where there has been the placement of salt grain or feed to attract game birds and an area where there has been manipulation of unharvested cropland (e.g., through mowing or discing), unless the manipulation is a normal agricultural practice. It would explicitly exclude from the definition any areas with (1) a treatment that is a normal agricultural practice, (2) unmanipulated standing crops, or (3) standing crops that are or were flooded. The last provision appears to exclude flooded cropland, whether naturally or artificially flooded. The section defines normal agricultural practice . Some features of this long definition are particularly noteworthy. First, the practice would be considered normal if recommended by the state office of the Cooperative Extension System of the Department of Agriculture. Second, the section would require that the applicable state game department be consulted and, if requested, be asked to concur. It does not specify who may do the requesting and what the effect would be if the applicable state game department did not concur. A normal agricultural practice is defined to include the destruction of crops as required by the Federal Crop Insurance Corporation to obtain a crop insurance payment after a natural disaster. Section 5 also would require an annual report from the Secretary of Agriculture to the Secretary of the Interior on any changes to normal agricultural practices. There has been controversy regarding limits on hunting over baited fields and what constitutes a normal agricultural practice. An amendment similar to this provision was offered in the House during the 113 th Congress. At issue in particular was a practice among rice farmers in Arkansas of managing a drought-damaged rice crop. When rains caused a rare second rice crop to spring up later, that second crop was considered bait, and hunting over it was considered illegal. With this change, farmers could hunt legally or charge other hunters for access to hunt over any fields if local officials deemed a particular agricultural practice to be normal. Neither the farmer nor other hunters would be held to the Migratory Bird Treaty Act's strict liability standards because the bill would prevent such practices from being considered baiting. For areas open to the public at Corps water resource projects, Section 6 would ban the Secretary of the Army from promulgating or enforcing regulations that prohibit individuals from possessing loaded firearms; loaded firearms currently are restricted for use in hunting or shooting in areas designated for such activities. The proposed language would require that possession comply with state law and that the individual not be otherwise prohibited from possessing firearms. This language would allow private individuals to carry loaded and/or concealed firearms consistent with state law at all Corps water resource project areas that are open to the public. However, individuals still would be prohibited from possessing a firearm at a federal facility (as identified under 18 U.S.C. §930) or areas not open to the public. Individuals would be responsible for knowing and complying with all applicable concealed carry laws of the state or states in which the water resources development project is located. The legislation does not distinguish between handguns and other firearms, such as long guns (rifles and shotguns). Supporters of the proposed legislation see enactment as part of a larger, ongoing effort to improve the consistency of laws and regulations concerning firearms on federally managed lands. They also see the proposed legislation as providing for consistent treatment of open and concealed firearms possession within a state, providing for recreational shooting and self-defense, and protecting the right to bear arms under the Second Amendment of the Constitution. Other stakeholders have raised concerns that the proposed legislation ignores implementation challenges that are not generally faced on other federal lands and by other federal land management agencies (e.g., presence of critical facilities or hydropower structures and limited Corps law enforcement authority) and that enactment could produce unintended public safety and infrastructure security issues. Section 7 would reauthorize the North American Wetlands Conservation Act through FY2020. Section 8 would reauthorize the five current laws that together form the Multinational Species Conservation Fund: African Elephant Conservation Act (16 U.S.C. §4245(a)); Rhinoceros and Tiger Conservation Act of 1994 (16 U.S.C. §5306(a)); Asian Elephant Conservation Act of 1997 (16 U.S.C. §4266(a)); Great Ape Conservation Act of 2000 (16 U.S.C. §6305); and Marine Turtle Conservation Act of 2004 (16 U.S.C. §6606) All five laws would be reauthorized through FY2020. In addition, the Great Ape Conservation Act (GACA) would be modified to allow both annual and multiyear grants and to clarify the duties of the panel of experts created under GACA. Among other things, to the extent practicable such panels are to include experts from range states. The panels are directed to identify conservation priorities, taking into account conservation plans and scientific research. The Marine Turtle Conservation Act would be amended to make not only foreign countries but also territories of the United States eligible for grants. The Pittman-Robertson Wildlife Restoration Fund provides grants to states for projects to conserve wildlife, as well as to support hunter education. Funding is derived from excise taxes on firearms and ammunition, and it is mandatory spending (that is, available without further appropriation). Under Title 16, Section 669b of the United States Code , those funds not required for spending in the current year must be invested in interest-bearing U.S. obligations. Further, that interest is then made available for use under the North American Wetlands Conservation Act (NAWCA; P.L. 101-233 ). Authority to transfer the interest to NAWCA expires at the beginning of FY2016. Section 9 would extend the authority for this transfer to the beginning of FY2026. | Hunting, fishing, trapping, and recreational shooting, particularly on federal lands, have been the subjects of various bills for several Congresses. In general, federal land management agencies work with state fish and game agencies in setting quotas, bag or size limits, and other specifics of management. Some agencies currently open more than 90% of their acreage to hunting and fishing. Yet there has been criticism in recent years that insufficient federal land is open to hunting. In the 114th Congress, attention has focused on a pair of companion bills, S. 556 and S. 659. While both are entitled the "Bipartisan Sportsmen's Act of 2015," each addresses different issues. S. 556 is intended to create or reinforce an "open until closed" management policy regarding these activities as well as for trapping and recreational shooting on federal lands. The bill describes criteria for federal land management agencies to consider in closing federal lands to fishing, hunting, or recreational shooting, and it directs that management is subject to existing law. Ambiguities in the text leave some doubt as to which federal lands are subject to the bill's provisions, which may result in the inclusion of lands managed by the Department of Defense, National Aeronautics and Space Administration, and Department of Energy. Those agencies typically are not considered land management agencies. The Bureau of Land Management (BLM), Fish and Wildlife Service (FWS), National Park Service (NPS), and Forest Service (FS) generally are considered land management agencies. S. 556 would change land management practices on some federal lands and require additional or different analyses, reports, or notices. For some agencies and some of the defined activities, modification may only add or change steps in the planning process. In addition, by including trapping under the definition of hunting, the practice of trapping may be added or encouraged on federal lands where it currently is not encouraged or permitted. Other provisions of the bill specify new procedures for small film crews to operate on federal lands, permit the carrying of bows and crossbows in national parks, and set aside a portion of appropriations under the Land and Water Conservation Fund (LWCF) for promoting physical access to federal lands for recreationists. The bill also would require reporting of expenditures under the Equal Access to Justice Act (EAJA; 5 U.S.C. §504) and of payments under the federal government's judgment fund in litigation against the federal government. S. 659 also addresses matters related to wildlife but is less focused on federal lands. It would exempt lead shot and ammunition and fishing sinkers from the provisions of the Toxic Substances Control Act (TSCA; 15 U.S.C. §2602(2)(B)) and allow territories and states to use more of the funds allocated to them under the Pittman-Robertson Wildlife Restoration Act (16 U.S.C. §669) for projects involving public target ranges for firearms or archery. The bill would allow hunters to import polar bear trophies taken in Canada before the species was listed as threatened under the Endangered Species Act (ESA; P.L. 93-205). In addition, it would redefine what constitutes hunting waterfowl over a baited field and allow the possession of loaded firearms at Army Corps of Engineers projects in areas open to the public. Finally, the bill would reauthorize or amend seven statutes relating to international wildlife conservation. |
In 1976, President Gerald R. Ford signed the Toxic Substances Control Act (TSCA) , giving the U.S. Environmental Protection Agency (EPA) authority to regulate production and use of industrial chemicals in U.S. commerce in the interest of protecting health and the environment from unreasonable risks. Thirty-seven years of experience with TSCA implementation and enforcement have demonstrated the strengths and weaknesses of the law and led many to propose legislative changes to TSCA's core provisions in Title I. Based on hearing testimony, a diverse set of stakeholders generally concur that TSCA needs to be updated, although there is disagreement about the extent and nature of any proposed revisions. For a summary of TSCA provisions and history, see CRS Report RL31905, The Toxic Substances Control Act (TSCA): A Summary of the Act and Its Major Requirements , by [author name scrubbed] . Legislation to amend TSCA Title I was introduced in the 111 th and 112 th Congresses. The Safe Chemicals Act (SCA), S. 847 , was reported by the Senate Committee on Environment and Public Works in the 112 th Congress. In the 113 th Congress, Senator Lautenberg reintroduced the reported bill as S. 696 . A few weeks later, Senator Lautenberg and 14 co-sponsors introduced a second comprehensive bill, the Chemical Safety Improvement Act (CSIA), S. 1009 . This CRS report compares key provisions of S. 696 and S. 1009 with provisions of TSCA Title I (15 U.S.C. 2601 et seq.) that would be affected if either bill became law. These provisions are summarized in Tables 1 through 6 of this report. Neither S. 1009 nor S. 696 would affect Titles II through VI of TSCA (except that S. 696 would change the definition of "asbestos" in Title II), nor would they change the basic organization of TSCA Title I. For example, provisions related to testing would remain in Section 4, requirements for notifying EPA when a new chemical or new use is proposed would remain in Section 5, and regulatory authorities would remain in Section 6. Also unaffected would be changes to TSCA Title I that were enacted during the 110 th Congress, such as a provision that bans exports of elemental mercury. However, S. 696 would amend or delete most of the original Title I provisions and would make substantial additions to the current statute. S. 1009 also would amend TSCA Title I provisions significantly but without adding most of the new provisions in S. 696 . Some key differences between the current statute and the bills are summarized in the following sections. S. 696 , as introduced, would direct the EPA Administrator to establish, by rule, various "minimum information sets" that would be required for different chemical substances or categories of substances. The bill would direct EPA to include in each minimum information set any information that the EPA deems necessary for the conduct of a screening-level risk assessment, "sufficient for the Administrator to administer this Act" with regard to categorization of new and existing chemical substances, assignment of priority classes, and safety standard determinations and redeterminations. S. 696 would require submission to EPA of a minimum information set by each manufacturer and processor of a new chemical substance or, as specified by the Administrator, of an existing chemical. The bill would authorize EPA to require, by rule or order, testing and submission by a specified date of additional results of tests not included in any applicable minimum information set "as necessary for making any determination or carrying out any provision" of TSCA. S. 696 would authorize EPA, by order, to take regulatory action if a manufacturer or processor failed to submit required information. Finally, S. 696 would direct EPA to accommodate use of testing methods and strategies to generate information quickly, at low cost, and with reduced use of animal-based testing, to the extent that such methods and strategies would yield information of equivalent quality and reliability. Neither S. 1009 nor the current statute requires development and submission of specified data for either new or existing chemicals. Instead, S. 1009 would direct the Administrator to develop a general framework, policies, and procedures for collecting, evaluating and developing data, and would require integration of relevant information from multiple sources into a tiered testing framework. The bill would authorize EPA to require manufacturers to develop new data if the agency promulgates a rule, enters into a testing consent agreement, or issues an order based on a determination that additional data are needed to perform a safety assessment, make a safety determination, or meet testing needs of an "implementing authority under another Federal statute." S. 1009 would require EPA to publish a statement identifying and explaining the need for data. It also would require EPA to specify a period for test data submission, "which period must not be of an unreasonable duration." Failure to submit any required information is a prohibited act and subjects the manufacturer or processor to penalties. Finally, S. 1009 would direct the Administrator to minimize the use of animals in testing of chemical substances or mixtures through various means. The bill would require the Administrator to promote the development and timely incorporation of new testing methods that are not laboratory animal-based. S. 1009 would authorize the Administrator to adapt or waive animal-testing requirements on request from a manufacturer or processor under specified circumstances. Under the current statute, there is no specific framework or minimum information set, but EPA has the authority to require data submission if it promulgates a rule, including a finding that a chemical "may present an unreasonable risk of injury to health or the environment," or is produced in very large volume and there is a potential for substantial quantity to be released into the environment or for substantial or significant human exposure. The agency also must demonstrate a need for data. EPA also may promulgate such rules for categories of chemicals, but is prohibited by Section 25(c)(2) from promulgating a rule for a group of chemicals that are grouped together solely on the basis of their being new chemical substances. Failure to submit any required information is a prohibited act and subjects the manufacturer or processor to penalties. Under the current statute, EPA maintains an inventory of all chemicals that have been in U. S. commerce since 1976. Manufacturers and importers must notify the EPA prior to manufacturing or importing a chemical not on the EPA inventory (that is, a "new" chemical). Based on information submitted with that notice (see TSCA 5(d) in Table 3 under the heading "Notice content for new chemical substances"), EPA has up to 90 days to determine whether a new chemical may present an unreasonable risk of injury to health or the environment. In addition, under the current statute EPA has authority to require notification 90 days prior to a significant new use of a chemical on the inventory, but the agency first must promulgate a Significant New Use Rule (SNUR) naming the chemical and defining the uses for which notice is required. Based on information submitted with that notice (see TSCA 5(d)), EPA must decide whether the new use may present an unreasonable risk. S. 696 and S. 1009 would continue the new chemical pre-manufacture notification requirement. S. 1009 is similar to the current statute in that it also would require notice prior to a significant new use of a chemical, if EPA has issued a SNUR. S. 696 would add a notification requirement for all chemicals already on the inventory prior to manufacture or processing for any new use or at a new production volume. For chemicals that had undergone a safety evaluation and determination by EPA, notice also would be required prior to a change in the manner of production or processing under S. 696 as introduced. In response to a pre-manufacture notice from a manufacturer to EPA, both bills would require EPA to categorize chemicals based on available information within 90 days of receiving a notice (but the period may be extended). S. 1009 also requires categorization of chemicals with proposed new uses. S. 696 would establish the following categories for new chemicals: Substances of Very High Concern, Substances Unlikely to Meet the Safety Standard, Substances with Insufficient Information, and Substances Likely to Meet the Safety Standard. S. 1009 would categorize new substances and uses as Not Likely to Meet the Safety Standard, Additional Information Is Needed, or Substances Likely to Meet the Safety Standard under Intended Conditions of Use. Under the current statute, the Interagency Testing Committee (ITC) advises the EPA Administrator regarding chemicals that should receive priority consideration for promulgation of a test rule. The ITC reports to EPA biannually, establishes a prioritized list of chemicals, and designates up to 50 chemicals on the list as the highest priority. In selecting chemicals, the committee is authorized to consider all relevant factors, including "the extent to which the substance or mixture is closely related to a chemical substance or mixture which is known to present an unreasonable risk of injury to health or the environment." Priority attention is to be given to chemicals "known to cause or contribute to or which are suspected of causing or contributing to cancer, gene mutations, or birth defects." The EPA Administrator also is authorized under TSCA 5(b)(4) to compile and keep current a list of chemical substances that the Agency has determined present or may present an unreasonable risk of injury to health or the environment. This list of chemicals of concern must be promulgated by notice and comment rulemaking under the Administrative Procedure Act (5 U.S.C. 553) and must provide opportunity for oral and written presentation of data, views, or arguments. In addition, EPA routinely prioritizes chemicals in commerce using its knowledge of chemistry and biology. S. 696 would eliminate the ITC provisions as well as the provision at TSCA 5(b)(4). Instead the bill would direct the Administrator to establish a system for assigning chemical substances into batches, categorizing them, and assigning priorities for testing and regulation. The bill would require the EPA Administrator to screen and prioritize all chemicals on the inventory for the purposes of risk assessment, safety standard determinations, and risk management. EPA would initially assign chemicals to batches. The first batch generally would include chemicals currently in commerce in the United States—that is, chemicals for which manufacturers submitted information to EPA in response to the most recent Chemical Data Reporting rule (issued under TSCA 8(a)). The bill then would direct EPA to assign all of the chemicals in the first batch to one of four categories based on available information: Substances of Very High Concern, Substances with Insufficient Information, Substances of Very Low Concern, and Substances to Undergo Safety Standard Determinations. S. 696 also would direct EPA to add new chemical substances categorized previously by EPA as Substances Likely to Meet the Safety Standard to the inventory of existing chemicals, assign each to a batch, and further categorize each as a Substance of Very Low Concern or a Substance to Undergo a Safety Standard Determination. All chemicals on the inventory categorized as Substances to Undergo a Safety Standard Determination would be prioritized further (Priority 1, Priority 2, or Priority 3) for risk assessment. After the initial categorization and prioritization, S. 696 would direct EPA to review information continually with an eye toward revising chemical assignments. S. 1009 retains the ITC but would require it to advise EPA with regard to testing consent agreements and test orders in addition to test rules. S. 1009 eliminates the chemicals of concern listing provisions of TSCA 5(b)(4), but would direct the Administrator to establish a risk-based screening process as well as criteria for identifying whether existing chemical substances are a high or a low priority for a safety assessment and determination. Priorities would be determined based on: (1) the ability of EPA to schedule and complete safety assessments and determinations in a timely manner; and (2) reasonably available data and information concerning the hazard, exposure, and use characteristics at the time the decision is made. The agency's proposed prioritization screening process and criteria would be published for public comment. Using the screening process, EPA would be required "in a timely manner" to evaluate all existing chemical substances or categories of substances on the active inventory (created under proposed TSCA 8(b)). Substances would be removed from the list of high-priority substances when a safety determination is published. The current statute allows chemicals to remain in U.S. commerce until EPA promulgates a rule and publishes a finding that a chemical presents or will present an "unreasonable risk" to human health or the environment. If EPA demonstrates that a risk associated with a chemical is unreasonable (relative to the benefits provided by the chemical and the estimated risks and benefits of any alternatives), the Agency is required to initiate rulemaking, but only to the extent necessary to reduce that risk to a reasonable level and using "the least burdensome" restriction. Under S. 696 , as introduced, continued production and use of a chemical would be permitted only if EPA made, or expected to make, an affirmative safety determination for the chemical. S. 696 would require manufacturers of chemicals to supply scientific data sufficient for EPA to conclude, based on a risk assessment, that the chemical would meet the safety standard: "there is a reasonable certainty that no harm will result to human health or the environment from aggregate exposure to the chemical substance" under the use conditions evaluated and specified by EPA. The bill would require EPA to base these safety determinations "solely on considerations of human health and the environment, including the health of vulnerable populations." An EPA determination that a chemical would not meet the safety standard would not require a risk assessment. S. 696 would prohibit manufacture, processing, and distribution of a chemical substance that EPA decided did not meet the safety standard; assigned to the category Substances of Very High Concern; assigned to the category Substances Unlikely to Meet the Safety Standard; or assigned to the category Substances with Insufficient Information (pending submission of the applicable minimum information set and re-categorization). In addition, S. 696 would prohibit manufacture of a chemical for any proposed new use that had not been considered in the safety determination issued for that chemical. S. 696 would allow production and use of a chemical determined by EPA to meet the safety standard; pending completion of the safety standard determination for a chemical assigned to the category Substances to Undergo Safety Standard Determinations; or assigned to the category Substances of Very Low Concern. S. 696 would authorize EPA to impose restrictions on the manufacture, processing, use, distribution in commerce, or disposal of a chemical substance, mixture, or article containing a chemical substance to ensure that a chemical use would meet the safety standard. S. 1009 is similar to the current statute in that it would allow manufacture and processing of, and commerce in, a chemical until EPA identified it as high priority and determined that it did not meet the safety standard for the intended conditions of use. EPA would be required to base its safety determinations on risk-based safety assessments considering hazard, use, and exposure (including exposure of vulnerable populations) for the chemical substance under the intended conditions of use. Under S. 1009 , the safety standard that each chemical would be required to meet "ensures that no unreasonable risk of harm to human health or the environment will result from exposure to the chemical." Before conducting the safety assessment, S. 1009 would require that EPA develop a science-based framework for making decisions, including a methodology for conducting safety assessments that addresses specified issues and that is subjected to public comment and scientific peer review. Also included in the framework would be procedural rules for safety determinations. S. 1009 would direct EPA to impose various restrictions on high-priority chemicals that do not meet the safety standard for the intended conditions of use. To ban or phase out manufacture, processing, or use of a chemical substance, EPA would first have to consider and publish a statement discussing "availability of technically and economically feasible alternatives for the substance under the intended conditions of use;" relative risks posed by those alternatives; "economic and social costs and benefits of the proposed regulatory action and options considered, and of potential alternatives; and" "the economic and social benefits and costs of" "the chemical substance," "alternatives to the chemical substance," and "any necessary restrictions on the chemical substance or alternatives." The current statute provides EPA with broad authority, as well as mandates, to require data and to restrict chemical use to prevent unreasonable risk of injury. In the exercise of this authority, manufacturers and processors produce and provide data, while EPA bears responsibility for collecting, analyzing, and evaluating the information and making a case in the public record for each of its risk management decisions for each chemical substance. Under the current statute, EPA is obligated to follow procedures laid out in the Administrative Procedure Act and to provide opportunities for persons to present data, views, or arguments orally and in written submissions. The current statute requires that a transcript be made of oral presentations, and the EPA Administrator must publish findings. TSCA Section 19 [15 U.S.C. 2618 ] authorizes any person to file a petition with the U.S. Court of Appeals for the District of Columbia Circuit or for the circuit in which the person resides or in which the person's principal place of business is located, for judicial review of specified TSCA rules within 60 days of issuance. The appropriate circuit court is directed to set aside specified rules if they are not supported by "substantial evidence in the rulemaking record … taken as a whole." "Rulemaking record" is defined at length in TSCA 19(a)(3). S. 696 would expedite regulatory action relative to the process under the current statute by authorizing EPA to issue administrative orders with respect to specific chemical substances instead of rules (which must be promulgated under the current statute). In addition, S. 696 would exempt certain EPA decisions from judicial review and remove TSCA rulemaking requirements not specified in the Administrative Procedure Act (5 U.S.C. 553) for informal notice and comment rulemaking. The proposed amendments to TSCA also would increase public access to information about EPA's decisions and to some information about chemicals that currently is treated as confidential business information. S. 696 provides for judicial review of safety determinations, in addition to all rules and orders. In the event that a safety determination is challenged in court, S. 696 would require that each manufacturer and processor "at all times bear the burden of proof in any legal proceeding relating to a decision of the Administrator regarding whether the chemical substance meets the safety standard." The bill imposes a duty on the manufacturer or processor of a chemical to provide sufficient information for EPA to determine whether the chemical meets the safety standard, and imposes a duty on EPA to determine whether a chemical meets the safety standard. The scope of EPA oversight also would be expanded by S. 696 . As introduced, the bill includes language that would allow EPA to define various distinct forms of substances that are the same in terms of molecular identity but differ in structure and function, such as manufactured nanoscale forms of carbon and silver. S. 696 also might broaden the scope of environmental risks that EPA is authorized to manage by defining "environment" to include the indoor environment. S. 696 would authorize EPA activities not currently authorized under TSCA to allow implementation of three international agreements pertaining to persistent organic pollutants and other hazardous chemicals. For example, the proposal would authorize EPA to regulate chemicals manufactured solely for export. The authority provided by the bill would be specific to three international agreements, rather than more generally authorizing regulatory activity to implement any ratified international agreement concerning chemicals. The bill would prohibit production and use of chemicals when it was inconsistent with U.S. obligations under any of the three international agreements after they had entered into force for the United States. S. 1009 is similar to the current statute, providing EPA with broad authority and mandates to require data and to restrict chemical use to ensure no unreasonable risk of harm from exposure. In the exercise of this authority, manufacturers and processors would produce and provide data, while EPA would bear responsibility for collecting, analyzing, and evaluating the information and making a case on the public record for each of its risk management decisions for each chemical substance. S. 1009 would allow EPA to negotiate consent agreements or to issue orders rather than rules in some cases. EPA uses consent agreements currently. Under S. 1009 , EPA would be required to justify its use of orders. The proposed legislation would direct EPA to develop and use a framework for decision making that incorporates most of the analytic, data quality control, publication, and notice and comment requirements of rulemaking and the Information Quality Act (Section 515 of P.L. 106-554 ). Under S. 1009 , EPA would still be obligated to follow procedures laid out in the Administrative Procedure Act when promulgating a rule but TSCA requirements beyond those in the APA would be eliminated. Like the current statute, S. 1009 would authorize any person to file a petition with the U.S. Court of Appeals for the District of Columbia Circuit or for the circuit in which the person resides or in which the person's principal place of business is located, for judicial review of a Title I rule (not an order) requiring data development, imposing a restriction or prohibition, including restriction or prohibition for elemental mercury, or requiring information reporting. Judicial review would not be authorized for significant new use determinations, rules regarding PCBs, or rules regarding asbestos or lead-based paint under Titles II and IV, respectively. Proposed TSCA Section 19 would retain the current standard of evidence for rules requiring data development or imposing a restriction or prohibition (including a restriction or prohibition for elemental mercury), but would define "evidence" to mean any matter in the rulemaking record and would prohibit review of the contents and adequacy of the statement of basis and purpose, except as part of the rulemaking record as a whole. Currently, TSCA Section 18 includes certain preemptions of state and local authority, and limitations to those preemptions. If EPA requires testing of a chemical under Section 4, no state may require testing of the same substance for similar purposes. Similarly, if EPA prescribes a rule or order under Section 5 or 6, no state or political subdivision may have a requirement for the same substance to protect against the same risk unless the state or local requirement is identical to the federal requirement, is adopted under authority of another federal law, or generally prohibits the use of the substance in the state or political subdivision. TSCA authorizes states and political subdivisions to petition EPA, and authorizes EPA to grant petitions by rule to exempt a law in effect in a state or political subdivision under certain circumstances. A petition may be granted if compliance with the requirement would not cause activities involving the substance to be in violation of the EPA requirement, and the state or local requirement provides a significantly higher degree of protection from risk than the EPA requirement does, but does not "unduly burden interstate commerce." S. 696 would significantly simplify this section of TSCA. As amended, TSCA would not preempt laws relating to a chemical substance, mixture, or article unless compliance with both federal and the state or local laws was impossible. S. 1009 would preempt state laws, new and existing , that (1) require testing or information "reasonably likely to produce the same data and information required" by rule, consent agreement, or order under proposed TSCA Section 4, 5, or 6; (2) prohibit or restrict the manufacturing, processing, distribution in commerce, or use of a chemical after issuance of a completed safety determination under proposed TSCA Section 6; or (3) require notification for a significant new use of a chemical if EPA requires notification under proposed TSCA Section 5. Proposed TSCA Section 18 also would preempt new state prohibitions or restrictions for any high-priority and low-priority substance. Exceptions to the general preemption provision would include laws—adopted under the authority of any other federal law; implementing a reporting or information collection requirement not redundant of federal law; or adopted pursuant to state authority related to water quality, air quality, or waste treatment or disposal, as long as it does not impose a restriction on the manufacture, processing, distribution in commerce, or use of a chemical and is not redundant or inconsistent with an EPA action under proposed TSCA Section 5 or 6. TSCA Section 14 [15 U.S.C. 2613] protects proprietary confidential information submitted to EPA about chemicals in commerce. Disclosure by EPA employees of such information generally is not permitted, except to other federal employees or when relevant in any proceeding under TSCA. Manufacturers, processors, or distributors in commerce may designate information that they believe is entitled to confidential treatment. If EPA proposes to release such data to the public (in the limited cases where it is authorized to do so), then the EPA Administrator must notify the manufacturer, processor, or distributor who designated the information confidential. Disclosure of confidential business information (CBI) is required when "necessary to protect health or the environment against an unreasonable risk of injury to health or the environment." S. 696 would increase public access to information about EPA's decisions and to some information about chemicals that currently is treated as CBI. Like the current statute, S. 696 would prohibit disclosure of CBI by EPA employees except to other federal agencies and EPA contractors or if the disclosure is necessary to protect human health or the environment (the qualifier "against an unreasonable risk" is omitted). Proposed TSCA Section 14 also would direct EPA to disclose information upon request to a state or tribal government for the purpose of administration or enforcement of a law, if an agreement ensured that appropriate steps would be taken to maintain the confidentiality of the information. EPA also would be directed to disclose information to public health or environmental health professionals or medical personnel under certain conditions. S. 696 would categorize and specify types of CBI as (1) information always eligible for protection, (2) information that may be eligible for protection, and (3) information never eligible for protection. The bill would direct EPA to promulgate rules specifying acceptable bases on which written requests to maintain confidentiality might be approved and documentation and justification that must accompany such a request. The Administrator would be required to review and respond to requests for confidentiality within 90 days of receiving the information. S. 696 would require those designating CBI to justify such claims and to certify that the information is not otherwise publicly available. If approved, submitted information generally would be protected from disclosure for up to five years. S. 1009 is similar to the current statute, but the bill would require persons to substantiate any claim that information qualifies for disclosure protection. As in the current statute, the proposed requirements of S. 1009 would not apply if the Administrator determined that disclosure was necessary to protect human health or the environment (the qualifier "against an unreasonable risk" is omitted) nor to disclosure of information to an officer, employee, contractor or employees of that contractor of the United States. Information also may be disclosed to a state or political subdivision of a state, or to a health professional under specified circumstances. Information may be disclosed when necessary in a proceeding under proposed TSCA or to any duly authorized committee of the Congress. If enacted, the bill would prohibit the Administrator from disclosing trade secrets and other information defined as presumed to be protected. Also, S. 1009 would identify information not protected from disclosure, including identity of a chemical unless the person meets substantiation requirements; specified health and safety information and determinations; and certain general information. The bill would require the submitter to justify why information qualifies for confidentiality protection, and to certify that the information submitted is true and correct. In addition, for claims related to chemical identity, S. 1009 would require the submitter to provide specified information demonstrating that confidentiality of the identity has been and is likely to be protected, and disclosure is likely to cause substantial harm to the competitive position of the person. In such cases, the submitter would have to identify a time period for which disclosure protection is necessary and a generic name for the chemical. S. 1009 would require the Administrator to protect CBI from disclosure for the period of time requested by the person submitting and justifying the claim, or for such period of time as the Administrator determines to be reasonable. The Administrator would be authorized to request "redocumentation" of a claim. S. 1009 would dictate a process for receiving and acting on claims for protection from information disclosure, and for providing recourse in the event the Administrator decides to release such data. Finally, S. 1009 would ensure that EPA may not require substantiation of a confidentiality claim for protection from disclosure of information submitted to EPA prior to the date of enactment of S. 1009 or to require more substantiation than proposed TSCA Section 14 requires. Several new provisions would be included in an amended TSCA under S. 696 , but not under S. 1009 . One provision under S. 696 , for example, would require definition and listing of localities with populations that are "disproportionately exposed" to toxic chemicals. EPA would be directed to develop an action plan to reduce exposure in such "hot spots." S. 696 also would require EPA to establish a program to create market incentives for the development of safer alternatives to existing chemical substances that reduce or avoid the use and generation of hazardous substances. The program would be required to expedite review of a new chemical substance if an alternatives analysis by a manufacturer or processor indicated the substance was a safer alternative, and to recognize a substance or product determined by EPA to be a safer alternative. Another new provision of S. 696 would direct the EPA Administrator to coordinate with the Secretary of Health and Human Services to conduct a biomonitoring study for any chemical that research indicated might be present in human tissues and that could have adverse effects on human development. The study would be designed to determine whether the chemical in fact was present in pregnant women and infants. If the chemical were found to be present, manufacturers and processors would have to disclose to EPA, commercial customers, consumers, and the general public all known uses of the chemical and all articles in which the chemical was expected to be present. Children's environmental health also is addressed by S. 696 . It would establish a children's environmental health research program at EPA and an advisory committee to provide independent advice relating to implementation of TSCA and protection of children's health. S. 696 also would establish at least four research centers to encourage the development of safer alternatives to existing hazardous chemical substances. In addition, "green chemistry and engineering" would be promoted through grants. In the remainder of this CRS report, Tables 1 through 6 summarize selected provisions of S. 696 and S. 1009 , as introduced, and current TSCA. | Thirty-seven years of experience implementing and enforcing the Toxic Substances Control Act (TSCA) since its enactment have demonstrated the strengths and weaknesses of the law and led many to propose legislative changes to TSCA's core provisions. The Safe Chemicals Act (S. 696) and the Chemical Safety Improvement Act (S. 1009) introduced in the 113th Congress would amend TSCA Title I. This CRS report compares key provisions of S. 696 and S. 1009 with the language of the current statute (15 U.S.C. 2601 et seq.). Existing Law TSCA as enacted authorizes the Environmental Protection Agency (EPA) to require manufacturers to develop data about chemical toxicity and exposure if EPA determines that a chemical may pose an unreasonable risk, or if chemical exposure is expected to be substantial. TSCA allows a chemical to enter and remain in commerce unless EPA can show that it poses "an unreasonable risk of injury to health or the environment." EPA then must regulate to control unreasonable risk, but only to the extent necessary using the "least burdensome" means of available control. This TSCA standard has been interpreted to require cost-benefit balancing. The current statute preempts state and local laws regarding chemicals specifically regulated by EPA. Proposed Legislation S. 696 would amend TSCA to require chemical manufacturers and processors to submit specified information about the toxicity and usage of chemicals in commerce to EPA. The information would be used by EPA to determine whether a chemical would meet the safety standard of "a reasonable certainty of no harm from aggregate exposure," given the imposition of any needed restrictions on manufacture, processing, distribution, use, or disposal. S. 696 would prohibit uses of evaluated chemical substances unless they were determined by EPA to meet the safety standard. S. 696 would increase public access to information about EPA's decisions and to some information about chemicals that currently is treated as confidential business information. S. 696 would rarely preempt state and local laws. S. 1009 would authorize EPA to require manufacturers to develop new information if EPA can show need in the context of an evaluative framework for chemical risk assessment and management. The bill would require EPA to screen all chemicals in commerce and assign each to one of three categories: high priority for risk assessment, low priority for risk assessment, or in need of additional information. S. 1009 would require EPA regulation, by rule or order, ensuring "no unreasonable risk of harm from exposure" to a chemical under the intended conditions of use. S. 1009 would preempt new state and local laws for chemicals identified as high or low priority. Both Senate bills would evaluate the existing inventory of chemicals in U.S. commerce since 1976 to allow prioritization of the estimated 9,000 chemicals currently produced and used in the United States. In addition, both bills would explicitly require manufacturers to substantiate some requests for protection of confidential business information from public disclosure. S. 696 (but not S. 1009) also would add a new section to TSCA to allow U.S. implementation of three international agreements. S. 1009 would amend an existing section of TSCA to allow implementation of one treaty. Other provisions included in S. 696 would authorize EPA to support research in "green" engineering and chemistry, promote alternatives to toxicity testing on animals, encourage research on children's environmental health, require biomonitoring of pregnant women and infants, require EPA to identify "hot spots" where residents are exposed disproportionately to pollution, and direct EPA to develop strategies for reducing their risks. Key provisions of S. 696 and S. 1009 are compared with current statute in Tables 1 through 6 of this CRS report. |
The privacy and security of health information is recognized as a critical element of transforming the health care system through the use of health information technology. As part of H.R. 1 , the American Recovery and Reinvestment Act of 2009, the 111 th Congress is considering legislation to promote the widespread adoption of health information technology (HIT), and the bill includes provisions dealing with the privacy and security of health records, and specifically authorizes state attorneys general to file lawsuits in federal court on behalf of state residents, seeking injunctive relief or civil damages against "any person" who violates HIPAA's privacy provisions. In 1996, Congress enacted the Health Insurance Portability and Accountability Act of 1996 (HIPAA) to "improve portability and continuity of health insurance coverage in the group and individual markets." Congress enacted HIPAA to guarantee the availability and renewability of health insurance coverage and limit the use of pre-existing condition restrictions. HIPAA also included tax provisions related to health insurance and administrative simplification provisions requiring issuance of national standards to facilitate the electronic transmission of health information. Part C of HIPAA requires "the development of a health information system through the establishment of standards and requirements for the electronic transmission of certain health information." Such standards are required to be consistent with the objective of reducing the administrative costs of providing and paying for health care. These Administrative Simplification provisions require the Secretary of HHS to adopt national standards to facilitate the electronic exchange of information for certain financial and administrative transactions; select or establish code sets for data elements; protect the privacy of individually identifiable health information; maintain administrative, technical, and physical safeguards for the security of health information; provide unique health identifiers for individuals, employers, health plans, and health care providers; and to adopt procedures for the use of electronic signatures. Health plans, health care clearinghouses, and health care providers who transmit financial and administrative transactions electronically are required to use standardized data elements and comply with the national standards and regulations promulgated pursuant to Part C. Failure to comply with the regulations may subject the covered entity to civil or criminal penalties. Under HIPAA, the Secretary is required to impose a civil monetary penalty (CMP) on any person failing to comply with the Administrative Simplification provisions in Part C. The maximum civil money penalty (i.e., the fine) for a violation of an administrative simplification provision is $100 per violation and up to $25,000 for all violations of an identical requirement or prohibition during a calendar year. A number of procedural requirements that are relevant to the imposition of CMP's for violations of the Administrative Simplification standards are incorporated by reference in HIPAA from the general civil money penalty provision in 42 U.S.C. § 1320a-7a. The Secretary may not initiate a CMP action "later than six years after the date" of the occurrence that forms the basis for the CMP action. The Secretary may initiate a CMP by serving notice in a manner authorized by Rule 4 of the Federal Rules of Civil Procedure (Commencement of Action). The Secretary must give written notice to the person on whom he wishes to impose a CMP and an opportunity for a determination to made "on the record after a hearing at which the person is entitled to be represented by counsel, to present witnesses, and to cross-examine witnesses against the person." Judicial review of the Secretary's determination and the issuance and enforcement of subpoenas is available in the United States Court of Appeals. A CMP may not be imposed with respect to an act that constitutes criminal disclosure of individually identifiable information "if it is established to the satisfaction of the Secretary that the person liable for the penalty did not know, and by exercising reasonable diligence would not have known, that such person violated the provisions"; or if "the failure to comply was due to reasonable cause and not to willful neglect" and is corrected within 30 days after learning of the violation. The Secretary may provide technical assistance during such period. A CMP may be reduced or waived "to the extent that the payment of such penalty would be excessive relative to the compliance failure involved." Three specific affirmative defenses bar the imposition of civil money penalties: (1) the act is a criminal offense under HIPAA's criminal penalty provision—wrongful disclosure of individually identifiable health information; (2) the covered entity did not have actual or constructive knowledge of the violation; and (3) the failure to comply was due to reasonable cause and not to willful neglect, and the failure to comply was corrected during a 30-day period beginning on the first date the person liable for the penalty knew, or by exercising reasonable diligence would have known, that the failure to comply occurred. The Office of Civil Rights (OCR) in HHS is responsible for enforcing the Privacy Rule. OCR has said that any civil penalties imposed will only affect covered entities; in other words, a member of a workforce who is not a covered entity appears not to be subject to civil sanctions by OCR. HIPAA establishes criminal penalties for any person who knowingly and in violation of the Administrative Simplification provisions of HIPAA uses a unique health identifier or obtains or discloses individually identifiable health information. Enhanced criminal penalties may be imposed if the offense is committed under false pretenses, with intent to sell the information or reap other personal gain. The penalties include (1) a fine of not more than $50,000 and/or imprisonment of not more than 1 year; (2) if the offense is "under false pretenses," a fine of not more than $100,000 and/or imprisonment of not more than 5 years; and (3) if the offense is with intent to sell, transfer, or use individually identifiable health information for commercial advantage, personal gain, or malicious harm, a fine of not more than $250,000 and/or imprisonment of not more than 10 years. These penalties do not affect any other penalties that may be imposed by other federal programs. In 2005, the Justice Department Office of Legal Counsel (OLC) addressed which persons may be prosecuted under HIPAA. Based on its reading of the plain terms of the statute, the privacy regulations, and Executive Order 13,141 (To Protect the Privacy of Protected Health Information in Oversight Investigations), OLC concluded that only a covered entity could be criminally liable "in violation of this part." Because Part C applies only to covered entities and mandates compliance only by covered entities, OLC concluded that direct liability for violations of section 1320d-6 was limited to covered entities (health plans, health care clearinghouses, those health care providers specified in the statute, and Medicare prescription drug card sponsors); and depending on the facts of a given case, certain directors, officers, and employees of these entities may be liable directly under section 1320d-6, based on general principles of corporate criminal liability. Other persons who obtain protected health information in a manner that causes a covered entity to release the information in violation of HIPAA, including recipients of protected information, may not be liable directly. The liability of persons for conduct that may not be prosecuted directly under section 1320d-6 is to be determined by principles of aiding and abetting liability under 18 U.S.C. § 2 and of conspiracy liability under 18 U.S.C. § 371. OLC also noted that such conduct may also be punishable under other federal laws, such as the identity theft under 18 U.S.C. § 1028 and fraudulent access of a computer under 18 U.S.C. § 1030. The Office of Legal Counsel also considered what the "knowingly" element of the offense requires and concluded that the "knowingly" element is best read, consistent with its ordinary meaning, to require only proof of knowledge of the facts that constitute the offense. To carry out the requirements of Part C, the HIPAA Privacy Rule, 45 C.F.R. Parts 160 and 164, was adopted as the national standard for the protection of individually identifiable health information. Enforcement of the Privacy Rule began on April 14, 2003, except that for small health plans with annual receipts of $5 million or less enforcement began April 2004. The Office of Civil Rights (OCR) in HHS is responsible for enforcing the Privacy Rule. The Centers for Medicare and Medicaid Services (CMS) has delegated authority to enforce the non-privacy HIPAA standards, including the Security Rule. Because of the explicit language of HIPAA, the Privacy Rule applies only to a specified set of "covered entities": (1) health plans, (2) health care clearinghouses, and (3) health care providers who transmit information in electronic form in connection with standard transactions governed by the Administrative Simplification provisions. Medicare prescription drug sponsors were added to the list of "covered entities" in 2003. Excluded from the definition of covered entities are employees of covered entities. Business associates of covered entities are subject to certain aspects of the Privacy Rule. The Privacy Rule applies to protected health information that is individually identifiable health information "created or received by a health care provider, health plan, or health care clearinghouse" that "[r]elates to the ... health or condition of an individual" or to the provision of or payment for health care. The HIPAA Privacy Rule governs the use and disclosure of protected health information by HIPAA-covered entities (health plans, health care providers, and health care clearinghouses). The Rule requires a covered entity to obtain the individual's written authorization for any use or disclosure of protected health information that is not for treatment, payment or health care operations or otherwise permitted or required by the Privacy Rule. A covered entity is required to disclose protected health information in two situations: (1) to individuals when they request access to or an accounting of disclosures of their protected health information; and (2) to HHS for compliance review or enforcement action. The HIPAA Privacy Rule permits use and disclosure of protected health information, without an individual's authorization or consent, for 12 national priority purposes. Regulations governing security standards under HIPAA require health care covered entities to maintain administrative, technical, and physical safeguards to ensure the confidentiality, integrity, and availability of electronic protected health information; to protect against any reasonably anticipated threats or hazards to the security or integrity of such information, as well as protect against any unauthorized uses or disclosures of such information. The Centers for Medicare and Medicaid Services (CMS) has been delegated authority to enforce the HIPAA Security Standard. Effective on February 16, 2006, the Department of Health and Human Services delegated to CMS the authority and responsibility to interpret, implement, and enforce the HIPAA Security Rule provisions; to conduct compliance reviews and investigate and resolve complaints of HIPAA Security Rule noncompliance; and to impose civil monetary penalties for a covered entity's failure to comply with the HIPAA Security Rule provisions. The Security Rule applies only to protected health information in electronic form (EPHI), and requires a covered entity to ensure the confidentiality, integrity, and availability of all EPHI the covered entity creates, receives, maintains, or transmits. Covered entities must protect against any reasonably anticipated threats or hazards to the security or integrity of such information, and any reasonably anticipated uses or disclosures of such information that are not permitted or required under the Privacy Rule; and ensure compliance by its workforce. The Security Rule allows covered entities to consider such factors as the cost of a particular security measure, the size of the covered entity involved, the complexity of the approach, the technical infrastructure and other security capabilities in place, and the nature and scope of potential security risks. The Rule establishes "standards" in three categories—administrative, physical, and technical—that covered entities must meet, accompanied by implementation specifications for each standard. The Security Rule requires covered entities to enter into agreements with business associates who create, receive, maintain or transmit EPHI on their behalf. Under such agreements, the business associate must: implement administrative, physical and technical safeguards that reasonably and appropriately protect the confidentiality, integrity and availability of the covered entity's electronic protected health information; ensure that its agents and subcontractors to whom it provides the information do the same; and report to the covered entity any security incident of which it becomes aware. The contract must also authorize termination if the covered entity determines that the business associate has violated a material term. A covered entity is not liable for violations by the business associate unless the covered entity knew that the business associate was engaged in a practice or pattern of activity that violated HIPAA, and the covered entity failed to take corrective action. On February 16, 2006, HHS published the Final Enforcement Rule, with both procedural and substantive provisions, applicable to all HIPAA administrative simplification standards in Part C. The final rule went into effect March 16, 2006. The following discussion summarizes the main provisions of the Enforcement rule. With respect to ascertaining compliance with and enforcement of the administrative simplification provisions, the Secretary of HHS is to seek the voluntary cooperation of covered entities. Enforcement and other activities to facilitate compliance include the provision of technical assistance, responding to questions, providing interpretations and guidance, responding to state requests for preemption determinations, and investigating complaints and conducting compliance reviews. The Privacy Rule permits any person to file an administrative complaint for violations. It did not create a private right of action for individuals to sue to remedy privacy violations. Individuals must direct their complaints to the HHS Office for Civil Rights (OCR) or to the covered entity. An individual may file a compliant with the Secretary if the individual believes that the covered entity is not complying with the administrative simplification provisions. Complaints to the Secretary may be filed only with respect to alleged violations occurring on or after April 14, 2003. The Secretary's investigation may include a review of the policies, procedures, or practices of the covered entity, and of the circumstances regarding the alleged acts or omissions. The Secretary is also authorized to conduct compliance reviews. According to OCR, it is conducting Privacy Rule compliance reviews only where compelling and unusual circumstances demand. Covered entities are required to provide records and compliance reports to the Secretary to determine compliance, and to cooperate with complaint investigations and compliance reviews. In cases where no violation is found, the Secretary is to inform the covered entity and the complainant in writing. In cases where an investigation or compliance review has indicated noncompliance, the Secretary is to inform the covered entity and the complainant in writing, and attempt to resolve the matter informally. If the Secretary determines that the matter cannot be resolved informally, the Secretary may issue written findings documenting the noncompliance. The covered entity has 30 days to respond to the Secretary's findings and must be given an opportunity to submit written evidence of any mitigating factors or affirmative defenses, as it proceeds to the civil monetary penalty phase. Finally, the Rule includes a provision that prohibits covered entities from threatening, intimidating, coercing, discriminating against, or taking any other retaliatory action against anyone who complains to HHS or otherwise assists or cooperates in the HIPAA enforcement process. Actions must be brought by the Secretary within six years from the date of the violation. Three specific affirmative defenses would bar the imposition of civil money penalties: (1) the violation is a criminal offense under HIPAA—wrongful disclosure of individually identifiable health information; (2) the covered entity did not have actual or constructive knowledge of the violation; or (3) the failure to comply was due to reasonable cause and not to willful neglect, and was corrected during a 30-day period beginning on the first date the person liable for the penalty knew, or by exercising reasonable diligence would have known, that the failure to comply occurred. With respect to the first two defenses, the Secretary may waive the civil money penalty if it would be excessive in relation to the violation. The Enforcement rule provides that the "Secretary will impose a civil money penalty upon a covered entity if the Secretary determines that the covered entity has violated an administrative simplification provision." The Secretary is required to provide notice of a proposed penalty to the covered entity, including the respondent a right to request a hearing within 90 days before an Administrative Law Judge. If the respondent fails to request a hearing, the Enforcement Rule states that "the Secretary will impose the proposed penalty or any lesser penalty permitted by 42 U.S.C. 1320d-5." Once a penalty has become final, the Secretary is obligated to notify the public, state, and local medical and professional organizations; state agencies administering health care programs; utilization and quality peer review organizations; and state and local licensing agencies and organizations. To determine the number of "violations" to compute the amount of the civil penalty, the Secretary is to base the decision upon the nature of the covered entity's obligation to act or not under the violated provision. The Rule also provides that HHS may consider the following aggravating or mitigating factors when determining the amount of the penalty: the nature of the violation; the circumstances under which the violation occurred; the degree of culpability; any history of prior compliance, including violations; the financial condition of the covered entity; and such "other matters as justice may require." The Secretary is authorized to settle any issue or case or to compromise any penalty. HHS refers to the DOJ for criminal investigation appropriate cases involving the knowing disclosure or obtaining of individually identifiable health information in violation of the Privacy Rule. Criminal convictions have been obtained in four cases involving employees of covered entities who improperly obtained protected health information. Three of the HIPAA criminal cases were brought after the OLC legal opinion limiting direct liability for violations to covered entities. The first case prosecuted by a U.S. Attorney's Office under the HIPAA criminal statute involved a Seattle phlebotomist employed at a cancer center who was sentenced to 16 months in prison and 3 years of supervised release in 2004 for stealing credit card information from a cancer patient, charging $9,000 worth of merchandise on it, and using that information to get credit cards in the defendant's name. The defendant was ordered to pay restitution in the amount of $15,000. The U.S. attorney's office in Seattle chose to prosecute the identity theft as a criminal HIPAA violation because the information had been collected from a patient, instead of prosecuting the defendant for identity theft. Specifically, the defendant was charged with and pled guilty to the wrongful disclosure of individually identifiable health information for economic gain in violation of 42 U.S.C. § 1320d-6(a)(3) and (b)(3). It is notable that the defendant was not a covered entity but a member of the covered entities workforce not acting within the scope of his employment. The OLC legal opinion was issued after the defendant's conviction. In 2006, a Texas woman employed in the office of a doctor who had a contract to provide physicals and medical treatment to FBI agents was convicted of selling an FBI agent's medical records for $500. The defendant pled guilty to the federal felony offense of wrongfully using a unique health identifier intending to sell individually identifiable health information for personal gain, 42 U.S.C. § 1320d-6(a)(1) and (b)(3), and of violating 18 U.S.C. §2. She was sentenced to six months in jail and four months of home confinement to be followed by a two-year term of supervised release. The defendant was also ordered to pay a criminal money penalty of $100. Two aggravating factors were found by the court. First, the defendant had sold the confidential medical record, and second, the record belonged to a federal agent. The defendant was an employee of a medical clinic and improperly obtained Medicare information and other patient information for more than 1,100 clinic patients and sold that information to the owner of a medical claims business for $5 to $10 each. The information was then used by medical providers to fraudulently bill Medicare for services not rendered and equipment not supplied, resulting in a $7 million fraud to Medicare and the payment of approximately $2.5 million to providers and suppliers. The defendants were charged with conspiracy in violation of 18 U.S.C. § 371, with computer fraud in violation of 18 U.S.C. § 1030(a)(4)and (c)(3)(A), wrongful disclosure of individually identifiable health information in violation of 42 U.S.C. § 1320d-6(a)(2) and (b)(3), and aggravated identity theft in violation of 18 U.S.C. § 1028A(a)(2). Because the clinic-employer was a cooperating witness and the defendant was acting outside the scope of her lawful employment, the clinic was not charged. In January 2007, Florida defendant Machado pled guilty to conspiracy to commit computer fraud, conspiracy to commit identity theft and conspiracy to wrongfully disclose individually identifiable health information. The defendant testified against her co-defendant. The defendant was sentenced on April 27, 2007, and faced a maximum of 5 years imprisonment, $250,000 fine, and possible restitution. Defendant Machado was sentenced to 3 years probation, including 6 months of home confinement, and also ordered to pay restitution in the amount of $2,505,883. Co-defendant Ferrer, owner of the medical claims business, was convicted by a jury of all eight counts (one count of conspiring to defraud the United States, one count of computer fraud, one count of wrongful disclosure of individually identifiable health information, and five counts of aggravated identity theft). Defendant Ferrer was also sentenced on April 27, 2007, and faced a maximum statutory term of imprisonment of 5 years on the conspiracy count; a maximum statutory term of imprisonment of 5 years on the computer fraud count; a maximum statutory term of imprisonment of 10 years on the wrongful disclosure of individually identifiable health information count; and a maximum statutory term of imprisonment of 2 years on each count of aggravated identity theft. Ferrer was sentenced to 87 months in prison, 3 years of supervised release, and ordered to pay restitution in the amount of $2,505,883. According to DOJ, this is the first HIPAA violation case that has gone to trial. The two other cases resulted in guilty pleas. The defendant, a licensed practical nurse at the time of the crime, pleaded guilty in April, 2008 to wrongfully disclosing individually identifiable health information for personal gain, a violation of the health information privacy provisions of HIPAA. On December 3, 2008, the defendant was sentenced to two years probation including 100 hours of community service. According to recently released data from HHS, from April 2003, when enforcement of the Privacy Rule began, to December 31, 2008, approximately 41,107 health information privacy complaints were filed with HHS. In 23,466 cases, HHS did not find enforcement authority under HIPAA. HHS found authority to investigate and resolve 7,729 cases. In those cases, HHS obtained changes in the investigated entity's privacy practices or other corrective actions. HHS found no violation of the Privacy Rule in 3,858 cases. Almost 6,054 cases remained unresolved. According to HHS, the compliance issues most frequently investigated were for impermissible use or disclosure of protected health information, lack of adequate safeguards for protected health information, lack of patient access to his or her protected health information, the disclosure of more information than is minimally necessary to satisfy a particular request for information, and failure to have an individual's authorization for a disclosure that requires one. The covered entities most commonly required to take corrective action by HHS, in order of frequency, include private practices, general hospitals, outpatient facilities, health plans, and pharmacies. According to its enforcement website, HHS did not report any civil penalties during the five-year period of 2003-2008. HHS reported that more than 448 cases were referred by HHS to DOJ for criminal investigation of knowing disclosure or access to protected health information in violation of the Privacy Rule. An additional 285 cases were referred to the Centers for Medicare and Medicaid Services (CMS) for investigation of cases that involve a potential violation of the HIPAA Security Rule. Although information on criminal convictions was not reported by HHS, criminal convictions were obtained in four cases involving employees of covered entities who improperly obtained protected health information. Concerns have been raised by some that the HIPAA Privacy Rule is being underenforced by the U.S. Departments of Health and Human Services (HHS) and Justice (DOJ). Privacy advocates have been critical of HHS' enforcement of the HIPAA Privacy Rule which has focused on technical assistance and voluntary cooperation for the covered entity with HHS. According to HHS, several factors contribute to the number of enforcement actions taken by it for violations of the HIPAA Privacy Rule. First is HHS's preference for voluntary compliance, corrective action, and/or resolution agreement. Second, HIPAA applies only to certain groups, defined as covered entities, health plans, health care clearinghouses, and health care providers who transmit financial and administrative transactions electronically. HIPAA does not cover all types of entities that maintain personal health information (e.g., life insurers, employers, workers compensation carriers, schools and school districts, state agencies such as child protective service agencies, law enforcement agencies, and municipal offices). Third, HIPAA does not cover of all types of health transactions. Fourth, the statute does not create a private right of action, but rather public enforcement by HHS and DOJ. Fifth, the complained-of activity might not be a violation of the Privacy Rule. In July 2008, the first time since the Privacy Rule went into effect in 2003, HHS required a resolution agreement from a covered entity (a contract signed by HHS and the covered entity) for violations of the HIPAA Privacy and Security Rules. HHS entered into a resolution agreement with Providence Health & Services requiring the covered entity to pay $100,000 and to implement a corrective action plan to safeguard identifiable electronic patient information to settle potential violations of the HIPAA Privacy and Security Rules. In this case the violations involved the loss of backup tapes and theft of laptops containing individually identifiable health information. The Centers for Medicare & Medicaid Services (CMS) is the agency within HHS that is responsible for enforcing the HIPAA Security Rule. In October 2008, the HHS inspector general released a report on the results of his audit to evaluate the effectiveness of CMS's oversight and enforcement of covered entities' implementation of the HIPAA Security Rule. Inspector General Daniel R. Levinson concluded that CMS had taken limited actions to ensure that covered entities adequately implement the HIPAA Security Rule. These actions had not provided effective oversight or encouraged enforcement of the HIPAA Security Rule by covered entities. Although authorized to do so by Federal regulations as of February 16,2006, CMS had not conducted any HIPAA Security Rule compliance reviews of covered entities. To fulfill its oversight responsibilities, CMS relied on complaints to identify any noncompliant covered entities that it might investigate. As a result, CMS had no effective mechanism to ensure that covered entities were complying with the HIPAA Security Rule or that ePHI was being adequately protected. Although CMS did not agree with those findings, the inspector general recommended that CMS establish policies and procedures for conducting HIPAA Security Rule compliance reviews of covered entities. | The privacy and security of health information is recognized as a critical element of transforming the health care system through the use of health information technology. As part of H.R. 1, the American Recovery and Reinvestment Act of 2009, the 111th Congress is considering legislation to promote the widespread adoption of health information technology which includes provisions dealing with the privacy and security of health records. For further information, see CRS Report RS22760, Electronic Personal Health Records, by [author name scrubbed]. P.L. 104-191, the Health Insurance Portability and Accountability Act of 1996 (HIPAA), directed HHS to adopt standards to facilitate the electronic exchange of health information for certain financial and administrative transactions. Health plans, health care clearinghouses, and health care providers are required to use standardized data elements and comply with the national standards and regulations. Failure to do so may subject the covered entity to penalties. The HIPAA Privacy Rule was adopted by HHS as the national standard for the protection of health information. It regulates the use and disclosure of protected health information by health plans, health care clearinghouses, and health care providers who transmit financial and administrative transactions electronically; establishes a set of basic consumer protections; permits any person to file an administrative complaint for violations; and authorizes the imposition of civil or criminal penalties. Enforcement of the Privacy Rule began in 2003. The HIPAA Security Rule was adopted by HHS as the national standard for the protection of electronic health information. It requires covered entities to maintain administrative, technical, and physical safeguards to ensure the confidentiality, integrity, and availability of electronic protected health information; to protect against any reasonably anticipated threats or hazards to the security or integrity of such information, as well as protect against any unauthorized uses or disclosures of such information. The Centers for Medicare and Medicaid Services (CMS) has been delegated authority to enforce the HIPAA Security Standard, effective February 16, 2006. On March 16, 2006, the Final HIPAA Administrative Simplification Enforcement Rule became effective. The Enforcement Rule has both procedural and substantive provisions, and is applicable to all HIPAA administrative simplification standards. The Enforcement Rule establishes procedures for the imposition of civil money penalties for violations of the rules. Lawmakers and others are examining the statutory and regulatory framework for enforcement of the HIPAA Privacy and Security standards, and ways to ensure that agencies use their enforcement authority under HIPAA to address improper uses and disclosures of protected health information. Concerns have been raised by some that the HIPAA Privacy and Security Rules are being under enforced by HHS, DOJ, and CMS. Of approximately 41,107 health information privacy complaints filed with HHS since 2003, HHS found authority to investigate and resolve 7,729 cases. Criminal convictions have been obtained by DOJ in four cases involving employees of covered entities who improperly obtained protected health information. Since February 2006, CMS has not conducted any HIPAA Security Rule compliance reviews. This report provides an overview of the HIPAA Privacy and Security Rules, and of the statutory and regulatory enforcement scheme. In addition, it summarizes enforcement activities by HHS, DOJ, and CMS. This report will be updated. |
This report provides an overview discussion on the modernization of U.S. military tactical aircraft, meaning fighter aircraft, strike fighters, and attack planes. Tactical aircraft are a major component of U.S. military capability, and account for a significant portion of U.S. defense spending. In early 2009, the Air Force, Navy, and Marine Corps collectively had an inventory of about 3,500 tactical aircraft. Current efforts for modernizing U.S. tactical aircraft center on three aircraft acquisition programs—the F-35 Joint Strike Fighter (JSF) program, the Air Force F-22 fighter program, and the Navy F/A-18E/F strike fighter program. Program-specific issues for Congress in FY2010 relating to the F-35, F-22, and F/A-18E/F include the following: Whether to approve or reject the administration's proposal to terminate program for developing an alternate engine for the F-35. Whether to whether to approve the administration's request to end F-22 procurement at the 187 aircraft that have been procured through FY2009, or reject that proposal and provide funding in FY2010 for the procurement of additional F-22s in FY2010 and/or subsequent years. Whether to approve, reject, or modify the Navy's FY2010 funding request for procurement of nine F/A-18E/Fs, and whether to approve a multiyear procurement (MYP) arrangement for FY2010-FY2014 for procuring F/A-18E/Fs (and also EA-18Gs, which are electronic attack versions of the F/A-18E/F). These program-specific issues, as well as FY2010 legislative activity relating specifically to the F-35, F-22, and F/A-18E/F programs, are covered in detail in the following CRS reports: CRS Report RL30563 on the F-35 program. CRS Report RL31673 on the F-22 program. CRS Report RL30624 on the F/A-18E/F program. This CRS report discusses and presents FY2010 legislative activity on issues relating to U.S. tactical aircraft in general. For several years now, a central issue relating to tactical aircraft in general has been the overall affordability of the Department of Defense's (DOD's) plans for modernizing the tactical aircraft force. A second key issue concerns the future of the U.S. industrial base for designing and manufacturing tactical aircraft. In general, the term tactical aircraft refers to shorter-ranged combat aircraft that can conduct missions up to several hundred miles away from their home bases without need for in-flight refueling. Tactical aircraft tend to perform their missions within a single regional theater of operations, which is why they are also sometimes called theater-ranged aircraft or simply theater aircraft. The term strategic aircraft, in contrast, usually refers to larger and longer-ranged Air Force B-52, B-1, and B-2 bombers that are designed to conduct missions involving very long (including intercontinental) flights to their intended areas of operations (though they can also be used for missions that take place within a single theater of operations). Although the above distinction between tactical and strategic aircraft can suggest that the term tactical aircraft refers to virtually all types of shorter-ranged aircraft, in practice the term is used primarily to refer to fighters, strike fighters, and attack planes. Fighters, which usually have an "F" designation (e.g., F-22), are designed primarily for air-to-air combat, though they can have some air-to-ground combat capability as well. Strike fighters, which can have either an "F" designation (e.g., F-35) or an "F/A" designation (e.g., F/A-18E/F), are dual-role aircraft that are designed to have a substantial capability in both air-to-ground (strike) and air-to-air (fighter) operations. Attack planes, which usually have an "A" designation (e.g., A-10) are designed primarily for air-to-ground operations. The term tactical aircraft is often shortened to tac air (also spelled tacair). Air Force tactical aircraft operate from land bases and are conventional takeoff and landing (CTOL) aircraft. Navy tactical aircraft are CTOL aircraft that have features permitting them to operate from aircraft carriers. Marine Corps aircraft are operated from both Navy ships and land bases, including expeditionary land bases with short runways. Some Marine Corps tactical aircraft are vertical/short takeoff and landing (VSTOL) or short takeoff, vertical landing (STOVL) aircraft. Tactical aircraft are used to perform a variety of missions. Fighters engage primarily in air-to-air combat so as to establish and maintain air superiority in a theater of operations. Attack planes focus on air-to-ground combat operations, including close air support (CAS) for friendly ground forces engaged in battle, battlefield air interdiction (BAI) against enemy forces that are behind the front lines, and deep interdiction (also known as "deep strike") against the enemy's military, political, and industrial infrastructure. Strike fighters engage in both air-to-air and air-to-ground operations. Tactical aircraft can also be used for other operations, including surveillance and reconnaissance operations. The Air Force currently operates new F-22 fighters and the following older aircraft types: F-15 fighters, F-15E strike fighters (a version of the F-15 with enhanced air-to-ground capabilities), F-16 fighters (which are actually strike fighters), and A-10 attack aircraft. The Navy currently operates older F/A-18A through D strike fighters and newer and more capable F/A-18E/F strike fighters. The Marine Corps' operates two older types of aircraft: F/A-18 A-D strike fighters and AV-8B VSTOL attack planes. Table 1 , which presents figures from a May 2009 Congressional Budget Office (CBO) report, shows approximate numbers of U.S. tactical aircraft in early 2009. As can be seen in the table, DOD in early 2009 had a total inventory of about 3,500 tactical aircraft, of which about 2,375 were in the Air Force and about 1,125 were in the Navy and Marine Corps. Current efforts for modernizing U.S. tactical aircraft center on three aircraft acquisition programs—the F-35 Joint Strike Fighter (JSF) program, the Air Force F-22 fighter program, and the Navy F/A-18E/F strike fighter program. The F-35 Joint Strike Fighter (JSF), also called the Lighting II, is a new strike fighter being procured in different versions for the Air Force, Marine Corps, and Navy. The F-35 was conceived as a relatively affordable fifth-generation strike fighter that could be procured in three highly common versions for the three services, so that the services could avoid the higher costs of developing, procuring, and operating and supporting three separate tactical aircraft designs to meet their similar but not identical operational needs. The F-35 program is DOD's largest weapon procurement program in terms of total estimated acquisition cost. Current DOD plans call for acquiring a total of 2,456 JSFs for the three services at an estimated total acquisition cost (as of December 31, 2007) of about $246 billion in constant (i.e., inflation-adjusted) FY2009 dollars. Procurement of F-35s began in FY2007. The Air Force is procuring the F-35A, a conventional takeoff and landing (CTOL) version of the F-35, as the replacement for the service's F-16s and A-10s. The F-35A is intended to be a more affordable complement to the Air Force's new F-22s. The Marine Corps is procuring the F-35B, a STOVL version of the F-35, as the replacement for the service's F/A-18A-D strike fighters and AV-8B Harrier VSTOL attack planes. The Navy is procuring the F-35C, a carrier-capable CTOL version of the aircraft, and plans to operate carrier air wings in the future featuring a combination of F/A-18E/F and F-35C strike fighters. The administration's proposed FY2010 budget requested funding for the procurement of 30 F-35s, including 10 F-35As for the Air Force, 16 F-35Bs for the Marine Corps, and four F-35Cs for the Navy. The Air Force F-22 fighter, also known as the Raptor, is the world's most capable air-to-air combat aircraft. The F-22 is a fifth-generation aircraft that incorporates a high degree of stealth, supercruise, thrust-vectoring for high maneuverability, and integrated avionics that fuse information from on-board and off-board sensors. Procurement of F-22s began in FY1999, and a total of 187 have been procured through FY2009, including 24 in FY2009. The administration wants to end F-22 procurement at 187 aircraft, and the administration's proposed FY2010 budget did not request funding for the procurement of additional F-22s in FY2010. Supporters of the F-22 want to continue procuring the aircraft in FY2010 and/or subsequent years, toward an eventual goal of 243 to 250 (or more). The F/A-18E/F, also known as the Super Hornet, is a Navy strike fighter. It is larger, more modern, and more capable than the earlier F/A-18A-Ds, which are known as Hornets. The F/A-18E/F is generally considered a fourth-generation aircraft. (Some F/A-18E/F supporters argue that it is a "fourth-plus" or "4.5"-generation aircraft because it incorporates some fifth-generation technology, particularly in its sensors.) Hornets and Super Hornets currently form the core of the Navy's aircraft carrier air wings—of the 70 or so aircraft in each carrier air wing, more than 40 typically are Hornets and Super Hornets. The Navy has been procuring F/A-18E/F Super Hornets since FY1997, and has procured a total of 449 through FY2009. The administration's proposed FY2010 budget requested funding for the procurement of nine F/A-18E/Fs. Air Force officials in 2008 testimony projected an Air Force fighter shortfall of up to 800 aircraft by 2024. Navy officials have projected a Navy-Marine Corps strike fighter shortfall peaking at more than 100 aircraft, and possibly more than 200 aircraft, by about 2018. Some observers have questioned the Air Force's projection of an 800-aircraft shortfall, arguing that such projections are strongly influenced by assumptions concerning military threats posed by other countries and on whether the United States will fight alone or as part of a coalition, and that Air Force demands for more fighter aircraft are driven partly by organizational constraints rather than warfighting needs. The peak size of the projected Navy-Marine Corps strike fighter shortfall depends in part on assumptions one makes about service life extensions for Hornets and procurement rates of F-35Cs and F-35Bs for the Navy and Marine Corps. On May 18, 2009—11 days after the submission to Congress of the proposed FY2010 defense budget—the Air Force announced a combat air forces restructuring plan that would accelerate the retirement of 249 older Air Force tactical aircraft, including 112 F-15s, 134 F-16s, and three A-10s, so as to generate savings that can be applied to other Air Force program needs. The plan does not include the retirements of five fighters proposed as part of the FY2010 Air Force budget submission. Briefing slides on the plan are presented in the Appendix . An Air Force News Service story on the restructuring plan stated: Following the May 7 roll-out of the fiscal year 2010 budget proposal for the Department of Defense, Air Force officials announced plans to retire legacy fighters to fund a smaller and more capable force and redistribute people for higher priority missions. The Combat Air Forces restructuring plan would accelerate the retirement of approximately 250 aircraft, which includes 112 F-15 Eagles, 134 F-16 fighting Falcons and three A-10 Thunderbolt IIs. This does not include the five fighters previously scheduled for retirement in FY10. "We have a strategic window of opportunity to do some important things with fighter aircraft restructuring," said Secretary of the Air Force Michael Donley. "By accepting some short-term risk, we can convert our inventory of legacy fighters and F-22 (Raptors) into a smaller, more flexible and lethal bridge to fifth-generation fighters like the F-35 (Lightning II Joint Strike Fighter). We'll also add manpower to capabilities needed now for operations across the spectrum of conflict." Under the plan, cost savings of $355 million in FY10 and $3.5 billion over the next five fiscal years would be used to reduce current capability gaps. Air Force officials would invest most of the funds in advanced capability modifications to remaining fighters and bombers. Some would go toward procuring munitions for joint warfighters, including the small diameter bomb, hard-target weapons and the AIM-120D and AIM-9X missiles. The remainder would be dedicated to the procurement or sustainment of critical intelligence capabilities such as the advanced targeting pod as well as enabling technologies for tactical air controllers and special operations forces. "We've taken this major step only after a careful assessment of the current threat environment and our current capabilities," said Air Force Chief of Staff Gen. Norton Schwartz. "Make no mistake, we can't stand still on modernizing our fighter force. The Air Force's advantage over potential adversaries is eroding, and this endangers both air and ground forces alike unless there is a very significant investment in bridge capabilities and fifth-generation aircraft. CAF restructuring gets us there." The CAF restructuring plan, which will require appropriate environmental analyses, would enable Air Force officials to use reassignment and retraining programs to move approximately 4,000 manpower authorizations to emerging and priority missions such as manned and unmanned surveillance operations and nuclear deterrence operations. This realignment would include the expansion of MQ-1 Predator, MQ-9 Reaper and MC-12 Liberty aircrews; the addition of a fourth active-duty B-52 Stratofortress squadron; and the expansion of Distributed Common Ground System and information processing, exploitation and dissemination capabilities for continued combatant commander support in Afghanistan and Iraq, among other adjustments. Secretary Donley and General Schwartz have committed the Air Force to initiatives that will reinvigorate its nuclear enterprise and field 50 unmanned combat air patrols for ongoing operations by FY11. "What we're looking for is a force mix that meets the current mission requirements of combatant commanders while providing a capable force to meet tomorrow's challenges," Secretary Donley said. A key issue for Congress regarding tactical aircraft in general is the overall affordability of DOD's plans for modernizing the tactical aircraft force. The issue has been a concern in Congress and elsewhere for many years, with some observers predicting that tactical aircraft modernization is heading for an eventual budget "train wreck" as tactical aircraft acquisition plans collide with insufficient amounts of funding available for tactical aircraft acquisition. In earlier years, the issue of tactical aircraft modernization affordability was characterized in terms of the collective affordability of the F-35, F-22, and F/A-18E/F programs. In coming years, as production of the F-22 and F/A-18E/F winds down, the issue may increasingly be characterized in terms of the affordability of the F-35 program as DOD seeks to ramp F-35 procurement up to higher annual rates. Past DOD plans have envisaged increasing F-35 procurement to 130 aircraft per year by 2014-2015, including 80 F-35As per year for the Air Force by 2015 and 50 F-35Bs and Cs for the Marine Corps and Navy by 2014. Since the early 1990s, DOD has substantially lowered the potential cost of its tactical aircraft modernization plans by significantly reducing the planned number of new aircraft to be acquired. Much of the reduction in the planned number of new aircraft to be acquired resulted from post-Cold War reductions in planned numbers of Air Force and Navy air wings. Additional reductions in the planned number of new aircraft to be acquired were accomplished through the Navy-Marine Corps Tactical Air Integration Plan, which more closely integrated the Navy and Marine Corps strike fighter inventories, permitting a reduction in planned procurements of Navy and Marine Corps strike fighters. Another major DOD initiative for limiting tactical aircraft modernization costs is the F-35 program, which seeks to reduce costs for developing, procuring, and operating U.S. tactical aircraft through the acquisition of a strike fighter that can be procured in three highly common versions for the three services. Even with initiatives such as these, it is not clear whether DOD's tactical aircraft modernization plan will be affordable, particularly in the context of future defense budgets that might feature little or no real (i.e., inflation-adjusted) growth over current levels, or possibly some amount of real decline. The projected Air Force fighter shortfall and the projected Navy-Marine Corps strike fighter shortfall (see " Projected Tactical Aircraft Shortfalls " above) might be viewed as indications of a continuing challenge regarding the affordability of tactical aircraft modernization. If DOD's tactical aircraft modernization plans cannot be fully funded without reducing funding for other DOD programs below acceptable levels, policymakers may face one or more of the following series of potential funding tradeoffs: F unding for tactical aircraft acquisition programs vs. f unding for non-aircraft systems that might be able to perform certain missions performed by tactical aircraft . Examples of such non-aircraft systems include Army and Navy surface-to-air missile systems, Army and Marine Corps surface-to-surface missiles, rockets, and artillery, and Navy ship-based guns and land-attack cruise missiles. F unding for tactical aircraft acquisition programs vs. funding for other aircraft , such as long-range bombers or helicopters , that can perform certain air-to-ground missions performed by tactical aircraft . Some observers argue that in light of recent and projected improvements in the regional anti-access capabilities of China and other countries, DOD should place less funding emphasis on tactical aircraft and more funding emphasis on long-range aircraft that can operate effectively outside the range of anti-access systems. F unding for tactical aircraft acquisition programs against funding for aircraft intended to perform different missions , such as airlift aircraft, aerial refueling tankers, electronic attack (aka electronic warfare) aircraft, airborne warning and control aircraft, and surveillance aircraft. For some observers, the affordability of DOD's tactical aircraft modernization plans is a subset of a larger issue concerning the affordability of DOD's plans for procuring new aircraft of all types. F unding for tactical aircraft acquisition programs against funding for unmanned aerial vehicles (UAVs) and unmanned combat aerial vehicles (UCAVs ) , which are armed UAVs. UAVs have played an increasing role in recent years in surveillance and reconnaissance operations, and UCAVs are now playing a substantial role in ground-attack operations, particularly for purposes such as conducting precision attacks on terrorist targets. DOD intends to place an increased emphasis on UAVs and UCAVs in coming years, particularly as a means of improving U.S. capabilities for conducting irregular warfare operations (such as counterinsurgency operations). F unding for land-based Air Force tactical aircraft acquisition programs (i.e., F-22 an F-35A) vs. funding for sea-based Navy and Marine Corps sea-based tactical aircraft acquisition programs (i.e., F/A-18E/F and F-35 Bs and Cs) . Observers have long discussed and debated the relative capabilities and costs of land- and sea-based aircraft for performing missions under various circumstances. F unding for one land-based tactical aircraft (the F-22) against funding for another (the F-35A), or funding for one sea-based tactical aircraft (the F/A-18E/F) against funding for another (the F-35 B/ C) . The administration's proposal to end F-22 procurement at 187 aircraft (rather than continuing F-22 procurement until a total of 243 to 250 is reached) and to concentrate future Air Force tactical aircraft procurement on the F-35A might be viewed as an example of DOD proposing such a tradeoff. F unding for procurement of F-35s, F-22s, and F/A-18E/Fs vs. funding for service life extensions of existing tactical aircraft or f or procur ing new and perhaps upgraded models of older-design tactical aircraft . Potential examples include upgraded F-15s in lieu of additional F-22s, upgraded F-16s in lieu of some currently planned F-35As, additional F/A-18E/Fs in lieu of some currently planned F-35Cs and Bs, and service life extensions of F/A-18A-Ds in lieu of procuring new F/A-18E/Fs or F-35Cs and Bs. Each of the above potential tradeoffs poses complex questions of comparative costs, capabilities, and (for service life extensions of older aircraft) technical feasibility. These questions have been studied and debated in depth for years by various parties in the context of U.S. military goals and objectives. U.S. military goals and objectives are currently being reviewed in the Quadrennial Defense Review (QDR), the final report on which is to be submitted to Congress with the proposed FY2011 budget in early-February 2010. One key issue in the QDR is how much emphasis to place on preparing for irregular warfare operations (such as counterinsurgency operations) vs. preparing for conventional interstate conflict, and how various force elements (such as tactical aircraft) relate to those two potential areas of planning emphasis. In the post-Cold War era, some observers have questioned the need to procure and operate large quantities of high-capability tactical aircraft, arguing among other things that such aircraft are not the most cost-effective forms of airpower for conducting the kinds of counterinsurgency and anti-terrorism operations that have occupied U.S. military forces in recent years. These observers would reduce planned procurement of high-capability tactical aircraft in favor of increased investments in UAVs and UCAVs, special operations helicopters, medical evacuation aircraft, and training and equipping forward air controllers. Other observers argue that large numbers of high-capability tactical aircraft are still necessary because Russian aircraft and surface-to-air missiles (SAMs) are available to potential adversaries, and because some European and Asian companies may soon be able to market advanced aircraft and SAMs to potential adversaries. In this view, the end of the Cold War did not mean the end of potential high-threat areas requiring advanced aircraft. Recent acquisitions of advanced fighter aircraft and surface-to-air missiles by China, and to a lesser degree India, have added to some observers' concerns that these countries may effectively challenge U.S. airpower in the future. Having large numbers of such advanced aircraft, it is argued, will help ensure operational success in future conflicts with well-armed adversaries. At the request of Representative Neil Abercrombie, the chairman of the Air and Land Forces subcommittee of the House Armed Services Committee, the Government Accountability Office (GAO) examined "DOD's investment planning for recapitalizing and modernizing its tactical fighter and attack aircraft force portfolio." GAO's report, issued in April 2007, stated: During the next 7 years, the military services plan to spend about $109.3 billion to acquire about 570 new tactical aircraft and to modernize hundreds of operational aircraft. Substantial cost increases, schedule delays, and changes in requirements have significantly reduced procurement quantities of new aircraft. For example, since its start, the development period for the F-22A doubled, threat conditions changed, new ground attack and intelligence-gathering requirements were added, and its unit costs more than doubled, resulting in a steady decline in the number of aircraft the Air Force can now procure. Similar conditions and risk of poor outcomes seem to be emerging for the Joint Strike Fighter (JSF). The JSF is the linchpin for future modernization efforts because of its sheer size and plans to replace hundreds of operational systems in all three services. However, its development costs have increased by $31.6 billion since 2004, and procurement and delivery schedules are slipping. Funding needs and plans for new and legacy aircraft are by nature interdependent. Legacy systems must be sustained and kept operationally relevant until new systems complete development and are ready to replace them. If quantities of new aircraft are reduced and/or deliveries slip further into future years, significantly more as yet unplanned money will be required to sustain, modernize, and extend the life of legacy systems to ensure that the total force is both capable and sufficient in numbers. Uncertainty about new systems costs and deliveries makes it challenging to effectively plan and efficiently implement modernization efforts and legacy retirement schedules. Over the next seven years, the services are investing an average of about $1.7 billion per year on legacy modifications, but there are large pent up demands—billions more—for unfunded requirements and potential life extension programs identified by program officials. Officials said the time is approaching when hard decisions on retiring or extending the life of legacy aircraft must be made. Looking forward, DOD does not have a single, comprehensive, and integrated investment plan for recapitalizing and modernizing fighter and attack aircraft. Lacking an integrated DOD-wide view of requirements, it is difficult to determine the extent of capability gaps and shortfalls, or, alternatively, duplication of capability. Rather, each military service operates largely within its own stovepipe to plan and acquire the resources needed to fill its individual force structure construct. In the Air Force's case, it is the forces deemed necessary to fill its air and space expeditionary wings; for the Navy, its carrier strike forces; and for the Marines, its expeditionary forces. Collectively, the services have underperformed to date in terms of delivering aircraft within desired costs and quantities, and future plans are likely unaffordable within projected funding levels. Individual service plans are largely dependent on favorable assumptions about the cost, quantity, and delivery schedules for new acquisitions and the ability to increase and sustain future funding levels substantially above current levels. These favorable assumptions are not realistic when juxtaposed with projected decline in future federal discretionary spending (including defense investment accounts), continued operational support requirements for the global war on terror, and looming start-ups of other big-ticket defense items, such as a strategic tanker aircraft and next generation long-range strike systems, competing for the same funds. Recent efforts to examine joint requirements on an integrated, DOD-wide basis have not significantly affected service plans and investments. In order to recapitalize and sustain capable and sufficient tactical air forces that reflect what is needed and affordable from a joint service perspective and that has high confidence of being executed as planned, GAO is recommending that DOD (1) take decisive actions to shorten cycle times in developing and delivering new tactical aircraft and (2) develop an integrated enterprise-level investment strategy for tactical air forces. At the direction of the Senate Armed Services Committee, the Congressional Budget Office (CBO) conducted "a study examining the capabilities and costs of the fighter [i.e., tactical aircraft] force that would be fielded under the Department of Defense's fiscal year 2009 plans and the potential implications for DoD's long-term budget and inventory levels if planned purchases of new aircraft are insufficient to maintain fighter inventories at levels called for by current service requirements." CBO stated that the study "also compares the advantages, disadvantages, and costs of seven alternative approaches that DoD might adopt to modernize its fighter forces—three that satisfy today's inventory requirements, two that maintain aggregate weapons capacity with fewer aircraft, and two that replace portions of the fighter force with longer-range aircraft." The report, which was issued in May 2009 and uses the term "fighter force" to refer to the tactical aircraft force, states: If realized, the services' goals for modernizing their fighter forces over the next several decades would result in a significant increase in capability over that offered by today's forces. Inventories would remain about the same, but the modernized fleets would be equipped with state-of-the-art aircraft that offer substantial technological advances over today's fighters, including increased payload capacity and greater stealth capabilities (and, as a result, enhanced survivability). Notwithstanding DoD's emphasis on fielding aviation forces with greater flight endurance, the distance that newer aircraft could fly without requiring refueling ("unrefueled ranges") would not increase to the same extent. Under DoD's fiscal year 2009 procurement plans , fighter inventories are likely to fall below the services' stated goals in the coming years. Nevertheless, many aggregate capabilities would remain equal to or improve relative to today's force because of the enhanced lethality and survivability that is expected from the new fighters. Some of those improvements might be offset by the increased capabilities of potential adversaries, however. Alternative approaches that included purchasing additional F/A-18E/F Super Hornets or purchasing upgraded versions of so-called legacy aircraft—such as the F-16 Fighting Falcon and F-15E Strike Eagle, which are still in production but based on older designs—would offer an opportunity for short-term inventory relief, long-term cost savings, or both, albeit with lesser capability improvements (especially in terms of survivability) than would be realized by purchasing JSFs. Compared with forces equipped solely with fighter aircraft, forces equipped with a mix of fighters (which are designed for supersonic speed and high maneuverability) and subsonic attack aircraft (designed, instead, to carry large payloads over long distances) would offer improved basing flexibility and persistence over the battlefield during air-to-ground missions. Force structures that replaced some fighters with smaller numbers of attack aircraft could provide air-to-ground weapons capacities comparable to those of today's forces and be fielded at costs similar to those projected for DoD's plans. Such forces would have fewer aircraft capable of air-to-air combat, however. Another issue for Congress regarding tactical aircraft modernization in general concerns the implications that decisions on tactical aircraft acquisition programs can have for workloads, revenues, and employments levels in the U.S. military aircraft manufacturing industry, which employs thousands of aircraft designers, engineers, and production workers at both major aircraft manufacturing firms and supporting supplier firms. In addition to affecting employment levels, decisions on tactical aircraft acquisition programs can have implications for the structure of the industry. The United States currently has two active prime contractors for the production of tactical aircraft—Lockheed, the prime contractor for the F-22 and F-35, and Boeing, the prime contractor for the F/A-18E/F. When F/A-18E/F (and F-22) production winds down, the number of active U.S. prime contractors for the production of tactical aircraft might be reduced to one (Lockheed). Some observers have expressed concern about this prospective development on the grounds that it could reduce the potential for using competition between prime contractors in the future to spur innovation, constrain prices, and ensure schedule adherence and production quality in the development and procurement of future U.S. tactical aircraft. Potential questions for Congress include the following: How many tactical aircraft prime contractors are needed to support U.S. military needs in the future? What is the value of competition at the prime contractor level in the development and procurement of tactical aircraft? What is the potential for a firm such as Boeing to use its work designing and building other types of aircraft to preserve key skills that would be needed to compete effectively in the future against a firm such as Lockheed for the role of prime contractor for the design and production of future tactical aircraft? How might decisions on tactical aircraft programs affect U.S. export earnings and the international competitiveness of the U.S. aerospace industry? This section presents legislative activity for FY2010 relating to tactical aircraft modernization in general. For legislative activity relating specifically to the F-35, F-22, or F/A-18E/F programs, see CRS Reports RL30563, RL31673, or RL30624, respectively. Section 133 of H.R. 2647 as passed by the House would require DOD to submit a report to Congress on the procurement of "4.5"-generation aircraft, which the provision defines as F-15s, F-16s, and F/A-18s that include certain upgrades. The text of the provision states: SEC. 133. REPORT ON 4.5 GENERATION FIGHTER PROCUREMENT. (a) In General- Not later than 90 days after the enactment of this Act, the Secretary of Defense shall submit to the congressional defense committees a report on 4.5 generation fighter aircraft procurement. The report shall include the following: (1) The number of 4.5 generation fighter aircraft for procurement for fiscal years 2011 through 2025 necessary to fulfill the requirement of the Air Force to maintain not less than 2,200 tactical fighter aircraft. (2) The estimated procurement costs for those aircraft if procured through single year procurement contracts. (3) The estimated procurement costs for those aircraft if procured through multiyear procurement contracts. (4) The estimated savings that could be derived from the procurement of those aircraft through a multiyear procurement contract, and whether the Secretary determines the amount of those savings to be substantial. (5) A discussion comparing the costs and benefits of obtaining those aircraft through annual procurement contracts with the costs and benefits of obtaining those aircraft through a multiyear procurement contract. (6) A discussion regarding the availability and feasibility of F-35s in fiscal years 2015 through fiscal year 2025 to proportionally and concurrently recapitalize the Air National Guard. (7) The recommendations of the Secretary regarding whether Congress should authorize a multiyear procurement contract for 4.5 generation fighter aircraft. (b) Certifications- If the Secretary recommends under subsection (a)(7) that Congress authorize a multiyear procurement contract for 4.5 generation fighter aircraft, the Secretary shall submit to Congress the certifications required by section 2306b of title 10, United States Code, at the same time that the budget is submitted under section 1105(a) of title 31, United States Code, for fiscal year 2011. (c) 4.5 Generation Fighter Aircraft Defined- In this section, the term `4.5 generation fighter aircraft' means current fighter aircraft, including the F-15, F-16, and F-18 [sic: F/A-18], that— (1) have advanced capabilities, including— (A) AESA radar; (B) high capacity data-link; and (C) enhanced avionics; and (2) have the ability to deploy current and reasonably foreseeable advanced armaments. Section 1032 would require a report on the force structure findings of the 2009 Quadrennial Defense Review (QDR). Regarding this section, the committee's report states: The committee expects that the analyses submitted [under Section 1032] will include details on all elements of the force structure discussed in the QDR report, and particularly the following: (1) A description of the factors that informed decisions regarding the fighter force structure for the Air Force, Navy, and Marine Corps, including: the assumed threat capabilities to include fighter force capabilities as well as air defense capabilities; the modeling simulations and analysis used to determine fighter force structure for the Air Force, Navy, and Marine Corps; the extent to which unmanned aerial vehicle inventories compensate for manned fighter aircraft inventory; and the quantifiable operational risks associated with the planned fighter fleets, based on requirements of combatant commanders, and measures planned to address those risks;... (Pages 387-388) Sectio n 1047 would prohibit the Air Force from retiring fighter aircraft in accordance with the combat air forces restructuring plan announced by the Air Force on May 18, 2009, until 90 days after the Air Force submits to Congress a report on various aspects of the plan. The text of the provision states: SEC. 1047. COMBAT AIR FORCES RESTRUCTURING. (a) Limitations Relating to Legacy Aircraft- Until the expiration of the 90-day period beginning on the date the Secretary of the Air Force submits a report in accordance with subsection (b), the following provisions apply: (1) PROHIBITION ON RETIREMENT OF AIRCRAFT- The Secretary of the Air Force may not retire any fighter aircraft pursuant to the Combat Air Forces restructuring plan announced by the Secretary on May 18, 2009. (2) PROHIBITION ON PERSONNEL REASSIGNMENTS- The Secretary of the Air Force may not reassign any Air Force personnel (whether on active duty or a member of a reserve component, including the National Guard) associated with such restructuring plan. (3) REQUIREMENTS TO CONTINUE FUNDING- (A) Of the funds authorized to be appropriated in title III of this Act for operations and maintenance for the Air Force, at least $344,600,000 shall be expended for continued operation and maintenance of the 249 fighter aircraft scheduled for retirement in fiscal year 2010 pursuant to such restructuring plan. (B) Of the funds authorized to be appropriated in title I of this Act for procurement for the Air Force, at least $10,500,000 shall be available for obligation to provide for any modifications necessary to sustain the 249 fighter aircraft. (b) Report- The report under subsection (a) shall be submitted to the Committees on Armed Services of the House of Representatives and the Senate and shall include the following information: (1) A detailed plan of how the force structure and capability gaps resulting from the retirement actions will be addressed. (2) An explanation of the assessment conducted of the current threat environment and current capabilities. (3) A description of the follow-on mission assignments for each affected base. (4) An explanation of the criteria used for selecting the affected bases and the particular fighters chosen for retirement. (5) A description of the environmental analyses being conducted. (6) An identification of the reassignment and manpower authorizations necessary for the Air Force personnel (both active duty and reserve component) affected by the retirements if such retirements are accomplished. (7) A description of the funding needed in fiscal years 2010 through 2015 to cover operation and maintenance costs, personnel, and aircraft procurement, if the restructuring plan is not carried out. (8) An estimate of the cost avoidance should the restructuring plan more forward and a description of how such funds would be invested during the future-years defense plan to ensure the remaining fighter force achieves the desired service life and is sufficiently modernized to outpace the threat. (c) Exception for Certain Aircraft- The prohibition in subsection (a)(1) shall not apply to the five fighter aircraft scheduled for retirement in fiscal year 2010, as announced when the budget for fiscal year 2009 was submitted to Congress. Section 1051 expresses the sense of Congress regarding Navy carrier air wing force structure. The text of the provision states: SEC. 1051. SENSE OF CONGRESS REGARDING CARRIER AIR WING FORCE STRUCTURE. (a) Findings- Congress makes the following findings: (1) The requirement of section 5062(b) of title 10, United States Code, for the Navy to maintain not less than 11 operational aircraft carriers, means that the naval combat forces of the Navy also include not less than 10 carrier air wings. (2) The Department of the Navy currently requires a carrier air wing to include not less than 44 strike fighter aircraft. (3) In spite of the potential warfighting benefits that may result in the deployment of fifth-generation strike fighter aircraft, for the foreseeable future the majority of the strike fighter aircraft assigned to a carrier air wing will not be fifth-generation assets. (b) Sense of Congress- It is the sense of Congress that— (1) in addition to the forces described in section 5062(b) of title 10, United States Code, the naval combat forces of the Navy should include not less than 10 carrier air wings (even if the number of aircraft carriers is temporarily reduced) that are comprised of, in addition to any other aircraft, not less than 44 strike fighter aircraft; and (2) the Secretary of the Navy should take all appropriate actions necessary to make resources available in order to include such number of strike fighter aircraft in each carrier air wing. The House Armed Services Committee, in its report ( H.Rept. 111-166 of June 18, 2009) on H.R. 2647 , summarizes Section 133 on page 125 and Section 1051 on page 393. The report summarizes Section 10 4 7 on page 392, and states further in connection with Section 1047 that: The committee is concerned about Air Force plans to accelerate the retirement of 249 legacy fighter aircraft in fiscal year 2010, in addition to the five fighter aircraft previously scheduled for retirement. The additional aircraft scheduled for retirement are 112 F-15s, 134 F-15s and 3 A-10s. The committee notes that such actions could lead to serious gaps in force structure and capability since these actions are being taken while replacement aircraft are still being tested and are not yet available for fielding. Additionally, the committee is concerned that the Air Force has not identified, for all of the affected bases, the follow-on missions that will serve to fill force structure and capability gaps. The committee has identified $143.7 million in unjustified program growth in the Air Force operation and maintenance administrative budget, specifically service-wide technical support, service-wide administration, and service-wide other activities. Additionally, the committee has identified $200.9 million in unexecutable peacetime operations due to deployments in the Air Force operating forces, air operations budget activity. The committee recommends that these funds totaling $344.6 be used for the continued operation and maintenance of the 249 legacy fighters that were slated for retirement during fiscal year 2010 until such time as the reporting requirement above is met. In addition, the committee recommends that $10.5 million of funds for aircraft procurement be available for obligations for modifications necessary to sustain the 249 fighter aircraft. (Pages 392-393) The report states the following regarding the projected Air Force fighter shortfall: The committee notes that for the past year, the Department of the Air Force has informed Congress that it requires 2,200 fighter aircraft, and that the Department projects a shortfall in its fighter aircraft inventory that would begin in fiscal year 2017 and grow to approximately 800 aircraft by 2024. The committee believes that such a shortfall will adversely affect the ability of the active duty forces and air reserve forces to meet future requirements for both air expeditionary forces and for the air sovereignty alert mission in the United States. Accordingly, the committee directs the Secretary of the Air Force, in consultation with the Chief of the Air National Guard and the Chief of the Air Force Reserve, to provide a report to the congressional defense committees by March 1, 2010. The report should include statements from both the Chief of the Air National Guard and the Chief of the Air Force Reserve describing their separate and independent views to Congress, as applicable. The report should address the so-called ''fighter gap'' issue in the long- and short-term with alternative solutions including but not limited to: accelerated procurement of fifth generation fighters such as the F-22 and F-35; an interim procurement of so-called ''4.5 generation'' fighters; and fleet management options such as service life extension programs. The report must include a detailed analysis of the effect that any shortfalls will have on the Air National Guard and the air sovereignty alert mission specifically, including the loss of Air National Guard flying missions throughout the United States and the resultant loss of Air National Guard pilot and maintenance capability. (Page 101) The report states the following regarding the projected Navy-Marine Corps strike fighter shortfall: The committee is concerned regarding the current and forecasted strike-fighter aircraft inventory of the Department of the Navy. The committee understands that the Department of the Navy has a fiscal year 2009 strike-fighter inventory shortfall of 110 aircraft and predicts a fiscal year 2010 shortfall of 152 aircraft, with a potential peak strike-fighter shortfall of 312 aircraft by fiscal year 2018. The committee believes such drastic shortfalls in strike fighter-inventory are unacceptable. The committee understands that a variety of factors cause the current and projected strike-fighter shortfall. Those factors include a fiscal year 2002 decision to reduce F/A-18A through D inventory by 88 aircraft, a reduction in the program of record quantity for F-35B/C by 409 aircraft, delays in development of the F-35B/C program, and F/A 18A through D aircraft reaching forecasted service life sooner than expected. The committee remains unconvinced that naval strike-fighter shortfalls should be viewed against the totality of Department of Defense strike-fighter inventory. The capabilities of the naval strike-fighter force are inherent in the capability of the aircraft carrier as a strike platform and, as such, force structure requirements for naval aviation must be viewed as those required to support sufficient carrier air wings (CVW) to match the number of statutorily mandated aircraft carriers. The committee supports procurement of additional F/A-18E/F aircraft to mitigate the naval strike-fighter inventory shortfall and believes that procurement of additional F/A-18E/F aircraft through a multi-year procurement contract is more cost effective and prudent than procuring new aircraft through an annual contract or applying $25.6 million of additional fiscal resources per aircraft to extend the service life of the F/A-18A through D fleet. Therefore, the committee includes a provision in title I of this Act that would authorize the Secretary of the Navy to enter into a multi-year procurement contract for the purchase of additional F/A-18E/F and EA-18G aircraft and also includes a provision in title X of this Act [Section 1051] that expresses a sense of Congress that the Department of the Navy should maintain no less than ten carrier air wings with no less than 44 strike-fighters each. Additionally, the committee directs the Director of the Congressional Budget Office to submit a report to the congressional defense committees by February 2, 2010, that evaluates the operational effectiveness and costs of extending and modernizing the service-life of F/A-18A through D aircraft to 10,000 flight hours versus procuring, either through an annual or multi-year procurement contract, additional F/A-18E/F aircraft beyond the current program of record. (Page 61) The Senate Armed Services Committee's report ( S.Rept. 111-35 of July 2, 2009) on the Senate-reported version of the FY2010 defense authorization bill ( S. 1390 ) includes a section on the F/A-18E/F program that states the following regarding the projected Navy-Marine Corps strike fighter shortfall: The committee has expressed concern that the Navy is facing a sizeable gap in aircraft inventory as older F/A-18A-D Hornets retire before the aircraft carrier variant (F-35C) of the Joint Strike Fighter (JSF) is available. The committee raised this issue in the committee reports accompanying S. 1547 ( S.Rept. 110-77 ) of the National Defense Authorization Act for Fiscal Year 2008 and accompanying S. 3001 ( S.Rept. 110-335 ) of the National Defense Authorization Act for Fiscal Year 2009. The committee is disappointed that the Navy has failed to provide the report comparing single versus multiyear procurement costs mandated by the second of those committee reports. Last year, the committee received testimony from the Navy of a projected shortfall in Navy tactical aviation. The Navy indicated that, under assumptions current at that time, it would experience a shortfall of 69 tactical aircraft in the year 2017, a number that swells to 125 when requirements of the United States Marine Corps are included. The committee believes that the Navy's projection of this shortfall was, however, based on a series of questionable assumptions. This year, the Chief of Naval Operations said that the projected gap may be as high as 250 aircraft total for the Department of the Navy. The committee believes that the Navy has failed to present a budget in fiscal year 2010 that takes effective action to deal with this substantially increased projected shortfall in the Department of the Navy's tactical air fleet and is concerned about the potential risk such a shortfall could pose to national security. The committee also notes that this shortfall figure is still predicated on an initial operation capability of the F–35C in 2015 but that achieving this is considered optimistic by many observers. The Navy's delay in taking action causes concern that it: (1) is continuing to accept the substantial security risks associated with the projected shortfall; (2) remains overly reliant on a potentially costly service life extension program (SLEP) for legacy F/A-18s as a means to mitigate the gap until the Joint Strike Fighter achieves full operational capability; and (3) is not adequately considering realistic, fiscally responsible long-range procurement plans to address the carrier strike aircraft shortfall, such as a multiyear procurement of F/A-18E/F aircraft as opposed to a series of single year purchases. The committee is concerned that, in response to possible further delays, expanding costs and technological immaturity with the JSF, the Navy appears increasingly reliant on its proposal to extend the life of select legacy F/A-18's from 8,600 to 10,000 flight hours through a SLEP currently estimated to cost on average $26.0 million per plane. This life extension would be in addition to the 2,600-hour service life extension that the Navy already plans for most legacy F/A-18s. By the Navy's own testimony, it is unclear how many of the planes are capable of reaching 10,000 flight hours even with a SLEP. The committee is concerned that the cost uncertainties of a SLEP achieving an additional 1,400 flight hours make such a plan risky. In any case, the committee believes such SLEP may be inefficient when compared with the benefits of procuring new F/A–18E/F's, which might cost less than $50.0 million each in 2009 constant dollars under a multiyear procurement acquisition strategy. Normalizing costs for the expected return in additional service life, a SLEP to achieve the additional 1,400 hours would cost approximately $18,571 per flight hour gained, versus $8,333 per flight hour provided by a new F/A–18E/F (at a 6,000 flight hour life, the cost per flight hour of a new F/A-18E/F would fall even further to $5,814 if those planes are similarly extended to 8,600 flight hours as have legacy F/A-18s). In light of such costs, the committee believes the Navy must more carefully evaluate costs and benefits of new F/A–18E/F procurements, compared to investing in a SLEP of legacy aircraft. The committee further notes that new F/A-18E/F models come equipped with improved technological capabilities over the legacy F/A-18's, including active electronically scanned array radar, modernized avionics, advanced aerial refueling system capability, and added weapon hard points, among other features that would not be part of a SLEP upgrade package for the older aircraft. These factors would tend to increase the benefit of purchasing new F/A-18E/Fs compared to conducting a SLEP on legacy aircraft. The Navy projects that the F/A-18E/F will remain in the fleet until at least 2040, and should be able to use most or all of the full service life of any newly purchased aircraft. The committee understands that the Department of Defense intends to review the whole issue of tactical aircraft forces in the pending Quadrennial Defense Review. The committee expects the Department to conduct and submit the analysis of multiyear procurement for the F/A-18 as directed in the committee report last year to include cost differentials between single year and multiyear procurement strategies and tradeoffs between a SLEP and new procurements of the F/A-18E/F. The Department should include such information derived from that analysis in deciding how to implement the results on the ongoing Quadrennial Defense Review regarding tactical aviation. The committee expects that the Department's tactical aviation procurement strategies will be informed by the Quadrennial Defense Review. In light of the significant increase in the strike-fighter shortfall testified to before the committee this year, additional actions to address that shortfall cannot be delayed too long. (Pages 20-22) The conference version ( H.Rept. 111-288 of October 7, 2009) of H.R. 2647 / P.L. 111-84 of October 28, 2009, contains a provision (Section 131) that requires the Department of Defense (DOD) to submit a report to Congress on the procurement of "4.5"-generation fighter aircraft. Section 1052 would require a report on the force structure findings of the 2009 Quadrennial Defense Review (QDR). The House report on H.R. 2647 ( H.Rept. 111-166 of June 18, 2009—see discussion above) stated that the report on 4.5-generation fighter aircraft is to include, among other things, a description of the factors that informed decisions regarding the fighter force structure for the Air Force, Navy, and Marine Corps. Section 1075 of H.R. 2647 / P.L. 111-84 prohibits the Air Force from retiring fighter aircraft in accordance with the combat air forces restructuring plan until 30 days after the Air Force submits to Congress a report on various aspects of the plan. Section 1076 expresses the sense of Congress regarding Navy carrier air wing force structure. Section 131 states: SEC. 131. REPORT ON THE PROCUREMENT OF 4.5 GENERATION FIGHTER AIRCRAFT. (a) IN GENERAL.—Not later than 90 days after the date of the enactment of this Act, the Secretary of Defense shall submit to the congressional defense committees a report on the procurement of 4.5 generation fighter aircraft. The report shall include the following: (1) The number of 4.5 generation fighter aircraft needed to be procured during fiscal years 2011 through 2025 to fulfill the requirement of the Air Force to maintain not less than 2,200 tactical fighter aircraft. (2) The estimated procurement costs for those aircraft if procured through annual procurement contracts. (3) The estimated procurement costs for those aircraft if procured through multiyear procurement contracts. (4) The estimated savings that could be derived from the procurement of those aircraft through a multiyear procurement contract, and whether the Secretary determines the amount of those savings to be substantial. (5) A discussion comparing the costs and benefits of obtaining those aircraft through annual procurement contracts with the costs and benefits of obtaining those aircraft through a multiyear procurement contract. (6) A discussion regarding the availability and feasibility of procuring F–35 aircraft to proportionally and concurrently re capitalize the Air National Guard during fiscal years 2015 through fiscal year 2025. (b) 4.5 GENERATION FIGHTER AIRCRAFT DEFINED.—In this section, the term ''4.5 generation fighter aircraft'' means current fighter aircraft, including the F–15, F–16, and F–18, that— (1) have advanced capabilities, including— (A) AESA radar; (B) high capacity data-link; and (C) enhanced avionics; and (2) have the ability to deploy current and reasonably foreseeable advanced armaments. Section 1052 states: SEC. 1052. REPORT ON THE FORCE STRUCTURE FINDINGS OF THE 2009 QUADRENNIAL DEFENSE REVIEW. (a) REPORT REQUIREMENT.—Concurrent with the delivery of the report on the 2009 quadrennial defense review required by section 118 of title 10, United States Code, the Secretary of Defense shall submit to the congressional defense committees a report with a classified annex containing— (1) the analyses used to determine and support the findings on force structure required by such section; and (2) a description of any changes from the previous quadrennial defense review to the minimum military requirements for major military capabilities. (b) MAJOR MILITARY CAPABILITIES DEFINED.—In this section, the term ''major military capabilities'' includes any capability the Secretary determines to be a major military capability, any capability discussed in the report of the 2006 quadrennial defense review, and any capability described in paragraph (9) or (10) of section 118(d) of title 10, United States Code. Section 1075 states: SEC. 1075. COMBAT AIR FORCES RESTRUCTURING. (a) LIMITATIONS RELATING TO LEGACY AIRCRAFT.—Until the expiration of the 30-day period beginning on the date the Secretary of the Air Force submits a report in accordance with subsection (b), the following provisions apply: (1) PROHIBITION ON RETIREMENT OF AIRCRAFT.—The Secretary of the Air Force may not retire any fighter aircraft pursuant to the Combat Air Forces restructuring plan announced by the Secretary on May 18, 2009. (2) PROHIBITION ON PERSONNEL REASSIGNMENTS.—The Secretary of the Air Force may not reassign any Air Force personnel (whether on active duty or a member of a reserve component, including the National Guard) associated with such restructuring plan. (b) REPORT.—The report under subsection (a) shall be submitted to the Committees on Armed Services of the House of Representatives and the Senate and shall include the following information: (1) A detailed plan of how the force structure and capability gaps resulting from the retirement actions will be addressed. (2) An explanation of the assessment conducted of the current threat environment and current capabilities. (3) A description of the follow-on mission assignments for each affected base. (4) An explanation of the criteria used for selecting the affected bases and the particular fighters chosen for retirement. (5) A description of the environmental analyses being conducted. (6) An identification of the reassignment and manpower authorizations necessary for the Air Force personnel (both active duty and reserve component) affected by the retirements if such retirements are accomplished. (7) A description of the funding needed in fiscal years 2010 through 2015 to cover operation and maintenance costs, personnel, and aircraft procurement, if the restructuring plan is not carried out. (8) An estimate of the cost avoidance should the restructuring plan more forward and a description of how such funds would be invested during the future-years defense plan to ensure the remaining fighter force achieves the desired service life and is sufficiently modernized to outpace the threat. (c) EXCEPTION FOR CERTAIN AIRCRAFT.—The prohibition in subsection (a)(1) shall not apply to the five fighter aircraft scheduled for retirement in fiscal year 2010, as announced when the budget for fiscal year 2009 was submitted to Congress. Section 1076 states: SEC. 1076. SENSE OF CONGRESS REGARDING CARRIER AIR WING FORCE STRUCTURE. (a) FINDINGS.—Congress makes the following findings: (1) Section 5062(b) of title 10, United States Code, requires the Department of the Navy to maintain not less than 11 operational aircraft carriers. (2) In repeated testimony before Congress, the Navy has pledged its long-term commitment to naval combat forces that include 11 operational aircraft carriers and 10 carrier air wings, composed of 44 strike-fighter aircraft per wing. (b) SENSE OF CONGRESS.—It is the sense of Congress that— (1) in addition to the forces described in section 5062(b) of title 10, United States Code, the Navy should meet its current requirement for 10 carrier air wings (even if the number of aircraft carriers is temporarily reduced) that are comprised of not less than 44 strike-fighter aircraft, in addition to any other aircraft associated with the air wing; and (2) the Congress and the Secretary of the Navy should take all appropriate actions necessary to achieve the current requirement for such carrier air wings until such time that modifications to the carrier air wing force structure are warranted and the Secretary of the Navy provides Congress with a justification of any proposed modifications, supported by rigorous and sufficient warfighting analysis. Regarding Section 131, the conference report states: The conferees agree that the investment strategy that the Department of the Air Force intends to help the Department of Defense transition from, the capability provided by the current tactical fighter force to a smaller but more flexible, lethal and capable strike fighter force, will be challenging. As the Air Force implements that strategy but where circumstances warrant, the conferees expect the Air Force will analyze the viability of procuring additional 4.5 generation fighter aircraft under a multiyear contract and, where those conditions required to be present under Section 2306b of title 10, United States Code, as amended, exist, submit a multiyear procurement proposal to Congress, accompanied with certifications required under Section 2306b of title 10, United States Code, as amended. With this provision, the conferees merely intend for the Air Force to conduct, and provide the congressional defense committees with, the analysis necessary to support, where warranted, a multiyear purchase of additional 4.5 generation fighter aircraft, specifically defined under this provision to capture the F–15, F–16, and F–18 that have advanced radar, data-link and avionics capabilities and the capability to deploy advanced armaments. The conferees do not intend that this provision will modify in any way the requirements of Section 2306b of title 10, United States Code, as amended, by section 811 of the National Defense Authorization Act for Fiscal Year 2008 (Public Law 110–181), and the statement of managers accompanying those amendments (H. Rept. 110–477). (Page 682) The House Appropriations Committee, in its report ( H.Rept. 111-230 of July 24 2009) on H.R. 3326 , states the following regarding the Air Force's proposed combat forces restructuring plan: COMBAT AIR FORCE RESTRUCTURE The Committee is concerned with the lack of detail and analysis provided to the Congress regarding the Air Force's Combat Air Force restructure plan that would retire 248 legacy F–15, F–16 and A–10 aircraft. Many of these same concerns regarding the proposed restructuring plan were expressed by the House-passed version of the fiscal year 2010 National Defense Authorization Act. The Committee directs that the reports stipulated in the House-passed version of the Fiscal Year 2010 Defense Authorization Act also be transmitted to the Defense Appropriations Committees. Particularly given these outstanding reports and the expected publication of the Quadrennial Defense Review in the coming year, the Committee is concerned that full implementation of the restructure may be premature. Additionally, the Committee is concerned with the personnel costs and potential acquisition costs associated with the Air Force proposal to remove the training of F–15 pilots and related personnel from Tyndall Air Force Base. The Committee directs the Department to provide a cost benefit analysis of this proposal regarding Tyndall Air Force Base and Kingsley Field in Klamath Falls, Oregon no later than 180 days after enactment of this Act. The report shall include an analysis of factors impacting F–15 training quantity and quality at each location, to include training synergies, airspace access and availability. The report shall identify and explain the justification for where F–15 Basic Crew Chief Training, Air Control Squadron Training and Intelligence Formal Training will be established and maintained. The report shall include analysis on simulator and ancillary training access, expected effect on the quality and experience of the instructor base, future military construction requirements and special considerations and costs required due to the differing training environments and climatology at each base. Moreover, the Committee requests that the Department identify airfields that share runways for both Air Force and commercial operations within the continental United States. The Committee requests that the Department include air force policy on and analysis of the training and operational mission impacts at bases with shared runways. Additionally, the Committee directs an independent review by a Federally Funded Research and Development Center (FFRDC) on the impact of the restructure on the Nation's combat air forces. The Committee directs the Secretary of the Air Force to provide the described reports no sooner than 180 days after enactment of this Act. The Committee further directs that no funds may be obligated on executing the Combat Air Force restructure until 180 days after submission to the congressional defense committees of all directed reports. (Pages 62-63) The report states the following regarding the project Navy-Marine Corps strike fighter shortfall: STRIKE FIGHTER SHORTFALL Sustained, continued operations in overseas contingencies have resulted in the Department of the Navy's tactical aircraft fleet (primarily the F–18 variant aircraft) being flown at an extremely high operational tempo. This has caused the aircraft to age at a faster rate than the Navy had planned when determining the introduction of the follow on aircraft, the F–35 Lightning II Joint Strike Fighter. The net result of these sustained operations is that the Navy is forecasting critical shortfalls in its strike fighter inventory. Delays in the introduction of the F–35 from the original forecast have exacerbated this shortfall. Last year, the Department of the Navy predicted that the shortfall would peak at 125 aircraft in fiscal year 2017. Although the Department of the Navy has not provided an updated shortfall prediction with the submission of this year's budget, the Committee understands it is now over 200 aircraft. This is due to the fact that a key assumption in last year's prediction, the life extension of the older variant F–18 aircraft, is proving to be more problematic than anticipated. Additionally, the Navy has reduced the number of F–18 aircraft being purchased in fiscal year 2010 from what was predicted last year. This reduction is confusing, since it moves the tactical aircraft inventory in the exact opposite direction one would expect when faced with a shortage of aircraft. Fortunately for the Navy, the production line for the F/A–18E/F variant aircraft is still open and producing aircraft. For the last ten years this program has produced cost effective aircraft under the umbrella of a multi-year procurement strategy, however the fiscal year 2010 aircraft are being purchased as a standalone, annually priced procurement. The unit price difference between an annual procurement and a multi-year procurement is substantial. Since the F–35 will not begin to deliver in significant quantities for several years, the Committee believes the Navy is letting a golden opportunity slip away by not entering into another multi-year procurement for F/A–18E/F aircraft. In addition to mitigating the strike fighter shortfall, the Navy would achieve significant savings by purchasing aircraft under a multi-year procurement. Therefore, the recommendation provides $108,000,000 above the request for the procurement of long lead equipment in an economic order quantity and cost reduction initiatives for a five year, 150 aircraft multi-year procurement for the F/A–18E/F and EA–18G programs. Additionally, in an attempt to further mitigate the strike fighter shortfall, the recommendation provides $495,000,000 for the procurement of an additional nine F/A–18E/F Aircraft. (Page 153) The Senate Appropriations Committee, in its report ( S.Rept. 111-74 of September 10, 2009) on H.R. 3326 states the following regarding the projected Navy-Marine Corps strike fighter shortfall: F/A–18 Super Hornet .—The Committee is concerned about the shortfall in the Navy's strikefighter inventory created by the aging of the older F/A–18 models and the fact that the F–35 Joint Strike Fighter program will not start delivering carrier aircraft in significant numbers for several years. The shortfall is currently estimated to be at least 129 aircraft; it could be well above that level if it extending the life of the F/A–18 out to 10,000 hours is cost prohibitive. To ensure that Navy has sufficient aircraft for the fleet, the Committee provides an increase of $512,280,000 to procure an additional nine 9 F/A–18s in fiscal year 2010. The Committee again encourages the Navy to pursue a multi-year procurement contract for these aircraft. (Page 257) On October 6, during its consideration of H.R. 3326 , the Senate approved, by a vote of 91-7 (Record Vote Number 309), an amendment ( S.Amdt. 2596 ) that prohibits the Air Force from retiring any tactical aircraft as announced in the Combat Air Forces restructuring plan announced on May 18, 2009, until the Air Force submits to the congressional defense committees the report that provides, among other things, a detailed plan for how the Air Force will fill the force structure and capability gaps resulting from the retirement of those aircraft. The text of the amendment is as follows: AMENDMENT NO. 2596 (Purpose: To limit the early retirement of tactical aircraft) At the appropriate place, insert the following: Sec. __. (a) Limitation on Early Retirement of Tactical Aircraft.—The Secretary of the Air Force may not retire any tactical aircraft as announced in the Combat Air Forces structuring plan announced on May 18, 2009, until the Secretary submits to the congressional defense committees the report described in subsection (b). (b) Report.—The report described in this subsection is a report that sets forth the following: (1) A detailed plan for how the Secretary of the Air Force will fill the force structure and capability gaps resulting from the retirement of tactical aircraft under the structuring plan described in subsection (a). (2) A description of the follow-on missions for each base affected by the structuring plan. (3) An explanation of the criteria used for selecting the bases referred to in paragraph (2) and for the selection of tactical aircraft for retirement under the structuring plan. (4) A plan for the reassignment of the regular and reserve Air Force personnel affected by the retirement of tactical aircraft under the structuring plan. (5) An estimate of the cost avoidance to be achieved by the retirement of such tactical aircraft, and a description how such funds would be invested under the period covered by the most current future-years defense program. This appendix presents Air Force briefing slides on the Air Force's proposed combat air forces restructuring plan. | Tactical aircraft are a major component of U.S. military capability, and account for a significant portion of U.S. defense spending. In early 2009, the Air Force, Navy, and Marine Corps collectively had an inventory of about 3,500 tactical aircraft. Current efforts for modernizing U.S. tactical aircraft center on three aircraft acquisition programs—the F-35 Joint Strike Fighter (JSF) program, the Air Force F-22 fighter program, and the Navy F/A-18E/F strike fighter program. For discussions of issues relating specifically to these three programs, see CRS Reports RL30563, RL31673, and RL30624, respectively. Air Force officials in 2008 testimony projected an Air Force fighter shortfall of up to 800 aircraft by 2024. Navy officials have projected a Navy-Marine Corps strike fighter shortfall peaking at more than 100 aircraft, and possibly more than 200 aircraft, by about 2018. On May 18, 2009, the Air Force announced a combat air forces restructuring plan that would accelerate the retirement of 249 older Air Force tactical aircraft, including 112 F-15s, 134 F-16s, and three A-10s, so as to generate savings that can be applied to other Air Force program needs. A key issue for Congress regarding tactical aircraft is the overall affordability of DOD's plans for modernizing the tactical aircraft force. The issue has been a concern in Congress and elsewhere for many years, with some observers predicting that tactical aircraft modernization is heading for an eventual budget "train wreck" as tactical aircraft acquisition plans collide with insufficient amounts of funding available for tactical aircraft acquisition. A May 2009 Congressional Budget Office (CBO) report examines several potential options for modernizing the U.S. tactical aircraft force. A second key issue for Congress regarding tactical aircraft concerns the future of the U.S. industrial base for designing and manufacturing tactical aircraft. FY2010 defense authorization bill: The conference version (H.Rept. 111-288 of October 7, 2009) of the FY2010 defense authorization act (H.R. 2647/P.L. 111-84 of October 28, 2009) contains a provision (Section 131) that requires the Department of Defense (DOD) to submit a report to Congress on the procurement of "4.5"-generation fighter aircraft. Section 1052 would require a report on the force structure findings of the 2009 Quadrennial Defense Review (QDR). The House report on H.R. 2647 (H.Rept. 111-166 of June 18, 2009) stated that the report on 4.5-generation fighter aircraft is to include, among other things, a description of the factors that informed decisions regarding the fighter force structure for the Air Force, Navy, and Marine Corps. Section 1075 of H.R. 2647/P.L. 111-84 prohibits the Air Force from retiring fighter aircraft in accordance with the combat air forces restructuring plan until 30 days after the Air Force submits to Congress a report on various aspects of the plan. Section 1076 expresses the sense of Congress regarding Navy carrier air wing force structure. FY2010 DOD appropriations bill: The House and Senate Appropriations Committees, in their reports (H.Rept. 111-230 of July 24, 2009, and S.Rept. 111-74 of September 10, 2009, respectively) on the FY2010 DOD appropriations bill (H.R. 3326), include report language discussing the combat air forces restructuring plan and the projected Navy-Marine Corps strike fighter shortfall. On October 6, the Senate approved, by a vote of 91-7 (Record Vote Number 309), an amendment (S.Amdt. 2596) that prohibits the Air Force from retiring any tactical aircraft as announced in the Combat Air Forces restructuring plan announced on May 18, 2009, until the Air Force submits to the congressional defense committees the report that provides, among other things, a detailed plan for how the Air Force will fill the force structure and capability gaps resulting from the retirement of those aircraft. |
The Adoption Incentive program (Section 473A of the Social Security Act) provides federal payments to state child welfare agencies that increase adoptions of children who are in need of new permanent families. Generally, these are children for whom reuniting with their biological parents is not possible and who would otherwise be expected to remain in public foster care until they "age out" (i.e., reach the state age of majority or the age at which state custody of children in foster care is ended). The first Adoption Incentive payments were made to states in FY1999 based on improvement in the numbers of adoptions completed in FY1998, and the most recent were announced in late FY2013 (August 2013) based on improvements in the numbers of adoptions completed in FY2012. Since the inception of the program, states (including the 50 states, the District of Columbia, and Puerto Rico) have collectively received close to $424 million in federal incentive payments for increased adoptions. The Adoption Incentive program was most recently extended through FY2013 by the Fostering Connections to Success and Increasing Adoptions Act of 2008 ( P.L. 110-351 ). However, as part of the Consolidated Appropriations Act, 2014 ( P.L. 113-76 ), Congress extended states' eligibility to earn adoption incentive payments for an additional year and appropriated $37.9 million to make those payments. Legislation to reauthorize and extend the Adoption Incentive Payments program through FY2016 has passed the full House ( H.R. 3205 ) and was approved in the Senate Finance Committee (Title I of S. 1870 ). Title II of H.R. 4980 , introduced on June 26, 2014, draws on language in both of those legislative proposals. In addition to extending funding authority for incentive payments through FY2016, Title II of H.R. 4980 would make changes to the incentive structure established in the 2008 law—including by changing the award categories to focus more on permanency for children 9 years of age or older, establishing incentive payments for states that appropriately move children from foster care to legal guardianship, determining improvements in state performance based on the rate (or percentage) of children leaving foster care to adoption or guardianship (rather than the number), and putting additional focus on achieving permanence through adoption or guardianship for older children. Apart from reauthorizing the Adoption Incentive program, the Fostering Connections to Success and Increasing Adoptions Act of 2008 made several other changes to federal law, which Title II of H.R. 4980 would amend or otherwise address. Specifically, the bill would extend $15 million in annual mandatory funding for Family Connection Grants for one year (FY2014); that grant program was first established and funded in the 2008 law; adjust eligibility criteria for Title IV-E kinship guardianship assistance (which was first established in the 2008 law) to ensure continuous program eligibility for a child who must go to live with a "successor guardian" due to the incapacitation or death of his/her relative guardians; seek to further ensure siblings have the opportunity to live together while in foster care, by specifying that a 2008 requirement for state agencies to identify and give notice to grandparents and other relatives of children entering foster care includes identifying and providing notice to any parent of a sibling of a child entering care (provided that parent has custody of the sibling); and require additional reporting by states to ensure they spend any savings resulting from the expanded federal support for Title IV-E adoption assistance provided for in the 2008 law, and require that no less than 30% of any identified savings be used by the state to provide post-adoption or post-guardianship services and services to ensure safety and well-being of children who might otherwise enter foster care. This report begins by describing in greater detail the legislation under consideration in the 113 th Congress that would reauthorize and extend the Adoption Incentive Payments program and make additional child welfare-related changes described above. ( Appendix A includes a table comparing current law with several reauthorization proposals, including Title II of H.R. 4980 .) It also discusses hearings and other legislative actions taken in this Congress as part of the reauthorization effort. Additionally, the report provides background related to the Adoption Incentive program, including a discussion of the long-standing congressional interest in domestic adoption, the significant increases in adoption from foster care that have occurred since the mid-1990s, and the Adoption Incentive Payments program as it has functioned since the program's 2008 reauthorization. Throughout this report some unique terms related to adoption, foster child adoptions, or the Adoption Incentive program are used (e.g., "special needs" and "adoption rate"). While each of these terms is explained in the body of the report, for ease of reference they are also included in a "Glossary of Terms" provided in Appendix B to this report. On June 26, 2014, Representative Camp, with Representatives Levin, Reichert, and Doggett, introduced the Preventing Sex Trafficking and Strengthening Families Act ( H.R. 4980 ). The bill's introduction was jointly announced by Representatives Camp and Levin, along with Senators Wyden and Hatch, and was described as "bipartisan legislation [that] reflects agreements reached between the House and Senate negotiators." Title II of H.R. 4980 draws on provisions included in both the Promoting Adoptions and Legal Guardianships for Children in Foster Care Act ( H.R. 3205 , introduced by Representative Camp, with Representatives Levin, Reichert, and Doggett), which was passed by the House in October 2013, and Title I of the Supporting At-Risk Children Act ( S. 1870 ), which was approved by the Senate Finance Committee in December 2013. (The Title I provisions of S. 1870 were also introduced in S. 1876 , the Strengthening and Finding Families for Children Act, which was introduced by Senator Baucus, with Senators Hatch, Wyden, Rockefeller, Grassley, and Casey.) H.R. 3205 and S. 1870 , in turn, drew on other introduced bills, which sought to extend Adoption Incentive Payments and/or make other amendments to child welfare law. In the 113 th Congress, these bills included the Guardians for Children Act ( H.R. 2979 , introduced by Representative Doggett, with Representatives Danny K. Davis, Bass, Lewis, Rangel, McDermott, and Blumenauer); Investing in Permanency for Youth in Foster Care Act ( H.R. 3124 , introduced by Representative Danny K. Davis); Removing Barriers to Adoption and Supporting Families Act of 2013 ( S. 1511 , introduced by Senator Rockefeller, with Senator Casey); Supporting Adoptive Families Act ( S. 1527 , introduced by Senator Klobuchar, with Senators Landrieu and Blunt/ H.R. 3423 introduced by Representative Langevin, with Representatives Wittman, Frederica Wilson, Sean Patrick Maloney, Norton, Bass, and Grimm); and the Sibling Connections Act ( S. 1786 , introduced by Senator Grassley, with Senator Kaine). This section describes Title II provisions of the Preventing Sex Trafficking and Strengthening Families Act ( H.R. 4980 ). For a comparison of these Title II provisions to current law and provisions included in H.R. 3205 and S. 1870 / S. 1876 , see Appendix A . The Adoption Incentive program was authorized to receive up to $43 million in annual appropriations through the end of FY2013. Despite the expiration of funding authority, Congress chose to provide $37.9 million in FY2014 appropriations for these payments ( P.L. 113-76 ). Title II of H.R. 4980 would renew discretionary funding authority for the program, renamed as Adoption and Legal Guardianship Incentive Payments, at the current annual level ($43 million) through FY2016. The proposed three-year reauthorization time frame would align the funding authorization for the incentive payments program with the funding authorizations provided for two child welfare programs authorized under Title IV-B of the Social Security Act (Stephanie Tubbs Jones Child Welfare Services and Promoting Safe and Stable Families). Title II of H.R. 4980 would revise the categories for which states may earn incentive payments, expanding them to include exits from foster care to legal guardianship and placing additional focus on states' abilities to appropriately move children age 9 or older to permanent homes via adoption or guardianship. It would retain an award category for improving foster child adoptions and add a separate award category for foster child guardianships. Awards in these categories would be available with regard to adoptions and guardianships for children of any age. Additionally, H.R. 4980 would split the current "older child adoptions" award category into two groups and add foster child guardianships to both categories. The two new award categories would be for adoptions and foster child guardianships of children ages 9 through 13 years (defined as "pre-adolescent" adoptions and guardianships) and for those aged 14 or older (defined as "older child" adoptions and guardianships). Finally, H.R. 4980 would eliminate the award category tied to adoptions of children less than 9 years of age who are determined by their state to have special needs. Further, H.R. 4980 would base all awards on improvements a state makes in the rate (or percentage) of children moving to adoption (or guardianships). An improved rate would mean that the percentage of adoptions (or guardianships) achieved in the fiscal year for which an incentive payment is being determined is greater than the percentage achieved in the baseline year. Under H.R. 4980 , a state's baseline year would be either the fiscal year immediately preceding the one for which the award is being determined, or the average rate for the three fiscal years immediately preceding the year for which the award is being determined, whichever has a lower rate . (Effectively, this means awards would be based on whichever of these two rates produces the greatest measured improvement.) Comparing percentages (or rates) to determine improved performance—instead of using the absolute numbers of adoptions achieved as is currently done in this program—removes the effect of overall caseload changes from the measurement. For states with declining numbers of children in foster care but continued strong performance with regard to appropriately placing children for adoption or in legal guardianships, comparing rates (instead of absolute numbers) can ensure access to incentive payments. For states with increasing caseloads, it can ensure that increases in the number of adoptions or guardianships completed by the state are related to improved permanency efforts by the state, not simply the availability of more children for placement. Under current law, a state's total adoption incentive payment is generally equal to the number of increased adoptions multiplied by the incentive payment amount tied to each category—$4,000 for foster child adoptions, $4,000 for special needs (under age 9) adoptions, and $8,000 for older child adoptions. By contrast, H.R. 4980 provides that a state's incentive payment would equal the number of adoptions and/or guardianships calculated to have been completed because the state improved its rate (or percentage) of those adoptions and/or guardianships, multiplied by the award amount in that category. For each such foster child adoption, the award amount would be $5,000; for each such foster child guardianship, $4,000; for each such pre-adolescent (9 through 13 years) adoption or guardianship, $7,500; and for each older child (14 or older) adoption or guardianship, $10,000. H.R. 4980 would stipulate that for a foster child guardianship to be counted in the incentive program, the child must leave foster care for placement with a legal guardian. Further, the state must report to the Department of Health and Human Services (HHS) that it has determined for that child that being returned home or placed for adoption are not appropriate permanency options, that the child shows a strong attachment to the prospective legal guardian, that the prospective legal guardian has a strong commitment to providing permanent care for the child, and, if the child is age 14 or older, that he or she has been consulted regarding the legal guardianship arrangement. As an alternative, the state may inform HHS that it used "alternative procedures" to determine that legal guardianship was the appropriate option for a child who exited foster care to live with a legal guardian. Under current law, in any year when appropriations are sufficient, states that improve their highest-ever foster child adoption rate (beginning with the rate achieved in FY2002) are eligible for additional incentive payments. H.R. 4980 would amend this policy to instead provide a "timely adoption award" in any fiscal year when appropriations remain after all incentive payments for improved rates of adoptions and/or guardianships have been made. A state would be eligible to receive this award in any fiscal year that HHS determined that on average, children who left foster care for adoption during that year had been in foster care for less than 24 months (from removal to finalized adoption). As discussed above, H.R. 4980 would significantly alter the incentive structure, including by changing the categories for which awards are provided, changing award amounts, and calculating all awards based on improvements in a state's rate of adoptions or guardianships. However, the bill would provide a transition period before this new incentive structure would be fully implemented. Specifically, the renaming of the program and the changes in the incentive structure would not begin to take effect until FY2015 (October 1, 2014). This means incentive payments expected to be made this fiscal year (i.e., in August or September 2014 for adoptions finalized in FY2013) would be paid under the incentive structure in current law (including award categories, baseline numbers, and award amounts). H.R. 4980 also stipulates that incentive payments made in the second year of the reauthorization (FY2015) would equal one-half of the amount a state earns under the current law structure, plus one-half of what it would earn under the incentive structure included in H.R. 4980 . In the third year of the reauthorization (FY2016), the award structure included in H.R. 4980 would be used exclusively to determine the state's incentive payments. Apart from extension of the program and changes in the incentive structure, H.R. 4980 would amend the law to permit states up to 36 months from the month they receive any incentive funding to use those funds. (Current law allows states up to 24 months from the date payments are made to use the funds.) Under current law, states must spend any incentive payments they receive on the kinds of child and family services that may be supported under the federal child welfare programs included in Title IV-B and Title IV-E of the Social Security Act. Further, current law specifies that any incentive spending must not be counted as the non-federal share of funding required under Title IV-B or Title IV-E programs. H.R. 4980 would keep each of those provisions in place and would additionally stipulate that states must use the incentive funds to supplement, not supplant, any current spending of federal or non-federal dollars for these child welfare activities. Title II of H.R. 4980 would also amend provisions of the adoption assistance component of the Title IV-E program under the Social Security Act. Under current law, states are required to document savings in state spending (if any) that result from expanding federal eligibility for Title IV-E adoption assistance. That eligibility expansion was allowed by the Fostering Connections to Success and Increasing Adoptions Act of 2008 ( P.L. 110-351 ) and is primarily the result of removing income eligibility criteria for Title IV-E adoption assistance. The eligibility expansion began to be phased in with FY2010 and will be fully implemented as of FY2018. Soon after enactment of this expanded eligibility provision, the Congressional Budget Office (CBO) projected that it would increase federal Title IV-E spending by $1.4 billion from FY2009-FY2018, with the bulk of that increase ($1.3 billion) projected to occur in FY2014-FY2018. Some or all of this increase in federal outlays is likely to represent savings of state monies. Under H.R. 4980 , the requirements related to reinvestment of these funds would be restated and expanded. States would be required, beginning with FY2015, to calculate any savings in state spending based on the federal adoption assistance provided to children made eligible by the less restrictive federal criteria. States would be required to do this calculation using a methodology specified by HHS, or proposed by the state and approved by HHS. Further, each state would need to annually submit to HHS the methodology it used to calculate savings (whether or not any were identified); the amount of any savings identified; and how the savings are to be spent. HHS would be required to post this state-reported information on its website. Finally, Title II of H.R. 4980 would require states to spend no less than 30% of any identified savings to provide post-adoption services, post-guardianship services, and services to support and sustain positive permanent outcomes for children who might otherwise need to enter foster care. Further, of that 30%, no less than two-thirds must be spent for post-adoption and post-guardianship services. H.R. 4980 would also amend the law to stipulate that the spending of any such savings would need to supplement, rather than supplant, any federal or non-federal money already being used to support child welfare services available under programs included in Title IV-B or Title IV-E. Title II of H.R. 4980 would amend the guardianship assistance provisions of the Title IV-E program to provide that if the relative legal guardian of a child who is receiving Title IV-E kinship guardianship assistance dies or is incapacitated, the child continues to be eligible for this assistance so long as he or she is placed with a successor legal guardian. The successor legal guardian must have been named in the Title IV-E kinship guardianship agreement that was earlier entered into between the state child welfare agency and the child's previous relative legal guardian. Under current law, a child receiving Title IV-E kinship guardianship assistance whose legal relative guardian dies or becomes incapacitated cannot be certain that this assistance will continue with a successor guardian. Instead, the child must have eligibility for this Title IV-E assistance redetermined. Among other things, this redetermination requires the child to return to foster care for at least six months (and while living with the prospective successor guardian). The Congressional Budget Office (CBO) estimates this change in Title IV-E eligibility criteria (which would prevent the need for children to re-enter more costly foster care) would reduce federal outlays by $7 million across 11 years (FY2014-FY2024). Title II of H.R. 4980 would appropriate $15 million to continue Family Connection Grants for one year (FY2014). (According to CBO, the cost of this one-year appropriation would be fully offset by other changes included in H.R. 4980 .) Family Connection grants are competitively awarded to public or private organizations to carry out kinship navigator programs, intensive family finding efforts, family group decisionmaking policies, and residential family treatment programs. The grants were established and funded (FY2009-FY2013) by the Fostering Connections to Success and Increasing Adoptions Act of 2008. Beyond extending program funding for one year, H.R. 4980 would expand the list of entities eligible to apply for Family Connection grant funding to include institutions of higher education. It would seek to encourage greater support for foster parents who are willing to care for youth in care who are themselves parents (through kinship navigator programs) and it would remove from the law a provision ensuring the reservation of no less than $5 million in Family Connection Grant funding, annually, to support kinship navigator programs. (Accordingly, under H.R. 4980 funding for kinship navigator programs would be available under Family Connection Grants on the same basis as for any other authorized service.) Under the federal foster care program (Title IV-E of the Social Security Act), states are required to "exercise due diligence" to identify grandparents and other adult relatives of children being removed from parental custody and to provide those relatives notice of the child's removal from his/her parent(s), as well as of the options the grandparent or other adult relative has for participating in the child's care or placement. Title II of H.R. 4980 would amend this provision to specify that states must identify and provide this notice to a parent of a sibling of a child, provided that parent has legal custody of the sibling. Further, for purposes of the federal foster care program, it would define "sibling" to mean an individual recognized as a sibling under the state's law, or an individual who would be defined as a sibling except for the legal termination or other disruption of parental rights (such as the death of a parent). As part of the Title IV-E program, states are required to regularly report and collect data on children in foster care and those leaving foster care for adoption. Title II of H.R. 4980 would require HHS to issue new regulations providing for collection of data specifically concerning children who enter foster care after having been previously adopted or placed in a legal guardianship. (This may include children who were, or were not, previously in foster care.) The legislation notes that the data to be collected under the regulation are to promote increased knowledge on how best to ensure strong, permanent families for children in foster care, must include the number of children who enter foster care after a prior finalized adoption or legal guardianship, and may include information on the length of the prior adoption or guardianship, the age of the child at the time of the prior adoption or guardianship, the age of the child when he or she subsequently entered foster care, the type of agency involvement in making the prior adoptive or guardianship placement, and any other information determined necessary to better understand the factors associated with the child's post-adoption or post-guardianship entry to foster care. On February 27, 2013, the Subcommittee on Human Resources of the House Ways and Means Committee held a hearing on "Increasing Adoptions from Foster Care." Subcommittee Chairman Dave Reichert, noting the increase in adoptions and decline in the foster care caseload since the enactment of the Adoption Incentive program and other changes to the law in 1997, said that the hearing was to consider if other changes were needed to encourage adoption from foster care. Four witnesses discussed the importance of adoption as a way for children to find permanent homes, and they gave particular attention to the need for adoptions of older children and those with special needs. Each of the witnesses supported reauthorization of the Adoption Incentive program. Several witnesses described successful efforts to recruit adoptive families for older or harder to place children as those that start with a focus on the individual children or youth in need of families and engage them in the search for those families. One recruitment model, known as "Wendy's Wonderful Kids," includes small caseloads that allow adoption caseworkers to get to know and work with the children for whom they are seeking permanent homes. A rigorous study of the model's effectiveness found that children served under this recruitment and placement model were one and a half times more likely to leave foster care for permanent homes than those who received traditional adoptive home recruitment services. The model's impact is greatest among older children and those with mental health disorders. The state of Ohio has recently contracted to use the Wendy's Wonderful Kids model (on a nearly statewide basis) to find homes for harder to place children age 9 or older. By moving children from foster care to permanent homes more quickly, Ohio anticipates significant fiscal savings. Raising awareness of the need for adoptive families is a central goal of the Wait No More campaign, discussed by another hearing witness. This campaign brings together public child welfare agencies, private and public adoption agencies, church leaders and other support partners to promote and host adoption events at churches around the country. Interested families may begin the adoption process at the event, where speakers stress that adoption is about meeting the needs of the child (not the needs of adults), discuss common behavioral challenges for adoptees from foster care, and offer strategies to enable successful child and family outcomes. Witnesses also focused on the need for post-adoption services, including counselors with specific training and knowledge about the needs of adoptive families, to ensure safety and stability of these families. One witness asked that the longer-standing federal focus and financial support for increasing adoptions be coupled with a greater focus on (and financial support for) post-adoption services and suggested that Congress require states to spend their Adoption Incentive funds on post-adoption support. Another asked that Congress ensure that children who were adopted did not lose access to education, mental health-related, or other services that would be available to them if they remained in foster care. Several witnesses mentioned assignment of the case plan goal "another planned permanent living arrangement" (APPLA) as a potential barrier to finding permanent families for youth in care. Once a youth's goal is fixed as "APPLA," one witness noted the child welfare agency stops searching for a permanent family and focuses exclusively on preparing the youth for "independent living." He asserted that federal policy should always require efforts to find a permanent home for youth in care and noted that those efforts could continue even as the agency worked to help the youth develop independent living skills. Other issues raised at the hearing included a call for reauthorization of the separate competitive grant program known as Family Connections, which one witness noted supports projects that can help connect youth with permanent families through greater kinship support, intensive family-finding efforts and family group decision-making meetings, and greater use (by states) of Title IV-E training funds to support more competent adoption casework. As part of the hearing question and answer, witnesses also supported expanding the Adoption Incentive program to reward states that help youth gain a safe, permanent family through means other than adoption. In particular, several mentioned the importance of legal guardianship to achieving a permanent family for some older youth. On August 7, 2013, the House Ways and Means Committee posted on its website a "discussion draft" bill to re-authorize the Adoption Incentive Payments program. The accompanying announcement sought comments on that draft bill as well as comments on the Guardians for Children Act ( H.R. 2979 ). After receiving comments and revising the proposal, the Promoting Adoption and Legal Guardianship for Children in Foster Care Act ( H.R. 3205 ) was introduced on September 27, 2013, by Representative Camp, along with Representatives Levin, Reichert, and Doggett. The full House considered and passed this bill, under suspension of the rules, on October 22, 2013. A requested roll call vote tallied 402 for the bill and 0 opposed. As noted earlier, and shown in Appendix A , Title II of H.R. 4980 draws significantly from this bill. On April 23, 2013, the Senate Finance Committee held a hearing to consider reauthorization of the Adoption Incentive program; to extend funding for Family Connection Grants; and, more broadly, to consider the kinds of changes necessary to make further improvements in the provision of foster care. The hearing revolved around the story of Antwone Fisher, who spent his entire childhood in foster care before "aging out" (just before his 18 th birthday) to live in a homeless shelter. At the hearing, Mr. Fisher recounted his story, and, among other things, highlighted the need for child welfare agencies to actively work to find a permanent family for each child in foster care, ensure the safety and well-being of children while they are in care, and provide them with meaningful opportunities to prepare for adulthood. Other witnesses at the hearing stressed many of these same points. One witness focused on the need to engage youth in taking charge of their lives, including through transition planning and a form of individual development accounts known as "Opportunity Passports." A former child welfare agency director talked about the efforts of his agency to move from a "punitive" system with a single "fault-finding" response to one that was collaborative and family-centered (providing responses commensurate with a family's needs and concerns). Additionally, one witness asserted the need for child welfare agencies to place a greater value on finding and involving family members in meeting the needs of the children they serve. He suggested the need for states to develop a more systemic approach to identifying family members and advocated more enforcement of, and new reporting on, the existing federal requirements for child welfare agencies to identify and give notice to adult relatives of children entering foster care. On September 30, 2013, the Senate Finance Committee posted a discussion draft bill to reauthorize Adoption Incentive Payments and make certain other changes to federal child welfare policies. After receiving comments on this draft, a version of that discussion draft bill became Title I of the Chairmen's Mark version of the Supporting At-Risk Children Act, which was considered at a December 12, 2013, Finance Committee mark up. The Chairman's Mark was modified to include two child welfare-related amendments (concerning promoting sibling connections and establishing a timely adoption award) before being approved on a voice vote. The bill was reported to the Senate (as S. 1870 ) on December 19, 2013. (A written report, S.Rept. 113-137 , to accompany this legislation, was filed later.) Also on December 19, 2013, the provisions of Title I of S. 1870 (as approved by the Senate Finance Committee) were introduced in a stand-alone bill, known as the Strengthening and Finding Families for Children's Act ( S. 1876 ). That bill was introduced by Senator Baucus, with Senators Hatch, Wyden, Rockefeller, Grassley, and Casey. As discussed earlier and shown in Appendix A , Title II of H.R. 4980 draws significantly from Title I of S. 1870 / S. 1876 . The remainder of this report reviews past congressional interest in use of adoption to move children from foster care to permanency, including the creation of the Adoption Incentive Payments program in 1997 legislation (ASFA, P.L. 105-89 ), before discussing this program as it has operated since its 2008 reauthorization (Fostering Connections, P.L. 110-351 ). Foster care is a temporary living arrangement for children for whom remaining in their own homes is not safe or appropriate. Most children who enter foster care are ultimately reunited with their parents. However, when reunification is determined not possible or appropriate, adoption is generally considered the best way to achieve a new permanent family for a child. Congress has long shown an interest in encouraging adoptions of children who would otherwise remain in foster care until they age out. In 1978, the Adoption Opportunities program (Title II of the Child Abuse Prevention and Treatment and Adoption Reform Act, P.L. 95-266 ) was enacted to require federal administrative coordination of adoption and foster care programs and to support research and other activities to "facilitate elimination of barriers to adoption and to provide permanent and loving home environments for children who would benefit from adoption, particularly children with special needs." In 1980, Congress enacted the Adoption Assistance and Child Welfare Act ( P.L. 96-272 ), including the first federal support for ongoing subsidies to eligible adoptees with "special needs" (under a new Title IV-E of the Social Security Act). In this context the "special needs" designation applies to children in need of new permanent families (i.e., they cannot be returned to their parents) and who have conditions or factors that make it harder to find them adoptive homes without offering assistance. States may establish their own factors to determine special needs, but commonly used factors include a child's age; membership in a sibling group; medical condition; mental, physical or emotional disability; or membership in a minority race/ethnicity. By 1997, a renewed concern about the failure to move children from foster care to permanent families was an important impetus for the Adoption and Safe Families Act (ASFA, P.L. 105-89 ). As part of that law, Congress made changes to federal child welfare policy that were intended to ensure that states focused on achieving expeditious permanence for children in foster care, including through adoptions whenever appropriate. Among other changes, the law tightened or added new permanency planning timelines for children in foster care, required states to spend certain federal child welfare funds (under the Promoting Safe and Stable Families Program) for adoption promotion and support services, and authorized financial incentives to states that increase adoptions of children out of foster care under the newly created Adoption Incentive program. In 2008, as part of the Fostering Connections to Success and Increasing Adoptions Act ( P.L. 110-351 )—and in addition to extending the Adoption Incentive program—Congress expanded eligibility for federal (Title IV-E) adoption assistance principally by removing income criteria tied to the family from which a child had been removed (usually this is the child's biological family). The revised eligibility criteria are being phased in and now apply to only some children determined to have special needs. However, as of FY2018 any child determined by a state to have special needs may be eligible for ongoing, federally supported adoption assistance. Adoption is a social and legal process by which a child gains a new and permanent family. For each child in foster care who cannot be reunited with his or her parents and for whom adoption is determined to be the child's route to permanency, the state must identify suitable and willing adoptive parent(s). States may begin the process of recruiting an adoptive family before a child is "legally free" for adoption. However, before the child's adoption may be finalized a state (or tribal) court must generally terminate any existing parental rights or responsibilities to a child. Once this process, referred to as "TPR" (for termination of parental rights), has been completed, the child's adoption by new parents may be finalized by a state or tribal court. Since the 1997 enactment of ASFA, the annual number of adoptions out of foster care rose significantly and the rate of adoptions has doubled. There are fewer children in foster care who are "waiting for adoption," and the average time it takes to complete an adoption has declined by roughly one year. At the same time, the number of children waiting for adoption remains more than double the number of those adopted each year and adoptions of older children remain less common than those of younger children. The annual number of adoptions from foster care climbed from less than 30,000 in the mid-1990s, to a peak of some 57,000 in FY2009. Since then (through FY2012) the number has remained at, or above, roughly 50,000. The rise in the number of adoptions played a significant role in the decline in the overall number of children in foster care, which peaked in FY1999 at 567,000 children and had declined by 30%, to 397,000 children, as of the last day of FY2012. The fact that the number of foster child adoptions has remained relatively high, despite the decline in the overall number of children in foster care, is notable. Viewed as a rate—that is the number of children adopted during a given fiscal year for every 100 children who were in foster care on the last day of the preceding fiscal year—public child welfare agency adoptions more than doubled since the late 1990s (from a rate of roughly 6 adoptions per 100 children in foster care to 13 per 100). (See Table C-1 in Appendix C for annual data on number and rate of adoptions.) For roughly one-quarter (24%) of the children in foster care on a given day, adoption has been identified as their case plan goal—that is, their exit strategy to permanency. Some children with a permanency goal of adoption, and certain other children in foster care, are "legally free" for adoption—meaning the rights of both parents have been terminated. These children—those with a case plan goal of adoption and/or for whom all parental rights have been terminated are generally referred to as children who are "waiting for adoption." For most of FY1998-FY2012, the number of children waiting for adoption was between 130,000 and 135,000. However, in recent years this number has declined, and it stood at 102,000 as of the last day of FY2012. Additionally, the share of waiting children who leave foster care for adoption has increased. Specifically, the number of children adopted from foster care in FY1999 was 37% of all children waiting for adoption on the last day of FY1998; the comparable percentage for children adopted in FY2012 was 49%. (See Table C-2 in Appendix C for annual data on the number of waiting children and the share adopted in the following year.) Even though the number of waiting children has declined, that number represents a slightly larger share of the overall foster care caseload in FY2012 (26%) than was the case in FY1998 (22%). This relatively modest increase in share of children in foster care waiting for adoption—coinciding with greater success in moving waiting children to adoption—might reflect changes in state practice regarding who may be assigned a case goal of adoption. Alternatively, or in addition, it might be the result of state efforts to reduce unnecessary entries to foster care—which in turn could mean a higher percentage of those entering will need to find a new permanent family via adoption. Adoption is a multi-step legal and social process that takes time to accomplish. Children who enter foster care do not typically move directly to adoption. With limited exceptions federal policy requires that a state must make "reasonable efforts" to reunite a child with his or her family. When reunification is determined not possible, however, the state must take certain steps to free a child for adoption. Specifically, as amended by ASFA, federal law requires a state to petition a state court for termination of parental rights (TPR) to the child if a state court finds either that the child is an abandoned infant (as defined in state law) or that reasonable efforts to reunite the child and his/her parents are not required (because the parent has committed one of certain heinous crimes against the child or his/her sibling). Additionally, once a child has been in foster care for 15 out of the last 22 months, the state must petition the court for TPR, unless it can document for the court that doing so would not be in the child's best interest, that services necessary for reunification and agreed to in the child's case plan have not been provided, or that the child is living with a relative. The state court must then determine—based on state laws defining when parental rights may be severed—whether to grant TPR. At the same time, for any child who cannot be reunited and whose case plan goal is adoption, the state agency must work to find an appropriate and willing adoptive family. Once this step is complete, and a child is successfully placed with the family, a state court must again act, this time to finalize the adoption and, as part of this process, to formally provide the adoptive parents with all legal parental rights and responsibilities for the child. Since FY2000, the amount of time a child spends in foster care before leaving via a finalized adoption has declined by roughly one year. Most of this reduction in time is a result of the shorter time frame needed to reach TPR. However, there has also been some decline in the amount of time it takes to finalize a child's adoption after TPR is completed. On average, adoptions of children out of foster care that were finalized in FY2000 took just under four years to complete (45.9 months). By contrast, children who reached a finalized adoption in FY2012 did so, on average, in less than three years (33.1 months). (For annual data on average and median time from removal to finalized adoption, see Table C-3 in Appendix C . ) Promoting the use of adoptions to ensure children who would otherwise remain in foster care have a permanent family has been a driving purpose of the Adoption Incentive program since its creation. The program has also sought to provide special incentives to states for adoptions of children who are considered harder to place in adoptive homes, including children with special needs and older children. Established by ASFA in 1997 (at Section 473A of the Social Security Act), the Adoption Incentive program has been amended and extended twice: first, by the Adoption Promotion Act of 2003 ( P.L. 108-145 ), and, more recently, by the Fostering Connections to Success and Increasing Adoptions Act of 2008 ( P.L. 110-351 ). Each reauthorization of the Adoption Incentive program has made some changes to the incentive structure used to determine awards, including the categories for which awards may be earned, the "baselines" used to determine improvement, and/or the amount of the individual incentive awards. The current incentive structure is described below. ( Appendix D includes a table that shows development of the incentive structure across program reauthorizations.) Under current law, states earn Adoption Incentive funds in four ways. Specifically, states may earn incentive payments for an increase in the number of children adopted out of foster care overall; number of children adopted at age 9 or older; number of children adopted with special needs and who are under the age of 9; or rate at which children were adopted from foster care. Whether a specific state has increased the number of adoptions is determined by comparing the number of adoptions that the state finalized during the fiscal year to the number of such adoptions it finalized in FY2007 (the "baseline" year). A state is determined to have increased its rate of adoption if the percentage of children adopted from foster care (as a share of the number of all children in foster care in the prior year) is greater than it was in FY2002, or in any succeeding fiscal year prior to the year for which the award is being determined. An eligible state earns $4,000 for each foster child adopted above its baseline number of foster child adoptions and $8,000 for each older child (age 9 or above) adoption above its older child adoption baseline. If a state earns an award in either of those categories—or if it improved its adoption rate—it also earned $4,000 for each adoption of a special needs child (under age 9) that was above its baseline number of such adoptions. Finally, for an improvement in its rate of adoption, a state is eligible for additional incentive funds of $1,000 multiplied by the increased number of adoptions achieved by the state that are attributed to its improved adoption rate. However, increases due to improved adoption rates may only be paid if sufficient program funding is available after all awards for increases in the number of adoptions have been made. Any state (includes the 50 states, District of Columbia, and Puerto Rico) operating a Title IV-E program may be eligible to earn Adoption Incentive payments provided awards are authorized for that year. The program law (Section 473A of the Social Security Act) provides states may only earn awards for adoptions finalized in any of FY2008-FY2012 and it authorizes funds for that purpose through FY2013. However, the Consolidated Appropriations Act, 2014 ( P.L. 113-76 ) provides that states may continue to be eligible to earn Adoption Incentive Payments for adoptions completed in FY2013 and it provides FY2014 funds ($37.9 million) to make those incentive payments. Further, to be eligible for Adoption Incentive payments, the state must provide—via the Adoption and Foster Care Analysis Reporting System (AFCARS)—the necessary data to calculate the incentive amounts. The state must also assure that it provides health insurance coverage to any adoptive child for whom the state determined the child has special needs—including those eligible for ongoing Title IV-E adoption assistance and those with special needs who are not eligible for this assistance. In addition, no state may receive an award for an increase in the number of special needs adoptions of children under the age of 9, unless that state, in that same year, also shows an increase in of the number of foster child or older child adoptions (compared to what the state achieved in FY2007), or an increase in the state's rate of foster child adoption (compared to the rate it achieved in FY2002, or any higher rate achieved in a prior subsequent year). The first Adoption Incentive awards were paid in FY1999 for adoptions finalized in FY1998 and the most recent were initially paid in FY2013 for adoptions finalized in FY2012. During the life of the program, all 50 states, the District of Columbia and Puerto Rico have earned Adoption Incentive payments in one or more years and more than $423 million has been awarded to all states through FY2012. Discretionary funding was authorized for the program through FY2013 at the annual level of $43 million. Actual appropriation levels have varied but in recent years have been less than $40 million. For FY2013, Congress provided $37.2 million (after sequestration) and for FY2014 it provided $37.9 million. Table 1 summarizes the appropriations provided and awards made by fiscal year for which the funds were initially appropriated and the fiscal year for which the incentive funds were earned. For numerous years, not all of the funding shown as the award amount for a given year was actually paid to states at a single time or in a single fiscal year. In years when funds are not sufficient to pay all incentive payment amounts earned (based on numbers of adoptions), HHS prorates the award amounts for the initial payment (as provided for by statute) and subsequently it awards remaining earned incentives (for improved numbers of adoptions) when additional appropriations are provided. For example, when HHS made the initial award for adoptions completed in FY2012, it had just $32.5 million available, or about 74% of the full amount states earned during the year for increasing the numbers of children adopted. Accordingly, each state that earned such an award received 74% of that total amount in September 2013. Subsequently, Congress provided additional program appropriations (as part of P.L. 113-76 ) and HHS awarded the remaining amount (26%, or about $11.4 million) to states. Under the incentive structure used to make awards for adoptions finalized in FY2008-FY2012, states were eligible to receive $212 million and received a total of $202 million in Adoption Incentive payments. Forty-five states were paid Adoption Incentive payments in one or more award category for adoptions finalized in any of FY2008-FY2012. Among the seven states that were not paid an incentive for adoptions finalized in those years, five (Massachusetts, New Jersey, Ohio, and Vermont) actually increased their rate of adoption in one or more of those award years and therefore were eligible for an adoption incentive payment, but did not receive an award due to the program funding level. Additionally, one state (New York) increased the number of special needs (under age 9) adoptions in some of those years. However, because it did not earn an incentive in any of the other categories (foster child, older child, or adoption rate), it was not eligible for incentive funds for those increases. The remaining two states (District of Columbia and Iowa) did not increase the number of adoptions achieved or improve their rates of adoption in any of the five years. Table 2 shows the total amounts paid to states under the current incentive structure by award year and incentive category. States did not necessarily receive all of these incentive payments in a single fiscal year. Further, there were insufficient program funds available to make incentive payments for improved adoption rates in most years. Therefore, the total amount of incentive payments that states were eligible to receive for adoptions finalized in FY2008-FY2012 is about $10 million more than the total amount they were expected to receive. States earned incentive payments of $94.7 million (45% of the total incentive funds they were eligible to receive) for increasing their number of foster child adoptions finalized in FY2008-FY2012. That award category is the broadest—applying to children adopted from foster care generally. States may earn $4,000 for every adoption of a foster child in the given award year that is above the number of foster child adoptions the state completed in FY2007 (the baseline year). Fifteen states finalized more foster child adoptions in each of FY2008-FY2012 than they did in FY2007, and they earned foster child adoption incentive payments in each of these five years. A little more than half of the states (27) earned incentive payments for increases in foster child adoptions in at least one or more (but not all five) of those years, and 10 states did not improve on their FY2007 record in any of these five years. Twenty-seven percent ($56.7 million) of the total incentive dollars states were eligible to receive for adoptions finalized in FY2008-FY2012 were tied to increases in the number of children who were adopted at 9 years of age or older. Adoptions of older children are less common than are adoptions of those who are younger. However, states may earn the largest award amount for increases in this incentive category. Specifically, states may earn $8,000 for every adoption of an "older child" in the given award year that is above the number of older child adoptions the state completed in FY2007 (the baseline year). Twelve states earned incentive payments for increasing their numbers of older child adoptions in each of FY2008-FY2012 and, a little more than half of the states (27) did so in at least one (but not all five) of those years. Thirteen states did not increase their number of older child adoptions (above their FY2007 level in the state) in any of those five years. Twenty-three percent ($49.5 million) of the incentive payments states were eligible to receive for adoptions finalized in FY2008-FY2012 were linked to increases in the number of adoptions of children who were determined to have special needs and who were under the age of nine. States are only eligible to earn incentive payments in this category if they have earned an award in at least one other incentive category during the same fiscal year (i.e., they increased older child or foster child adoptions or they improved their rate of adoption). For eligible states, the award amount is $4,000 for every adoption of a special needs child under 9 years of age that is above the state's baseline number of such adoptions (i.e., above the number of such adoptions it achieved in FY2007). For adoptions finalized in FY2008-FY2012, 10 states increased their number of special needs (under age 9) adoptions above their baseline, but were not eligible in one or more years when this occurred because they did not earn an incentive payment in any other Adoption Incentive category in that same year. Overall, 10 states increased the number of special needs (under age 9) adoptions finalized in each of those five years (compared to FY2007); more than half of the states (30) did so in at least one (but not all) of the five years (FY2008-FY2012); and 12 states did not increase the number of these adoptions (above their FY2007 level) in any of those five years. Finally, the total incentive amount a state is eligible to receive in a year is increased if the state improves its rate of adoption. However, this increased incentive payment is only authorized to be paid to states if sufficient appropriations remain available after awards are made for increases in the number of adoptions. For adoptions finalized in FY2008-FY2012, states were collectively eligible for $11.5 million in incentive payments for improved adoption rates (5% of incentive payments states were eligible for across all four award categories). However, there were sufficient appropriations to award just $1.7 million (15%) of the total amount. A state's adoption rate is equal to the total number of foster child adoptions it completed in the fiscal year for every 100 children that were in its foster care caseload on the last day of the preceding fiscal year. An award for an increased rate of adoption can ensure that an incentive may be earned by a state that continues to appropriately move children from foster care to adoption even as the total number of children in foster care declines. In those states, the total number of children for whom adoption is the desired or appropriate permanency outcome is also likely to decline. To be counted as having an improved adoption rate, a state was required to exceed the highest rate of adoptions it had achieved in any year (beginning with FY2002) that came before the year for which the awards were being calculated. A state that improved its adoption rate was eligible for $1,000 award for each adoption calculated to have been achieved due to the higher rate of adoptions. The large majority of states (44) improved on their initial adoption rate baseline in one or more years from FY2008-FY2012. In FY2008, on average, states finalized roughly 11 adoptions for every 100 children who were in foster care; the comparable number for FY2012 was 13 adoptions for every 100 children in foster care. States may spend Adoption Incentive funds anytime within a 24-month period, beginning with the month in which the funds are awarded to a state. The statute permits states to spend these incentive dollars on any service authorized to be provided to children and families under Title IV-B or Title IV-E of the Social Security Act. Those parts of the law authorize a broad range of child welfare-related activities, including activities to prevent child abuse or neglect and/or provide services to enable a child to remain in his/her own home; investigation of alleged child abuse or neglect and placement of children in foster care if necessary; provision of services to reunite a child in foster care with his/her parents and for services to maintain the reunification; finding a new permanent home for children who may not be reunited with their parents, including through adoption or guardianship; provision of post-permanency services; and services to assist a youth in foster care to make a successful transition to adulthood. A state may not count its spending of Adoption Incentive funds toward meeting any of the "matching" requirements included in the programs authorized in Title IV-E and Title IV-B of the Social Security Act. (Programs under those parts of the law generally require states to supply between 20% and 50% of the total program funding out of their non-federal, state or local, dollars.) Many states report spending incentive funds on adoption-related purposes, including post-adoption support services (e.g., support for adoptive parent mentors or adoptive family support groups, respite care, casework and supports for adoptive families of children at risk of re-entering foster care); recruitment of adoptive homes (e.g., support for online adoption exchange or photo-listing, development of promotional materials, child-specific recruitment efforts); and training or conferences to improve adoption casework. Other adoption-related services or supports funded with Adoption Incentive awards (in a smaller number of states) included provision of monthly adoption assistance payments, purchase of new equipment or provision of other resources to improve processing and archiving of adoption records, support for new or improved adoption home studies, and attention to inter-jurisdictional adoption placement. Some states used Adoption Incentive funds for foster care-related activities (e.g., training or recruitment of foster parents—alone or in combination with adoptive parents and foster and/or adoptive parent supports). Others referenced support for permanency efforts more generally (i.e., incorporating guardianship or reunification). At least one state reported using these incentive funds for foster care maintenance payments. Finally, a few states described use of Adoption Incentive funds for services to families and children remaining in the home (e.g., alternative response and direct child protection services). Appendix A. Comparison of Current Law and Selected Reauthorization Proposals Appendix B. Glossary of Terms ADOPTION RATE —The number of children in foster care who are adopted during a fiscal year for every 100 children who were in foster care on the last day of the previous fiscal year. ADOPTION RATE BASELINE —Highest ever adoption rate achieved by the state for any fiscal year that is before the fiscal year for which the Adoption Incentive rate award is being determined, beginning with FY2002. ANOTHER PLANNED PERMANENT LIVING ARRANGEMENT (APPLA) —Each child in foster care must have a permanency goal—that is a plan for leaving foster care to a permanent home. A hearing to determine (or re-determine) that permanency goal must be held no later than 12 months after a child enters foster care, and every 12 months thereafter while the child remains in foster care. If at this hearing it is determined that the child's plan for permanency may not be any of reuniting with his/her parents, placement for adoption, placement with a legal guardian, or going to live with a fit and willing relative, then a child's plan for exiting care may be "another planned permanent living arrangement." BASELINE (as used in the Adoption Incentive program)—The standard against which state performance is measured to determine whether, in a given year, the state has increased its number of adoptions or improved its adoption rate. A baseline is specific to the state, and is based on a state's past performance. (The four specific baselines used in the current Adoption Incentive program are defined individually in this glossary.) FOSTER CHILD ADOPTION —The finalized adoption of a child who, at the time of adoptive placement, was in public foster care under the placement and care responsibility of the state child welfare agency. FOSTER CHILD ADOPTION BASELINE —The number of foster child adoptions in the state in FY2007 as reported by the state via the Adoption and Foster Care Analysis Reporting System (AFCARS). GUARDIANSHIP —A judicially created legal relationship between child and caretaker which is intended to be permanent and self-sustaining as evidenced by the transfer to the caretaker of the following parental rights with respect to the child: protection, education, care and control of the person, custody of the person, and decision-making. OLDER CHILD ADOPTION —The finalized adoption of a child who is nine years of age or older and who, at the time of the adoptive placement was in public foster care or was the subject of a Title IV-E adoption assistance agreement between the state child welfare agency and the child's adoptive parents. OLDER CHILD ADOPTION BASELINE —The number of older child adoptions in the state in FY2007 as reported by the state via AFCARS. SPECIAL NEEDS ADOPTION —The adoption of a child whom the state has determined (1) cannot be returned to his or her parents and (2) is unlikely to be adopted without assistance because of a particular factor or condition (e.g., child's age; membership in a sibling group; minority race/ethnicity; medical or physical condition; or emotional, mental or behavioral disability). Additionally, unless this is not in the best interest of the child, the state must have made reasonable efforts to place the child for adoption without providing assistance. (A state is required to enter into a Title IV-E adoption assistance agreement with the adoptive parents of any child it finds to have special needs.) SPECIAL NEEDS (UNDER AGE 9 ) ADOPTION —The finalized adoption of a child who is eight years of age or younger and who at the time of the adoptive placement was the subject of a Title IV-E adoption assistance agreement between the state child welfare agency and the child's adoptive parents. SPECIAL NEEDS (UNDER AGE 9 ) ADOPTION BASELINE— The number of special needs (under age 9) adoptions in the state in FY2007 as reported by the state via AFCARS. TERMINATION OF PARENTAL RIGHTS (TPR) —The legal severing (in a state court /court of competent jurisdiction) of the parent-child relationship. (Typically this severs the rights and responsibilities of a biological parent to his/her child. In the case of a previously adopted child however, it is the severing of the rights and responsibilities of the adoptive parent.) WAITING FOR ADOPTION (as counted by HHS, Children's Bureau)—A child who is in foster care and who has a case plan goal of adoption and/or to whom all parental rights have been terminated. Except that any youth age 16 or older and to whom all parental rights have been terminated is excluded if that youth has a case plan goal of "emancipation." Appendix C. Trends in Adoptions with Public Child Welfare Agency Involvement Table C-1 shows, by fiscal year, the number of adoptions in which the public child welfare agency was involved, the number of children in foster care (under the responsibility of the public child welfare agency) on the last day of the fiscal year, and the rate of adoptions. All children who leave public foster care for adoption are adopted with public child welfare agency involvement and they represent the very large number of children shown in the adoption column. A small number of children who do not enter foster care may also be adopted with public child welfare agency involvement and that number is also included in the number shown in the adoptions column. Appendix D. Adoption Incentive Payments At each reauthorization of the Adoption Incentive program, Congress has adjusted the incentive structure. New award categories and adjustments to the baselines have placed greater emphasis on adoption of harder to place children, helped to ensure that earning an incentive was possible even as caseloads declined, and protected the value of the incentive payments from erosion by inflation. Appendix E. Children in Foster Care and Waiting for Adoption by State | Under the Adoption Incentive program (Section 473A of the Social Security Act), states earn federal incentive payments when they increase adoptions of children who are in need of new permanent families. All 50 states, the District of Columbia, and Puerto Rico have earned a part of the $424 million in Adoption Incentive funds that have been awarded since the program was established as part of the Adoption and Safe Families Act of 1997 (ASFA, P.L. 105-89). Discretionary funding authorized for this program has been extended twice since it was established, most recently in 2008 (P.L. 110-351). Although funding authority for the Adoption Incentive program expired on September 30, 2013, the Consolidated Appropriations Act, 2014 (P.L. 113-76) permits states to continue to receive the Adoption Incentive payments and appropriates $37.9 million for them. In addition, Title II of the Preventing Sex Trafficking and Strengthening Families Act (H.R. 4980), which was introduced on June 26, 2014, would extend current annual discretionary funding authority ($43 million) for Adoption Incentive payments through FY2016. Beyond this, Title II of H.R. 4980 would add incentive payments for states that make improvements in appropriately moving children from foster care to legal guardianship and would determine awards based on the percentage (or rate) of children leaving foster care to adoption and/or guardianship, instead of the absolute number of children leaving. In similar statements issued on June 26, 2014, by the House Committee on Ways and Means and the Senate Committee on Finance, Representatives Camp and Levin, along with Senators Wyden and Hatch, announced H.R. 4980 as "bipartisan legislation [that] reflects agreements reached between House and Senate negotiators" on legislation previously approved in the House and in the Senate Finance Committee. Specifically, Title II of H.R. 4980 draws on H.R. 3205, passed by the House in October 2013, and provisions included in Title I of S. 1870, approved by the Senate Finance Committee in December 2013. Congress has long shown interest in improving the chances of adoption for children who cannot return to their parents and who might otherwise spend their childhoods in temporary foster homes before "aging out" of foster care. Since ASFA's enactment in 1997, the annual number of children leaving foster care for adoption has risen from roughly 30,000 to more than 50,000 and the average length of time it took states to complete the adoption of a child from foster care declined by close to one year (from about four years to less than three). Over the same time period, and in significant measure due to the greater number of children leaving foster care for adoption and at a faster pace, the overall number of children who remain in foster care declined by 29%—from a peak of 567,000 in FY1999 to 400,000 in FY2012. Despite these successes, however, the number of children "waiting for adoption" (102,000 on the last day of FY2012) remains about double the number of children who are adopted during a given year. Adoptions of older children remain far less common than adoptions of younger children, and some 23,000 youth aged out of foster care in FY2012, compared to just 19,000 in FY1999. Under the current award structure, a state's adoption incentive payment equals the specified incentive amount for a given category of adoptions multiplied by the number of adoptions in the category that is above the number completed by the state in FY2007. The specified incentive amount is $4,000 for foster child adoptions, $8,000 for older child (9 years or more) adoptions, and—provided a state is eligible for an incentive in another award category—$4,000 for special needs (under age 9) adoptions. Additionally, if sufficient appropriations are available in the fiscal year, a state may also earn incentive payments for improving the rate (or percentage) of foster child adoptions. In the five years (FY2008-FY2012) that this incentive structure has been in place, states received combined incentive payments of nearly $202 million, including $95 million for increases in the number of foster child adoptions, $57 million for increases in older child adoptions, and $48 million for increases in special needs (under age 9) adoptions. They also received about $2 million for increases in the rate of foster child adoptions. (This amount was significantly less than the nearly $12 million states were eligible to receive based on improved adoption rates. However, that full amount was not paid because nearly all appropriations provided were needed to make incentive payments for increased numbers of adoptions.) States are permitted to use Adoption Incentive payments to support a broad range of child welfare services to children and families. Many states report spending incentive funds on adoption-related child welfare purposes, including post-adoption support services, recruitment of adoptive homes, and training or conferences to improve adoption casework. A smaller number of states report using these funds for adoption assistance payments, improved adoption homes studies, child protection casework, foster care maintenance payments, or other child welfare purposes. In addition to amending and extending Adoption Incentive payments, Title II of H.R. 4980 would extend funding for Family Connection Grants (Section 427 of the Social Security Act) for one year, add new reporting and spending requirements for states with regard to certain federal funds they receive under the adoption assistance component of the Title IV-E program, and make possible continued federal Title IV-E guardianship assistance eligibility for children already receiving that assistance who are subsequently placed with a "successor guardian." Additionally, the bill would make changes to federal foster care requirements intended to further facilitate placement of siblings together while in foster care. |
Since 2007, the Supreme Court has ruled on two separate occasions that the Clean Air Act authorizes the Environmental Protection Agency (EPA) to set standards for emissions of greenhouse gases (GHGs). In the first case, Massachusetts v. EPA , the Court held that GHGs are air pollutants within the Clean Air Act's definition of that term and that EPA must regulate their emissions from motor vehicles if the agency found that such emissions cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare. In the second case, American Electric Power, Inc. v. Connecticut , the Court held that corporations cannot be sued for GHG emissions under federal common law, because the Clean Air Act delegates the management of carbon dioxide and other GHG emissions to EPA: "... Congress delegated to EPA the decision whether and how to regulate carbon-dioxide emissions from power plants; the delegation is what displaces federal common law." GHGs are a disparate group of pollutants —the most significant of them being carbon dioxide (CO 2 ). According to a widely held scientific consensus, these gases trap the sun's energy in the Earth's atmosphere and contribute to climate change. In 2009, the House passed comprehensive legislation that would have limited numerous elements of EPA's existing authority over GHGs, substituting economy-wide cap-and-trade systems to reduce GHG emissions. Companion legislation emerged from committee in the Senate, but failed to reach the floor. Since then, Congress has made no serious effort to revive the legislation. Instead, in the 112 th -114 th Congresses, attention to the issue has focused on various bills to repeal or limit EPA's authority over GHG emissions without providing a substitute. Meanwhile, EPA has taken action, using its existing Clean Air Act (CAA) authority: In April 2010, then-EPA-Administrator Lisa Jackson signed final regulations that required auto manufacturers to limit emissions of GHGs from new Model Year (MY) 2012-2016 cars and light trucks. Effective in January 2011, EPA began requiring new and modified major stationary sources to undergo pre-construction review under the Prevention of Significant Deterioration/New Source Review (PSD/NSR) program with respect to their GHG emissions in addition to any other pollutants subject to CAA regulation that they emit. This review requires affected new and modified sources to obtain permits and install Best Available Control Technology (BACT) to address their GHG emissions. At the same time, EPA began requiring large existing stationary sources of GHG emissions (in addition to new sources) to obtain operating permits under Title V of the Clean Air Act (or have existing permits modified to include their GHG emissions). In September 2011, EPA promulgated GHG emission standards for MY2014-2018 medium- and heavy-duty trucks. In October 2012, EPA promulgated a second round of GHG emission standards for cars and light trucks, applicable to MY2017-2025 vehicles. In July 2015, EPA proposed a second round of GHG emission standards for medium- and heavy-duty trucks, applicable to MY2021-2027 trucks and engines, and MY2018 and later trailers. In August 2015, EPA promulgated emission standards for new and existing fossil-fueled electric generating units (EGUs) under Section 111 of the Clean Air Act. EPA's potential regulation of GHG emissions (particularly from stationary sources) has led many in Congress to suggest that the agency delay taking action or be stopped from proceeding. In each Congress since the 111 th , bills have been introduced to rescind or limit EPA's greenhouse gas authority. Early on, EPA attempted to respond to congressional and stakeholder concerns by clarifying the direction and schedule of its actions. The agency provided three clear responses to implementation issues as it was taking the first regulatory actions described above: The first came on March 29, 2010, when the Administrator reinterpreted a 2008 memorandum concerning the effective date of the stationary source permit requirements. Facing a possibility of having to begin the permitting process on April 1, 2010 (the date the first GHG standard for automobiles was finalized), the March 29 decision delayed for nine months (to January 2, 2011) the date on which EPA would consider stationary source GHGs to be subject to regulation, and thus subject to the permitting requirements of PSD/NSR and Title V. On May 13, 2010, the Administrator signed the GHG "Tailoring" Rule, which provided for a phasing in of Title V and PSD/NSR permitting requirements, so that only a limited number of very large sources would initially have to meet requirements. On November 10, 2010, EPA released a package of guidance and technical information to assist local and state permitting authorities in implementing PSD and Title V permitting for greenhouse gas emissions. The EPA Administrator and the President also repeatedly expressed their preference for Congress to take the lead in designing a GHG regulatory system. However, EPA simultaneously stated that, in the absence of congressional action, it must proceed to regulate GHG emissions: the April 2007 Supreme Court decision in Massachusetts v. EPA compelled EPA to address whether GHGs were air pollutants that endanger public health and welfare, and if it found they were, to embark on a regulatory course prescribed by statute. Having made an affirmative decision in response to the endangerment question, EPA proceeded with regulations. Thus, EPA and many Members of Congress have been on a collision course. EPA is proceeding to regulate emissions of GHGs under the Clean Air Act, as it maintains it must. Opponents of this effort in Congress continue to explore approaches to alter the agency's course. The President has made clear that he intends to take action to control GHG emissions. In his second inaugural address, he promised to "respond to the threat of climate change." He has reiterated his determination to address the issue in multiple State of the Union addresses. In June 2013, he directed EPA to propose New Source Performance Standards for greenhouse gas emissions from new fossil-fueled power plants by September 20, 2013, and to propose guidelines for existing power plants by June 1, 2014. EPA met both of these deadlines and finalized the power plant rules in August 2015—leaving Congress to consider whether and how best to respond. This report discusses elements of this controversy, providing background on stationary sources of greenhouse gas pollution and identifying options Congress has if it chooses to address the issue. The report discusses four sets of options: (1) resolutions of disapproval under the Congressional Review Act; (2) freestanding legislation directing, delaying, or prohibiting EPA action; (3) the use of appropriations bills as a vehicle to influence EPA activity; and (4) amendments to the Clean Air Act, including legislation to establish a new GHG control regime. The report considers each of these in turn, but first provides additional detail regarding the sources of GHG emissions, the requirements of the Clean Air Act, and a brief description of the two rules that would limit power plant GHG emissions. Although this report focuses on Congress and the Executive Branch, there is, of course, a third branch of government, the judiciary, which continues to be involved in the issues discussed here. The courts have upheld EPA's regulations related to GHG emissions from motor vehicles. The Supreme Court has issued a stay, however, of the Clean Power Plan, EPA's August 2015 regulations governing GHG emissions from existing fossil-fueled power plants. Challenges to both EPA power plant rules are proceeding in the U.S. Court of Appeals for the D.C. Circuit, with the potential for appeals thereafter to the Supreme Court. Stationary sources are the major sources of the country's GHG emissions. As shown in Figure 1 , 64% of U.S. emissions of greenhouse gases comes from stationary sources (the remainder comes from mobile sources, primarily cars and trucks, and from agriculture, which has elements in both the stationary and mobile source groups). If EPA (or Congress) is to embark on a serious effort to reduce greenhouse gas emissions, stationary sources, and in particular large stationary sources such as power plants, will have to be included. The substantial amount of greenhouse gas emissions emanating from stationary source categories is even more important from a policy standpoint: reducing greenhouse gas emissions from these sources is likely to be more timely and cost-effective than attempts to reduce emissions from the transport sector. A relatively small number of stationary sources (a few thousand power plants, for example) account for a large percentage of total emissions, making regulation easier to administer and enforce. By contrast, there are more than 200 million sources in the fleet of cars and trucks. EPA has no legal authority to impose more stringent standards on these existing vehicles. Even for new vehicles, standards have to be phased in: the manufacturers can't be expected to develop new vehicle designs and engines for every model simultaneously. The fleet of vehicles turns over slowly. Thus, although new vehicles will be required to reduce GHG emissions by about 50% in Model Year 2025 and later vehicles, it will be 2040 or later before the full effect of that requirement is felt. Existing power plants and other stationary sources—although not easily modified—are somewhat more amenable to changes than mobile sources: fuel sources can be switched; processes can be made more efficient, reducing fuel consumption; and demand for power can be modified through a variety of measures. Section 111 of the Clean Air Act provides authority for EPA to impose performance standards on stationary sources of air pollution directly in the case of new (or modified) stationary sources (Section 111(b)), and through the states in the case of existing sources (Section 111(d)). Because power plants and other stationary sources are the largest sources of GHG emissions, EPA has begun the process of regulating their emissions through the two authorities. New Source Performance Standards (NSPS) are emission limitations imposed on designated categories of new (or substantially modified) stationary sources of air pollution. A new source is subject to NSPS regardless of its location or ambient air conditions. The authority to impose performance standards on new and modified sources refers to any category of sources that the Administrator judges "causes, or contributes significantly to, air pollution which may reasonably be anticipated to endanger public health or welfare" (Sec. 111(b)(1)(A))—language similar to the endangerment and cause-or-contribute findings EPA promulgated for new motor vehicles in December 2009. In establishing these standards, Section 111 gives EPA considerable flexibility with respect to the source categories regulated, the size of the sources regulated, the particular gases regulated, along with the timing and phasing-in of regulations (Section 111(b)(2)). This flexibility extends to the stringency of the regulations with respect to costs, and secondary effects, such as non-air-quality, health and environmental impacts, along with energy requirements (Section 111(a)(1)). This flexibility is encompassed within the Administrator's authority to determine what control systems have been "adequately demonstrated" (Section 111(a)(1)). (For discussion of what is meant by the term "adequately demonstrated," see CRS Report R43127, EPA Standards for Greenhouse Gas Emissions from New Power Plants .) Standards of performance developed by the states for existing sources under Section 111(d) can be similarly flexible. EPA first proposed NSPS for fossil-fueled electric generating units (EGUs) on April 13, 2012. After receiving more than 2.5 million public comments, the most on any proposed rule in EPA's 40-year history up to that time —and in response to a Presidential directive —the agency withdrew the 2012 proposal and proposed a somewhat modified version of the rule on January 8, 2014. In addition, the President directed the agency to propose guidelines for existing EGUs under Section 111(d) by June 1, 2014, with final action one year later. The agency finalized both rules on August 3, 2015. The standards for new sources limit GHG emissions from both coal-fired and natural-gas-fired EGUs. Gas-fired plants are able to meet the standard without add-on emission controls, but coal-fired plants (which generate carbon dioxide (CO 2 ) at a rate at least double that of new combined cycle natural gas plants) would need to reduce CO 2 emissions by roughly 20% as compared to the best performing U.S. coal-fired power plants currently in operation in order to meet the NSPS standard. Achieving this would require the installation of partial carbon capture and storage systems at new coal-fired plants, an expensive technology not yet commercially demonstrated on a large U.S. coal-fired EGU. EPA states that this technology will soon be demonstrated by plants currently under construction, and that the rule will provide the certainty needed to stimulate the technology's further development; but many view EPA's rule as effectively prohibiting the construction of new coal-fired power plants. As a result, many in Congress have expressed interest in blocking this EPA regulatory action. The standards for existing EGUs, which EPA calls the "Clean Power Plan" (CPP), would set state-specific goals for CO 2 emissions from power generation. In the CPP, EPA established different goals for each state based on three "building blocks": improved efficiency at coal-fired power plants; substitution of natural gas combined cycle generation for coal-fired power; and zero-emission power generation (from increased renewable or nuclear power). Two sets of goals were promulgated: an interim set, which would apply to the average emissions rate in a state in the 2022-2029 time period; and a final set for the years 2030 and beyond. Under the rule, the states are required to develop plans to reach their goal using whatever combination of measures they choose, but it would be difficult to reach the goals without reducing emissions from coal-fired power plants. (For additional information on the Clean Power Plan see CRS Report R44341, EPA's Clean Power Plan for Existing Power Plants: Frequently Asked Questions .) As noted earlier, if Congress favors a different approach to GHG controls than those on which EPA has embarked, including stopping the agency in its tracks, at least four sets of options are available to change the agency's course: the Congressional Review Act; freestanding legislation; appropriations riders; and amendments to the Clean Air Act. Among the most widely discussed options has been the Congressional Review Act. The Congressional Review Act (CRA, 5 U.S.C. §§801-808), enacted in 1996, establishes special congressional procedures for disapproving a broad range of regulatory rules issued by federal agencies. Before any rule covered by the act can take effect, the federal agency that promulgates the rule must submit it to both houses of Congress and the Government Accountability Office (GAO). If Congress passes a joint resolution disapproving the rule under procedures provided by the act, and the resolution becomes law, the rule cannot take effect or continue in effect. Also, the agency may not reissue either that rule or any substantially similar one, except under authority of a subsequently enacted law. The CRA has been much discussed as a tool for overturning EPA's regulatory actions on GHG emissions. In the 111 th Congress, on December 15, 2009, four identical resolutions were introduced to disapprove the first of EPA's GHG rules, the endangerment finding—one in the Senate ( S.J.Res. 26 ) and three in the House ( H.J.Res. 66 , H.J.Res. 76 , and H.J.Res. 77 ). Of the four, one ( S.J.Res. 26 ) proceeded to a vote: on June 10, 2010, the Senate voted 47-53 not to take up the resolution. The path to enactment of a CRA resolution is a steep one. In the nearly two decades since the CRA was enacted, only one resolution has ever been enacted. The path is particularly steep if the President opposes the resolution's enactment, which is the case with resolutions disapproving EPA rules for GHG emissions. The Obama Administration has made the reduction of GHG emissions one of its major goals; any legislation restricting EPA's authority to act, if passed by Congress, is likely to encounter a presidential veto. Overriding a veto requires a two-thirds majority in both the House and Senate. The potential advantage of the Congressional Review Act lies primarily in the procedures under which a resolution of disapproval is to be considered in the Senate. Pursuant to the act, an expedited procedure for Senate consideration of a disapproval resolution may be used at any time within 60 days of Senate session after the rule in question has been published in the Federal Register and received by both houses of Congress. The expedited procedure provides that, if the committee to which a disapproval resolution has been referred has not reported it by 20 calendar days after the rule has been received by Congress and published in the Federal Register , the panel may be discharged if 30 Senators submit a petition for that purpose. The resolution is then placed on the Calendar. Under the expedited procedure, once a disapproval resolution is on the Senate Calendar, a motion to proceed to consider it is in order. Several provisions of the expedited procedure protect against various potential obstacles to the Senate's ability to take up a disapproval resolution. The Senate has treated a motion to consider a disapproval resolution under the CRA as not debatable, so that this motion cannot be filibustered through extended debate. After the Senate takes up the disapproval resolution itself, the expedited procedure of the CRA protects the ability of the body to continue and complete that consideration. It limits debate to 10 hours and prohibits amendments. The Congressional Review Act sets no deadline for final congressional action on a disapproval resolution, so a resolution could theoretically be brought to the Senate floor even after the expiration of the deadline for the use of the CRA's expedited procedures. To obtain floor consideration, the bill's supporters would then have to follow the Senate's normal procedures, however. Similarly, a resolution could reach the House floor through its ordinary procedures, that is, generally by being reported by the committee of jurisdiction (in the case of CAA rules, the Energy and Commerce Committee). If the committee of jurisdiction does not report a disapproval resolution submitted in the House, a resolution could still reach the floor pursuant to a special rule reported by the Committee on Rules (and adopted by the House), by a motion to suspend the rules and pass it (requiring a two-thirds vote), or by discharge of the committee (requiring a majority of the House [218 Members] to sign a petition). The CRA establishes no expedited procedure for further congressional action on a disapproval resolution if the President vetoes it. In such a case, Congress would need to attempt an override of a veto using its normal procedures for considering vetoed bills. In December 2015, Congress passed and sent to the President two resolutions of disapproval under the CRA: S.J.Res. 23 , which would disapprove the New Source Performance Standards for power plants promulgated by EPA on August 3, 2015, and S.J.Res. 24 , which would disapprove the emission guidelines for existing power plants, also promulgated by EPA on August 3, 2015. The President vetoed both resolutions on December 18. As of April, 2016, neither the House nor the Senate has attempted to override the President's vetoes. For additional information on the Congressional Review Act, see CRS In Focus IF10023, The Congressional Review Act (CRA) , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. To provide for a more nuanced response to the issue than permitted under the CRA, Members have introduced freestanding legislation or legislation that amends the Clean Air Act in a targeted way. More than a dozen bills (and several amendments) have been introduced in the 113 th and 114 th Congresses that would prohibit temporarily or permanently EPA's regulation of greenhouse gas emissions. These bills have faced the same obstacle as a CRA resolution of disapproval (i.e., being subject to a presidential veto); in addition, they would likely need 60 votes to be considered on the Senate floor. On June 24, 2015, the House passed Representative Whitfield's H.R. 2042 , the Ratepayer Protection Act of 2015, 247-180. The bill would delay the compliance date of GHG emission standards for existing EGUs (including the date by which states must submit implementation plans) until after the completion of judicial review of any aspect of the rule—a provision now rendered largely moot by the Supreme Court's issuance of a stay on February 9, 2016. It would also allow a state to opt out of compliance if the governor determines that the rule would have an adverse effect on rate-payers or have a significant adverse effect on the reliability of the state's electricity system. A Senate bill, Senator Capito's S. 1324 , was reported by the Environment and Public Works Committee on October 29, 2015. In addition to provisions similar to those of H.R. 2042 , S. 1324 would prohibit EPA from regulating under Section 111(d) any category of existing sources regulated under Section 112, the hazardous air pollutant section of the act. Power plants are regulated under the Mercury and Air Toxics Standards, promulgated by EPA under Section 112 in 2012. The bill would also revoke the Clean Power Plan and NSPS for power plants, would establish separate categories for coal-fired and natural-gas-fired units, and would prohibit EPA from promulgating or implementing GHG emission standards for new, modified, or reconstructed units in each of those categories until at least six power plants representative of the operating characteristics of electric generation units at different locations across the United States have demonstrated compliance with proposed emission limits for a continuous period of 12 months on a commercial basis. Projects demonstrating the feasibility of carbon capture and storage that received government funding or financial assistance could not be used in setting such standards. Given the role of the U.S. Department of Energy in financing demonstrations of clean coal technology and the cost of developing new emissions control technologies not required by regulation, the bill would effectively prohibit EPA from promulgating New Source Performance Standards for GHG emissions from EGUs. The agency's now-promulgated NSPS sets a standard that no coal-fired EGU in the United States currently meets, and it relies on technology that is being implemented with financial assistance from the Department of Energy. A separate category would be established for units burning low rank coals, with any NSPS for the category to be based on similar requirements achieved by at least three units. Before issuing, implementing, or enforcing a GHG emission rule for power plants, the Administrator would also be required under the Senate bill to submit a report to Congress describing the quantity of GHG emissions that the rule is projected to reduce as compared to overall domestic and global GHG emissions and meet other, including state-specific, requirements. Other bills introduced in the 114 th Congress would exclude GHGs from the CAA definition of "air pollutant" ( H.R. 3880 ), impose requirements for cost-benefit analysis of GHG rules ( H.R. 3015 ), and prevent EPA from using funds to enforce the Clean Power Plan or any cap-and-trade program ( H.R. 3626 ), among other provisions. In the 113 th Congress, more than a dozen bills addressing EPA's GHG regulatory authority were introduced. Among these, H.R. 3826 , the Electricity Security and Affordability Act, passed the House March 6, 2014, and was also included in House-passed H.R. 2 , later in the that Congress. It addressed the New Source Performance Standards proposed by EPA, rather than the standards for existing power plants. It had provisions similar to those described above in S. 1324 in the 114 th Congress, regarding the degree to which a system of emission reduction would have to have been demonstrated before EPA could promulgate an emission standard based on its use. In addition, it would have required that the standards not take effect unless Congress enacted new legislation setting an effective date. Although the bill passed the House, it was not considered in the Senate. In the 112 th Congress, attention focused on several bills that passed the House and/or were considered in the Senate. Several of these bills would have delayed any action by EPA under the Clean Air Act with regard to stationary sources for a period of two years. Three such bills were voted on in April 2011 (as amendments to other Senate legislation)— S.Amdt. 215 , S.Amdt. 236 , and S.Amdt. 277 —and were not agreed to, by lopsided margins. Legislation that received broader support in the 112 th Congress, H.R. 910 / S. 482 , was introduced by Chairman Upton of the House Energy and Commerce Committee and Senator Inhofe, then-ranking Member of the Senate Environment and Public Works Committee. It would have permanently removed EPA's authority to regulate greenhouse gases. The House version passed, 255-177, April 7, 2011. In the Senate, Senator McConnell introduced language identical to the bill as an amendment to S. 493 ( S.Amdt. 183 ). The amendment was not agreed to, on a vote of 50-50, April 6, 2011. The Upton-Inhofe-McConnell bill would have repealed a dozen EPA greenhouse-gas-related regulations, including the Mandatory Greenhouse Gas Reporting rule, the Endangerment Finding, and the PSD and Title V permitting requirements. It would have redefined the term "air pollutant" to exclude greenhouse gases. And it stated that EPA may not "promulgate any regulation concerning, take action related to, or take into consideration the emission of a greenhouse gas to address climate change." The bill would have had no effect on federal research, development, and demonstration programs. The already promulgated light-duty motor vehicle GHG standards and the GHG emission standards for Medium- and Heavy-Duty Engines and Vehicles would have been allowed to stay in effect, but no future mobile source rules for GHG emissions would have been allowed. Also, EPA would have been prohibited from granting another California waiver (under Section 209(b) of the Clean Air Act) for greenhouse gas controls from mobile sources. A third option that Congress has used to delay regulatory initiatives is to place an amendment, or "rider" on the agency's appropriation bill to prevent funds from being used for the targeted initiative. In comparison to a CRA resolution of disapproval or freestanding legislation, addressing the issue through an amendment to the EPA appropriation—an approach that has been discussed at some length since 2009—may be considered easier. The overall appropriation bill to which it would be attached would presumably contain other elements that would make it more difficult to veto. This approach has been considered in every session of Congress since 2010. House appropriations riders considered during this time would have prohibited EPA (during the one-year period following enactment) from proposing or promulgating New Source Performance Standards for GHG emissions from electric generating units and refineries; declared any statutory or regulatory GHG permit requirement to be of no legal effect; prohibited common law or civil tort actions related to greenhouse gases or climate change, including nuisance claims, from being brought or maintained; prohibited the preparation, proposal, promulgation, finalization, implementation, or enforcement of regulations governing GHG emissions from motor vehicles manufactured after model year 2016, or the granting of a waiver to California so that it might implement such standards; and prohibited EPA from requiring the issuance of permits for GHG emissions from livestock and prohibited requiring the reporting of GHG emissions from manure management systems. Throughout this period, the only riders affecting EPA's GHG regulatory authority that have been enacted have dealt with the potential regulation of agricultural sources of GHGs. The FY2016 appropriation and every previous EPA appropriation since FY2010 have included such provisions: Section 417, in Title IV of Division G of P.L. 114-113 provides that "none of the funds made available in this Act or any other Act may be used to promulgate or implement any regulation requiring the issuance of permits under title V of the Clean Air Act ... for carbon dioxide, nitrous oxide, water vapor, or methane emissions resulting from biological processes associated with livestock production." Section 418 prohibits the use of funds to implement mandatory reporting of GHG emissions from manure management systems. The most comprehensive approach that Congress could take to alter EPA's course would be to amend the Clean Air Act to modify EPA's current regulatory authority as it pertains to GHGs or to provide alternative authority to address the GHG emissions issue. In the 111 th Congress, this was the option chosen by the House in passing H.R. 2454 , the American Clean Energy and Security Act (the Waxman-Markey bill) and by the Senate Environment and Public Works Committee in its reporting of S. 1733 , the Clean Energy Jobs and American Power Act (the Kerry-Boxer bill). The bills would have amended the Clean Air Act to establish an economy-wide cap-and-trade program for GHGs, established a separate cap-and-trade program for hydrofluorocarbons (HFCs), preserved EPA's authority to regulate GHG emissions from mobile sources while setting deadlines for regulating specific mobile source categories, and required the setting of New Source Performance Standards for uncapped major sources of GHGs. While giving EPA new authority, both bills contained provisions to limit EPA's authority to set GHG standards or regulate GHG emissions under Sections 108 (National Ambient Air Quality Standards), 112 (Hazardous Air Pollutants), 115 (International Air Pollution), 165 (PSD/NSR), and Title V (Permits) because of the climate effects of these pollutants. The bills would not have prevented EPA from acting under these authorities if one or more of these gases proved to have effects other than climate effects that endanger public health or welfare. The bills differed in the extent of their exemptions from the permitting requirements of the PSD and Title V programs. H.R. 2454 would have prevented new or modified stationary sources from coming under the PSD/NSR program solely because they emit GHGs. In contrast, the Senate bill would have simply raised the threshold for GHG regulation under PSD from the current 100 or 250 short tons to 25,000 metric tons with respect to any GHG, or combination of GHGs. Likewise, with respect to Title V permitting, H.R. 2454 would have prevented any source (large or small) from having to obtain a state permit under Title V solely because they emit GHGs. In contrast, the exemption under the Senate bill was restricted to sources that emit under 25,000 metric tons of any GHG or combination of GHGs. Amending the Clean Air Act to revoke some existing regulatory authority as it pertains to GHGs while establishing new authority designed specifically to address their emissions is the approach that was advocated by the Administration and, indeed, by many participants in the climate debate regardless of their position on EPA's regulatory initiatives. However, the specifics of a bill acceptable to a majority would be challenging to craft. In some respects, EPA's greenhouse gas decisions are similar to actions it has taken previously for other pollutants. Beginning in 1970, and reaffirmed by amendments in 1977 and 1990, Congress gave the agency broad authority to identify pollutants and to proceed with regulation. Congress did not itself identify the pollutants to be covered by National Ambient Air Quality Standards (NAAQS); rather, it told the agency to identify pollutants that are emitted by "numerous or diverse" sources, and the presence of which in ambient air "may reasonably be anticipated to endanger public health or welfare" (CAA Section 108(a)(1)). EPA has used this authority to regulate six pollutants or groups of pollutants, the so-called "criteria pollutants." EPA also has authority under other sections of the act—notably Sections 111 (New Source Performance Standards), 112 (Hazardous Air Pollutants), and 202 (Motor Vehicle Emission Standards)—to identify pollutants on its own initiative and promulgate emission standards for them. Actions with regard to GHGs follow these precedents and can use the same statutory authorities. The differences are of scale and of degree. Greenhouse gases are global pollutants to a greater extent than most of the pollutants previously regulated under the act; reductions in U.S. emissions without simultaneous reductions by other countries may somewhat diminish but will not solve the problems the emissions cause. Also, GHGs are such pervasive pollutants, and arise from so many sources, that reducing the emissions may have broader effects on the economy than most previous EPA regulations. These and other considerations have led many in Congress to try to prevent EPA from using its general authority to control GHG emissions. If the rules are to be overturned during the remainder of the Obama Administration, there are two arenas in which to do so: the courts and the Congress. Opponents of the regulations have not prevailed in either venue, thus far, although the Supreme Court has stayed EPA's implementation of the Clean Power Plan pending the resolution of court challenges to the rule. In the courts, several of EPA's early GHG-related actions, in 2009 and 2010, survived challenges in 95 consolidated petitions for review in the D.C. Circuit. The Supreme Court agreed to review only a narrow question raised by this ruling—whether EPA's regulation of GHG emissions from motor vehicles triggered CAA permitting requirements for GHG emissions from stationary sources as well—leaving the remainder of the D.C. Circuit decision intact. When the Supreme Court ruled on this one issue, in 2014, it gave EPA most of what it wanted, allowing it to require such permitting for GHG emitters who would be subject to permit requirements anyway because of other pollutants they emit. In contrast to this record, petitioners may have better chances in the litigation that has been filed against EPA's rules for new and existing power plants. That is one interpretation of the Supreme Court's unprecedented stay of the Clean Power Plan, issued in February 2016. Until now, opponents in Congress have been unable to overturn most of EPA's GHG actions. With new congressional majorities in the 114 th Congress, legislation to overturn EPA's rulemaking has had easier going than in previous Congresses. But the legislation still faces two important obstacles: the filibuster rule in the Senate and the likelihood of presidential vetoes. Whether either obstacle can be overcome depends on the specifics of the bills in question. While any congressional action to overturn EPA's GHG regulations will face challenges, most analysts expect riders to appropriation bills to have the best odds of success. | In August 2015, the Environmental Protection Agency (EPA) promulgated standards to limit emissions of greenhouse gases (GHGs) from both new and existing fossil-fueled electric power plants. Because of the importance of electric power to the economy and its significance as a source of GHG emissions, the EPA standards have generated substantial interest. The economy and the health, safety, and well-being of the nation are affected by the availability of a reliable and affordable power supply. Many contend that that supply would be adversely impacted by controls on GHG emissions. At the same time, an overwhelming scientific consensus has formed around the need to slow long-term global climate change. The United States is the second largest emitter of greenhouse gases, behind only China, and power plants are the source of about 30% of the nation's anthropogenic GHG emissions. If the United States is to reduce its total GHG emissions, as the President has committed to do, it will be important to reduce emissions from these sources. Leaders of both the House and Senate in the 114th Congress have stated their opposition to GHG emission standards, so Congress has considered several bills to prevent EPA from implementing the promulgated rules. Such legislation could take one of several forms: 1. a resolution (or resolutions) of disapproval under the Congressional Review Act; 2. freestanding legislation; 3. the use of appropriations bills as a vehicle to influence EPA activity; or 4. amendments to the Clean Air Act. Following promulgation of the power plant GHG standards, Congress passed and sent to the President S.J.Res. 23 and S.J.Res. 24, joint resolutions disapproving the standards for both new and existing power plants under the Congressional Review Act. The President vetoed both resolutions on December 18, 2015. Earlier, the House passed H.R. 2042, which would delay the compliance date of GHG emission standards for electric generating units and would allow a state to opt out of compliance if the governor determines that the rule would have an adverse effect on rate-payers or have a significant adverse effect on the reliability of the state's electricity system. The Senate Environment and Public Works Committee has reported a bill with similar (and additional) provisions, S. 1324, but as of this writing the full Senate has not acted on it. This report discusses elements of the GHG controversy, providing background on stationary sources of GHG emissions and providing information regarding the options Congress has at its disposal to address GHG issues. |
RS20678 -- Hate Crimes: Sketch of Selected Proposals and Congressional Authority Updated May 17, 2002 S. 625 , the Local Law Enforcement Enhancement Act of 2001, introduced by Senator Kennedy on March 27, 2001, has 50 cosponsors; its companionin the House, H.R. 1343 , the local Law Enforcement Hate Crimes Prevention Act of 2001, introduced byRepresentative Conyers, has over 180cosponsors. They are virtually identical to the Kennedy hate crime amendment (Amend. 3473) to the NationalDefense Authorization Act for Fiscal Year 2001( H.R. 4205 ) which passed the Senate during the 106th Congress but was dropped from the billprior to final enactment. Representative Jackson-Leehas offered an alternative proposal ( H.R. 74 , the Hate Crimes Prevention Act of 2001), which closelyresembles her offering in the 106th Congress( H.R. 77 ). A second alternative from the 106th Congress, Senator Hatch's S. 1406 , has,as yet, not been proposed in this Congress. New Crimes : S. 625 / H.R. 1343 creates two federal crimes. Both outlaw willfully causing physical injuries; using fire, firearms, orbombs; or attempting to do so -- motivated by certain victim characteristics (whether real or perceived). Offendersare subject to imprisonment for not more than10 years, or for any term of years or life if the crime involves attempted murder, kidnapping, attempted kidnapping,rape or attempted rape. The two offensesdiffer in that the first applies to crimes motivated by the victim's race, color, religion, or national origin and containsno other explicit federal jurisdictionalelement. The second applies to crimes motivated by the victim's gender, sexual orientation, disability, race, color,religion, or national origin and contains a seriesof alternative jurisdictional elements of a commerce clause stripe. Federal prosecution of either offense wouldrequire certification of a senior Department ofJustice official that state or local officials are unable or unwilling to prosecute, favor federal prosecution, or haveprosecuted to a result that leaves federal interestin eradicating bias-motivated violence unvindicated. H.R. 74 would establish the same two offenses, but hasno certification requirement. Hate Statistics : The companion bills and H.R. 74 add gender to the list of predicate characteristics for hate crime statistical collection purposes,section 280003(a) of the Violent Crime Control and Law Enforcement Act of 1994. Assistance to Local Law Enforcement : Unlike H.R. 74 , the companion bills each call for the Justice Department to assist state and tribal lawenforcement efforts to investigate and prosecute violent, felonious hate crimes, motivated by animosity towardsthose of the victim's race, color, religion, nationalorigin, gender, sexual orientation, disability or other characteristic found in the state's or tribe's hate crime law. Theyinsist that priority be given to cases infiscally strapped rural jurisdictions and to cases involving multistate offenders. Grants : Each of the proposals features a grant program to help the states combat hate crimes committed by juveniles, authorizing such appropriations as arenecessary. S. 625 / H.R. 1343 calls for an additional extraordinary grant program available to the statesand tribes to addressinvestigative and prosecutorial needs that cannot otherwise be met. The bills authorize appropriations of $5 millionfor each of fiscal years 2002 and 2003, but noindividual grant may not exceed $100,000 per year. Sentencing Guidelines : Each proposal instructs the Sentencing Commission to study and make any appropriate adjustments in the federal sentencing guidelinesconcerning adult recruitment of juveniles to commit hate crimes, consistent with the other federal sentencingguidelines and being sure to avoid duplication. Commerce Clause : Congress enjoys only those legislative powers that flow from the Constitution. U.S.Const. Amends. IX, X. The commerce clause, section 5of the Fourteenth Amendment and section 2 of the Thirteenth Amendment and Fifteenth Amendment, are the grantsof power most often mentioned whendiscussing Congress' authority to proscribe hate crimes, and to enact other forms of civil rights legislation. Under the commerce clause, Congress is empowered "to regulate commerce with foreign nations, and among the several States, and with the Indian Tribes."U.S.Const. Art.I, �8, cl.3. The Supreme Court in Lopez and Morrison identified the threeways in which Congress may exercise its prerogatives under the clause:"First, Congress may regulate the use of the channels of interstate commerce. Second, Congress is empowered toregulate and protect the instrumentalities ofinterstate commerce, or persons or things in interstate commerce, even though the threat may come only fromintrastate activities. Finally, Congress' commerceauthority includes the power to regulate those activities having a substantial relation to interstate commerce, . . . i.e.,those activities that substantially affectinterstate commerce."). This last category, the "affects interstate commerce" category, can sometimes be the most difficult to define for it may embrace what appears to be purelyintrastate activity. Morrison cited with approval the signposts of this aspect of the commerce powerthat Lopez sought in vain when examining the Gun-FreeSchools Act (18 U.S.C. 922(q)(1)(A)). First, the statute had "nothing to do with commerce or any sort of economicenterprise, however broadly one might definethose terms." Second, "the statute contained no express jurisdictional element which might limit its reach to adiscrete set of firearm possessions that additionallyhave an explicit connection with or effect on interstate commerce." Third, neither the statute "nor its legislativehistory contains express congressional findingsregarding the effects upon interstate commerce of gun possession in a school zone." Finally, the link between gunpossession in a school zone and commerceinterest urged by the government (the cost of violent crime and damage to national productivity caused by violentcrime) was too attenuated without more tosupport a claim to commerce clause authority. In this last regard, Morrison observed, "[w]e accordingly reject the argument that Congress may regulate noneconomic, violent criminal conduct based solely onthat conduct's aggregate effect on interstate commerce. The Constitution requires a distinction between what is trulynational and what is truly local. . . Theregulation and punishment of intrastate violence that is not directed at the instrumentalities, channels, or goodsinvolved in interstate commerce has always beenthe province of the States." The hate crime proposals present two, somewhat different, claims to commerce clause power. First, they create a federal crime for which an aspect of interstatecommerce is an element, i.e., in the case of H.R. 74 : either that (a) "in connection with theoffense, the defendant or the victim travels in interstatecommerce or foreign commerce, uses a facility or instrumentality of interstate or foreign commerce, or engages inany activity affecting interstate or foreigncommerce; or (b) the offense is in or affects interstate or foreign commerce;" and in the case of S. 625 / H.R. 1343 : either that (1) theoffense "occurs during the course of, or as a result of, the travel of the defendant or the victim " either (a) "acrossa State line or national border" or (b) "using achannel, facility, or instrumentality of interstate or foreign commerce;" or (2) the defendant uses a channel, facility,or instrumentality of interstate or foreigncommerce" in the commission of the offense; or (3) in connection with the offense "the defendant employs afirearm, explosive or incendiary device, or otherweapon that has traveled in interstate or foreign commerce; or (4) the offense either (a) interferes with commercialor other economic activity in which the victimis engaged at the time of the conduct; or (b) otherwise affects interstate or foreign commerce." Then they create a second federal crime whose claim to a commerce clause nexus must be more inferential, tied to the findings and the general nature andconsequences of hate crimes. Morrison suggests that the findings and general nature of the offenses involved are likely to be insufficient to support an assertion that the commerce clauseempowers Congress to enact the provisions. Morrison rejected virtually the same argument with respectto a statute creating a civil remedy for the victims ofgender-motivated violence. Its success here would seem to depend on convincing the Court that race-motivated,or color-motivated, or religion-motivated, ornational origin-motivated violence are somehow more commercially influential than gender-motivated violence. Brighter seem the prospects for a judicial conclusion that the offenses that come with commerce-explicit elements come within Congress' commerce clausepowers. They have the distinct advantage of precluding conviction unless the prosecution can convince the courtsof the statutory nexus between the defendant'sconduct and the commerce impacting element of the offense. Moreover, several of the elements involve preventingthe channels of commerce from becoming theavenues of destructive misconduct or protecting the flow of commerce from destructive ingredients -- the mark ofcircumstances that indisputably fall withinCongress' authority under the commerce clause. Section 5 of the Fourteenth Amendment : Where the proposals seem beyond Congress' reach under the commerce clause they may be within the scope of otherlegislative powers such as the legislative clauses of the Thirteenth, Fourteenth, and Fifteenth Amendments. Morrison addresses the breadth of Congress'legislative power under section 5 of the Fourteenth Amendment. The Amendment guarantees certain civil rightsoften by forbidding state or federal interference. Under section 5 the Congress is vested with "power to enforce, by appropriate legislation, the [Amendment's]provisions." Morrison pointed out that UnitedStates v. Harris held that section 5 did not vest Congress with the power to enact a statute "directedexclusively against the action of private persons, withoutreference to the laws of the state, or their administration by her officers." And in Civil Rights Cases ,"we held that the public accommodation provisions of theCivil Rights Act of 1875, which applied to purely private conduct, were beyond the scope of the �5 enforcementpower. . . . The force of the doctrine of staredecisis behind these decisions stems not only from the length of time they have been on the books, but also fromthe insight attributable to the Members of theCourt at that time . . . [who] obviously had intimate knowledge and familiarity with the events surrounding theadoption of the Fourteenth Amendment." The statute in Morrison created a cause of action against private individuals who perpetrated gender-motivated violence enacted in the face of evidence that thestates often failed to adequately investigate and prosecute such crimes. The authority under section 5, however,extends only to state action including theenactment of a "remedy corrective in its character, adapted to counteract and redress the operation of such prohibitedstate laws or proceedings of state officers." The Morrison statute rested on the wrong side of the divide, for its remedy fell not upon wayward stateofficials, but upon private individuals. The hate crimeproposals seem perilously comparable at best. They address private misconduct, not the deficiencies of state action. Section 2 of the Thirteen Amendment : The companion bills and H.R. 74 each stake a claim to the legislative authority in section 2 of the ThirteenAmendment within their findings. The Civil Rights Cases , considered so instructive with respect toCongressional powers under the Fourteenth Amendment, alsoafforded the Court its first opportunity to construe section 2 of the Thirteenth Amendment. Unlike, the Fourteenth,it speaks not of state action, but declares"Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been dulyconvicted, shall exist within the United States,or any place subject to their jurisdiction." U.S.Const. Amend. XIII, �1. It finishes with the stipulation that "Congressshall have power to enforce this article byappropriate legislation." U.S.Const. Amend. XIII, �2. The Civil Rights Cases observed that section 2 "clothes Congress with power to pass all laws necessary and proper for abolishing all badges and incidents ofslavery in the United States." This power it concluded, however, reached "those fundamental rights whichappertain to the essence of citizenship" and but not the"social rights" (access lodging, transportation, and entertainment) that Congress had by statute endeavored to protectfrom racial discrimination. The Court said little of section 2 for nearly a century thereafter until Jones v. Alfred H. Mayer Co. , which found that Congress might ban racial discriminationfrom real estate transactions under the section. Almost in passing, Jones dismissed without repudiatingthe social rights distinction: "Whatever the presentvalidity of the position taken by the majority on that issue--a question rendered largely academic by Title II of theCivil Rights Act of 1964, 78 Stat. 243 (seeHeart of Atlanta Motel v. United States , 379 U.S. 241; Katzenbach v. McClung , 379U.S. 294 [confirming the Title's validity as an exercise ofcommerce clause power])--we note that the entire Court agreed upon at least one proposition: The ThirteenAmendment authorizes Congress not only to outlawall forms of slavery and involuntary servitude but also to eradicate the last vestiges and incidents of a society halfslave and half free, by securing to all citizens, ofevery race and color, the same right to make and enforce contracts, to sue, be parties, give evidence, and to inherit,purchase, lease, sell and convey property, as isenjoyed by white citizens." Three years later in Griffin the Court confirmed that 42 U.S.C. 1985(3)(relating to conspiracies in deprivation of the rights of citizenship) was within the scope ofsection 2 authority. Griffin opined that "Not only may Congress impose such liability, but the varietiesof private conduct that it may make criminally punishableor civilly remediable extend far beyond the actual imposition of slavery or involuntary servitude. By the ThirteenthAmendment, we commit ourselves as a Nationto the proposition that the former slaves and their descendants should be forever free. To keep that promise,Congress has the power under the ThirteenthAmendment rationally to determine what are the badges and incidents of slavery, and the authority to translate thatdetermination into effective legislation. Wecan only conclude that Congress as wholly within its powers under �2 of the Thirteen Amendment in creating astatutory cause of action for Negro citizens whohave been the victims of conspiratorial, racially discriminatory private action aimed at depriving them of the basisrights that the law secures to all free men." 403U.S. at 105. Section 2 envisions legislation for the benefit of those who bore the burdens slavery and their descendants (race, color), but does it contemplate a wider range ofbeneficiaries ( e.g. , religion, national origin). The hate crime proposals would have encloaked groupssubject to classification by "race, color, religion, or nationalorigin." In construing the civil rights statutes enacted contemporaneously with the Thirteenth, Fourteenth andFifteenth Amendment, the Supreme Court held thatArabs and Jews would have been considered distinct "races" at the time the statutes were passed and theAmendments drafted, debated and ratified. Whether thiswould be considered sufficient to embrace all religious discrimination is another question. Would Roman Catholicsor Methodists, for example, have beenconsidered distinct "races" even in the Nineteenth Century? Of course, even this expansion of beneficiaries does not ensure that the Court would consider violence a badge or incident of slavery. Although commenting onits irrelevancy in light of Congress' use of commerce clause, even Jones did not go so far as to rejectthe fundamental versus the social rights distinction of the Civil Rights Cases . Perhaps more to the point, the anxiety of Morrison and Lopez lest an overly generous commerce clause construction swallow all state criminaljurisdiction over violence might argue against the prospect of the Court embracing violence as a badge or incidentof slavery for purposes of Congress' legislativeauthority under section 2 of the Thirteenth Amendment. | Hate crime legislation (S. 625/H.R. 1343), comparable to a measure whichpassed the Senateas an amendment to the National Defense Authorization Act for Fiscal Year 2001 (but which was dropped prior topassage), has been introduced with a substantialnumber of cosponsors in both the House and Senate. It outlaws hate crimes, establishes a system of JusticeDepartment and grant program assistance, andinstructs the Sentencing Commission to examine adult recruitment of juveniles to commit hate crimes. It has beenreported out of committee unchanged in theSenate, S.Rept. 107-147 (2002). An alternative (H.R. 74), more sweeping in its criminal provisions and moremodest in its grant provisions, has alsobeen proposed. In both alternatives, the newly established federal offenses take two forms and are based on Congress'legislative authority under the commerce clause, thelegislative sections of the Thirteenth, Fourteenth, and Fifteenth Amendment. One species outlaws hate crimescommitted on the basis of race, color, religion,national origin, gender, sexual orientation, or disability under various commerce clause circumstances and appearsconsistent with the Supreme Court'spronouncements in Lopez and Morrison. The other forbids hate crimes committed on thebasis of race, color, religion or national origin. Although its claim toCongressional authority seems strongest when based on the Thirteenth Amendment and proscribing violencecommitted on the basis of race, its hold appearsotherwise more tenuous. This report is an abridged version of CRS Report RL30681(pdf), Hate Crimes: Summary of Selected Proposalsand Congressional Authority, stripped of the footnotes,authorities, and appendices of that report; for additional related information, see also CRS Report 98-300, Hate Crime Legislation: An Update. |
As of June 16, 2016, the World Health Organization (WHO) reported that 60 countries worldwide had experienced mosquito-borne transmission of Zika, 46 of which had never had Zika cases before (see Figure 1 ). The U.S. Centers for Disease Control and Prevention (CDC) has concluded that Zika causes microc ephaly (a serious birth defect involving brain damage) and is associated with Guillain-Barré syndrome (GBS, a neurological condition) and other neurological and autoimmune conditions. Latin America and the Caribbean have been most affected by this outbreak ( Figure 1 ). Since February 2016, new cases in the southern parts of the region have decreased, but an increase in new cases is expected in the Caribbean during the summer months as mosquitoes hatch and bite. The United States will likely experience an increase in travel-associated cases and possibly local transmission. Policymakers are concerned about the spread of Zika into the continental United States, as well as the potential that visitors traveling to the Olympics in Brazil in August could contract the virus and bring it back to their home countries. In February 2016, WHO Director-General Margaret Chan announced that the International Health Regulations (2005) Emergency Committee on Zika virus had determined that the Zika outbreak was a Public Health Emergency of International Concern (PHEIC). Shortly thereafter, President Barack Obama requested that Congress provide almost $1.9 billion in emergency appropriations to fund domestic and international responses to the outbreak. A conference agreement on Zika funding was approved by the House but remains pending in the Senate. As Congress considers funding the Zika request and then exercises oversight over U.S. Zika responses in Latin America and the Caribbean, Members may consider issues such as the following: Balance between U.S. bilateral and multilateral Zika responses . Although U.S. health assistance (bilateral and regional) to Latin America in general has declined, U.S. support for the Pan American Health Organization (PAHO) has increased. While considering the President's Zika request and the FY2017 budget request, Congress may discuss how much support to provide for multilateral responses in the region led by PAHO. U.S. health programs in Latin America as a part of U.S. policy toward the region . On average, roughly 10%-20% of the funds provided by the State Department and the U.S. Agency for International Development (USAID) for Latin America between FY2009 and FY2016 have been aimed at health programs. The WHO has recommended that women and men in countries with local transmission of Zika be correctly informed and oriented to consider delaying pregnancy. Congress may evaluate reproductive health and family planning funding in the region given the WHO recommendation and the limited access to sexual education and contraception in the region. Regional a pportionment and components of global health budget . Less than 5% of all U.S. global health funds are provided to Latin America, and the majority of these funds are for HIV/AIDS programs. On average, health indicators in the region—particularly those related to maternal and child health, family planning, and reproductive health—are better than in other low- and middle-income countries, although inequities exist. Congress might reexamine the apportionment of global health funding and consider whether investments in the region are sufficient to meet emerging health concerns. F unding for pandemic preparedness . The United States committed to support 30 countries (including Haiti and Peru) and the Caribbean Community (CARICOM) in bolstering their ability to respond to disease outbreaks through the Global Health Security Agenda (GHSA). Congress included almost $600 million in emergency Ebola appropriations to the CDC in support of GHSA and $50 million in FY2016 appropriations to USAID for pandemic preparedness activities. Congress might consider funding levels for those programs and where those funds are allotted. Investments in research and development of neglected diseases . In recent years, Aedes mosquitoes have caused three disease outbreaks (dengue, chikungunya, and Zika) in Latin America and the Caribbean, all of which have been imported into the United States, with the latter being only travel-associated at the time of this report. These and other diseases lack vaccines to prevent transmission, treatment regimens, and effective vector control tools. Congress might evaluate options to address threats from new and reemerging diseases, including those that are mosquito-borne. This report provides background information on the Zika virus, discusses challenges faced by governments and implementing partners in the Latin America and Caribbean region that are attempting to control the ongoing outbreak, and analyzes the above issues in the context of the U.S. Zika response. Zika was discovered in the Zika forest of Uganda in 1947. From that time until 2007, when the first large Zika outbreak was recorded, Zika virus infection primarily caused mild symptoms (fever, skin rash, conjunctivitis, muscle and joint pain) that resolved within one week. In 2007, the first large Zika outbreak was recorded on the Micronesian island of Yap. Household surveys detected 185 cases. Scientists are studying the virulence of the Zika virus and the extent to which human activity affects global spread. Retrospective studies of a 2013-2014 outbreak in French Polynesia linked Zika infection with GBS for the first time. The current outbreak, which began in Brazil, has been accompanied with a spike in microcephaly and GBS cases, as well as other neurological and autoimmune disorders. As of June 16, 2016, WHO has reported more than 1,600 cases of Zika-related microcephaly worldwide—almost all in Brazil. In addition, 13 Zika-affected countries have recorded an increased incidence of GBS. In the last century, Latin American and Caribbean countries have transformed from largely rural to mostly urban societies, with some 80% of all people in Latin America and the Caribbean now living in urban areas. Throughout the region, millions of people live in densely populated urban slums and poor rural communities where homes and other facilities lack air conditioning or window screens. Lack of proper plumbing and poor sanitation facilitate mosquito breeding, as mosquitoes can lay their eggs in standing water. Aedes mosquitoes thrive in such conditions, biting during the day and breeding indoors and out. Health threats to Latin American and Caribbean populations may also be exacerbated by the 2015-2016 El Niño weather pattern, which is reflected in unusually warm water in the eastern equatorial Pacific Ocean. The present El Niño phenomenon, which has been particularly strong, has produced multiyear droughts in some areas (Colombia, Venezuela, and northern Central America) and extreme flooding in others (Argentina, Uruguay, and Paraguay). The warm, wet weather has facilitated the proliferation of mosquitoes, and human responses to drought conditions have provided favorable conditions for mosquito breeding because more people have been storing water. Studies have also linked climate change with greater health threats, such as increasing prevalence of malaria, chikungunya, and dengue fever. In recent years, Aedes mosquitoes have spread chikungunya, dengue, and Zika across the Americas. All three of these diseases have been imported into the United States and can become locally transmissible because the Aedes mosquito resides in large segments of the United States. Scientists are unsure how many people have been infected by Zika in the Western Hemisphere, but as many as 4 million people may be at risk of infection, and nearly all countries have recorded cases. As of June 16, 2016, Brazil had 159,914 suspected Zika cases, almost 40,000 of which have been confirmed through diagnostic testing (see Figure 3 ). Since the outbreak began in Colombia, the country had recorded 82,935 suspected cases, more than 8,000 of which have been confirmed. Two key factors complicate efforts to count Zika cases: 1. About 75% of infected people do not develop symptoms. 2. The virus is detectable for less than seven days in infected people's blood. As of June 16, 2016, all Zika cases detected in the continental United States (755) had been either acquired abroad or sexually transmitted, although the U.S. Virgin Islands, American Samoa, and Puerto Rico have experienced local transmission by mosquito. CDC and other health experts are preparing for the likelihood that the continental United States may experience locally acquired Zika cases this summer. Given the broad range of the Aedes mosquitoes (see Figure 2 ) and the fact that mosquito-borne diseases have been imported into the United States previously, a successful response to the Zika outbreak may require U.S.-Latin American cooperation in surveillance, research, and response over several years. The number of Zika cases, the capacity of health systems to address them and related complications, and the plans to do so vary widely across Latin America and the Caribbean. Haiti, for example, lacks a functioning hospital system, and Venezuela has little capacity to provide basic maternal and child health care at this time. In terms of preparedness and response to epidemiological emergencies, including Zika, recent assessments of core capacities under the International Health Regulations carried out by PAHO have highlighted weaknesses in health system capacity in all Caribbean countries (including Suriname and Guyana), selected countries of Central America (El Salvador, Guatemala, Honduras, and Nicaragua), Bolivia, and Paraguay. The Inter-American Development Bank (IDB) shares this view. Experts are concerned that these countries and several others are much less equipped than Brazil and Colombia—two of the six countries in the Americas that PAHO deemed capable of handling a pandemic illness in 2012—to address Zika and related health consequences. Inadequate laboratory and diagnostic capacity, poor access to sexual education and contraception, and resistance to national mosquito control efforts due to mistrust of government authorities have hindered efforts in some countries. Gang violence and insecurity have also reportedly prevented health workers from providing services in some parts of El Salvador and Honduras. Should Zika-associated cases of microcephaly become more common outside of Brazil, the health systems in the region may come under strain. Most countries in Latin America and the Caribbean lack the capacity to treat children born with severe birth defects and do not generally permit abortion. Lifetime care for a child with microcephaly can be expensive. In the United States, such care can cost up to $10 million. Brazil has struggled to care for infants with microcephaly, many of whose families live hours from one of the few hospitals that can provide care. Brazil has been at the epicenter of the ongoing Zika outbreak, with 159,914 suspected Zika cases since the beginning of the current outbreak, of which 39,993 have been confirmed as of June 16, 2016. On November 11, 2015, Brazil's Ministry of Health declared a Public Health Emergency of National Importance in response to a sharp increase in the number of infants born with microcephaly. Whereas fewer than 200 cases of microcephaly were reported annually in Brazil prior to 2015, Brazil's Ministry of Health detected 1,581 microcephaly cases between the start of 2015 and June 16, 2016. In Brazil, as in most countries in Latin America, a diagnosis of microcephaly in utero does not meet the government's standards under which abortion is permissible. As a result, Brazil's Ministry of Health has issued guidelines for providing physical and occupational therapy to children born with microcephaly and is certifying hospitals capable of providing care to those infants. Brazil's congress passed a law to provide a small monthly stipend to families caring for microcephalic children, many of whom are led by single mothers who have lost the ability to maintain employment due to the type of care microcephalic babies require. Many observers are concerned that there may be a rise in illegal abortions (and possibly maternal mortality due to unsafe abortions) in Brazil as a result of increasing diagnoses of microcephaly. The Brazilian government has launched a National Plan to Combat the Aedes Mosquito and Microcephaly, which includes research, prevention, and mosquito control efforts, as well as health assistance for pregnant women and children. Brazil has several world-class research institutions with vast experience in tropical diseases, and the country's national public health institutions are working with local and international partners to develop more efficient diagnostic kits, antiviral drugs, and a Zika vaccine. The government has dispatched 220,000 troops and 300,000 health agents to communities around the country to educate the population and eliminate mosquito breeding grounds. Officials have placed particular focus on mosquito-control efforts in Rio de Janeiro, which is scheduled to host the 2016 Summer Olympic Games in August. Some observers have expressed concerns about the adequacy of Brazil's efforts, particularly in low-income areas. Although Brazil has one of the most advanced public health systems in Latin America, significant discrepancies exist in the quality of prenatal care and child mortality rates between the poor north and northeast regions, where many Afro-descendants live (and many Zika cases have been concentrated), and the wealthier south. Reports also indicate that many states in Brazil's northeast region ran out of mosquito larvicide last year and that the country's fiscal challenges and political instability have inhibited some Zika responses this year. Colombia has the second-most cases of reported Zika virus infection in the Western Hemisphere. As of June 16, 2016, Colombia had reported 82,935 suspected cases, roughly 8,000 of which have been confirmed. Two-thirds of Colombia's municipalities have reported suspected or confirmed cases, and Colombia's National Institute of Health estimates that between 200,000 and 300,000 people may contract the disease in the country by the end of 2016. Similar to Brazil, Colombia has a relatively sophisticated public health system. Over the past several years, Colombia has spent a little over $15 million annually on combating contagious pathogens. It plans to maintain that funding level in 2016. The Colombian Ministry of Health issued a Zika virus risk-based preparedness and response plan in January 2016 that included four key elements: 1. Strengthening the national system of epidemiological surveillance; 2. Training health personnel on early detection, diagnosis, and management of Zika cases; 3. Coordinating Zika awareness, prevention, and response activities; and 4. Bolstering health care services to improve capacity to address Zika cases and related illnesses and to implement guidelines for comprehensive care of patients. In January 2016, the Colombian Minister of Health visited the main cities around the country to raise awareness about Zika and build support for countering the disease among local health officials. The Ministry of Health also released policy recommendations that advised couples in affected areas to use contraceptive methods to prevent possible sexual transmission of the virus and postpone pregnancy. The government allotted an additional $1.4 million to purchase necessary supplies and improve institutional support to prevent and combat Zika. As of June 16, 2016, Colombia had seven confirmed cases of microcephaly. Some experts predict that Colombia may see an increase in microcephaly cases in the coming months because its Zika outbreak began roughly six months after Brazil's. Others maintain that numbers may not grow significantly because abortion is legal under certain circumstances in the country, and some pregnant women may opt to abort after a prenatal microcephaly diagnosis. Colombian officials predict that about 300 Zika-linked microcephaly cases may be diagnosed between May and September 2016. The government is working with the U.S. CDC to monitor and treat women infected with the Zika virus. In 2015, Brazil experienced an unusual spike in microcephaly cases. Evidence later emerged linking Zika with microcephaly. The phenomenon prompted WHO Director-General Margaret Chan to convene an emergency committee on Zika virus to discuss four key issues: 1. The association of Zika infection with birth malformations and neurological syndromes; 2. The potential for further international spread of the virus given the wide geographical distribution of the mosquito vector; 3. The lack of population immunity in newly affected areas; and 4. The absence of vaccines, specific treatments, and rapid diagnostic tests. Upon recommendations of the emergency committee, Chan declared that the Zika outbreak was a PHEIC in February 2016. A PHEIC declaration signals that the health event may require immediate international action and often prompts a coordinated, multinational response. Also in February, the WHO released an interim Strategic Response Framework and Joint Operations Plan to guide the international response to the outbreak and related complications from January 2016 to June 2016. The plan focused on the following: Strengthening disease surveillance, Building laboratory capacity to detect the virus, Bolstering mosquito control, Providing care for infected persons, and Defining and supporting priority research areas. The plan asked for donors to provide $25 million to WHO (to coordinate and support global responses to the outbreak and scientific studies on the virus) and PAHO (to coordinate and support implementation of responses in the Americas). The remaining $31 million in funds was requested for partner organizations, including the U.N. Children's Fund (UNICEF) and U.N. Population Fund. Due to sluggish contributions, in May 2016, U.N. Secretary General Ban Ki-moon announced the establishment of a U.N. Zika Response Multi-Partner Trust Fund to attract support for unfunded priorities outlined in the aforementioned WHO strategic framework. As of June 22, 2016, donors had provided more than $4 million (16%) to the WHO/PAHO portion of the request. In addition, WHO released $3.8 million in emergency support for the Zika response. WHO and PAHO do not count the emergency funds toward fundraising goals, as these funds are to be reimbursed. On June 16, 2016, WHO issued a revised $122 million Zika Strategic Response Plan to guide international efforts from July 2016 through December 2017. The plan describes how the WHO/PAHO and 60 partner organizations aim to bolster detection, prevention, care and support, and research on Zika and related complications. It prioritizes support for women of childbearing age and their partners in communities affected by Zika. In addition, the plan urges countries and donors to bolster investments in counseling, reproductive health services, abortions (where legal), and postnatal follow-up and care for women who have been infected with Zika and for children born with microcephaly. It also calls for expanding services and research on GBS. Since 2015, PAHO has been working with the U.S. CDC, USAID, National Institutes of Health (NIH), U.S. Department of Defense (DOD), and other leading research entities in the region to fill in significant knowledge gaps about Zika, its transmission, and its complications and to develop new diagnostic tests and hasten progress toward creating a vaccine. PAHO has partnered with governments, U.N. entities, multilateral development banks, and private organizations on disease surveillance, mosquito abatement, community engagement and education campaigns on personal protection, and services for those affected. PAHO, the World Bank, and the IDB have developed an assessment tool that measures country capacity to handle anticipated Zika cases and accompanying complications. In recent years, the World Bank has scaled back many of its health programs in Latin America to focus on regions with greater health needs, particularly sub-Saharan Africa. Nevertheless, the World Bank has maintained health strengthening projects in Argentina, Brazil, Nicaragua, and El Salvador and is launching a new project in Panama. It is also analyzing countries to forecast the impact of major events, such as Zika, on economies in affected countries. In February 2016, the World Bank initially estimated that the costs of the Zika outbreak to Latin America would be moderate at $3.5 billion, or roughly 0.06% of regional gross domestic product. Officials have since stated, however, that the impact could be greater, particularly for Caribbean countries dependent on tourism from non-Zika affected countries. Since the Zika outbreak began in Latin America, the World Bank has made $150 million available for assistance. Most of the funding would be made available by restructuring existing projects to include components focused on Zika or by including Zika-related activities in new projects. Nine countries in Latin America qualify for International Development Association aid based on their low per-capita incomes. These countries can therefore access a "crisis response" window that would provide new money (including grants or credits). As of mid-June 2016, Guyana had asked for $5 million from the crisis response window. El Salvador had allocated $4 million from an existing health project, and Nicaragua had allocated $1 million from an existing project for Zika responses. Two states in Brazil had requested $20 million. Another large effort with the federal government of Brazil to address Zika had been put on hold due to the political challenges unfolding in the country. The IDB has an active portfolio of loans and grants for health programs in Latin America totaling roughly $2.7 billion. The largest programs are in Brazil, Mexico, the Dominican Republic, El Salvador, Nicaragua, and Panama. Most IDB programs focus on health system strengthening to enable governments to improve the provision of maternal and child health care and to better address noncommunicable diseases. The IDB is considering a request from the Caribbean Health Agency and a joint proposal from four South American countries to help improve those countries' compliance with International Health Regulations (2005) and assist in planning for health emergencies. In response to the Zika outbreak, the IDB has offered to reorient up to $180 million of its current portfolio of water, sanitation, and health programs to address Zika. Of the $60 million in health financing made available, the IDB had received requests to reorient $19 million as of mid-May 2016. IDB efforts to address Zika are generally focused on providing family planning in rural areas using community health workers, training primary care workers to detect nervous-system problems, and distributing supplies to prevent mosquito bites. The IDB is also supporting communications campaigns and efforts to increase surveillance capacity and vector control. In addition, the IDB has collaborated with New York University to launch a crowdsourcing project that would enable governments to seek and partner with global health experts for responses to Zika and other infectious disease outbreaks. In February 2016, President Barack Obama requested almost $1.9 billion in emergency supplemental funding to address the Zika outbreak ( Table A-1 ), the bulk of which was requested for the Department of Health and Human Services (HHS) primarily for domestic responses. The Administration requested that $376 million of those funds be used by USAID and the Department of State for international responses and $150 million be used for CDC international responses. On April 6, 2016, the Administration announced that it would reprogram $589 million in unspent Ebola funds to address the Zika outbreak. USAID is reprogramming $215 million of that funding to support short-term efforts in Latin America, including a transfer of $78 million to CDC for Zika activities in the region and a $4 million transfer to the Department of State for a contribution to the International Atomic Energy Agency. The largest components of USAID funds are to support vector control programs ($50 million) and to fund a grand challenge to encourage innovative responses to vector control, diagnostics, surveillance, and personal protection ($30 million). By far the largest component of USAID's transfer to CDC is to support surveillance, epidemiology, and public health studies ($44 million). (See Table A-2 .) USAID and CDC are determining where to program their activities based on the anticipated numbers of cases in each country (based on experience with dengue and chikungunya) and the anticipated needs of countries in the region. Central America and the Caribbean are top priorities. Unlike the supplemental request, which included $10 million for operating costs, the reprogrammed funds will be implemented with existing staff and resources (although USAID may use program funding to hire some staff). The funds are expected to last for a year at most. In mid-May 2016, both the House and the Senate passed supplemental appropriations measures for Zika response. The House bill, H.R. 5243 , would provide $622.1 million in Zika funding and rescind an equal amount of budget authority. The Senate measure ( S.Amdt. 3900 to H.R. 2577 , the combined FY2017 Military Construction-Veterans Affairs and Transportation-Housing and Urban Development appropriations bills) would provide $1.1 billion in Zika response funding without rescissions. On June 23, 2016, the House agreed to a conference agreement (see H.Rept. 114-640 ) that would provide $1.1 billion for Zika response, including $175.1 million for State Department and USAID activities. On June 28, 2016, the Senate voted not to invoke cloture on the conference agreement. Congress is considering a range of domestic and international responses to the Zika outbreak. In the global context, as summarized above (see " Congressional Action on the Budget Request "), Members are debating the appropriate response to the outbreak. In the international context, Congress may consider how to balance support for U.S. bilateral and multilateral Zika responses. U.S. foreign assistance to Latin America and the Caribbean has been declining since FY2011, and USAID has been phasing out many global health programs in the region. The Zika outbreak may prompt broader discussions about whether to bolster U.S. global health investments in the Western Hemisphere, including in reproductive health. Discussions about controlling the Zika outbreak may also focus on U.S. support for global pandemic preparedness efforts, as well as research and development for diagnostics, treatments, and prevention measures for certain neglected diseases. The bulk of U.S. bilateral and regional health assistance for Latin America and the Caribbean is provided by the State Department and USAID. Since the start of the Obama Administration, State Department and USAID health assistance to the region has declined by roughly 34%. In contrast, U.S. annual assessed contributions to PAHO have increased from $59.1 million in FY2009 to $65.7 million in FY2015. U.S. voluntary and assessed contributions currently represent roughly 37% of the organization's $200 million annual budget. Despite these increases, PAHO has struggled to fund missions that bring experts to the region, which cost between $15,000 and $20,000 per expert. PAHO maintains that those missions, partnerships with NIH and other research entities, and training for health and vector control workers are greatly needed in the region. The U.S. government also provides annually assessed and voluntary contributions to WHO, UNICEF, the World Bank, and the IDB, which have launched Zika responses in the region. WHO and PAHO have launched a revised plan to support countries in their response to the Zika outbreak (see " WHO and PAHO ," above) through 2017. As of mid-June 2016, WHO and PAHO have received $4 million to support what they estimate will cost $122 million overall. The WHO has not reported voluntary contributions from the U.S. government for the plan, although the Administration's February 2016 Zika budget request includes $10 million for the WHO/PAHO response and the Administration reprogrammed $14 million of Ebola funds for voluntary contributions to WHO, PAHO, and UNICEF for Zika activities in April 2016. Given the relatively small U.S. health investment in the region (as discussed below), Congress may discuss the appropriate mix of funds, if any, to provide for multilateral Zika responses. In a region with relatively deep engagement with multilateral organizations, some would argue for providing increased funds to those entities. Others believe that it is harder to control how multilateral contributions are spent and ensure that related activities align with U.S. priorities. Current U.S. policy in Latin America is designed to promote economic and social opportunity, ensure the safety of the region's citizens, strengthen effective democratic institutions, and secure a clean energy future. As part of broader efforts to advance these priorities in the region, USAID and the State Department lead these efforts through a variety of foreign assistance programs. State Department assistance is primarily related to rule of law and security and certain other presidential priorities, whereas USAID focuses primarily on poverty alleviation, democracy and governance, health, and economic development. USAID and State Department assistance in Latin America and the Caribbean has been declining, particularly since FY2011—the period following the release of the 2010 President's Policy Directive on Global Development (PPD-6). Although the directive sought to elevate development as a "core pillar" of American foreign policy, it also directed U.S. agencies to "be more selective about where and in which sectors [they] work." The PPD-6 prompted USAID to conduct a comprehensive review of its development assistance programs. Following a review of the health sector, USAID determined that many of the countries in the region "had achieved remarkable progress, were far ahead of other presence countries [i.e., those with a USAID mission], and could effectively sustain progress without further USAID assistance." This finding led to a gradual reduction in health funding in the region ( Figure 4 ). Health assistance fell from a high of $445.6 million in FY2010 to an estimated $231.3 million in FY2016. USAID continues to support programs related to maternal and child health, reproductive health, and family planning in Guatemala and Haiti, but it has discontinued such programs in all other countries across the region. Policymakers concerned about development in Latin America may consider whether health should once again become a larger component of U.S. assistance programs, as inadequate access to health services can exacerbate poverty and inequality. A recent report by the U.N. Development Program urged governments and donors in the region to focus on addressing exclusion experienced by Afro-descendant and indigenous populations, women who suffer from domestic violence, and rural populations. These issues may be of particular concern in Central America, where the Administration significantly increased development assistance in FY2016 (and in the FY2017 request) but did not include any funds for bilateral health programs in Honduras or El Salvador. With support from USAID and other donors, many Latin American countries have made notable progress in improving the delivery of primary health care services—including access to contraception and basic prenatal care—over the past few decades. Since the 1960s, these developments have led to a 41% decline in maternal mortality, a 70% decline in infant mortality, and a drop in fertility rates from six children per family to between two and three children per family. As a result of this progress, USAID global health engagement in the region has been steadily declining (see Figure 5 ). In FY2009, for example, USAID implemented global health programs in 14 countries in the region. By FY2016, USAID global health programs were operating in five countries (Brazil, Dominican Republic, Guatemala, Guyana, and Haiti). In three of those countries (Brazil, Dominican Republic, and Guyana), global health programs focus only on HIV/AIDS. In FY2009, maternal and child health (23%) and reproductive health and family planning programs (13%) together constituted almost 40% of USAID health programs in Latin America. By 2016, maternal and child health (8%) and family planning and reproductive health programs (7%) amounted to 15% of all USAID health spending in the region. In 2016, health ministers in several countries urged women to consider postponing pregnancy in response to Zika. Delaying or avoiding pregnancy is a problem in some communities where access to affordable and reliable contraception is limited and domestic violence (including spousal rape) is a major problem. Experts estimate that some 56% of pregnancies in Latin America are unplanned, particularly among adolescents in poor communities who often do not have access to sexual education or counseling. Health experts, including WHO Director-General Margaret Chan, have decried this constraint. The WHO/PAHO Zika Strategic Response Plan urges support for reproductive health counseling and services, and pre- and postnatal care to pregnant women who may be affected by Zika and related birth defects. Some groups have advocated for many countries in Latin America and the Caribbean to legalize abortions for severe microcephaly cases and have urged the United States to bolster investments in family planning and reproductive health services across the region. Others oppose the legalization of abortion and argue that additional resources should be spent on finding effective treatments and vaccines. In February 2016, Pope Francis—an Argentinian who is influential in largely Catholic Latin America—indicated that birth control may be the "lesser evil" compared with allowing babies to be born with microcephaly, though he remained staunchly opposed to abortion. In recent years, a succession of new and reemerging infectious diseases have caused outbreaks and pandemics that have together affected millions of people worldwide: Severe Acute Respiratory Syndrome (2003), Avian Influenza H5N1 (2005), Pandemic Influenza H1N1 (2009), Middle East Respiratory Syndrome coronavirus (2013), Ebola (2014), and Zika (2015). In 2014, former HHS Secretary Kathleen Sebelius and WHO Director-General Margaret Chan announced the Global Health Security Agenda (GHSA), a global effort to accelerate implementation of the International Health Regulations (2005), particularly in resource-poor countries that lack the ability to comply with the regulations. The regulations include measures to strengthen global responses to public health events with potential international impact. Some analysts have asserted that Zika transmission has exposed weaknesses in Latin American countries' pandemic preparedness. As of 2012, PAHO maintained that only six countries (Brazil, Canada, Colombia, Costa Rica, and the United States) were prepared to handle a pandemic. Through GHSA, the United States has committed to support 30 countries—two of which (Haiti and Peru) are in the Western Hemisphere—and CARICOM. Congress provided $597 million to CDC through emergency Ebola appropriations for the GHSA. The legislation did not specify where the funds were to be used. In light of the growing disease threats posed by Aedes mosquitoes in the Western Hemisphere, policymakers might consider whether to expand U.S. support for GHSA implementation to other countries in Latin America. Given entreaties from health experts to bolster pandemic preparedness efforts to minimize the effects of future outbreaks, Congress might consider whether ongoing funding for pandemic preparedness is sufficient. Since FY2014, Congress has been appropriating $72.5 million annually to USAID and an average of $58 million annually to CDC for global health security efforts. The Administration is seeking $72.5 million for USAID and $65.2 million for CDC to implement global health security programs in FY2017. Since 2015, three disease outbreaks (dengue, chikungunya, and Zika) have spread from Latin America and the Caribbean into the United States, with the latter being only travel associated at the time of this report. These and other diseases lack vaccines to prevent transmission, treatment regimens, and effective vector control measures. The WHO and other health experts have called for increasing investments in research and development for "neglected tropical diseases" such as dengue and chikungunya, as well as for Zika. A consortium of health experts estimates that the international community would need to double current investments in health research and development for neglected diseases from $3 billion in 2014 to $6 billion by 2020 to meet global health goals. According to the Global Health Technologies Coalition, the United States accounts for roughly 70% of public investment and 45% of global investment in global health research and development. The United States provides the highest amounts of funding for research and development for 26 of the 30 most neglected diseases. As of 2012, it supported more than half of the global health products in the development pipeline. Since peaking in 2009, however, U.S. funding for global health research and development has fluctuated ( Figure 6 ). In April 2016, Congress enacted P.L. 114-146 , Adding Zika Virus to the FDA Priority Review Voucher Program Act, to add the Zika virus to the list of tropical diseases eligible for the Food and Drug Administration's (FDA) Priority Review Voucher program, which allows companies to fast-track a product through the FDA regulatory process. It is unclear what effect this action will have on the development of products to control, treat, and prevent Zika, although several U.S. government agencies are already supporting development of vaccines and treatments for the Zika virus. DOD is conducting preclinical research on a Zika vaccine candidate and plans to start human testing by the end of 2016. The Biomedical Advanced Research Development Authority (BARDA) within HHS has received a number of proposals to develop new Zika vaccines using vaccine platforms that could also be used for other emerging infectious disease threats. BARDA, NIH, and DOD are collaborating to support the development of a vaccine at DOD's Walter Reed Army Institute of Research. Health experts argue that the Zika outbreak highlights the need to increase research not only for the treatment and prevention of human Zika infections but also for the development of effective vector control measures. At the 69 th World Health Assembly, WHO Director-General Chan asserted that "the spread of Zika, the resurgence of dengue, and the emerging threat from chikungunya are the price being paid for a massive policy failure that dropped the ball on mosquito control in the 1970s." Inappropriate and inconsistent use of insecticides has led to insecticide resistance and the growth of Aedes populations across the Western Hemisphere. This phenomenon has prompted some to advocate for increased U.S. investments in vector control in the region. Brazil has become the first country in the world to approve the large-scale use of genetically modified mosquitoes in vector control programs, and the FDA is reviewing a request to conduct trials of the technology in the United States. The Zika budget request includes $100 million for USAID to incentivize the development of Zika vaccines, diagnostics, and vector control measures. It is unclear whether these funds will be sufficient to encourage market development of these products. The future of the Zika supplemental funding request is uncertain at this time due to a number of controversial measures that are in the conference report. Some observers are concerned that there may not be enough time for the House and Senate to resume negotiations to reconcile their responses to the Zika outbreak before they adjourn in July. In the meantime, U.S. agencies are using reprogrammed funds to complement current efforts by Latin American governments, PAHO, the private sector, and other donors. The size and scope of U.S.-funded initiatives to address Zika in Latin America and the Caribbean is also uncertain. Appendix A. Supporting Documentation Appendix B. Online Resources on Zika Virus | Congress is debating how to respond to an ongoing outbreak of Zika virus, a mosquito-borne illness that has no treatment or vaccine and can cause microcephaly—a severe birth defect—and other neurological complications. As of June 16, 2016, 60 countries and territories had reported mosquito-borne transmission of the virus, 39 of which are in Latin America and the Caribbean and are reporting cases of Zika for the first time. Brazil, which has registered the most confirmed cases of Zika in Latin America, will host the summer Olympics in August 2016. Scientists expect that travel destinations in the Caribbean will see more cases as the summer's warm, rainy season continues. More than 750 U.S. citizens, including pregnant women, have become infected through either travel or sexual transmission. Frequent business and tourist travel, combined with the close proximity and similar climates of Latin America and the southern United States, means that mosquito-borne Zika infections are likely in the United States. Zika is primarily spread by Aedes mosquitoes—primarily Aedes aegypti but also Aedes albopictus, the latter of which is present in a majority of U.S. states. Local (or mosquito-borne) transmission has not yet occurred in the continental United States but is occurring in Puerto Rico and the U.S. Virgin Islands. On February 8, 2016, the Obama Administration submitted an emergency request for almost $1.9 billion in supplemental funding to respond to the Zika outbreak, including $526 million for international efforts. On April 6, 2016, the Administration announced that it would reprogram $589 million in unobligated funds, including $510 million in Ebola supplemental funds, for efforts to address the Zika outbreak. The U.S. Agency for International Development (USAID) is reprogramming $215 million of that funding—including a $78 million transfer to the U.S. Centers for Disease Control and Prevention (CDC)—for international efforts. In mid-May 2016, both the House and the Senate passed supplemental appropriations measures for Zika response. The House bill, H.R. 5243, would provide $622.1 million in Zika funding and rescind an equal amount of budget authority. The Senate measure (S.Amdt. 3900 to H.R. 2577, the combined FY2017 Military Construction-Veterans Affairs and Transportation-Housing and Urban Development appropriations bills) would provide $1.1 billion in Zika response funding without rescissions. On June 23, 2016, the House agreed to a conference agreement (see H.Rept. 114-640) that would provide $1.1 billion for Zika response, including $175.1 million for State Department and USAID activities. On June 28, 2016, the Senate voted not to invoke cloture on the conference agreement. The number of people in the Western Hemisphere affected by Zika is unknown, but as many as 4 million people may be at risk of infection in 2016, and nearly all countries in Latin America and the Caribbean have recorded cases of the virus. Zika responses in the region have been led by Brazil and Colombia, multilateral organizations such as the World Health Organization (WHO)/Pan American Health Organization (PAHO), and the U.S. government. Health experts have expressed concerns about the capacity of health systems—particularly in Central America and the Caribbean—to prevent, diagnose, and care for Zika cases and associated complications, particularly among pregnant women. Related issues of interest to Congress include how to balance support for U.S. initiatives and multilateral approaches, the proper scope and components of U.S. health assistance to the region, and funding for pandemic preparedness and research on neglected tropical illnesses in Latin America. This report focuses on the Latin American dimensions of the Zika virus. For more information, see CRS Report R44549, Supplemental Appropriations for Zika Response: The FY2016 Conference Agreement in Brief, by [author name scrubbed] and [author name scrubbed] This report will be updated periodically. |
The U.S. Congress has expressed deep concern over Russia's annexation of Crimea and its role in the ongoing crisis in Ukraine. Among other things, the crisis has heightened concerns in the United States and in Europe about the future direction and scope of the transatlantic security relationship and the cornerstone of that relationship, the North Atlantic Treaty Organization (NATO). Some policy makers and analysts have called for a reassessment of the transatlantic community's progress in realizing its goal of a Europe "whole, free, and at peace," citing security concerns in some of NATO's Central and Eastern European member states and ongoing territorial disputes in countries on the alliance's borders, such as Moldova, Ukraine, and Georgia. Questions about NATO's commitment and capacity to defend its member states and about the nature of the alliance's relationship with Russia have moved to the forefront of discussions about NATO's future. These questions are expected to feature prominently at NATO's next summit of heads of state and government, scheduled to take place in Wales on September 4-5, 2014. The crisis in Ukraine has also exposed longer-standing tensions within NATO regarding its strategic focus. Since the end of the Cold War, NATO has evolved from an exclusive focus on territorial defense and deterrence in Europe to overseeing a range of military and crisis management operations across the globe. This transformation was predicated largely on the perception that Russia no longer posed a security threat to NATO, and on a conviction that the primary security challenges facing the allies emanated from beyond the Euro-Atlantic region. However, some NATO members, including many former members of the communist bloc, have consistently expressed concern that the alliance's transformation could come at the expense of its capacity to uphold its commitment to collective defense, enshrined in Article 5 of the North Atlantic Treaty. After more than a decade of war in Afghanistan and against the backdrop of a militarily resurgent Russia, some allies are calling for a renewed NATO focus on collective defense. Debates about NATO's mission come against the backdrop of continued economic stagnation in Europe and long-standing U.S. concerns about a downward trend in European defense spending, shortfalls in European defense capabilities, and burden sharing within the alliance. In 2013, total defense spending by NATO European allies as a percentage of GDP was about 1.6%; and just three NATO allies (Greece, the UK, and the United States) exceeded the alliance's goal of spending 2% of GDP on defense. Since 2001, the U.S. share of total allied defense spending has grown from 63% to 72%. Analysts in the United States have long asserted that defense spending in many European countries is inefficient, with disproportionately high personnel costs coming at the expense of much-needed research, development, and procurement. In 2013, only four allies met a NATO guideline to devote 20% of defense expenditures to the purchase of major equipment, considered a key indicator of the pace of military modernization. These trends correlate with significant shortfalls in key military capabilities, including strategic air- and sealift; aerial refueling; and intelligence, surveillance and reconnaissance (ISR). NATO Secretary General Anders Fogh Rasmussen and others have argued that the budgetary constraints facing allied governments could spur much-needed defense cooperation among European allies. At NATO's May 2012 summit, the allies committed to a "Smart Defense" initiative that calls for cooperation, prioritization, and specialization in pursuit of needed defense capabilities. Some critics maintain that this is just the latest in a long line of post-Cold War efforts to enhance capabilities that have had mixed success, at best. They argue that the limited outcomes may reflect a general lack of public support for military engagement and divergent threat perceptions both across the Atlantic and within Europe. As noted above, within Europe, some allies have emphasized the need for territorial defense capabilities, while others have stressed the importance of more flexible, rapidly deployable units and civilian-military crisis management operations. An increasingly strained budget environment and heightened concerns about the security threat from Russia appear to be amplifying these differences. U.S. officials have consistently underscored their firm commitment to the transatlantic security relationship and the collective defense of the alliance. However, far-reaching defense budget cuts in the United States, the Obama Administration's "rebalance" to Asia, and the withdrawal over the past two years of two of the U.S. Army's four Brigade Combat Teams based in Europe have raised questions about future U.S. commitments to European security. Russia's actions in Ukraine have heightened these concerns. Reflecting the views of the United States and its European allies, NATO Secretary General Rasmussen has characterized Russia's military aggression as "the most serious crisis in Europe since the fall of the Berlin Wall," and declared that NATO can "no longer do business as usual with Russia." NATO's response to the crisis thus far has focused on demonstrating support for Ukraine and its territorial integrity; reaffirming the allied commitment to defensing Central and Eastern European allies; and rebuking Russia. In early April, NATO announced the suspension of all "practical" civilian and military cooperation with Russia in the framework of the NATO-Russia Council. Political dialogue between the two sides will continue. Cooperative activities in the NATO-Russia Council that could be affected include a helicopter maintenance fund and a counternarcotics initiative in Afghanistan, and some joint counter-terrorism initiatives. The allies have agreed to strengthen political and military cooperation with the government in Kyiv. This includes providing military trainers to assist in Ukraine's military modernization efforts and improving the interoperability of Ukrainian and allied armed forces through exercises and joint operations. In June, Secretary General Rasmussen announced the creation of several new NATO trust funds to help develop Ukrainian defense capacity, including in the areas of logistics, command and control, cyber defense, and assisting retired military personnel to adapt to civilian life. Total contributions to these trust funds has not as yet been publicly disclosed. NATO has not provided Ukraine with military hardware and is not expected to do so. This does not, however, preclude bilateral military assistance from individual allies. For example, as discussed below, the United States has provided Ukraine with non-lethal military aid (see, " Ukraine "). All NATO allies have thus far ruled out providing Ukraine with lethal military aid, arguing, among other things, that such assistance could lead to a further escalation of the conflict. Since Russia's annexation of Crimea, NATO has sought to reinforce its commitment to defending central and eastern European allies. Measures taken thus far have centered on air defense and surveillance, maritime deployments, and military exercises. Despite calls from some member states, NATO has thus far ruled out permanent troop deployments in the region. Air Defense and Surveillance: NATO member states have deployed additional fighter jets to the alliance's Baltic Air Policing mission and NATO is carrying out aerial surveillance flights over Poland and Romania. In April, NATO increased the Air Policing Mission from four to 16 fighter jets. The mission to protect Baltic airspace has been led by NATO allies on a rotational basis since 2004 (the Baltic countries do not have their own air forces). Denmark, France, Poland, and the UK are each currently contributing four fighter aircraft to the mission. Canada has also deployed jets to Romania to conduct training exercises with the Romanian air force. Since mid-March 2014, NATO airborne warning and control system (AWACS) surveillance aircraft have been conducting twice daily flights to monitor events in Ukraine, one over Poland and one over Romania. NATO has used surveillance images to monitor Russian troop movements along the Ukrainian border. Maritime deployments: NATO has deployed two maritime groups on patrols to the Baltic and Mediterranean Seas. One group of 5-7 mine clearance vessels has been patrolling the Baltic Sea since late April. It includes ships from Belgium, Estonia, France, Germany, the Netherlands, and Norway. A second maritime contingent of frigates has been patrolling the Mediterranean since May. It includes ships from Canada, Germany, Norway, Turkey, and the United States. In mid-July, a third NATO maritime group participated in naval exercises in the Black Sea. The group of four ships (from Italy, Turkey, and the UK) conducted interoperability exercises with naval units from Greece, Italy, Romania, Turkey, and the United States. Military Exercises: NATO member states have conducted several military exercises in Central and Eastern Europe, and have planned at least one major exercise in Ukraine in September. From May 16-23, about 6,000 allied troops conducted a military exercise in Estonia aimed at repelling a potential attack on Estonian territory. Troops from Belgium, Denmark, Estonia, France, Latvia, Lithuania, Poland, the UK, and the United States participated in the NATO exercise, dubbed "Steadfast Javelin 1." The U.S. Army-led Rapid Trident 2014, originally scheduled to take place in western Ukraine in July, has been tentatively postponed until mid-September. The Army anticipates that up to 14 nations, including many NATO member states, will participate in the exercise, which will reportedly feature a combined U.S.-Ukrainian battalion headquarters practicing a peacekeeping operation. Last year's Rapid Trident exercise in Ukraine included 1,300 troops from 17 nations. Although they have welcomed these measures, some allies in Central and Eastern Europe have called for a more robust demonstration of NATO's willingness and capacity to defend them. Most notably, leaders in Poland and the Baltic State have advocated permanent NATO troop deployments on their territories (see " Security Situation and Concerns in Central and Eastern Europe "). Other allies have cautioned against a further "militarization" of NATO relations with Russia, highlighting, among other things, NATO's 1997 pledge to refrain from permanently stationing substantial combat forces in countries that joined NATO after the collapse of the Soviet Union. Officials in Germany, for example, have said that permanent troop deployments in member states formerly aligned with the Soviet Union could represent a counter-productive provocation of Russia. As well as being a key proponent of the NATO response thus far, the Obama Administration has taken additional military measures intended to reassure Central and Eastern European allies. These efforts, under the umbrella of U.S. European Command's Operation Atlantic Resolve , have consisted primarily of enhanced U.S. troop rotations in the region and joint military exercises with allies and partners. Measures taken to date include: deployment in March and April of an additional six F-15 fighter jets to the Baltic Air Policing mission; deployment in March of an aviation detachment of 12 F-16s and 300 personnel to Lask Air Base in Poland; deployment of 175 marines to Romania to supplement the Black Sea rotational force, which will now consist of about 400 marines; and deployment of 150 paratroopers each to Poland, Lithuania, Latvia, and Estonia. According to the Department of Defense, these and other U.S. troops have participated in at least ten land-based military exercises with NATO Central and Eastern European and other allies this spring and summer. The United States has suspended all military-to-military activities with Russia, including two previously scheduled trilateral exercises with Canada and Norway. The Defense Department has also enhanced U.S. naval presence in the Black and Baltic Seas. In March, April, and May 2014 four U.S. naval vessels (the USS Truxton , the USS Donald Cook , the USS Taylor , and the USS Vella Gulf ) were at varying times deployed to the Black Sea for naval exercises. The USS Oscar Austin has conducted naval exercises and port visits in the Baltic Sea. Russia's annexation of Crimea and its continued support for separatist forces in eastern Ukraine have sharpened concerns in Central and Eastern Europe about Vladimir Putin's possible future intentions. Geographical proximity and long-standing historical relationships, including the experience of Soviet invasion and domination during the Communist era, color regional attitudes toward Russia. Many officials and analysts in Central and Eastern Europe relate that they have not been especially surprised by Russia's actions in Ukraine and assert that their past efforts to convey concerns about President Putin's revanchist ambitions went largely unheeded in the United States and Western Europe. Poland, the Czech Republic, and Hungary joined NATO in 1999, and Slovakia joined in 2004. All four countries regard NATO as the central pillar and guarantor of their national security, and all four have demonstrated their commitment to the alliance by participating in the NATO-led mission in Afghanistan, among other activities. In addition to their membership in NATO and the EU, these four countries cooperate on a range of regional issues and interests as the Visegrád Group (V4). Energy dependence is a central consideration in V4 relations with Russia: about 59% of the natural gas consumed in Poland, 80% in Hungary, 84% in Slovakia, and 57% in the Czech Republic comes from Russia. In recent years, Russia has been actively trying to extend its influence in the region through energy deals and the acquisition of energy infrastructure. While business usually centers on natural gas, Hungary also agreed to a deal with Russia's state nuclear company in early 2014 for the upgrade of a Hungarian nuclear power plant, financed by a €10 billion (about $13.4 billion) loan from Moscow. In February 2014, the V4 foreign ministers released a joint statement reiterating "their strong interest in maintaining the sovereignty, independence, unity, and territorial integrity of Ukraine..." All V4 members agreed to the 5 rounds of limited sanctions (travel bans and asset freezes) imposed by the EU against Russian individuals and companies between March 17 and July 26 in response to the annexation of Crimea and the conflict in eastern Ukraine. (The EU's common position is that the Crimea referendum was illegal, and no EU member states recognize its outcome. ) Furthermore, after the shooting down of Malaysian Airlines Flight 17 on July 17 and Russia's subsequent failure to halt support for separatist forces in eastern Ukraine quickly shifted the sanctions debate in Europe, the V4 countries joined their fellow EU member states in adopting wider financial and trade sanctions against Russia on July 29. Nevertheless, debates during the spring and early summer of 2014 about EU sanctions and responding to the Ukraine crisis exposed differences within the V4 significant enough that some observers questioned the future relevance of the grouping as a mechanism for coordinating foreign policy. Poland's consistent and forceful advocacy of a robust response to Russia's actions made it something of an outlier in the V4. Whether owing to a desire to preserve energy and economic ties with Russia, concerns about provoking Russia further, or the perception that Russia's actions in Ukraine are distant and do not pose a direct threat to their countries, the governments of the other three countries have tended to be more reserved. Critics of these governments' response noted an apparent preference for inaction by the governments of the Czech Republic and Slovakia, and even some outright pro-Russian stances by the prime minister of Hungary. Poland stands out among the V4 group as having the most difficult relationship with Russia. Despite a mild, temporary thaw in the relationship after the Polish President and nearly 100 high-level Polish officials were killed in a 2010 airplane crash in Russia, Polish suspicions about the nature of Putin's Russia have long persisted. Poland is by far the most populous country, the largest economy, and the most significant military actor of the V4. Like many European countries, Poland is in the midst of a long-term transformation to a smaller, more capable, and more deployable military. Despite budgetary pressures, Poland is pursuing a broad equipment acquisition program linked to the need to phase out remaining Soviet-era material. In an effort to upgrade its main battle tanks and other armored vehicles, helicopters, air defenses, drones, and individual soldier equipment, Poland has reportedly significantly increased equipment expenditures. Poland has been a leading allied participant in NATO's mission in Afghanistan. At the same time, given its enduring perception of Russia as a threat, Poland has also been a leading voice in calling for NATO to focus on its traditional vocation as an alliance of territorial defense. In the wake of the Crimea annexation, Polish officials revived a long-standing wish to base U.S. forces on their territory, calling for two NATO brigades (approximately 10,000 soldiers) to be stationed in Poland as a security guarantee. The 12 U.S. F-16s and 300 airmen deployed to Poland in March 2014 build on a small U.S. aviation detachment that was established in Poland in 2012, which has supported quarterly training rotations of 200 U.S. personnel operating F-16s and C-130s. Poland also participates in the U.S./NATO European Phased Adaptive Approach missile defense system, intended to guard against a possible Iranian missile threat. Aegis-ashore interceptors are scheduled to be deployed in Poland in 2018. Of additional note with regard to Poland's security is the 5,800 square mile Russian exclave Kaliningrad, wedged between Poland and Lithuania. Kaliningrad has a heavy Russian military presence, including the Baltic Sea Fleet and two airbases. In addition, Russia has reportedly stationed, or at least threatened to station, Iskander short-range nuclear missiles there. Compared to Poland, the militaries of the Czech Republic, Hungary, and Slovakia are significantly smaller and possess more modest capabilities. Each of the three countries also faces substantial resource constraints and budget pressures: since 2008, the Czech Republic has cut its defense spending by 16%, Slovakia by 22%, and Hungary by 29%. Nevertheless, the Czech and Hungarian forces are considered by military experts to be well-structured, well-equipped, well-trained, highly capable for their size, and experienced from participation in international deployments. The Czech government plans to increase defense spending from the current 1.0% of GDP to 1.4% by 2020, to replace equipment such as Soviet-era transport helicopters, and to continue developing niche capabilities such as chemical, biological, radiological, and nuclear defense (CBRN). Hungary intends to increase defense spending from the current 0.8% of GDP to 1.4% by 2022, to replace Soviet-era transport aircraft and helicopters, and to focus on maintaining elite special operations forces, developed in close cooperation with the United States, as well as rapidly-deployable light infantry units. Analysts observe that a low defense budget presents the Slovak military with an especially difficult challenge because it faces a need to replace a large percentage of its ageing equipment—as much as 75% of Slovakia's defense equipment is past its life cycle and the military remains heavily dependent on Russian armaments. In recent years, the V4 countries have sought to expand their cooperation from largely political matters to include security and defense. The four generally consult closely with one another in attempting to present a unified regional stance within NATO and on issues related to the EU's Common Security and Defense Policy (CSDP). In 2013, the V4 countries launched plans to form an EU Battlegroup, a rapid reaction force consisting of 2,500 to 3,000 troops, to be operational by 2016. The V4 countries have also sought to increase military and industrial cooperation in line with NATO's Smart Defense and the EU's Pooling and Sharing initiative. Current or prospective areas of such cooperation include joint procurement of ammunition, armored vehicles, individual soldier equipment, and battlefield imaging systems, as well as joint logistics programs, and joint development of capabilities such as countering improvised explosive devices (IED); CBRN; joint training of helicopter pilots and air traffic controllers; and cyber defense. The three Baltic countries, Estonia, Latvia, and Lithuania, were formerly republics of the Soviet Union, having been absorbed into the USSR in 1940 after achieving independence between the two world wars. They became independent again with the breakup of the USSR in 1991 and joined both NATO and the European Union in 2004. In general terms, the view of the Baltic countries is comparable to that of Poland in perceiving Russia as an enduring threat. Size, geographic location, and energy dependence make the Baltic countries vulnerable to Russia, and events in Ukraine have significantly increased anxiety in the Baltics. All three Baltic countries also have minority populations of ethnic Russians, a significant element in the threat calculation given that claims of persecution against Russian communities have been a part of the pretext for Russia's interventions in both Georgia and Ukraine. Language issues have caused tensions between Russia and Latvia. In 2012, a referendum rejected naming Russian as Latvia's official second language, although it is the first language for about one-third of the population. In Estonia, plans to relocate a Soviet war memorial led to clashes between police and pro-Russian demonstrators in 2007. About one-quarter of Estonia's population is ethnically Russian. Estonia subsequently found itself the target of a large-scale coordinated cyberattack thought to have originated from either pro-Russian groups or from within the Russian government itself. Lithuania found itself singled out by Russia for trade sanctions in late 2013 as an expression of Russia's displeasure over energy issues and the EU's Eastern Partnership. Ethnic Russians comprise a smaller percentage of Lithuania's population, about 7%. The Baltic countries joined their NATO and EU partners in strongly condemning Russia's annexation of Crimea as illegal. All three initially called for the EU to impose harsh political and economic sanctions, but moderated their stance after economists suggested that severe EU sanctions against Russia, the Baltics' largest non-EU trade partner, could push the countries into an economic recession, with Latvia and Lithuania likely most affected. Despite the potential economic consequences of the wider EU sanctions adopted July 29, however, the leaders of the Baltic countries have backed the expanded measures as a political imperative that outweighs economic disruption and discomfort. The break-up of the USSR left the Baltic countries with virtually no national militaries, and their forces remain small and limited. The defense planning of the Baltic countries consequently relies heavily on NATO membership, and they have emphasized active participation in the alliance, including by having contributed troops to the Afghanistan mission. Analysts suggest that recent events in Ukraine are pushing the Baltic countries to recommit even more deeply to NATO. Beyond NATO's Baltic Air Policing mission (see below), some Baltic officials have urged NATO to establish a permanent base in the region. Rotating forces, increased exercises, and pre-positioning of assets may be a more likely NATO response to bolster security in the region. Lacking their own fighter aircraft, the Baltic countries rely on their NATO allies to police and defend their airspace. NATO's Baltic Air Policing mission was launched in 2004 and is based at an airbase in Lithuania. About a dozen NATO members have taken part in the mission, including the United States, UK, France, Germany, Poland, Denmark, and the Czech Republic, providing four fighters at a time on rotating four-month deployment. In 2011, the Baltic countries pledged to gradually increase their combined contribution to the mission from €2.2 million (approximately $3 million) in 2011 to €3.5 million (approximately $4.8 million) in 2015 to pay for the costs of accommodating the air policing contingents, providing ground services for their aircraft, and contributing to the cost of aviation fuel. Compared to most other members of NATO, Estonia spends a relatively high percentage of GDP on defense. The country is seeking to add a second infantry brigade by 2022, upgrade its air defense system, and modernize a range of ground warfare equipment. Estonia also hosts a NATO cyber defense center. Latvia's forces are smaller and less well equipped, and the country's defense spending has suffered from severe budgetary pressures. Latvia aims to double its defense spending as a percentage of GDP by 2020 and to procure new equipment, including armored vehicles, transport helicopters, and air defense radar. Lithuania's forces are likewise pursuing restructuring and re-equipment programs, but efforts have been similarly hindered by funding constraints. All three Baltic countries also contribute forces to the EU's Nordic Battlegroup, a rapid reaction unit of 2,400 troops expected to be ready and available for deployment in 2015 (additionally comprised of troops from Sweden, Finland, Norway, and Ireland). Moldova's pro-Western government has responded to recent events in Ukraine with great concern. Moldova and Ukraine have stopped armed men trying to cross the border from Transnistria to Ukraine to "participate" in demonstrations against Ukraine's government. Transnistria, Moldova's breakaway region with a strongly pro-Russian government, has redoubled its long-standing efforts to secure Russia's recognition for its independence. Russia has not yet done so, but may have little more to lose in doing so now, given international condemnation of its actions in Ukraine. In March 2014, NATO's top military commander, General Philip Breedlove, expressed concern that Russian forces could sweep across eastern and southern Ukraine to link up with Transnistria. Such a move, while very ambitious, would have the advantage of linking the region directly with Russia. However, while Moscow has shown hostility toward the Moldovan government, especially due to its signature of an Association Agreement with the European Union in June 2014, it has so far given no indications that it is planning military action against Moldova. Most observers believe that for the present Russia will continue to try to turn Moldova away from a pro-Western orientation by using indirect tactics such as imposing de facto trade sanctions, increasing support for Transnistria and separatism in Moldova's Gagauzia region, and supporting the Communist opposition to the government in the run-up to Moldova's parliamentary elections in November 2014. During a visit to Moldova on March 30, 2014, Assistant Secretary of State Victoria Nuland confirmed U.S. support for Moldova's path toward European integration and for anti-corruption efforts, strengthening border security, boosting Moldovan exports, and energy security, among other areas. Moldova does not seek NATO membership, but it does participate in NATO's Partnership for Peace program. NATO cooperation with Moldova includes such areas as defense strategy, planning and budgeting, as well as improving military education and training. Moldova currently receives very modest U.S. security assistance: an estimated $1.25 million in Foreign Military Financing in FY2014, as well as $750,000 in International Military Education and Training (IMET) funds. The Administration's FY 2015 aid request, drafted before the current conflict in Ukraine, includes the same amounts for FY 2015 for Moldova. However, Moldova may receive additional security assistance from the United States, perhaps as part of the Administration's proposed European Reassurance Initiative. Ukraine's armed forces and police were unable to effectively oppose Russia's invasion of Crimea in February and March 2014. Pro-Russian gunmen took over Donetsk, Luhansk, and other towns and cities in the Donbas region of eastern Ukraine in April and May. According to many observers, the weakness of Ukrainian forces was due to many factors, including poor training, poor morale, shortages of key equipment, and treason in the military and police. However, since June 2014, Ukrainian forces have managed to overcome some of these problems and have inflicted serious defeats on the pro-Russian separatists. Ukrainian forces are seeking to surround the key "rebel" bastions in Donetsk and Luhansk and cut the separatists off from their source of supplies in Russia. Ukrainian leaders say they are seeking to avoid house-to-house fighting in big cities, which could cause a dramatic increase in military and civilian casualties. Even a prolonged siege of the cities would likely dramatically worsen the humanitarian situation. Ukrainian military spokesmen and some outside observers claim that Ukraine may be able to defeat the separatists in a matter of weeks, if Russia does not massively intervene to support them. Ukrainian leaders say that they want to negotiate the peaceful withdrawal of Russia-backed separatists from Ukraine as part of a peace plan for the region. According to U.S. policy makers, the "rebels'" deteriorating situation has caused Russia to increase its supply of tanks, artillery, armored personnel carriers, and other heavy weapons to them. Administration officials also say Russia supplied the "rebels" with the SA-11 anti-aircraft missile that was used to shoot down Malaysian Airline Flight MH17. U.S. officials have also provided satellite imaging that reportedly shows that Russian forces have launched artillery attacks on Ukrainian forces from Russian territory. They have said that Russia could be preparing to send additional, sophisticated heavy weaponry to separatists in eastern Ukraine. Analysts have expressed concern about Russia's reaction if the forces it has supplied are close to defeat. Russia could decide to abandon them (perhaps hoping to loosen U.S. and international sanctions on Russia), or it could openly invade eastern Ukraine with the forces it has deployed on the border. On July 30, NATO Supreme Allied Commander General Breedlove said that Russian troops on the border with Ukraine had increased to well over 12,000. In March 2013, Ukraine requested military aid from the United States, according to several press reports. A full list of what Ukraine is seeking has not been disclosed, but press reports claim that Ukraine has asked for arms and ammunition, communications gear, intelligence support, aviation fuel, night-vision goggles, mine-clearing equipment, vehicles, medical gear, and other items. The Administration has declined so far to send lethal military aid to Ukraine, but has provided non-lethal assistance. In an April 2014 fact sheet, the White House detailed an $18 million security assistance package for Ukraine. The amount included 300,000 Meals Ready to Eat (MREs) to Ukraine in March, at a cost of about $3 million. The Administration is also providing an additional nearly $7 million in health and welfare assistance to Ukraine's armed forces. An additional $8 million in non-lethal support includes explosive ordinance disposal equipment and handheld radios for Ukraine's military and engineering equipment, communications equipment, vehicles, and non-lethal individual tactical gear for Ukraine's border guards. On June 4, the Administration announced an additional $5 million in security assistance to Ukraine. The funding will pay for body armor, night vision goggles, and communications equipment. On June 7, the United States announced a further $10 million to assist Ukraine's State Border Guard Service, bringing total security assistance to Ukraine since the beginning of the crisis to $33 million. In testimony before the Senate Foreign Relations Committee on July 9, Assistant Secretary of Defense Derek Chollet said that during June and July, the United States delivered to Ukraine 1,929 first aid kits; 80 multiband handheld radios, 1,000 sleeping mats; over 5,000 uniform items. Ukraine received 2,000 body armor vests on July 4. He said that in July and August the United States would supply to Ukraine 50 night-vision devices, 150 thermal imagers, 1,000 Kevlar helmets, 5 explosive ordnance disposal robots, and another 96 radios. Some Members of Congress have argued for supplying lethal military aid to Ukraine and/or providing real-time intelligence support to Ukraine's armed forces, particularly in locating surface-to-air missiles, such as the one that shot down Flight MH17. Supporters of such aid say the United States needs to show resolve in the face of Russian aggression against Ukraine's territorial integrity and sovereignty. They argue such aid could serve to deter Putin from further incursions into eastern Ukraine. Some objections to lethal aid for Ukraine are that it could foreclose a diplomatic solution to the crisis; that it could actually provoke Putin to invade eastern Ukraine with his army; and that it could end U.S.-Russian cooperation in such issues as the withdrawal of U.S. equipment from Afghanistan. Russian actions in Ukraine have prompted a reassessment of post-Cold War efforts to build a cooperative relationship with Moscow. As noted above, on April 2, NATO suspended all practical civilian and military cooperation with Russia. In the words of NATO Deputy Secretary General Alexander Vershbow, "For 20 years, the security of the Euro-Atlantic region has been based on the premise that we do not face an adversary to our east. That premise is now in doubt." According to some analysts, Russia's annexation of Crimea validates the concerns long expressed by some NATO member states, especially in Central and Eastern Europe, regarding Russia's commitment to partnership, its unpredictability, acts of hostility toward NATO and its partners, and perceived attempts to sow disunity within the alliance. On the other hand, while Russian actions have drawn uniform condemnation from NATO and the European Union, many in Europe and the United States emphasize that Europe's long-term security will depend on cooperative relations with Russia. As noted above, some NATO members in Western Europe have expressed concern that a military response to Russian actions could significantly hinder future attempts to boost cooperation with Russia. The principal institutional mechanism for NATO-Russia cooperation has been the NATO-Russia Council (NRC), established in May 2002, five years after the 1997 NATO-Russia Founding Act provided the formal basis for bilateral cooperation. Most observers agree that despite having advanced NATO-Russia cooperation in some areas—including in Afghanistan—the NRC has failed to live up to its potential. These perceived shortcomings are often attributed to Russian suspicion about NATO's long-term intentions, including with respect to countries it long considered within its sphere of influence such as Ukraine and Georgia. Many European allies continue to stress that they aspire to cooperation and partnership with Russia. However, analysts expect ties to continue to be marked by contention and mistrust, at least for the time being. Moscow has objected to NATO and the United States' military responses to the crisis, calling into question the alliance's 1997 commitment—codified in the NATO-Russia Founding Act—not to permanently station substantial combat forces in countries that joined NATO after the collapse of the Soviet Union. Although NATO has not as yet made decisions about permanent troop deployments, Secretary General Rasmussen has responded to Russian complaints by noting that Russia "has violated every principle and international commitment it has made." On July 29, 2014, EU member states (22 of which are also members of NATO) committed to ending all future arms sales to Russia, after months of pressure from governments and analysts on both sides of the Atlantic. The embargo will not, however, apply to previously agreed sales. Compared to other European arms sales, sales to Russia are relatively insignificant. However, over the past several years, some critics have drawn attention to several high profile deals. Chief among these is a 2011 French agreement to sell Russia two amphibious assault warships in a deal worth €1.2 billion (about $1.6 billion)—the first ever sale of a significant offensive military capability by a NATO member to Russia. The first of these Mistral ships is scheduled to be delivered later this year. French President François Hollande has repeatedly stated that France would honor the existing contract. Even before the annexation of Crimea, some Members of Congress and European leaders repeatedly criticized France's decision to sell the Mistral to Russia, expressing concern about Russia's military intentions, while French commentators have noted the economic and associated political benefits of the sale for France. Some Members of Congress have called on NATO to offer to purchase the Mistrals built for Russia from France. Since Russia's annexation of Crimea, Germany has cancelled the planned sale of a military training facility to Russia; the UK and United States also say they have halted military cooperation. Russian actions in Ukraine have prompted some U.S. observers and Members of Congress to call for a more concerted NATO effort to enlarge the alliance, particularly to the east. Among other things, they argue that continued enlargement would send an important signal to aspiring members that NATO's "open door" policy will not be scaled back in the face of Russian opposition. Some proponents of enlargement add that Russia would be less willing and less able to take the aggressive actions it has in Ukraine, Georgia, and elsewhere in its near-abroad if these countries were members of the alliance. Despite these calls, most analysts consider NATO unlikely to make any significant progress toward expanding over the next several years. They point to a perception in some Western European countries that NATO has enlarged too quickly and that the alliance should agree on how to resolve a complex range of issues, including managing relations with Russia, before taking in new members. For some allied governments, ongoing territorial disputes with Russia in countries such as Georgia and Ukraine could be a strong deterrent to extending membership invitations to these countries. Four countries are currently considered formal aspirants for NATO membership: Montenegro, Bosnia-Herzegovina, Macedonia, and Georgia. Montenegro has had a Membership Action Plan (MAP) since December 2009. Although it is considered the candidate with the most advanced membership prospects, NATO officials have cautioned that Montenegrin security agencies and the defense sector require reforms to meet NATO standards and that further efforts need to be made to fight corruption and organized crime in the country. Some have also questioned the level of public support for NATO membership in Montenegro. Bosnia was formally invited to join the MAP in April 2010, but was told that its Annual National Program under the MAP would not be accepted until the country resolved the issue of immovable defense property (mainly former military bases and barracks) on its territory. The country's leaders have agreed in principle to resolve the issue, but many doubt whether Bosnia can agree on whether to join NATO, as Bosnian Serb leaders have given mixed signals on the issue and public opinion polls have shown very strong opposition to membership among the Bosnian Serb population. NATO agreed that Macedonia met the qualifications for membership in 2008, but its candidacy has been stalled due to a protracted dispute with NATO ally Greece over the country's official name. The two sides have been unable to resolve the issue during talks sponsored by the United Nations. Representatives of Ukraine's current government have said the country is not seeking NATO membership. This reflects long-standing indifference, if not opposition, to NATO membership in the country. Under former President Yanukovych, the country renounced previously asserted ambitions to join NATO. According to one March 2014 opinion poll, 34% of Ukrainians were for NATO membership, and 44% opposed, with a regional split of 74% for membership in western Ukraine and 67% opposed in the east. As the conflict in Ukraine has persisted, there has been some indication that public support for NATO membership has increased to some degree, though not significantly. Some observers assert that the Ukrainian government could be cautious about expressing ambitions to join NATO for a number of reasons, including sensitivity to public opinion and possible opposition to membership from countries within the alliance that would be reluctant to further antagonize Russia. In early April, in response to NATO Secretary General Rasmussen's assertion that the door to NATO membership for Ukraine remained open, German Foreign Minister Frank-Walter Steinmeier reportedly countered that "NATO membership for Ukraine is not pending." In September 2008, NATO and Georgia established the NATO-Georgia Commission (NGC) in an effort both to both oversee NATO assistance to Georgia after its 2008 conflict with Russia and to supervise progress toward eventual membership in the alliance, as called for at NATO's 2008 Bucharest Summit. Since then, the two sides have deepened cooperation in a variety of areas, especially on defense and security sector reform, and Georgia has contributed to ongoing NATO operations, including by deploying the second-largest non-NATO contingent in Afghanistan. Nonetheless, most observers believe that the unresolved situation in Georgia's breakaway regions of South Ossetia and Abkhazia could continue to pose a major obstacle to possible Georgian membership for the foreseeable future. They contend that as long as the territorial dispute persists, some allies could oppose defining a specific timeline for membership. Georgia has not been granted a Membership Action Plan, but Administration officials have indicated that they would support granting a MAP to Georgia at NATO's September summit in Wales. Some observers have argued that recent Russian military aggression could indirectly serve to boost support for NATO membership in Sweden and Finland. Since joining NATO's Partnership for Peace Program in 1994, both countries have been active participants in NATO operations and have taken significant steps to modernize their militaries. In a reflection of continuing sensitivities regarding relations with Russia, both have also continued to maintain long-standing policies of military "nonalignment." In 2013, Russian Prime Minister Dmitry Medvedev said that Moscow would be forced to "respond" if Finland or Sweden joined NATO, and in the past year Russian forces have performed air and land exercises near Swedish and Finnish territory. Recent Russian actions and statements have led at least one Swedish government official to advocate a "doctrinal shift" in defense policy; and Finland's current Prime Minister supports NATO membership. Nonetheless, public opinion in both countries remains firmly opposed to NATO membership. Some analysts assert that at the least, the two governments could continue to bolster defense spending and cooperation with other Nordic states and the Baltics. The crisis in Ukraine has renewed focus on the U.S. commitment to European security and on overall U.S. force posture in Europe. Since the end of the Cold War, as NATO and the EU have enlarged eastward and as both organizations have pursued partnership with Russia, the perceived need for a robust U.S. military presence to defend the continent receded. Today, about 67,000 U.S. forces are stationed in Europe, primarily in Germany, Italy, and the UK; this is down from a Cold War high of about 400,000. Some allies in Central and Eastern Europe have consistently expressed concerns about the reduced U.S. force posture, and especially the recent withdrawal of two of the Army's four Brigade Combat Teams. Other allies and U.S. policy makers supported the shift, particularly given other security challenges facing the United States and NATO. The adjusted U.S. force posture has coincided with U.S. calls for European allies and the EU to enhance their own military capabilities in order to boost NATO's effectiveness and reduce Europe's dependence on the U.S. security guarantee. As discussed above, such efforts have had mixed results, at best. The Obama Administration and its supporters assert that the United States remains prepared and able to honor its commitments to the defense and security of fellow NATO member states. In addition to the aforementioned U.S. military responses to the crisis in Ukraine, they note that the United States was a key proponent of NATO's drafting of contingency plans for the defense of Poland and the Baltic States in 2009, and they draw attention to recent U.S. calls for a new round of NATO contingency planning. They add that the U.S. agreement in 2011 to establish an Air Force Aviation detachment in Poland has paved the way for the recent deployment of 12 F-16s to the country, and point out that to compensate for the reduction of U.S. Brigade Combat Teams in Europe, the Department of Defense has committed a U.S.-based rapid reaction force to rotate to Europe for joint training exercises. The current cornerstone of the U.S. commitment to NATO military capabilities in Europe is the Ballistic Missile Defense (BMD) program known as the European Phased Adaptive Approach (EPAA). The U.S. system, designed to defend alliance territory against possible missile attacks from Iran and other potential adversaries, serves as the foundation for a new NATO missile defense capability, based primarily on U.S. assets under NATO command and control. The United States has deployed missile defense ships to the Mediterranean, ready to operate under NATO control when necessary. A U.S. radar, based in Turkey, is also under NATO operational control. Interceptor sites are to be deployed in Romania in 2015 and in Poland in 2018. The United States and NATO have consistently emphasized, however, that the missile defense system is neither intended to nor capable of defending against a potential missile attack from Russia. While they have welcomed these steps, critics of the Administration's and NATO's response to Russian actions in Ukraine have argued that more should be done to support Ukraine, reassure allies in Central and Eastern Europe, and counter Russian aggression. Some have called for bolstered and possibly permanent NATO and/or U.S. troop deployments in Central and Eastern Europe, as well as more frequent military exercises, including in the Black Sea. For example, as discussed above, the Polish government has requested the deployment of two heavy brigades of NATO troops on its territory. In a March 26, 2014, letter to President Obama, House Armed Services Committee Chairman Buck McKeon and seven other Members of Congress called on the President to "increase and enhance the alert posture and readiness of U.S. forces in Europe without delay, including maintaining forward-deployed U.S. quick-reaction forces." At an April 10, 2014, hearing of the Senate Foreign Relations Committee's Subcommittee on European Affairs, Assistant Secretary of Defense for International Security Affairs Derek Chollet said that he did not foresee a significant adjustment to the U.S. military's permanent footprint in Europe, but added that forward or rotational deployments to Central and Eastern Europe were an ongoing possibility. Critics of Administration policy draw attention to the fact that only 300 U.S. forces reportedly participated in NATO's November 2013 Steadfast Jazz exercise in Estonia, Latvia, Lithuania, and Poland. The 6,000-troop exercise—the largest NATO exercise to take place in the region in over 10 years—was intended to certify command and control elements of the NATO Response Force, including in response to a possible attack on the territory of a NATO member state. Other analysts have questioned the Administration's commitment to missile defense, noting that in 2013, the Administration dropped Phase 4 of the EPAA, which would have deployed in Europe land- and possible sea-based versions of advanced naval BMD interceptors designed to destroy limited numbers of first generation intercontinental ballistic missiles (ICBMs). As discussed above, the United States has provided the Ukrainian government with some nonlethal military aid but has thus far declined to provide lethal military aid. Some analysts, including a former NATO military commander, have argued that the United States and other allies should consider providing additional military assistance, including intelligence and surveillance capabilities and anti-aircraft and anti-tank weapons. Congress could continue to play an important role in shaping U.S. and NATO responses to Russia's actions in Ukraine. In terms of U.S. defense policy, possible congressional action could include reexamining U.S. force posture in Europe and assessing U.S. capacity and willingness to uphold its collective defense commitments in Europe. Congress could also take an increasingly active role in determining U.S. policy toward NATO and in guiding broader discussions about NATO's future, particularly ahead of the next NATO summit, scheduled to take place in Wales on September 4-5, 2014. This could include holding hearings and/or drafting legislation on issues such as development of allied military capabilities and military burdensharing within the alliance, the allied commitment to NATO enlargement and its relations with partner countries such as Ukraine and Georgia, NATO relations with Russia, and NATO involvement in areas such as cybersecurity and energy security. | Russia's actions in Ukraine and its alleged role in the downing of Malaysia Airlines Flight 17 have caused observers and policy makers on both sides of the Atlantic, including Members of Congress, to reassess the role of the United States and the North Atlantic Treaty Organization (NATO) in upholding European security. The security concerns of NATO's Central and Eastern European member states and non-NATO member states such as Moldova and Ukraine are of particular concern. NATO has strongly condemned Russian actions in Ukraine and has taken steps aimed both at reassuring allies and partners in Central and Eastern Europe and at deterring further Russian aggression. These include demonstrations of support for Ukraine and its territorial integrity; actions to demonstrate NATO's commitment to defending Central and Eastern European allies; and measures aimed at rebuking Russia. NATO members have said they will continue to conduct previously planned military exercises in Ukraine and elsewhere in the region. The United States has been a key driver of the NATO response and has taken additional military measures intended to reassure its allies and partners in Central and Eastern Europe. These include the deployment of U.S. fighter jets and 600 paratroopers to Poland and the Baltic states, and U.S. naval vessels to the Black and Baltic Seas. In June, the Obama Administration requested congressional approval for $925 million in the Department of Defense's FY2015 Overseas Contingency Operations (OCO) budget to fund a proposed European Reassurance Initiative (ERI). Among other things, the ERI would enable augmented U.S. troop rotations and military infrastructure in Central and Eastern Europe. The United States has supplied the Ukrainian government with some nonlethal military assistance, but has thus far ruled out providing lethal military aid. Although these actions have been welcomed by supporters of the United States and NATO, some analysts and allied governments have called for a more concerted military response. Among other things, critics have called for more robust forward or permanent deployment of U.S. and NATO forces in Central and Eastern Europe; additional military exercises in the region; and additional military assistance to Ukraine, including military training and anti-tank and anti-aircraft weapons. The U.S. Congress has played an active role in guiding the U.S. response to the Ukraine crisis, including by authorizing a $1 billion loan guarantee to the Ukrainian government, $150 million in financial assistance to Ukraine and other Central and Eastern European countries, and sanctions against Russia (P.L. 113-95). However, some Members of Congress have called on the Obama Administration and NATO to take additional military action to reassure allies and deter Russia. Some Members have also called for a more resolute demonstration of NATO's commitment to enlargement, including to Georgia, a former republic Soviet republic, with which Russia had a military conflict in 2008. For example, the proposed Forging Peace through Strength in Ukraine and the Transatlantic Alliance Act (H.R. 4433) calls for additional NATO and U.S. military assistance to Ukraine and calls for immediate NATO membership for Montenegro and the granting of a NATO Membership Action Plan (MAP) to Georgia. This report addresses the NATO and U.S. military response to the crisis in Ukraine. It does not discuss political, economic, or energy policy responses. For information on these and other aspects of the crisis response, see CRS Report RL33460, Ukraine: Current Issues and U.S. Policy, by [author name scrubbed]. |
By standard convention, the balance of payments accounts are based on a double-entry bookkeeping system. As a result, each transaction entered as a credit must have a corresponding debit and vice versa. This means that a surplus or deficit in one part of the accounts necessarily will be offset by a deficit or surplus, respectively, in another account so that, overall, the accounts are in balance. This convention also means that a deficit in one account, such as the merchandise trade account, is not necessarily the same as a debt. The trade deficit can become a debt equivalent depending on how the deficit is financed and the expectations of those who hold the offsetting dollar-denominated U.S. assets. The balance of payments accounts are divided into three main sections: the current account, which includes the exports and imports of goods and services and personal and government transfer payments; the capital account, which includes such capital transfers as international debt forgiveness; and the financial account, which includes official transactions in financial assets and private transactions in financial assets and direct investment in businesses and real estate. In these accounts, exports are recorded as a positive amount even though they represent an outflow of goods and services from the economy, because they represent a credit for which there is a specific obligation of repayment. Similarly, although imports represent an inflow of goods and services to the economy, they are recorded as a negative amount, because they represent a debt that must be repaid. When the basic structure of the balance of payments was established, merchandise trade transactions dominated the accounts. Financial transactions recorded in the capital accounts generally reflected the payments and receipts of funds that corresponded to the importing and exporting of goods and services. As a result, the capital accounts generally represented "accommodating" transactions, or financial transactions associated directly with the buying and selling of goods and services. During this early period, exchange rates between currencies were fixed, and private capital flows, such as foreign investment, were heavily regulated so that nearly all international flows of funds were associated with merchandise trade transactions and with some limited government transactions. Since the 1970s, however, private capital flows have grown markedly as countries have liberalized their rules governing overseas investing and as nations have adopted a system of floating exchange rates, where the rates are set by market forces. Floating exchange rates have spurred demand for the dollar. The dollar also is sought for investment purposes as it has become a vehicle itself for investment and speculation and it serves as a major trade invoicing currency. This means that the balance of payments records not only the accommodating flows of capital which correspond to imports and exports of goods and services, but also autonomous flows of capital that are induced by a broad range of economic factors that are unrelated directly to the trading of merchandise goods. Liberalized capital flows and floating exchange rates have greatly expanded the amount of autonomous capital flows between countries. These capital transactions are undertaken in response to commercial incentives or political considerations that are independent of the overall balance of payments or of particular accounts. As a result of these transactions, national economies have become more closely linked, the process some refer to as "globalization." The data in Table 1 provide selected indicators of the relative sizes of the various capital markets in various countries and regions and the relative importance of international foreign exchange markets. In 2013, these markets amounted to over $900 trillion, or more than 50 times the size of the U.S. economy. Worldwide, foreign exchange and interest rate derivatives, which are the most widely used hedges against movements in currencies, were valued at $655 trillion in 2013, more than twice the size of the combined total of all public and private bonds, equities, and bank assets. For the United States, such derivatives total more than three times as much as all U.S. bonds, equities, and bank assets. Another aspect of capital mobility and capital inflows is the impact such capital flows have on the international exchange value of the dollar. Demand for U.S. assets, such as financial securities, translates into demand for the dollar, since U.S. securities are denominated in dollars. As demand for the dollar rises or falls according to overall demand for dollar-denominated assets, the value of the dollar changes. These exchange rate changes, in turn, have secondary effects on the prices of U.S. and foreign goods, which tend to alter the U.S. trade balance. At times, foreign governments intervene in international capital markets to acquire the dollar directly or to acquire Treasury securities in order to strengthen the value of the dollar against particular currencies. In addition, various central banks moved aggressively following the Asian financial crisis in the 1990s to bolster their holdings of dollars in order to use the dollars to support their currencies should the need arise. The dollar is also heavily traded in financial markets around the globe and, at times, plays the role of a global currency. Disruptions in this role have important implications for the United States and for the smooth functioning of the international financial system. During the decade preceding the recent global financial crisis, banks and other financial institutions expanded their global balance sheets from $10 trillion in 2000 to $34 trillion in 2007. These assets were comprised primarily of dollar-denominated claims on non-bank entities, including retail and corporate lending, loans to hedge funds, and holdings of structured finance products based on U.S. mortgages and other underlying assets. As the crisis unfolded, the short-term dollar funding markets served as a major conduit through which financial distress was transmitted across financial markets and national borders, according to analysts with the Bank for International Settlements (BIS). When these short-term dollar funding markets collapsed in the early stages of the crises, the U.S. Federal Reserve engaged in extraordinary measures, including a vast system of currency swap arrangements with central banks around the world, to supply nearly $300 billion. After initially expanding the then-existing reciprocal currency arrangements (swap lines) with the European Central Bank, the Bank of England, the Swiss National Bank, and the Bank of Japan, the Federal Reserve made an unprecedented announcement in October 2008 that it would provide swap lines to "accommodate whatever quantity of U.S. dollar funding is necessary" to stem the dollar shortage. At the same time, the U.S. Treasury announced a money market guarantee program to stop the withdrawal of funds from the money markets and to offset the withdrawals by providing public funds. The prominent role of the dollar means that the exchange value of the dollar often acts as a mechanism for transmitting economic and political news and events across national borders. While such a role helps facilitate a broad range of international economic and financial activities, it also means that the dollar's exchange value can vary greatly on a daily or weekly basis as it is buffeted by international events. A triennial survey of the world's leading central banks conducted by the Bank for International Settlements in April 2016 indicates that the daily trading of foreign currencies through traditional foreign exchange markets totaled $5.1 trillion, down 5% from the $5.3 trillion reported in the previous survey conducted in 2013, as indicated in Figure 1 . In addition to the traditional foreign exchange market, the over-the-counter (OTC) foreign exchange derivatives market reported that daily turnover of interest rate and non-traditional foreign exchange derivatives contracts reached $2.7 trillion in April 2016. The combined amount of nearly $8.0 trillion for daily foreign exchange trading in the traditional and OTC markets is more than four times the annual amount of U.S. exports of goods and services. The BIS data also indicate that 88.0% of the global foreign exchange turnover in April 2016 was in U.S. dollars, as indicated in Figure 2 . This share was slightly higher than the 87.0% share reported in a similar survey conducted in 2013. Table 2 presents a summary of the major accounts in the U.S. balance of payments over the four quarters of 2015 and the first two quarters of 2016. The data indicate that throughout the period, the U.S. current account, or the balance of exports and imports of goods, services and transfers, was in deficit, or the United States imported more goods and services than it exported. The current account balance represents the broadest measure of U.S. trade in goods, services, and certain income flows. The balance worsened by 16% from 2014 to 2015. On a quarterly basis, the deficit in the current account has varied from quarter to quarter, although remaining negative, reflecting a broad range of economic activities. Most economists argue that, given the current composition of the U.S. economy, foreign capital inflows play an important role by bridging the gap between domestic supplies of and demand for capital, or between the total amount of saving in the economy relative to the total amount of investment. Indeed, economists generally argue that it is this interplay between the demand for and the supply of credit in the economy, rather than the flow of manufactured goods and services, that drives the broad inflows and outflows of capital and serves as the major factor in determining the international exchange value of the dollar and, therefore, the overall size of the nation's trade deficit or surplus. Capital inflows, in turn, place upward pressure on the dollar's exchange rate, pushing the exchange value of the dollar up relative to other currencies. As the dollar rises in value, the price of U.S. exports rises and the price of imports falls, which tends to increase the current account deficit. The important role capital flows play in determining the overall trade balance is demonstrated in the recent changes that have occurred in the price of oil and its impact on the U.S. trade deficit. Given the prominent role that energy imports play in the U.S. trade deficit, the U.S. trade deficit might be expected to decline along with the drop in the price of oil that occurred in 2014 and 2015, but this was not the case. From 2014 to 2015, the average price of an imported barrel of crude oil fell by nearly half from an average annual price of $91 per barrel to an average annual price of $47 per barrel, although the price of imported crude oil fell below $40 per barrel by the end of 2015. At the same time that the average price in imported crude oil dropped sharply, the quantity of imported crude oil fell by 1.4%. As a result of this drop in crude oil prices and relatively stable quantity of imports, crude oil imports fell from accounting for more than 40% on average of the annual U.S. merchandise trade deficit in 2012 to about 10% on average of the annual U.S. trade deficit in 2015. Despite the drop in the average annual price of imported crude oil and the decline in the role of imported crude oil in the value of the U.S. trade deficit in 2014 to 2016, the U.S. merchandise deficit increased in 2015 over that recorded in 2014. Instead of seeing the overall trade deficit decline, the composition of the trade deficit changed, with non-petroleum products replacing petroleum products, seemingly affirming the proposition that the overall value of the trade deficit is determined primarily by macroeconomic forces, as indicated in Figure 3 . According to the balance of payments accounts, the United States experienced deficits in the merchandise trade goods accounts over the last eight quarters in the range of $113 billion to $123 billion and a surplus in the services accounts during the same period in the range of about $61 to $67 billion, as indicated in Table 2 . In the income accounts, which represent inflows of income on U.S. assets abroad relative to outflows of income earned on U.S. assets owned by foreigners, the net balance of the accounts was in surplus throughout the period. The data also indicate that the U.S. financial accounts were in surplus throughout the period, because they represent the opposite and offsetting transactions to the deficits in the current account. Indeed, the accounting of the balance of payments is such that the surplus in the financial accounts is equivalent to the deficit in the combined balance in the capital account, the statistical discrepancy, and the balance on the current account. The balance in the financial accounts represents the difference between the capital outflows associated with U.S. investments abroad, which are recorded as a net positive outflow, and the capital inflows associated with foreign investment in the United States, which are recorded as a net positive inflow. These investment flows represent the combined amount of both private and official investments, or investments by private individuals and institutions and investments by governments and governmental institutions, respectively. The balance on the financial account (the difference between the net U.S. acquisition of foreign financial assets and the net foreign acquisition of U.S. financial assets) in 2015 fell from that recorded in 2014 due to an increase in U.S. net purchases of assets abroad and a drop in foreign net purchases of assets in the United States. The relative decline in foreign acquisitions of U.S. assets in 2015 below those recorded in 2014 reflects a 180% drop in foreign official purchases of U.S. portfolio assets, including a decline of 200% in official purchases of U.S. Treasury securities. Foreign private purchases of U.S. portfolio assets declined by 40%, reflecting a decline by 33% in foreign private purchases of U.S. treasury securities and an increase year-over-year of 75% in private purchases of corporate bonds. During the same period, U.S. purchases of foreign equities and debt securities fell by 75%, year-over-year. The data in Table 2 also indicate that in 2015, the flows in direct investment, particularly foreign direct investment in the United States, experienced significant changes. U.S. direct investment abroad rose slightly in 2015 to reach $348.6 billion, and foreign direct investment in the United States rose by 83% to reach $379 billion. A lower value for foreign direct investment in 2014 reflected a $130 billion stock repurchase transaction that occurred between Verizon and the French-owned Vodafone. Another way of viewing the balance of payments data is presented in Table 3 , which shows the net amount of the flows in the major accounts, or the difference between the inflows and outflows. Net inflows are represented by positive numbers; net outflows are represented by negative numbers. In 2015 for instance, total net capital inflows representing the net balance on the current account, the capital account, and the statistical discrepancy, were a negative $195.2 billion, which was equivalent to the offsetting amount recorded in the financial accounts and is below the amount recorded in 2014. These values are subject to periodic revisions. Department of the Treasury data indicate that foreign private net purchases of Treasury securities have shifted between positive and negative values at various times, as indicated in Figure 4 . Foreign official net acquisitions of Treasury securities have also tended to change abruptly on an annual basis, at times reflecting the role of the dollar and dollar-denominated securities as safe haven assets. During the midst of the financial crisis in 2009 and 2010, for instance, foreign private investors sharply increased their net purchases of Treasury securities, which rose to over $500 billion in 2010. From 2010 to 2013, however, as concerns over financial market stability eased foreign private net purchases of Treasury securities fell to $52 billion in 2013. Similarly, foreign governments increased their net purchases of Treasury securities in 2008 and 2009, which they maintained until foreign official net purchases fell in 2013 and again in 2015 when foreign official entities liquidated more than $200 billion in treasury securities. As Figure 4 indicates, financial flows over the 2007-2015 net private and net official capital inflows have changed abruptly at times. Private capital flows, representing the combination of net purchases of Treasury securities, corporate stocks and bonds, and other U.S. Government agency bonds, shifted from a net inflow of $1.7 trillion in 2007 to a net outflow in 2008 and 2009, reflecting the contraction in capital flows as a result of the financial crisis. Between 2010 and 2015, net private inflows have varied sharply, often reflecting changes in private net purchases of a broad range of financial assets exclusive of Treasury securities. Net private inflows by U.S. citizens resumed in the 2012 to 2014 period. During the same period, net foreign official accumulations of U.S. financial assets increased from $188 billion in 2007 to $225 billion in 2012, shifting to a net outflow in 2015 of over $200 billion. Table 4 data show the total net accumulation of long-term U.S. securities, or the amount of securities purchased less those that were sold, by foreign private and official sources from 2013 to 2015 and five recent quarters. The data indicate that in between 2013 and 2014, the net foreign private accumulation of U.S. securities tripled from $80 billion to $249 billion, before falling by a third to $155 billion in 2015. According to the Department of the Treasury, the drop in net foreign purchases of U.S. securities reflects adjustments by private investors in their portfolios by reducing their holdings of U.S. corporate stocks and U.S. Treasury securities and increasing their net purchases of corporate bonds and the bonds of U.S. government agencies other than Treasury securities. As indicated above, the data in Table 2 and Table 3 show that the trade deficit is accompanied by an equal capital inflow that represents an accumulation of dollar-denominated assets by foreigners. Some observers have equated the trade deficit and the associated accumulation of foreign-owned dollar-denominated assets as a debt that the U.S. economy owes to foreigners that will have to be repaid. This characterization, however, is not entirely appropriate. The debts owned by foreign investors represent claims on assets, rather than loans where payments on the principal and interest are specified according to a fixed schedule and where failure to meet the repayment schedule can result in the loans being called in and made payable in full. While foreign investors have expectations of a positive return on their dollar-denominated assets, returns, except for Treasury securities, are not guaranteed, but are subject to market forces. An important feature of claims by foreign investors on U.S. assets is that some or all of the profits or returns on the assets can be repatriated to the home country of the foreign investor, thereby reducing the returns that otherwise would remain in the U.S. economy. Depending on the tax convention the United States has with other governments, private foreign investors who own U.S. Treasury securities will owe taxes on the interest income. According to the most commonly accepted approach to the balance of payments, macroeconomic developments in the U.S. economy are the major driving forces behind the magnitudes of capital flows, because the macroeconomic factors determine the overall demand for and supply of capital in the economy. Economists generally conclude that the rise in capital inflows can be attributed to comparatively favorable returns on investments in the United States when adjusted for risk, a surplus of saving in other areas of the world, the well-developed U.S. financial system, the overall stability of the U.S. economy, and the generally held view that U.S. securities, especially Treasury securities, are high quality financial instruments that are low risk. In turn, these net capital inflows (inflows net of outflows) bridge the gap in the United States between the amount of credit demanded and the domestic supply of funds, likely keeping U.S. interest rates below the level they would have reached without the foreign capital. These capital inflows also allow the United States to spend beyond its means, including financing its trade deficit, because foreigners are willing to lend to the United States in the form of exchanging goods, represented by U.S. imports, for such U.S. assets as stocks, bonds, U.S. Treasury securities, and real estate and U.S. businesses. While this exchange of assets is implicit in the balance of payments, the Department of Commerce explicitly accounts for this broad flow of dollar-denominated assets through the nation's net international investment position. The U.S. net international investment position represents the accumulated value of U.S.-owned assets abroad and foreign-owned assets in the United States measured on an annual basis at the end of the calendar year. Some observers refer to the net of this investment position (or the difference between the value of U.S.-owned assets abroad and the value of foreign-owned assets in the United States) as a debt, or indicate that the United States is a net debtor nation, because the value of foreign-owned assets in the United States is greater than the value of U.S.-owned assets abroad. In fact, the nation's net international investment position is not a measure of the nation's indebtedness similar to the debt borrowed by some developing countries, but it is simply an accounting of assets. The Department of Commerce uses three different methods for valuing direct investments that can yield different estimates for the net position, depending on the stock market value of the investments. For example, by year-end 2015 the overseas assets of U.S. residents totaled $22.0 trillion, with U.S. direct investment abroad valued at historical cost, while foreigners had acquired about $28.0 trillion in assets in the United States, with direct investment measured at historical cost. As a result, the U.S. net international investment position was about a negative $5.6 trillion in 2015, with direct investment measured at historical cost, but was valued at negative $7.3 with direct investment valued at current cost, as indicated in Table 5 . Foreign investors who acquire U.S. assets do so at their own risk and accept the returns accordingly. While foreign investors likely expect positive returns from their dollar-denominated assets, the returns on most of the assets in the international investment position, except for bonds, are not guaranteed and foreign investors stand to gain or lose on them similar to the way U.S. domestic investors gain or lose. As Table 5 indicates, investments in the international investment position include such financial assets as corporate stocks and bonds, government securities, and direct investment in businesses and real estate. The value of these assets, measured on an annual basis, can change as a result of purchases and sales of new or existing assets; changes in the financial value of the assets that arise through appreciation, depreciation, or inflation; changes in the market values of stocks and bonds; or changes in the value of currencies. For instance, by year-end 2015, U.S. holdings abroad had risen in value to $22 trillion, with direct investment valued at historical cost, and $23.2 trillion and $21.4 trillion with direct investment valued at current cost and market value, respectively, reflecting an upward revaluation in the values of foreign corporate stocks due to an increase in stock market values. Similarly, the value of foreign owned assets in the United States rose in 2015 to $27.2 trillion with direct investment valued at historical cost and $30.6 trillion with direct investment valued at market cost, with rising stock values pulling up the overall investment position of foreign investors. The foreign investment position in the United States continues to increase as foreigners acquire additional U.S. assets and as the value of existing assets appreciates. These assets are broadly divided into official and private investments, reflecting transactions by governments among themselves and transactions among the public. While the foreign official share of the overall amount of capital inflows has grown sharply as indicated in Table 3 , the overall foreign official share of foreign-owned assets in the United States has remained relatively modest. As Figure 6 indicates, foreign official asset holdings were valued at about $6.0 trillion in 2015, or about 20% of the total foreign investment position, a share that rose above 20% in 2008 as foreign official holdings of U.S. Treasury securities rose during the global financial crisis. Official assets include such monetary reserve assets as gold, the reserve position with the International Monetary Fund (IMF), and holdings of foreign currency. An important component of foreign official holdings in the United States is the acquisitions of U.S. Treasury securities by foreign governments. At times, such acquisitions are used by foreign governments, either through coordinated actions or by themselves, to affect the foreign exchange price of the dollar. Foreign currency holdings account for a relatively small share of the total foreign investment position. Private asset holdings are comprised primarily of direct investment in businesses and real estate, purchases of publicly traded government securities, and corporate stocks and bonds. As indicated in Figure 7 , the composition of U.S. assets abroad and foreign-owned assets in the United States differs in a number of ways. The strength and uniqueness of the U.S. Treasury securities markets make these assets sought after by both official and private foreign investors, whereas U.S. investors hold few foreign government securities. As a result, foreign official assets in the United States far outweigh U.S. official assets abroad. Both foreign private and official investors have been drawn at times to U.S. government securities as a safe haven investment during troubled or unsettled economic conditions. The persistent U.S. trade deficit raises concerns in Congress and elsewhere due to the potential risks such deficits may pose for the long-term rate of growth for the economy. In particular, some observers are concerned that foreigner investors' portfolios will become saturated with dollar-denominated assets and foreign investors will become unwilling to accommodate the trade deficit by holding more dollar-denominated assets. The shift in 2004 in the balance of payments toward a larger share of assets being acquired by official sources generated speculation that foreign private investors had indeed reached the point where they were no longer willing to add more dollar-denominated assets to their portfolios. This shift was reversed in 2005, however, as foreign private investments rebounded. Another concern is with the outflow of profits that arise from the dollar-denominated assets owned by foreign investors. This outflow stems from the profits or interest generated by the assets and represents a clear outflow of capital from the economy that otherwise would not occur if the assets were owned by U.S. investors. These capital outflows represent the most tangible cost to the economy of the present mix of economic policies in which foreign capital inflows are needed to fill the gap between the demand for capital in the economy and the domestic supply of capital. Indeed, as the data presented indicate, it is important to consider the underlying cause of the trade deficit. According to the most commonly accepted economic approach, in a world with floating exchange rates and the free flow of large amounts of dollars in the world economy and international access to dollar-denominated assets, macroeconomic developments, particularly the demand for and supply of credit in the economy, are the driving forces behind the movements in the dollar's international exchange rate and, therefore, the price of exports and imports in the economy. As a result, according to this approach, the trade deficit is a reflection of macroeconomic conditions within the domestic economy, and an attempt to address the issue of the trade deficit without addressing the underlying macroeconomic factors in the economy likely would prove to be of limited effectiveness. In addition, the nation's net international investment position indicates that the largest share of U.S. assets owned by foreigners is held by private investors who acquired the assets for any number of reasons. As a result, the United States is not in debt to foreign investors or to foreign governments similar to some developing countries that run into balance of payments problems, because the United States has not borrowed to finance its trade deficit. Instead the United States has traded assets with foreign investors who are prepared to gain or lose on their investments in the same way private U.S. investors can gain or lose. It is certainly possible that foreign investors, whether they are private or official, could eventually decide to limit their continued acquisition of dollar-denominated assets or even reduce the size of their holdings, but there is no firm evidence that such presently is the case. | The U.S. merchandise trade deficit is a part of the overall U.S. balance of payments, a summary statement of all economic transactions between the residents of the United States and the rest of the world, during a given period of time. Some Members of Congress and other observers have grown concerned over the magnitude of the U.S. merchandise trade deficit and the associated increase in U.S. dollar-denominated assets owned by foreigners. International trade recovered from the global financial crisis of 2008-2009 and the subsequent slowdown in global economic activity that reduced global trade flows and, consequently, reduced the size of the U.S. trade deficit. Now, however, U.S. exporters face new challenges with an increase in the international exchange value of the dollar relative to other key currencies and the slow rate of economic growth in important export markets in Europe and Asia. This report provides an overview of the U.S. balance of payments, an explanation of the broader role of capital flows in the U.S. economy, an explanation of how the country finances its trade deficit or a trade surplus, and the implications for Congress and the country of the large inflows of capital from abroad. The major observations indicate the following. The current account balance, the broadest measure of U.S. trade in goods, services, and certain income flows, worsened by 18% in 2015 from that recorded in 2014. Foreign-owned assets in the United States continued to outpace U.S. ownership of foreign assets, reflecting the deficit in the current account, but the net amount, or the difference between U.S.-acquisition of foreign assets and foreign acquisition of U.S. assets, dropped by about one-third in 2015 compared with 2014 and down by over half since 2012. The relative decline in foreign acquisitions of U.S. assets in 2015 reflected a drop in the net private purchases of U.S. corporate stocks and a decline by one-third in net private purchases of U.S. treasury securities. In addition, foreign official purchases of U.S. portfolio purchases shifted from positive net purchases in 2014 to negative net purchases in 2015, including a 38% decline in purchases of corporate stocks and a 58% decline in official purchases of U.S. Treasury securities. Foreign private net purchases of U.S. Treasury securities in 2015 fell by one-third from those in 2014, but foreign private purchases of U.S. equities increased by 20% in 2015 compared with 2014. At the same time, foreign direct investment increased by 83% in 2015 compared with 2014, rising from $207 billion in 2014 to $379 billion in 2015; U.S. direct investment abroad in 2015 rose slightly above the amount invested in 2014, although U.S. net purchases of foreign equities and debt securities in 2015 fell by 75%, compared with net purchases in 2014. The inflow of capital from abroad supplements domestic sources of capital and likely allows the United States to maintain its current level of economic activity at interest rates that are below the level they likely would be without the capital inflows. Foreign official and private acquisitions of dollar-denominated assets likely will generate a stream of returns to overseas investors that would have stayed in the U.S. economy and supplemented other domestic sources of capital had the assets not been acquired by foreign investors. In general terms, foreign private holders of U.S. Treasury securities are taxed on their interest income, depending on U.S. tax conventions with other countries. |
On January 25, 2009, by a 61% to 39% vote, a new constitution promoting the rights of the indigenous majority and giving more control of the economy to the government was approved. The referendum also set the limit for private land holdings at 5,000 hectares winning strong majority support (81%) over the alternative of a 10,000-hectare limit. However, the new landholding limit will not be applied retroactively. On December 15, 2008, Bolivia's duty-free access to U.S. markets was suspended. President Bush when announcing the suspension of Bolivia's Andean Trade Preferences Act (ATPA) designation cited Bolivia's lack of cooperation with the United States on required counter-narcotics measures. On November 10, 2008, Bolivian officials delivered a formal request asking the U.S. government to extradite former President Gonzalo Sánchez de Lozada to stand trial for civilian deaths that occurred when he ordered government security forces to respond to violent civilian protests in the fall of 2003. On November 1, 2008, Bolivian President Evo Morales announced an indefinite suspension of U.S. Drug Enforcement Administration (DEA) operations in Bolivia after accusing some DEA agents of espionage. On October 21, 2008, after a multiparty congressional commission agreed to over 100 changes to the draft text passed by the Constituent Assembly in December 2007, the Bolivian Congress ratified the new draft constitution and passed a law that will enable a referendum on that constitution to be held on January 25, 2009. On October 16, 2008, President Bush signed the Andean Trade Promotion Extension Act ( H.R. 7222 ) into law. As enacted, P.L. 110-436 extends Andean trade preferences until December 31, 2009 for Colombia and Peru, and until June 30, 2009 for Bolivia and Ecuador. On September 26, 2008, President Bush directed the United States Trade Representative to publish a public notice proposing to suspend Bolivia's Andean Trade Promotion Act (ATPA) benefits because of the Morales government's failure to cooperate in counternarcotics matters. On September 16, 2008, President Bush determined that Bolivia had failed demonstrably to live up to its obligations under international narcotics agreements, but waived sanctions so that U.S. bilateral assistance programs could continue. On September 15, 2008, Chilean President Michelle Bachelet convened an emergency meeting of the presidents from the countries composing the newly-formed Union of South American Nations (UNASUR) to discuss the crisis in Bolivia. UNASUR issued a declaration expressing its full support for the Morales government and offering to help mediate between the government and the opposition. On September 11, 2008, the U.S. State Department announced that it had declared Bolivia's U.S. Ambassador, Gustavo Guzmán, persona non grata and asked him to leave the United States immediately. On September 11, 2008, opposition protests turned violent, with at least 18 demonstrators killed during a shootout in Pando, Bolivia's northernmost department, the vast majority of whom were Morales supporters. According to the Morales government, the attack on protesters was planned by Pando's departmental prefect, Leopoldo Fernández. In response, President Morales called a state of emergency and sent troops in to restore order in the province whereupon Fernández was arrested. Also on September 10, 2008, opposition protestors temporarily shut down a major natural gas pipeline near Bolivia's border with Argentina. Their actions interrupted Bolivia's natural gas exports to Argentina and Brazil and caused millions of dollars in damages to the pipeline. On September 10, 2008, President Morales accused the U.S. Ambassador to Bolivia, Philip Goldberg, of supporting opposition forces, declared him persona non grata, and expelled him from the country. On September 6, 2008, in response to a national electoral court ruling that challenged the legality of his earlier decree calling for a constitutional referendum, President Morales sent a bill to the Bolivian Congress seeking its approval to schedule a vote on the constitution and land reform. He moved the proposed date of those referendums from December 7, 2008 to January 25, 2009. On September 3, 2008, opposition prefects issued a statement announcing roadblocks in five eastern provinces and threatening to interrupt gas supplies to Argentina and Brazil if President Morales proceeded with his plans to hold a referendum on the constitution in December 2008. On August 28, 2008, President Morales issued a decree scheduling a referendum on the constitution passed by the Constituent Assembly in late 2007 for December 7, 2008, a move that prompted widespread protests from the opposition. On August 10, 2008, some 67% of Bolivian voters reaffirmed their support for the government of Evo Morales in a national recall referendum. Of the eight prefects (departmental governors) that were also subject to a recall vote, four opposition prefects and two government-allied prefects were also approved with more than 50% of the vote. Two opposition prefects were voted out of office. On June 24, 2008, coca growers unions in the Chapare region of Bolivia announced that they would no longer sign new aid agreements with the U.S. Agency for International Development (USAID). On June 9, 2008, a few thousand protesters surrounded the U.S. Embassy in La Paz demanding the extradition of former president Gonzalo Sánchez de Lozada and his ex-defense minister. The two have been charged in Bolivia with responsibility for civilian deaths that occurred during protests in September and October 2003. After the protests, the U.S. Ambassador to Bolivia Philip Goldberg was called back to Washington for consultations on security issues. Throughout May and June 2008, departmental referendums on whether to implement autonomy statutes were held in the four eastern provinces of Santa Cruz, Beni, Pando and Tarija, despite the lack of congressional approval for them to be convened. Notwithstanding relatively high abstention rates, the statutes received strong popular support from those who voted in each of the referendums. Bolivia is a country rich in cultural diversity and natural resources, whose political and economic development have been stymied by chronic instability, extreme poverty, pervasive corruption, and deep ethnic and regional cleavages. In 1825, Bolivia won its independence from Spain, but then experienced frequent military coups and counter-coups until democratic civilian rule was established in 1982. As a result of the War of the Pacific (1879-1883) with Chile, Bolivia lost part of its territory along the Pacific coast and has no sovereign access to the ocean, a source of lingering resentment among Bolivians. Bolivia does have preferential rights of access to the Chilean ports of Antofagasta and Arica and the Peruvian port of Ilo. As a result of the Chaco War with Paraguay (1932-1935), Bolivia lost access to the Atlantic Ocean by way of the Paraguay river and significant territory. Bolivia is rich in natural resources, with the second-largest natural gas reserves in Latin America after Venezuela and significant mineral deposits, yet 64% of Bolivians live in poverty and 35% earn less than $2 a day. Bolivia's population of 9.1 million people is among the most ethnically diverse in South America. Quechua and Aymara are the two predominant indigenous groups who live largely in the altiplano and highland regions. Approximately 30% of the Bolivian population are Quechuan, 25% are Aymaran, 30% are mestizo (mixed), while 15% are of European origin. Bolivia has been a major producer of coca leaf, the main ingredient in the production of cocaine. Although coca leaf is legal in the country for traditional uses and is grown legally in some parts of the country, its cultivation for illegal purposes increased in the 1970s and 1980s. Cultivation levels have decreased to half of the levels of the 1990s in response to policies to eradicate illicit production, according to the U.S. State Department. These policies, and the way in which they have been implemented, have caused social unrest and economic hardship in the two main coca-growing regions. One consequence has been the rise of coca growers' trade unions and an associated political party, the Movement Toward Socialism (MAS). Despite the National Revolution of 1952, in which the Bolivian indigenous benefitted from land reform and expanded suffrage, indigenous groups have historically been under-represented in the Bolivian political system and disproportionately affected by poverty and inequality. In 2002, some 74% of indigenous Bolivians lived in poverty as compared to 53% of the general population. In the 1980s, indigenous-based political parties and movements emerged in Bolivia, and by 2006 some 17% of members of the Bolivian Congress self-identified as indigenous. In recent years, indigenous representatives have used the legislature as a forum to advocate for indigenous rights, equitable economic development, and the preservation of indigenous land and culture. Some assert that indigenous groups may gain more strength in the Bolivian political system if there continues to be an alliance between leftist and indigenous struggles, as has occurred since 2000. For example, an indigenous woman presided over the Constituent Assembly and the draft constitution it produced recognizes indigenous autonomy. The issues of land tenure and coca cultivation have been long-standing sources of conflict. An Agrarian Reform Law passed in 1996 allows indigenous communities to have legal titles to their communal lands. However, these communities argue that their lands have not been legally defined or protected, and that outsiders have been allowed to exploit their resources. Coca leaf is used legally by indigenous communities for spiritual and medical purposes, and its use is considered an important indigenous cultural right. Previous U.S. and Bolivian policy to eradicate illegal cultivation forcibly was met with violent protests. The Morales government has sought to help resolve these issues by promoting land reform and decriminalizing coca cultivation. Political protests led to the resignation of President Gonzalo Sánchez de Lozada on October 17, 2003, just 15 months after he was elected. The 2003 protests were led by indigenous groups and workers concerned about the continuing economic marginalization of the poorer segments of society. The protesters carried out strikes and road blockages that resulted in up to 80 deaths in confrontations with government troops. These events occurred against a backdrop of opposition to U.S.-funded coca eradication programs and to the government's implementation of austere fiscal reforms backed by the International Monetary Fund (IMF). The final spark that preceded Sánchez de Lozada's resignation was his plan to export natural gas via a port in Chile, a historic adversary of Bolivia. Succeeding Sánchez de Lozada as president was his former vice president, Carlos Mesa, a popular former television journalist and political independent. Mesa appointed a new cabinet, also largely of independents, and demonstrated a sensitivity to indigenous issues. He carried out his promise for a referendum on the export of natural gas. Acceding to demands of indigenous and opposition groups, he also overturned a 1997 decree that had given oil companies ownership of the natural gas they extracted. Mesa also shepherded legislation through Congress that allowed more popular participation in elections. Further, he announced plans for a constituent assembly to consider a new constitution. Despite these measures, President Mesa, like his predecessor, proved unable to resolve continuing discord over issues related to the exploitation of Bolivia's natural resources, coca eradication programs, indigenous rights, and the extent of power sharing between the central government and the country's nine departments. In June 2005, Mesa resigned in favor of Eduardo Rodriguez, head of the Supreme Court, in response to continuing street protests that at times paralyzed the country. Upon taking office in June 2005, President Rodriguez promised to convoke early presidential and legislative elections, which were then not scheduled to occur until June 2007. In December 2005, Evo Morales, an indigenous leader and head of Bolivia's coca growers' union, and his party, the leftist Movement Toward Socialism (MAS), won a convincing victory in Bolivia's presidential and legislative elections. Morales captured the presidency with just under 54% of the vote, marking the first time since Bolivia's return to democracy in 1982 that a candidate won an absolute majority in the first round of a presidential election. The MAS won a majority in the lower chamber of the Bolivian Congress, 12 of 27 seats in the Senate, and three of the country's nine governorships (prefectures), with stronger electoral support than any of the country's traditional political parties. On January 22, 2006, Evo Morales became Bolivia's first indigenous president in the country's 180-year history. While some analysts forecasted a Morales victory, few predicted that he would win by such a decisive margin. That margin proved that Morales had broadened his support beyond rural, indigenous, union, and lower-middle class voters. Some factors that likely contributed to his victory included the perception that most Bolivians had not benefitted from pro-market economic reforms adopted by previous governments, the corruption of the traditional parties, and the tough, nationalistic stances he had taken against foreign investors and U.S. counternarcotics programs. The December 2005 elections were also significant because they included the first direct election of governors (prefects) in Bolivia. Department prefects have traditionally been appointed by the executive and have not been held directly accountable to citizen's demands. Although MAS dominated the presidential and legislative elections, candidates from the new center-right Social and Democratic Power Party (PODEMOS), won most of the gubernatorial races. Ongoing conflicts have since occurred between the Morales government in La Paz and departmental governments regarding the distribution of resources and political power in the country. More than halfway through his five-year presidential term, Evo Morales and the MAS have already had a profound effect on Bolivia's political system. Supporters maintain that, despite entrenched opposition to many of his policies, the Morales government has implemented some significant social and economic reforms, such as nationalizing the country's gas industry and starting to enact land reform. Critics argue that the Morales government has used anti-democratic methods, such as encouraging the Constituent Assembly elected in mid-2006 to approve a draft constitution despite a boycott by opposition delegates, in order to impose his will on the country. Despite these differing interpretations, most analysts agree that the Morales government has benefitted from high energy prices and that, despite ongoing cycles of civil unrest, President Morales continues to enjoy strong personal approval ratings. Morales recently received the support of 67% of Bolivian voters in a national recall referendum held on August 10, 2008. His governments' position has been strengthened vis-a-vis the opposition prefects by the support he has received from fellow Latin American leaders, the Organization of American States (OAS), and, most recently, the newly-formed Union of South American Nations. Since 1990, there have been repeated calls from Bolivian civil society—particularly the indigenous majority—for a new constitution to increase the recognition and participation of the indigenous and other traditionally excluded groups in the political and cultural life of the country. The convocation of a constituent assembly to reform the Bolivian constitution has been a key demand of social protests since 2000. A constituent assembly was originally planned for 2004, but disagreements with the Congress on the subjects to be considered and other logistical considerations postponed it until 2006. In March 2006, President Morales secured passage of legislation establishing elections for a constituent assembly. Elections for assembly delegates were held on July 2, 2006. The MAS captured 50.7% of the popular vote and 137 of 255 seats in the assembly but lacked the two-thirds majority necessary to pass constitutional reforms. Any constitutional reforms approved by two-thirds of the delegates present were then to be voted on by Bolivians in a national referendum. On August 6, 2006, the Constituent Assembly was installed in Sucre, the colonial capital of Bolivia. President Morales and his supporters urged the assembly to draft a constitution that would redefine Bolivia as a "multinational state made up of indigenous groups" and incorporate indigenous institutions within the national structure. They also favored measures in support of agrarian reform and state ownership of the country's natural resources. Many opposition delegates, particularly those from Bolivia's wealthy eastern provinces, maintained that the MAS proposals could result in a "radically ethnic" governing model that is not representative of the entire country. They argued that President Morales was trying to dominate the assembly, as occurred in Venezuela under President Hugo Chávez. Opposition delegates in the assembly pushed for increased regional autonomy from the central government. Throughout the assembly process, neither side appeared willing to compromise its positions in order to move negotiations forward. For the first eight months of its deliberations, the assembly was bogged down in a protracted debate over voting procedures. As a result, most of the constitutional commissions did not begin to consider reform proposals until the spring of 2007. In August 2007, the Bolivian Congress reached a last minute agreement to extend the assembly until December 14, 2007. By the fall, both sides' positions were becoming deeply entrenched and increasingly divergent. In October 2007, the MAS government introduced a decree, which was approved by the Congress that November, to divert a significant portion of the direct hydrocarbons tax (IDH) revenue that had gone to the departments to pay for a national pension payment for seniors. This provoked heated resistance from the opposition prefects and assembly delegates. At the same time, opposition delegates supported Sucre residents' proposal to move the capital from Laz Paz to Sucre, a seemingly inviolable proposal opposed by most of the MAS delegation. Recurring protests in Sucre, which turned violent, kept the assembly suspended for most the fall. Violent clashes between police and opposition protesters in Sucre in November 2007 resulted in three deaths and dozens of injuries. The Constituent Assembly passed a draft constitution on December 9, 2007, but many opposition delegates did not attend the final sessions during which it was approved and have denounced it as unlawful. The draft constitution provides for indigenous rights, communal justice, land redistribution, presidential reelection, and increased federal government control over the country's oil and gas resources. It does not resolve the issue of what size of private land should be considered excessive and therefore vulnerable to government expropriation. President Morales put his plans to convoke a national referendum on the draft constitution on hold until after a national recall referendum was held on August 10, 2008 to determine whether he and the prefects should remain in office. After securing some 67% of the votes in the recall referendum, President Morales decided to push forward with constitutional reform. In late August, he issued a decree scheduling a referendum on the constitution passed by the Constituent Assembly for December 7, 2008, a move that prompted widespread protests from the opposition. Then, in a conciliatory response to a national electoral court ruling that challenged the legality of that decree, President Morales sent a bill to the Bolivian Congress seeking its approval to schedule referendums on the constitution and on the question of land ownership. He moved the proposed date of those referendums from December 7, 2008 to January 25, 2009. After weeks of protests and confrontations between MAS and opposition supporters, a multiparty commission in the Bolivian Congress took up consideration of the draft constitution passed in December 2007. In order to assuage opposition legislators, the commission made more than 100 changes to the original text of that constitution, including adding a provision that will limit President Morales to one possible reelection. On October 22, 2008, the Bolivian Congress voted overwhelmingly in favor of two laws which, taken together, approved the draft constitution, called for referendums on the constitution and on the land issue to be held on January 25, 2009, and scheduled the next general elections for December 2009. While some observers have praised the recent congressional compromise as a victory for both the Morales government and for moderate legislators in the Bolivian Congress, others have criticized the ambiguity of the agreement. On January 25, 2009, the constitution championed by the Morales government won by 61% to 39% and the land ownership limit was set at 5,000 hectares by a wide majority of 81%. The constitution, which had been modified considerably from the one first advocated by the MAS government, guarantees indigenous rights and establishes new arrangements for governance. The bicameral Congress is retained, but the name changed to a "pluri-national assembly." The Senate is enlarged from 27 members to 36 (4 senators from each of the nine departments). The new charter establishes a multi-tiered system allowing for some autonomy—departmental, regional, municipal and indigenous—while the central government retains the control of foreign, fiscal, energy and security policy. The supreme court will be elected rather than appointed as is currently the case. In a change of tone, the U.S. Department of State spokesperson Robert Wood complimented the Bolivian people on their "successful" referendum on January 27, 2009. In a TV interview, President Morales quickly responded to the new tone of the Obama Administration and called it "encouraging." In recent years, civic committees and citizens from the resource-rich areas around Santa Cruz have been pushing for increased regional autonomy, with implications for how central government resources are distributed. This movement is largely supported by Bolivia's four wealthy eastern regions. Nine governors or prefects were elected on December 18, 2005; however, their powers have yet to be well-defined. Several of the prefects are pushing for autonomy over budgetary and even military powers. This push for regional autonomy and devolution has caused friction between political and business leaders from the eastern regions and the Morales government in La Paz. On July 2, 2006, concurrent with the constituent assembly elections, Bolivia held a referendum on whether to grant increased powers and autonomy to the regional (departmental) governments. According to the law convoking both the Constituent Assembly election and the referendum on regional autonomy, the Assembly delegates would be legally bound to grant increased powers (which are still to be defined) to prefects in the departments where a majority of supporters approve the autonomy measure. The election results revealed the deep socioeconomic and geographic divisions within Bolivia. The country was split as the four wealthy eastern provinces voted strongly in support of increased autonomy, while the other five provinces opposed the measure. Notwithstanding the results of the autonomy referendum, the Morales government, including the MAS delegates in the Constituent Assembly, has resisted devolving power or resources to prefects in the four departments that voted in favor of the autonomy measure. President Morales has asserted that gas-producing departments will not receive higher percentages of revenue at the expense of the national government. In November 2006, he proposed legislation that would allow the Bolivian legislature to impeach elected prefects. These moves prompted six of the country's nine prefects to break ties with the MAS government in November 2006 and to launch massive protests in December 2006. Conflicts between the eastern prefects and the MAS government in La Paz continued throughout 2007. In mid-January 2007, after the opposition prefect from Cochabamba hinted that he would seek greater regional autonomy, MAS sympathizers launched protests demanding his resignation. Those protests led to violent clashes that left 2 people dead and more than 100 injured. In July 2007, the four eastern prefects commemorated the anniversary of the autonomy referendum by announcing draft autonomy statutes. In late November 2007, the prefects were deeply angered when the Morales government was able to push its proposal to redirect the IDH hydrocarbons revenues from their departmental budgets to pensions for seniors through the Bolivian Congress. They also vehemently opposed the draft constitution passed by the Assembly in early December 2007. In response to the draft constitution, four prefects issued autonomy statutes on December 14, 2007. The statutes, though varying by department, generally seek greater departmental control over taxes, land, security, and natural resources than is currently allowed. Whereas plans for a national referendum on constitutional reforms have stalled until recently, departmental referendums on autonomy have been held in four provinces, despite the lack of congressional approval for them to be convened. The statutes received strong popular support from those who voted in each of the referendums held in May and June 2008. The Morales government has used the high abstention rates in those autonomy referendums to minimize their results. According to the constitutional accord approved by the Bolivian Congress on October 22, 2008, the autonomy statutes drafted by the eastern departments will have to be brought into compliance with the new constitution. Bolivia pursued state-led economic policies during the 1970s and early 1980s. In the mid-1980s, however, external shocks, the collapse of tin prices, and higher interest rates combined with hyperinflation forced Bolivian governments to adopt austerity measures. Bolivia was one of the first countries in Latin America to implement an IMF structural adjustment program. In the 1990s, many state-owned corporations were privatized. Gross domestic product growth from 1990 to 2000 averaged 3.5%, but the economy remained highly dependent on foreign aid and had an extremely high debt/GDP ratio. Sluggish economic growth in 2001 and 2002 (1.2% and 2.5%, respectively) fueled resentment that the benefits of globalization and free market economic policies were not reaching most of the population. Bolivia posted faster growth rates of roughly 4% in both 2004 and 2005. Strong international demand for Bolivian mining products and gas, as well as high tax revenues from the natural gas sector, fueled growth of about 4% in 2006. Bolivia's GDP grew by close to 4% again in 2007, despite significant flooding that damaged much of the country's agricultural production. Economic growth was driven by strong performance in the construction, financial services, manufacturing, and hydrocarbons sectors. Despite that growth, some 63% of Bolivians live in poverty with 34.3% earning less than $2 a day. Future growth will likely be constrained by declining foreign investment and the country's high debt burden, among other things. President Morales opposes free market economic policies and supports more state involvement in economic policy-making and greater government spending on infrastructure, health, and education. In June 2006, the MAS unveiled a five-year national development plan (2006-2010) calling for $6.9 billion in government investment complemented by $6 billion of private investment, particularly in the housing, infrastructure, and small business sectors. The plan aims to increase GDP growth to 7.6% by 2010, create 90,000 jobs annually and reduce the percentage of the population living in poverty to below 50%. Critics of the plan argue that it lacks a clear financing plan and is overly ambitious. The Morales government has also negotiated for further debt relief from the major international donors. On July 1, 2006, the World Bank announced that Bolivia would receive a total of $1.8 billion in total debt relief under the Multilateral Debt Relief Initiative. In March 2007, the Inter-American Development Bank (IDB) agreed to cancel Bolivia's $1 billion debt, along with the outstanding debt owed by Guyana, Honduras, Nicaragua, and Haiti. With respect to trade, Bolivia is a member of the Andean Community (CAN), with Peru, Ecuador, and Colombia. The members of the Andean Community have requested an extension of trade benefits from the United States and started negotiating a free trade agreement with the European Union. The future of the CAN had been in question after Venezuela suddenly quit the trading block in April 2006 because it opposed free trade agreements negotiations conducted by Peru, Ecuador, and Colombia with the United States. Bolivia is also an associate member of Mercosur, the trading block composed of Brazil, Argentina, Uruguay, Paraguay, and, as of July 2006, Venezuela. In May 2006, the Morales government signed a trade and cooperation agreement with Cuba and Venezuela. Morales and the MAS opposed the Free Trade Area of the Americas (FTAA) and have been critical of the type of bilateral and sub-regional trade agreements reached by other countries in Latin America with the United States. Investors are concerned about the ad-hoc nature of the Morales government's economic policy. They are also worried about Morales' stated goal of increasing state control over mining, energy, transport, and telecommunications. Inflation, which reached 12% in 2008, has become a major challenge for the government to address. Some predict that the global financial crisis could reduce demand for Bolivia's commodity exports and weaken remittance inflows from Bolivians living abroad, thereby causing economic growth to slow in 2009. Some maintain that the job losses and lost revenue resulting from the suspension of Bolivia's ATPA trade benefits is likely to dampen growth in some sectors. Estimates of job losses resulting from the loss of ATPA benefits range from 12,000 to 50,000. While GDP growth was an estimated 6% in 2008, several factors threaten to sharply decelerate growth in 2009—weakening export markets, reduced investment, lower remittances, as mentioned above, and rising unemployment. The most controversial components of the Morales government's economic and social development plans remain its efforts to nationalize the natural gas sector, to industrialize the coca leaf for licit uses while using cooperative means to eradicate excess crops, and to enact large-scale land reform. Bolivia has the second-largest gas reserves in South America after Venezuela. Some 50% of the gas used in Brazil, and 75% of the gas used in the industrial state of São Paulo, flows from Bolivia. However, Bolivia is land-locked and must go through neighboring countries in order to export its natural gas. In addition, Bolivia lacks the technological and financial capacity to develop its natural gas resources without significant foreign investment. Despite these limitations, most Bolivians believe that their government needs to assert greater control over its natural resources in order to ensure that the revenues they produce are used to benefit the country as a whole. In a June 2004 referendum, more than 92% of Bolivians support an increased state role in gas exploration and production, while stopping short of nationalization. As a result of the referendum, then-president Carlos Mesa sent legislation to the Congress to replace the 1996 Hydrocarbons Law, which had opened Bolivia's hydrocarbons sector to private investment. The state-owned energy company Yacimientos Petroliferos e Fiscales Bolivianos (YPFB) would resume a more active role in oil and gas operations. The proposed legislation raised taxes on oil and gas production and reestablished state ownership of oil and gas "at the wellhead." In May 2005, the Bolivian Congress enacted its own version of hydrocarbons legislation that created a non-deductible 32% Direct Tax on Hydrocarbons (IDH) that would apply to production and maintained the current 18% royalty rate. Foreign oil companies vehemently criticized the law, but most elected to comply with its terms, at least in the short-term. As a result of the tax hikes, some companies initiated legal action over having their existing contracts rewritten and investment reduced, and predicted that new investments would not be feasible in Bolivia. On May 1, 2006, President Morales fulfilled his campaign pledge to nationalize the country's natural gas industry. As a result of the May 2006 nationalization measure, the Bolivian government's income from gas and oil rose to an estimated $1.57 billion in 2007 (compared to $173 million in 2002). The nationalization measure significantly raised energy costs for neighboring Argentina and Brazil and raised tax and royalty rates to a level that some investors perceived to be unprofitable. As a result, Brazil's Petrobras and Spain's Repsol-YPF—the largest foreign investors in Bolivia's energy sector—halted new investments in the country through the end of 2007. Owing to a lack of investment in production, Bolivia is currently unable to fulfill its domestic needs for natural gas and meet the contract demands of Brazil and Argentina. State oil companies from a number of countries (including Petrobras and Repsol) have pledged to make significant investments in Bolivia which could enable it to boost production. Critics of the nationalization measure assert that, even with new investments, YPFB still lacks the capacity to develop Bolivia's gas resources. In early January 2009, Bolivian gas exports to Brazil suddenly declined by a third because of hydropower increases available in Brazil and lowering demand due to the economic downturn. On January 8, 2009, Bolivia sent an emergency delegation to Brazil to reverse this development, and Petrobas announced it would maintain its gas purchases from Bolivia at around 24 million cubic meters a day down from the 31 million cubic meters a day it was receiving in December 2008. Argentina, Bolivia's only other client for natural gas exports, agreed to increase its daily intake by 5 million cubic meters absorbing some of the excess production made available by Brazil's cutback. These events shook the Bolivian government and made clear that Bolivia's failure in attracting investment in the sector and opening new markets for gas exports makes it vulnerable to continued fluctuations in demand from Brazil, which are likely as Brazil develops its own domestic supply more inexpensively. The coca leaf has been used for thousands of years by indigenous communities in the Andean region for spiritual and medical purposes, and its use is considered an important indigenous cultural right. The coca leaf is also a primary component of cocaine, an illicit narcotic. Since the 1960s, coca leaf and coca paste produced in Bolivia have been shipped to Colombia to be processed into cocaine. At the height of its production, the Chapare region of Bolivia—a jungle region stretching from the eastern Andes mountains to the Amazon—produced enough coca leaf to make some $25 billion worth of cocaine per year. Since the 1980s, successive Bolivian governments, with financial and technical assistance from the United States, have tried various strategies to combat illicit coca production. In 1988, Bolivia passed legislation criminalizing coca growing outside 30,000 acres (12,000 hectares) in the Yungas region that was set aside to meet the country's traditional demand for coca. During the 1990s, the Bolivian government tried to implement that drug control law by paying coca growers to eradicate their crops. After this policy produced only modest results, the Banzer-Quiroga administration (1997-2002), implemented a forced eradication program focusing on the Chapare region. Although the program dramatically reduced coca cultivation in Bolivia, human rights abuses were committed by security forces during its implementation. In addition, the government failed to implement viable alternative development programs to benefit coca growers and their families. Forced eradication caused economic hardship and fueled social discontent in the Chapare region. Frequent clashes between coca growers and security forces, which occasionally turned violent, de-stabilized the region and the country as a whole. This ongoing conflict continued until October 3, 2004, when Chapare growers, led by Evo Morales and others, signed a one-year agreement with the Mesa government, which permitted limited coca production in the region and replaced forced eradication with a more cooperative, voluntary approach. Under the agreement, each family is allowed to produce one cato (1,600 square meters) of coca, but any coca grown beyond that is subject to eradication. U.S. State Department figures found that drug cultivation in Bolivia increased by 8% in 2005 compared to the previous year, but the United Nations Office on Drugs and Crime (UNODC) reported an 8% decrease in cultivation for the same period. UNODC credited that reduction largely to the success of the Chapare agreement. Regardless of its merits, the Chapare agreement was only supposed to remain in place if a European Union-funded study, which just got underway in 2007 after a long delay, concluded that the "traditional" demand for coca in Bolivia exceeds the current 12,000 hectares allowed by law. Critics argue that since, according to police sources, some 99% of the coca grown in the Chapare goes to the cocaine industry, it is not going to meet traditional demand for coca and must therefore be eradicated. Evo Morales and the MAS have developed a "coca yes, cocaine no" policy for Bolivia based on the principles of the Chapare agreement. The policy seeks to (1) recognize the positive attributes of the coca leaf; (2) industrialize coca for licit uses; (3) continue "rationalization" of coca (voluntary eradication) in the Chapare and extend it to other regions; and, (4) increase interdiction of cocaine and other illicit drugs at all stages of production. President Morales has sought to decriminalize coca growing and his government is trying to develop alternative uses of the coca plant for products such as coca tea. Venezuela is funding the restoration of two factories in the Yungas region for the industrialization of coca products—such as baking flour and toothpaste—for export. In June 2006, President Morales announced a plan to end the current division of the Yungas region into legal and illegal coca growing zones, to allow licensed growers to sell coca directly to consumers, and to permit each family in the Yungas to grow one cato of coca. In July 2006, his government then targeted some 3,000 hectares in the Yungas for cooperative eradication, marking the first time that the Bolivian government has attempted eradication in that region. According to the U.S. Department of State's International Narcotics Strategy Control Report covering 2007, the Morales government met its coca eradication targets for 2007 and seized more cocaine base, marijuana, and precursor chemicals than in 2006. Proponents of the "coca yes, cocaine no" policy argue that it is a culturally sensitive approach to coca eradication that is widely accepted in Bolivia. For those reasons, they believe that, although it may take time to show results, it stands a much better chance of being successful than previous forced eradication programs. They assert that Morales' experience as a coca grower has enabled him to negotiate agreements with producers in regions where prior governments were unable to limit coca cultivation. Critics of Morales' coca policy argue that it is based on the false premises that traditional demand for coca exceeds the current legal threshold, and that there are viable markets outside Bolivia for licit coca-based products. They assert that both the "rationalization" policies and the December 2006 MAS proposal to expand the areas allowed for licit cultivation may encourage further increases in illegal drug cultivation and processing in both the Chapare and Yungas regions. Extreme land concentration and the lack of indigenous access to arable land has been a long-standing cause of rural poverty in Bolivia. In 1953, Bolivia enacted a large-scale land reform program, distributing some 2 million acres to indigenous and peasant communities. Nevertheless, as of 2005 some 100 families reportedly owned 12.5 million acres of land in Bolivia, while 2 million survived on 2.5 million acres. In 1996, Bolivia passed an Agrarian Reform Law 1996 that allows indigenous communities to have legal title to their communal lands. However, these communities argue that their lands have not been legally defined or protected and that outsiders have been allowed to exploit their resources. Previous land reform efforts in Bolivia and other countries in Latin America reportedly have been incomplete, because they have failed to provide land recipients the access to credit and technical assistance needed to use the land efficiently. In May 2006, the Morales government launched its agrarian reform program, giving land titles for 7.5 million acres to 60 indigenous communities and promising to distribute titles, accompanied by access to credit and technical training, for an additional 50 million acres to Bolivia's rural poor over the next five years. According to the government, about one-third of the land to be distributed is state-owned, and the additional two-thirds would be reclaimed from individuals or companies that own land in the eastern lowlands without legal titles or with illegally obtained titles. This land redistribution policy has been vehemently opposed by the agro-industrial sector and other large landowners in the Santa Cruz region, who see it as a threat to their livelihoods. It is also likely to affect hundreds of Brazilian landowners who have acquired large tracts of land in eastern Bolivia for soya farming and other agricultural pursuits. In 2006, landowners reported an increase in peasant occupations of private land, actions which they say have been encouraged by the Morales government. On November 28, 2006, the Morales government secured passage of a new agrarian reform law with the support of two alternate senators from opposition parties. Although press reports have described the agrarian reform bill as "radical," some observers maintain that it does not represent a dramatic departure from the land policy enacted in 1996. The new agrarian reform law stipulates that government land, unused tracts of private land, and land that was illegally acquired will be distributed to settlers, peasants, and indigenous peoples. Opponents of the law are concerned that it is likely to lead to arbitrary expropriations of private lands and will inhibit landowner's ability to buy or sell existing holdings, but Bolivian government officials say they will take the steps necessary to avoid those outcomes. For some 20 years, U.S. relations with Bolivia have centered largely on controlling the production of coca leaf and coca paste, much of which was usually shipped to Colombia to be processed into cocaine. In support of Bolivia's counternarcotics efforts, the United States has provided significant interdiction and alternative development assistance, and has forgiven all of Bolivia's debt for development assistance projects and most of the debt for food assistance. Bolivia, like Peru, has been viewed by many as a counternarcotics success story, with joint air and riverine interdiction operations, successful eradication efforts, and some effective alternative development programs. Others, however, view the forced eradication as a social and political disaster that has fueled popular discontent and worsened Bolivia's chronic instability. Prior to the December 2005 elections, most analysts predicted that a Morales victory would complicate U.S. relations with Bolivia. Although U.S. officials refrained from commenting publicly on their concerns about a possible Morales victory for fear of inadvertently swaying Bolivian support to his candidacy (as occurred in 2002), they expressed serious concerns about his position on the coca issue and his possible ties with Cuba and Venezuela. After the election, U.S. State Department officials congratulated Evo Morales but noted that "the quality of the relationship between the United States and Bolivia will depend on what kind of policies they [Morales and the MAS government] pursue." Some analysts predicted that Evo Morales would become another Hugo Chávez, an outspoken, anti-American, leftist leader. Others disagreed, predicting that the United States could use foreign aid and trade preferences to exert some influence over the Morales government. Despite an initial openness to dialogue, U.S.-Bolivian relations became tense soon after President Morales took office. U.S. officials expressed concerns about the Morales government's commitment to combating illegal drugs, its ties with Venezuela and Cuba, and its nationalization of Bolivia's natural gas industry. In September 2006, President Bush expressed concern about the decline in Bolivian counternarcotics cooperation that had occurred since Morales took office. In 2007, there continued to be periodic friction in U.S.-Bolivian relations. In September 2007, President Bush expressed concern about the reported expansion of coca cultivation in Bolivia that has occurred despite the Morales government's eradication efforts. Tensions in U.S.-Bolivian relations flared during the fall of 2007 as Bolivian authorities (including President Morales) complained that some U.S. assistance was going to support opposition groups seeking to undermine the MAS government. U.S. officials also expressed some concerns about the instability in Bolivia surrounding the constitutional reform process. In 2008, U.S.-Bolivian relations deteriorated from what analysts described as "tenuous" at best in the summer, to extremely tense by the fall. Bilateral relations took a turn for the worse in June 2008, when the U.S. Ambassador to Bolivia, Philip Goldberg, was called back to Washington for consultations on security matters after protesters surrounded the U.S. Embassy in La Paz. The protesters were demanding the extradition of former president Gonzalo Sánchez de Lozada and his ex-defense minister Carlos Sanchez Berzain who have been charged in Bolivia with responsibility for civilian deaths that occurred during protests in the fall of 2003. The June protests occurred in response to Berzain's announcement that he had received political asylum from the U.S. government. Also in June, coca growers unions in the Chapare region of Bolivia announced that they would no longer sign new aid agreements with USAID. Bilateral relations reached their lowest point in recent memory in mid-September 2008, when President Morales accused U.S. Ambassador Goldberg of inappropriately supporting opposition forces, declared him persona non grata, and expelled him from the country. Within a day, the U.S. State Department followed suit, expelling Bolivia's U.S. Ambassador Gustavo Guzmán. These ambassadorial expulsions were followed by President Bush's September 16, 2008 determination that Bolivia had failed demonstrably to live up to its international narcotics commitments. Soon thereafter, a resolution was introduced ( H.Res. 1483 ) in Congress expressing outrage over the expulsion of U.S. Ambassadors to Venezuela and Bolivia, and calling for these countries to resume full counternarcotics cooperation with the United States. On September 26, 2008, as a result of Bolivia's "demonstrable failure to cooperate in counternarcotics matters over the past 12 months," President Bush proposed to suspend Bolivia's ATPA trade benefits for the first time since the Andean trade preference programs began in 1991. On December 15, 2008, the suspension of Bolivia's benefits went into effect. Some analysts have asserted that the recent Bush Administration decisions regarding Bolivia are meant to punish the Morales government for expelling the U.S. Ambassador. Regardless of the reasoning behind them, most observers expect bilateral relations to remain tense, at least in the short to medium term. The Morales administration has speculated that the positive comments made by the Obama State Department spokesperson following the constitutional referendum might reflect a willingness to re-visit the relationship in the near future. By the late 1990s, Bolivia, like Peru, was considered a counternarcotics success story and a close U.S. ally in the fight against illegal narcotics. As aggressive coca eradication programs in Bolivia resulted in significant reductions in illegal coca production, the bulk of U.S. concern (and counternarcotics funding) shifted to neighboring Colombia. At that time, some argued that Bolivia's earlier significant gains in reducing illegal coca production could be threatened by any successes in controlling production in Colombia through a "balloon effect," in which coca production shifts to other areas with less law enforcement presence. Those warnings appear to have some merit as, according to the State Department, coca cultivation in Bolivia increased 17% in 2003, 6% in 2004, and 8% in 2005. These findings, and the social discontent that has resulted from forced eradication, have prompted some critics to question the efficacy of existing counternarcotics programs in Bolivia and across South America. Bush Administration officials maintain that it is vital that governments in Latin America continue to combat the cultivation of coca in order to help stem the flow of illicit narcotics to the United States. Many U.S. officials were seriously concerned that the level of drug cooperation from Bolivia would lessen following the December 2005 election of Evo Morales. Morales was a coca growers union leader who had been extremely critical of U.S. drug policy. At first, some U.S. officials expressed a willingness to engage in a dialogue with the Morales government on how to fight drug processing and trafficking while allowing some level of coca cultivation for traditional uses. This willingness has been replaced by increasing frustration on the part of the U.S. government with Bolivia's counternarcotics efforts. The State Department found that the Chapare agreement, rather than contributing to reductions in coca cultivation, actually "undercut the Government of Bolivia's commitment to its forced eradication policy and resulted in less eradication in 2005." U.S. officials are wary of President Morales' December 2006 policy to allow more coca to be grown in order to satisfy demand for traditional coca usage and coca-based products for export. The State Department asserts that "many suspect [that traditional coca usage] has declined as Bolivian society has urbanized." In September 2007, President Bush expressed concern about the expanded coca cultivation in Bolivia that occurred in 2006 despite the Morales government's eradication efforts. Figures from the United Nations Office of Drugs and Crime (UNODC) showed that the area under coca cultivation in Bolivia increased by 5% in 2007 (as compared to a 27% increase in Colombia). However, U.S. figures cited during the release of the FY2008 State Department report on Major Illicit Drug Producing Countries showed a larger increase in coca cultivation in Bolivia of some 14% in 2007. Also during that report release, David Johnson, U.S. Assistance Secretary of State for International Narcotics and Law Enforcement Affairs, asserted that "cocalero syndicates—endorsed by the Government of Bolivia—expelled USAID from the Chapare region...and [and that] last week the U.S. Drug Enforcement Administration was similarly expelled from the Chapare." Bolivian officials have since denied those assertions. On September 16, 2008, President Bush determined that Bolivia, along with Venezuela and Burma, had failed demonstrably to live up to its obligations under international narcotics agreements, but waived sanctions so that U.S. bilateral assistance programs could continue. For the past several years, Bolivia has been among the largest recipients of U.S. foreign assistance in Latin America. However, assistance levels have been declining since FY2007. Bolivia received $122.1 million in U.S. assistance in FY2007, including $66 million in counternarcotics assistance through the Andean Counterdrug Initiative account. In FY2008, Bolivia received an estimated $99.5 million, including roughly $47.1 million in counternarcotics assistance. The FY2009 request for Bolivia is for $100.4 million, not including P.L. 110-480 Title II food aid. A continuing resolution ( H.R. 2638 / P.L. 110-329 ) will provide funding for U.S. programs in Bolivia at FY2008 levels through March 6, 2009. Table 1 provides figures on U.S. counternarcotics aid to Bolivia since FY2000, including how funds have been broken down between interdiction/eradication and alternative development. From FY2000 through FY2007, Bolivia received interdiction assistance as well as alternative development assistance through the Andean Counterdrug Initiative (ACI). Beginning in FY2008, the Andean Counterdrug Initiative (ACI) was renamed as the Andean Counterdrug Program (ACP). In addition, alternative development programs previously supported by Andean Counterdrug Initiative funds shifted to the Economic Support Fund (ESF) account. In the FY2009 budget request, funds for alternative development were shifted to the Development Assistance (DA) account. Interdiction funding provides operational support for specialized counterdrug police and military units and is intended to improve data collection for law enforcement activities. ACP funds are also used to support increased interdiction of precursor chemicals and cocaine products. They provide support for a U.S.-owned helicopter fleet and funding to maintain and purchase vehicles, riverine patrol boats, training and field equipment, and to construct and refurbish antiquated counternarcotics bases. A small amount of ACP funds is also used to fund voluntary eradication programs. Alternative development (AD) programs provide a range of assistance to help farmers as they stop relying solely on coca production and as their illicit crops are eradicated by law enforcement. U.S. programs supporting AD in the Chapare and Yungas regions of Bolivia have been linked to illicit coca eradication. AD includes economic development in coca-growing areas, demand-reduction education programs, and the expansion of physical infrastructure. For the past few years, USAID has been carrying out AD work in the Chapare in municipalities where some of the mayors are former coca growers. In June 2008, however, Chapare coca grower representatives announced that they would henceforth not sign any new AD agreements with USAID. Instead, USAID will focus its programs on the Yungas region. The United States extends special duty treatment to imports from Bolivia, Colombia, Ecuador, and Peru under the Andean Trade Preference Act (ATPA; Title II of P.L. 102-182 ) which was enacted on December 4, 1991 and was originally authorized for 10 years. The purpose of ATPA is to promote economic growth in the Andean region and to encourage a shift away from dependence on illicit drugs by supporting legitimate economic activities. ATPA lapsed on December 4, 2001 and was renewed and modified under the Andean Trade Promotion and Drug Eradication Act (ATPDEA; Title XXXI of P.L. 107-210 ) on August 6, 2002. ATPDEA renewed ATPA trade preferences until December 31, 2006, with a retroactive date of December 4, 2001, and also expanded trade preferences to include additional products in the following categories: petroleum and petroleum products, textiles and apparel products, footwear, tuna in flexible containers, and others. Since that time, Congress has approved short term extensions of ATPA benefits. On September 26, 2008, President Bush directed the United States Trade Representative (USTR) to publish a public notice proposing to suspend Bolivia's trade benefits because of the Morales government's failure to cooperate in counternarcotics matters. He reiterated his reasons for suspending Bolivia's trade benefits when he signed the Andean Trade Preference Extension Act ( H.R. 7222 / P.L. 110-436 ) into law on October 16, 2008. P.L. 110-436 extends trade benefits for Bolivia and Ecuador through June 30, 2009 and for Colombia and Peru through December 31, 2009. A public hearing on the proposed suspension of Bolivia's ATPA benefits was held on October 23, 2008. At that hearing, witnesses examined the effects of the ATPA on Bolivia's economy as a whole, as well as its impact on specific sectors of the Bolivian economy. In general terms, most experts predict that the overall effect on Bolivia's economy if the ATPA benefits were to be eliminated would likely be small because exports under this program account for a small percentage of Bolivia's GDP. Despite having a small overall effect on the Bolivian economy, Bolivian officials have said that there are some 20,000 jobs, mainly in the textile and jewelry sectors, that would likely be lost without the ATPA benefits. While some argue that Bolivia does not deserve to receive U.S. trade benefits because of its declining counternarcotics cooperation and recent expulsion of the U.S. Ambassador, others fear that the proposed suspension might result in more harm than good. In a recent statement, Representative Eliot Engel, Chairman of the House Subcommittee on the Western Hemisphere, predicted that a suspension of ATPA benefits "would empower champions of anti-Americanism and would make the United States less and less relevant in Bolivia." On November 25, 2008, President Bush announced his decision to suspend Bolivia's ATPA benefits effective December 15. The extent of job losses and lost export revenue resulting from the suspension remains unclear—as are the prospects for Bolivia to be redesignated as a beneficiary country. Bolivia could also benefit from assistance from the Millennium Challenge Account (MCA). In December 2005, Bolivia submitted a compact proposal worth $598 million to the Millennium Challenge Corporation (MCC). That initial proposal focused on linking raw material producers to small and medium-sized businesses who would then produce valued-added manufactured goods for export. After taking office, the Morales government decided to modify the compact proposal slightly and resubmit it to the MCC. On September 21, 2007, the Bolivian government submitted a second proposal to the MCC for consideration. That proposal focused on improving road infrastructure in the historically isolated northern region of La Paz, Beni, and Pando. It also included a smaller project focusing on rural productive development. In December 2007, a visit by the MCC Bolivia Transaction Team to Bolivia was postponed due to unrest in the country surrounding the Constituent Assembly process. On January 29, 2008, Philip Goldberg, then-U.S. Ambassador to Bolivia, stated that the MCC dialogue process with Bolivia has been put on hold for the time being. In 2008, the MCC continued to monitor developments in Bolivia closely in order to determine when the proper political, economic, and social situation was in place to enable the dialogue process to move forward. On December 10, 2008, the MCC Board did not re-select Bolivia for eligibility for an FY2009 compact. Between 1996 and 2004, the implementation of forced eradication programs in Bolivia had been accompanied by charges of human rights abuses committed by Bolivian security forces. In 2003, violent clashes erupted between protesters and government troops in the Chapare and the La Paz departments that resulted in more than 80 deaths, prompting new allegations of abuses by security forces. The State Department's annual Country Reports on Human Rights Practices covering 2004-2007 recognized improvements from 2003, when it reported that serious problems existed with regard to deaths of protestors at the hand of security forces, the excessive use of force, extortion, torture, and improper arrests. Congress has also repeatedly expressed concern with human rights abuses in Bolivia. Report language accompanying the foreign operations appropriations laws for FY2004 through FY2008 recognized the lack of progress in investigating and prosecuting human rights cases by Bolivian authorities and urged the Secretary of State to give higher priority to these issues. The Appropriations Committee required the Secretary of State to make a determination with regard to whether Bolivian security forces are respecting human rights and cooperating with investigations and prosecutions of alleged violations and to submit a report to the committee substantiating the determination. Funding for FY2004 and FY2005 was not made contingent on the determination, but funding for FY2006 and FY2007 was contingent on that determination. The FY2008 Consolidated Appropriations Act ( H.R. 2764 / P.L. 110-161 ) includes provisions stipulating that aid to Bolivian military and police be contingent upon the Secretary's determination. Human rights organizations and the Morales government believe that former President Sánchez de Lozada, who currently resides in the United States, should be held legally responsible for the civilian deaths that occurred in Bolivia during September and October 2003. The 2003 protests were led by indigenous groups and workers concerned about the continuing economic marginalization of the poorer segments of society. The protesters carried out strikes and road blockages that resulted in up to 80 deaths in confrontations with government troops. In September 2007, the Bolivian Supreme Court issued a new extradition decree for the former president. That extradition request was translated into English and sent to the U.S. State Department on November 10, 2008. A separate civil lawsuit was filed in the U.S. court system in September 2007 by human rights lawyers seeking compensatory damages for ten families of those killed in the protests. A ruling on that case is expected to be delivered during the spring of 2009. | Bolivia has experienced a period of political volatility, with the country having had six presidents since 2001. Evo Morales, an indigenous leader and head of Bolivia's coca growers' union, and his party, the leftist Movement Toward Socialism (MAS), won a convincing victory in the December 18, 2005, presidential election with 54% of the votes. Early in his term, President Morales moved to decriminalize coca cultivation and nationalized the country's natural gas industry. His efforts to reform the Bolivian constitution have, until recently, been stymied by a strong opposition movement led by the leaders (prefects) of Bolivia's wealthy eastern provinces who are seeking greater regional autonomy. In December 2007, the Constituent Assembly elected in mid-2006 passed a draft constitution without the presence of opposition delegates. In late August 2008, President Morales, buoyed by the strong support he received in a national recall referendum held on August 10, 2008, proposed to convoke a referendum on the draft constitution in December 2008. He later agreed to seek congressional approval for that referendum. Several opposition prefects were angered by Morales' proposal, and launched protests and blockades, which turned violent in mid-September. On October 20, 2008, after multiparty negotiations on the draft constitution's text, the Bolivian Congress approved legislation convoking a constitutional referendum on January 25, 2009. The new constitution was approved by a 61% to 39% vote following a peaceful election. Four eastern provinces, however, all voted against the constitution suggesting a strong possibility of continued opposition and discord. U.S.-Bolivian relations have been strained by the Morales government's drug policy and its increasing ties with Venezuela. Bilateral relations hit their lowest point in recent memory on September 10, 2008, when President Morales accused the U.S. Ambassador to Bolivia of supporting opposition forces and expelled him from the country. The U.S. government responded by expelling Bolivia's U.S. Ambassador. On September 16, 2008, President Bush designated Bolivia as a country that had failed to live up to its obligations under international narcotics agreements. That decision was closely followed by a Bush Administration proposal to suspend Bolivia's trade preferences under the Andean Trade Preferences Act (ATPA). On November 1, 2008, Bolivian President Morales announced an indefinite suspension of U.S. Drug Enforcement Administration (DEA) operations in Bolivia after accusing some DEA agents of espionage. Concerns regarding Bolivia in the 110th Congress focused largely on counternarcotics and trade issues. Bolivia received an estimated $99.5 million in U.S. foreign aid in FY2008, including roughly $47 million in counternarcotics assistance, significantly lower than in previous years. An enacted continuing resolution H.R. 2638/P.L. 110-329 will provide funding for U.S. programs in Bolivia at FY2008 levels through March 6, 2009. In October 2008, Congress enacted legislation to extend ATPA trade preferences for Bolivia until June 30, 2009 (P.L. 110-436). However, on November 25, 2008, President Bush announced his decision to suspend Bolivia's ATPA trade preferences effective December 15, citing Bolivia's failure to cooperate with the United States on counternarcotics efforts. The 111th Congress is likely to continue to focus on trade and drug issues as these concerns remain central to U.S. relations with Bolivia. |
Critical infrastructure is so vital to the United States that its incapacity would harm the nation's physical security, economic security, or public health. The federal government has a key role in helping protect the nation's critical infrastructure from all types of hazards through programs of mitigation, preparedness, response, and recovery. Accordingly, Congress has a strong interest in the vulnerability of critical infrastructure to natural hazards, accidents, or terrorism. Since September 11, 2001, legislators, government agencies, and industry increasingly have been focused on the sources of infrastructure vulnerability and potential measures to address those vulnerabilities through operational changes and capital investment. When infrastructure is physically concentrated in a limited geographic area it may be particularly vulnerable to geographic hazards such as natural disasters, epidemics, and certain kinds of terrorist attacks. Whereas a typical geographic disruption is often expected to affect infrastructure in proportion to the size of an affected region, a disruption of concentrated infrastructure could have greatly disproportionate—and national—effects. A catastrophic ice storm in metropolitan Chicago, for example, would undoubtedly create local emergencies, but could also temporarily disrupt rail transportation and associated commerce throughout the country because Chicago is a major railway hub. Extended closure of the port of Long Beach, the largest port in the nation, would greatly harm California's economy, but could also disrupt vital supply chains for a number of national industries. The social and economic impacts of geographic disasters are often difficult to quantify, but their costs can quickly run into the billions and can spread far beyond the area of the event itself. In 2005, Hurricanes Katrina and Rita demonstrated this kind of geographic impact by disrupting a substantial part of the national U.S. energy and chemical sectors, both heavily concentrated in the Gulf of Mexico. In 2008, Hurricanes Gustav and Ike have caused similar disruptions, renewing concerns about geographic vulnerability. As the nation's responses to recent natural disasters continue, and as its homeland security activities evolve, Congress has been examining federal policies related to the geographic concentration and vulnerability of critical infrastructure. For example, in the 109 th Congress, the Energy Policy Act of 2005 ( P.L. 109-58 ) facilitated the construction of new liquefied natural gas import terminals in diverse ports by granting the Federal Energy Regulatory Commission exclusive siting approval authority (Section 311). Provisions in the Pipeline Safety Improvement Act of 2006 ( P.L. 109-468 ) require periodic studies to identify geographic areas in the United States where unplanned loss of oil pipeline facilities may cause oil shortages or price disruptions (Sec. 8(a)). The 110 th Congress is overseeing implementation of these measures and considering additional policies which may affect critical infrastructure concentration. Prominent among these are legislative proposals such as H.R. 6566 , H.R. 6709 , S. 3202 , and S. 3126 , which would lift federal moratoriums on, or otherwise encourage, offshore oil and natural gas development outside the western Gulf of Mexico. This report provides an overview of geographic concentration and related vulnerability among critical infrastructures in the United States. The report illustrates the nature of such geographic concentration and how it may expose infrastructures to catastrophic failure due to geographic hazards. It identifies several long-term forces which have contributed to infrastructure concentration. These forces include resource location, agglomeration economies, scale economies, community preferences, and capital efficiency. It reviews several ways in which the federal government has also influenced critical infrastructure, such as prescriptive siting, economic incentives, environmental regulation, and economic regulation. The report concludes with options to address geographic vulnerability in the context of current federal infrastructure policy. This report focuses on "nationally" critical infrastructure and related federal policies. While many of the infrastructure and policy issues addressed in this report may also apply at the state and local levels, the report discusses them only in the context of federal activities. This report also discusses a number of specific geographic hazards to critical infrastructure in the context of a broader federal policy discussion. The report does not attempt to quantify the likelihood of any particular hazard occurring in any particular location, or the degree of vulnerability of any particular infrastructure concentration to geographic hazards. Such projections are available elsewhere and are beyond the scope of this analysis. Twenty years ago, "infrastructure" was defined primarily with respect to the adequacy of the nation's public works.In the mid-1990's, however, the growing threat of international terrorism led policy makers to reconsider the definition of "infrastructure" in the context of homeland security. Successive federal government reports, laws, and executive orders have refined, and generally expanded, the number of infrastructure sectors and the types of assets considered to be "critical" for purposes of homeland security. The USA PATRIOT Act of 2001 ( P.L. 107-56 Section 1016e) contains the federal government's most recent definition of "critical infrastructure." According to the act, "critical infrastructure" is systems and assets, whether physical or virtual, so vital to the United States that the incapacity or destruction of such systems and assets would have a debilitating impact on security, national economic security, national public health or safety, or any combination of those matters (Section 1016e). This definition was adopted, by reference, in the Homeland Security Act of 2002 ( P.L. 107-296 , Section 2.4) establishing the Department of Homeland Security (DHS). The Bush Administration's 2006 National Infrastructure Protection Plan (NIPP) contains a detailed list of critical infrastructures and assets of national importance, as follows: As the list suggests and the NIPP acknowledges explicitly, "The majority of the [critical infrastructure/key resource]-related assets, systems, and networks are owned and operated by the private sector." The list may continue to evolve as economic changes or geopolitical developments influence homeland security policy. This report defines "geographic concentration" of critical infrastructure as the physical location of critical assets in sufficient proximity to each other that they are vulnerable to disruption by the same, or successive, regional events. To be of national significance, the collection of concentrated assets may account for a significant fraction of the nation's total infrastructure capacity in a given sector or subsector. Alternatively, the collection of regional assets could make up an infrastructure hub, accounting for a nationally significant fraction of commodity or service flows through that infrastructure sector or subsector. The threshold above which such assets could be considered "nationally" concentrated would depend upon the type of impact resulting from a prolonged disruption. From strictly a market perspective, for example, some policy makers have suggested that a change in energy infrastructure capacity of as little as 10% to 15% could have an exaggerated effect on related market prices. The corporate merger guidelines used by the United States, Canada, and the European Union variously assume that a company must have a 25% to 35% market share to exercise market power, and so uncompetitively influence market prices or supplies. Although the loss of critical infrastructure would have effects beyond market price, other possible metrics of concentration (e.g., environmental) offer little additional clarity on concentration thresholds. Many of the critical infrastructure sectors identified in the NIPP exhibit some degree of geographic concentration, as illustrated by the following examples. Chemicals (chlorine)—Over 38% of U.S. chlorine production is located in coastal Louisiana. Transportation (marine cargo)—Over 33% of U.S. waterborne container shipments pass through the ports of Long Beach and Los Angeles in southern California. Transportation (rail)—Over 37% of U.S. freight railcars pass through Illinois, primarily around Chicago. Over 27% of freight railcars pass through Missouri, primarily around St. Louis. Agriculture and food (livestock)—Approximately 28% of U.S. hog inventories are located in Iowa. Another 15% of hog inventories are located in the eastern counties of North Carolina. Public health and health care (pharmaceuticals)—Approximately 25% of U.S. pharmaceuticals are manufactured in Puerto Rico, primarily in the San Juan metropolitan area. Energy (refining)—Approximately 43% of total U.S. oil refining capacity is clustered along the Texas and Louisiana coasts. Banking and finance (securities market)—Approximately 39% of U.S. securities and options (by market value) are traded on the floors of the New York and American Stock Exchanges in lower Manhattan. Approximately 21% of U.S. securities industry employees are located in New York City. Defense industrial base (shipyards)—Over 31% of U.S. naval shipbuilding and repair capacity is in and around Norfolk, VA. In addition to single infrastructure concentrations, some regions of the United States contain concentrations of multiple critical infrastructures. As indicated in the examples above, coastal Louisiana has concentrations of both refining and chemical production capacity. In addition to a concentration of financial services, the metropolitan New York and New Jersey area contains a concentration of U.S. port capacity (12% of container shipping) and airport capacity (8% of airline passengers), among other critical infrastructure. Where critical infrastructure is geographically concentrated, it may be distinctly vulnerable to a range of geographic hazards, including natural or unnatural events. These events could have varying potential for infrastructure disruption depending upon the type of event, its location, and the infrastructure sectors present in that location. What such events have in common is their geographic scale. Among the geographic events posing the greatest hazard to U.S. critical infrastructure concentrations are the following. Major meteorological events, such as hurricanes, tropical storms, floods, and ice storms, have the potential to physically disrupt critical infrastructures or displace related critical workers in large geographic areas. For example, the damaging effects of hurricanes Katrina and Rita (and associated flooding) on energy and chemicals infrastructure in the Gulf of Mexico have been widely reported. In 1998, a major ice storm in Quebec, Canada, and the northeastern United States caused widespread, persistent power and communications blackouts, disrupted other power-dependent services, and prevented critical workers from traveling to their jobs. Earthquakes have the potential to damage concentrations of critical infrastructure in seismically active regions of the United States, including the west coast, Alaska, and the central Mississippi Valley. The 1994 earthquake in Northridge, CA, is an example of such seismic activity in a region with concentrated critical infrastructure. The Northridge earthquake had limited impact on the region's major ports, airports, and energy infrastructure, but it did cause significant damage to bridges and highways vital for commercial trucking and public transportation. A 1995 earthquake in Kobe, Japan was far more destructive to Japanese critical infrastructure. In addition to highway damage, the earthquake heavily damaged the port of Kobe, Japan's largest container shipping port, as well as chemical manufacturers, steel manufacturers, railroads, and utilities in the area. Repairs to the port took almost a year to complete. Coastal infrastructure concentrations are also potentially vulnerable to disruption by tsunamis. The infrastructure damage to Sri Lanka, India, Indonesia, and other Asian nations from the 2004 tsunami in the Indian Ocean was extensive. Experts have testified before Congress that the United States is also potentially vulnerable to a major tsunami. Depending upon its magnitude, such an event could disrupt ports and other critical transportation infrastructure. According to California's Seismic Safety Commission, for example, a major tsunami in southern California could close the ports of Long Beach and Los Angeles for two months and cause $60 billion in economic losses. Epidemics and pandemics of infectious diseases such as Severe Acute Respiratory Syndrome (SARS) and avian influenza (bird flu) have the potential to disrupt critical infrastructure by infecting critical workers or restricting their movement. The Bush Administration's National Strategy for Pandemic Influenza states that "while a pandemic will not damage power lines, banks or computer networks, it will ultimately threaten all critical infrastructure by removing essential personnel from the workplace for weeks or months." An outbreak of infectious disease may sicken critical workers or force them into quarantine. It may also restrict their access to critical facilities where the disease may be present. As one federal government report states, during such an event "operations become disrupted, exposed people and facilities undergo extensive testing ... and buildings and equipment require decontamination." The 2003 SARS outbreak in Toronto demonstrated the vulnerability of critical health and transportation infrastructure in Canada to such an infectious disease. The World Health Organization, the U.S. Department of Health and Human Services, and other health organizations have since expressed concern about the likelihood of a bird flu pandemic with more serious potential consequences than SARS. In the event of a bird flu or similar outbreak in a particular geography, some analysts have predicted up to 40% absenteeism among workers during the peak weeks of a regional outbreak. Concentrations of livestock may be similarly vulnerable to infectious disease, with the potential to catastrophically affect the nation's food supply. As one expert has testified before Congress, "animal diseases can be quickly spread to affect large numbers of herds over wide geographic areas. This reflects the intensive and concentrated nature of modern farming practices in the US." Foot and mouth disease (FMD), in particular, has the potential to infect regionally concentrated stocks of hogs, cattle, and sheep should they be exposed. A 2002 General Accounting Office report found that an FMD outbreak could cost the U.S. economy up to $24 billion dollars and could have "significant social impacts, such as enormous psychological damage, especially on families and localities directly affected by the outbreak." Certain types of terrorist attacks could be of sufficient scale to pose a geographic threat to critical infrastructure. Nuclear bombs, radiological weapons ("dirty" bombs), or electromagnetic pulse (EMP) devices could damage or render inaccessible concentrated critical assets. Cyber-attacks on regional computer systems also have the potential to damage or disrupt computer networks' ability to control critical infrastructure. Biological attacks could have impacts similar to those of epidemics, although they could be more specifically targeted at particular regions. Taken individually, the types of disasters discussed above occur only rarely in a specific location. Taken collectively, however, such events occur often enough to warrant dedicated policy attention. As Table 1 shows, reviewing only the past 15 years, major disasters have occurred in North America almost annually. Not all of these events have impacted regions of concentrated critical infrastructure, nor have they all significantly affected such infrastructure where it has been present. Nonetheless, the cost estimates for these events indicate their disruptive power. Although attention to the geographic concentration of U.S. critical infrastructure has increased in the wake of recent terrorist attacks and natural disasters, such geographic concentrations are not new. They have developed for multiple reasons—typically some combination of market influences, including resource location, agglomeration economies, scale economies, community preferences, and capital efficiency. These influences often have been in place for decades, gradually driving critical infrastructure development to its geographic configuration today. The location of certain critical infrastructures is driven by the location of related natural resources or, in some cases, natural terrain. Such influences are particularly apparent in energy, agriculture, and transportation. United States oil and natural gas basins, for example, are located in particular regions of the country, including the Gulf of Mexico, the Rockies, and Appalachia. These locations are generally far from Northeastern urban centers which are the primary locations of oil and gas demand. Consequently, large oil and gas pipelines tend to be concentrated between these widely separated resource regions and the Northeast, as shown in Figure 1 . Likewise, production of phosphoric acid, a key component of agricultural fertilizer, is concentrated in Florida, which has the nation's largest deposits of phosphoric rock. Agricultural production is also driven by geography, since particular crops require particular climates, weather conditions, and types of soil. Terrain may also be a driver of infrastructure concentration. There are relatively few natural harbors suitable as deepwater ports in the western United States compared to the eastern part of the country. Consequently, the ports that exist, such as Long Beach, have become very heavily utilized. In these cases, and others, the concentration of a natural resource drives the concentration of infrastructure exploiting that resource. Where resource location and terrain are not constraints, concentrations of critical infrastructure may emerge due to economic factors collectively referred to as "agglomeration economies." Broadly speaking, it is clear that [industry] concentrations form and survive because of some form of agglomeration economies, in which spatial concentration itself creates the favorable economic environment that supports further or continued concentration. For critical infrastructure, such agglomeration economies may include the availability of specialized knowledge, the availability of skilled workers, access to production inputs, and access to large markets for the goods and services produced. The concentration of semiconductor manufacturing in Silicon Valley illustrates such economies. Silicon Valley emerged near major research institutions (e.g., Lawrence Livermore National Laboratory), with the ready availability of highly skilled graduates from leading research universities (e.g., U.C. Berkeley, Stanford University), and with access to both product suppliers, computer manufacturers (e.g., Apple Computer), and software companies. Agglomeration economies have also been demonstrated in food manufacturing, and may similarly influence other critical infrastructure sectors such as financial services, chemicals manufacturing, and telecommunications. Critical infrastructure may become geographically concentrated in pursuit of "scale economies." Scale economies are found in industries where unit costs fall as the scale of operations increases. This phenomenon was first studied in pipeline industries ... when it was observed that the amount of material required to make a pipe of a given diameter increased only two-thirds as quickly as the carrying capacity of the pipe. This observation led to larger pipes having lower unit costs. In addition to pipelines, researchers have identified scale economies across many critical infrastructure sectors. The size of new chemical plants, for example, increased by a factor of five between the late 1950s and early 1980s, in part due to scale economies. Some analysts likewise suggest that the concentration of shipping container traffic among several U.S. "megaports" is partly due to economies of scale in warehousing and terminal operations. Because scale economies tend to drive an increase in size of individual facilities, they may also geographically concentrate regional infrastructure capacity where multiple facilities are located in the same region. Community preferences have sometimes led to concentrations of critical infrastructure by preventing or inviting the development of new facilities in particular new locations. Such preferences have affected, for example, ongoing efforts by energy developers to site new liquefied natural gas (LNG) import terminals. Since 2000, developers have proposed the construction of over 70 new LNG terminals in U.S. ports or U.S. waters, many near major natural gas markets in California and the Northeast. But most near-to-market terminal proposals have struggled for approval due to community concerns about LNG safety, effects on local commerce, and other potential negative impacts. Due primarily to local community opposition, LNG developers have withdrawn terminal proposals in Alabama, California, Maine, Massachusetts, North Carolina, and Florida. Other terminal proposals in Rhode Island, New York, and New Jersey are facing stiff community opposition. In some cases state and local agencies also have been at odds with federal agencies over LNG terminal siting jurisdiction. Communities in only a few states, notably Louisiana and Texas, have encouraged the siting of new LNG facilities. As a result, most new LNG terminals approved by federal agencies are located in the Gulf of Mexico, where natural gas infrastructure is already heavily concentrated. Similar siting preferences have faced other types of critical infrastructure and industries, including electric power, telecommunications, and transportation. Capital efficiency seeks to maximize financial returns on capital investment. Since most U.S. critical infrastructure is in the private sector, capital efficiency has long influenced how and where private companies have invested in infrastructure capacity. Attention to capital efficiency sharply increased in the 1990s, however, as financial markets grew dissatisfied with other measures of company performance such as simple revenue growth. This attention, in turn, led a range of capital-intensive infrastructure companies, such as electric utilities, telecommunications providers, pipelines, and other industrial companies, to sharply reduce annual capital requirements from historical levels. Economic deregulation of the energy, telecommunications, and transportation industries, among others, accelerated this trend. In some cases companies reduced capital requirements by cutting "excess" infrastructure capacity—reducing reserve capacity in capital equipment or reducing inventories of production supplies ("just-in-time" inventory). For example, power generation capacity margins for the U.S. electric utility industry as a whole fell by almost 40% between 1992 and 2000. There has been a similar reduction in excess capacity among other critical infrastructures, many of which now operate near or at capacity. Oil refineries, for example, have seen capacity utilization rise from below 77% in 1985 to 89% in 2005. While such a reduction in reserve capacity has not, itself, led to geographic infrastructure concentration, it has greatly increased the sensitivity of infrastructures to the disruption of concentrated capacity. Although market forces have been the primary influence on critical infrastructure development, especially in the private sector, Congress and federal agencies historically have, from time to time, adopted policies intended to affect the capacity and location of critical infrastructure in the national interest. Although these policies often have been motivated by the desire to promote specific social objectives (e.g., economic development, environmental protection, infrastructure reliability) they have sometimes also encouraged or discouraged the geographic concentration of critical infrastructures. Examples of these policies follow. The federal government has prescriptively sited, constructed, and operated federally owned or operated critical infrastructure. Such infrastructure includes transportation facilities, military bases, postal facilities, federal energy facilities, and national laboratories. In some cases, such prescriptive siting has led to geographic concentration of critical infrastructure. For example, the federal government sited and constructed the Panama Canal in the early 1900s, encouraging a concentration of military and commercial shipping through the new waterway which persists today. (The canal carried over a third of U.S. grain exports in 2006.) In the Pacific Northwest, dams constructed or operated by federal agencies on the Columbia River system account for 28% of U.S. hydroelectric generation capacity. In other cases, prescriptive federal siting has dispersed critical infrastructure. In the early 1940s, for example, the federal government financed and sited a major steel plant in Utah, far from existing U.S. steel plants and steel markets. A key reason for siting the plant (viewed as critical for shipbuilding during World War II) in Utah was "as a precaution against steel shortages in the West in case of a Pacific coast invasion or closure of the Panama Canal." A more current example is the U.S. Postal Service, which routes no more than 1.3% of all mail through any single processing and distribution center. Although the federal government prescriptively sites its own infrastructure, it is difficult to find examples of federal prescriptive siting of private sector infrastructure. One way the government has done so, however, is through its control of federal lands and other federal assets necessary for infrastructure development. For example, the Trans-Alaska Pipeline Authorization Act of 1973 ( P.L. 93-153 ) directed the Secretary of the Interior to authorize a right-of-way for construction of the Trans-Alaska Pipelines System (TAPS) through federal lands in Alaska. The construction of TAPS physically diversified U.S. oil supplies, although it initiated a new geographic concentration of critical infrastructure in Alaska. TAPS transports nearly 17% of United States domestic oil production. More recently, the Energy Policy Act of 2005 ( P.L. 109-58 ) directs federal agencies to designate "energy corridors" on federal lands in 11 western states for the siting of new oil, gas, and hydrogen pipelines and electricity transmission facilities (Section 368). While both the TAPS and energy corridor projects involve privately owned facilities, the location of those facilities is established prescriptively by the federal government. Economic incentives are another policy mechanism employed by the federal government to direct private sector infrastructure siting. Such incentives are intended to encourage private developers to build infrastructure that might otherwise not be built or to build infrastructure in a location favored by government. While most federal incentive programs are not geographically targeted, some are intended to affect infrastructure development in particular geographic areas. The construction of the transcontinental railroad and telegraph is an historic example of such a policy. Under the Pacific Railway Act of 1862, the Congress provided private companies with 30-year bonds, federal land grants, and other incentives to construct a rail and telegraph line along a specified route from Nebraska to the Pacific coast. The federal government continues to offer such financial incentives for critical infrastructure projects today. For example, in 2004 Congress passed the Alaska Natural Gas Pipeline Act ( P.L. 108-324 , Div. C) offering an $18 billion loan guarantee, accelerated depreciation, and investment tax credits to private developers for the construction of a new natural gas pipeline similar to the existing Trans-Alaska oil pipeline. In both the railroad and the Alaska gas pipeline cases, Congress has viewed the new infrastructure as critical for expanding and diversifying (geographically) the nation's critical assets. Federal environmental laws, such as the Coastal Zone Management Act and the Clean Air Act, also have influenced the geographic development of critical infrastructure. The Coastal Zone Management Act of 1972 (CZMA, P.L. 92-583) was enacted to enable states to establish coordinated coastal zone management programs balancing environmental protection with coastal development. State coastal management plans implemented under the CZMA may affect the geographic concentration of infrastructure by encouraging or discouraging the siting of coastal infrastructure. Research has shown, for example, that one third of states with coastal management plans under CZMA appear to have adopted policies seeking to confine the physical expansion of ports to areas already committed to port and industrial uses. Energy industry representatives have argued that state plans under CZMA have also been used to block the development of new energy infrastructure in many parts of the country. The Clean Air Act of 1970 (CAA, P.L. 91-604) created a national program to mitigate the harmful effects of air pollution by regulating pollution sources. Among other provisions, the CAA requires that new facilities emitting certain air pollutants install best available control technology as determined by the Environmental Protection Agency. New facilities being sited in counties not in attainment of federal air quality standards may have more stringent—and potentially more costly—emissions control requirements than facilities sited in counties that are in attainment of those standards, depending upon a state determination of the lowest emission rate available and the need to acquire emissions offsets. By affecting facility costs in this way, some analysts argue that the CAA encourages the concentration of infrastructure in geographic "pollution havens," or, alternatively, encourages the dispersion of facilities away from existing infrastructure in polluted regions. One empirical study in New York, for example, suggests that air quality regulations have significantly affected the destination choices of relocating manufacturing plants. Because facility siting decisions are complex, however, other empirical studies of CAA effects on siting concentration, specifically, have been less conclusive. While the environmental regulations under the CZMA and CAA apply generally to many regions in the United States, some federal environmental policies have been directed at more specific geographic areas. Congressional moratoria on oil and natural gas development in specific parts of the outer continental shelf (due to concerns about local economic and environmental impacts) are one example of such federal policy. Energy industry analysts have argued that the moratoria have resulted in oil and gas infrastructure concentration in the central and western Gulf of Mexico, where such development is permitted. This example notwithstanding, the federal government does not appear to impose regional-level (as opposed to facility-level) environmental restrictions frequently. Economic regulation of critical infrastructure, or the lack thereof, by the federal government may also influence infrastructure concentration. Under federal price regulation, the U.S. airlines industry offered primarily direct, point-to-point service. After economic deregulation in 1978, the airlines began offering far more indirect flights, routing air traffic through concentrated "hub" airports—a largely unanticipated consequence of inter-carrier competition. Federal deregulation of banking led to a consolidation of the banking sector, with ever-larger banks concentrating critical operations in centralized administration facilities to capture economies of scale. Limited federal regulation does not necessarily lead to infrastructure concentration, however, especially if state or local agencies have regulatory authority. Under the Federal Power Act of 1935 (FPA), for example, retail electricity sales and generation investments of investor-owned electric utilities are regulated by the states. State regulators have historically required utilities to meet state electric generation needs by constructing in-state plants, or by jointly constructing plants with neighboring utilities. Consequently, privately-owned electric power plants have been geographically dispersed among the 50 states. The largest shares of U.S. generating capacity in individual states are 10% in Texas and 6% in California. By contrast, the federally owned Tennessee Valley Authority (TVA) had plans in the 1960s to construct 17 nuclear power reactors at seven sites. Although TVA only completed six reactors due to changes in the energy market and nuclear safety regulation, its original plans would have created a nationally significant concentration of nuclear generating capacity within TVA's territory. It is interesting to note that the recent restructuring of the electric utility industry, which exempts new generation plants from state economic regulation, appears to be encouraging the geographic concentration of new generating plants near certain transmission corridors because plant developers are no longer constrained by state regulators in their site selection. Since helping to reduce the overall vulnerability of critical infrastructure is an objective of the federal government, it is useful to outline what options, if any, may be considered to reduce vulnerabilities and potential national consequences arising specifically from the geographic concentration of such infrastructure. Some analysts may argue that little government intervention in infrastructure concentration is necessary because the private sector will appropriately adjust its infrastructure practices out of its own financial interest. Catastrophic insurance premiums, for example, or internal corporate risk management programs, may influence corporate practices in a way that reduces vulnerabilities and associated risk to future profits by reducing the geographic vulnerability of private infrastructure. As the National Strategy for the Physical Protection of Critical Infrastructures and Key Assets states, Customarily, private sector firms prudently engage in risk management planning and invest in security as a necessary function of business operations and customer confidence.... Consequently, private sector owners and operators should reassess and adjust their planning, assurance, and investment programs to better accommodate the increased risk.... Holders of such a view would assert that the socially optimal geographic distribution of critical infrastructure, balancing economic efficiency with geographic risk, is best left to the market forces outlined earlier in this report. Other analysts have argued that the private sector does not properly account for the full social costs of critical infrastructure failure, or that individual companies cannot independently and significantly influence geographic concentration in a critical sector. Holders of this view would see a definite and active role for the federal government in alleviating geographic vulnerability of critical infrastructure in addition to the market-driven measures taken by the private sector on its own. If Congress concludes that federal intervention is appropriate, it has several broad policy options for doing so. One way Congress may alleviate geographic concentration and associated vulnerability is to eliminate existing policies that encourage such concentration. As the previous discussion has shown, some federal policies may increase concentration prescriptively. Others, especially certain economic and environmental policies, may implicitly or unintentionally encourage geographic concentration. Without such government influence, market forces may drive developers to less geographically concentrated locations for future infrastructure projects. The challenge to this approach of alleviating geographic concentration is that it may conflict with other objectives of federal legislation. In the case of the economic deregulation, for example, geographic concentration often provides the consumer cost reductions and service improvements that deregulation was intended to achieve. In the case of environmental laws, concentration is often viewed as a desirable means of preserving undisturbed natural areas from destructive development. Would the CZMA be able to fulfill its fundamental balance of environmental protection and economic development if states were not free to concentrate infrastructure where they choose to? The resolution of such policy questions would require a careful and complex reconsideration of long-standing policy objectives in light of evolving concerns about critical infrastructure risk. Another remedy for geographic vulnerability is to encourage the geographic dispersion of concentrated assets where such dispersion is possible. As discussed in this report, the federal government may implement a range of targeted policies, including prescriptive siting, economic incentives, and regulation, to help bring about infrastructure dispersion. Such dispersion could involve the development of new infrastructure capacity or the shifting of critical goods and services among existing infrastructure. Some transportation analysts, for example, have proposed shipping containers through Mexican ports and then on to the United States by rail as a means of reducing cargo traffic in Southern California's ports. Shifting concentrations of critical supplies and services to alternative infrastructure already in place (and not itself concentrated) may be one way to alleviate geographical vulnerabilities relatively quickly. If the alternative infrastructure lies outside the United States, however, such a strategy may create new vulnerabilities since it might no longer be under U.S. protection or administration. While encouraging infrastructure dispersion through federal policy may be helpful, doing so may be challenging. It may be difficult, for example, to identify and prioritize geographic infrastructure concentrations amenable to such dispersion. Predicting the long-term effects of such polices on market economics, especially the effects on market competition, may also be uncertain. If incentives are involved, dispersion policies may also be costly to the federal government, potentially drawing resources away from other federal programs. Furthermore, since infrastructure development is mostly in private and regional government (state and local) hands, ensuring that regional infrastructure projects are consistent with federal objectives may also be a problem. As the Congressional Budget Office has stated, The federal government's most important role in infrastructure provision is as a source of finance.... Thus, for infrastructure to be managed in a way that furthers national objectives, federal agencies must offer incentives for local managers to align their choices with the welfare and equity goals of federal programs. Choices for infrastructure systems that aim at such broad objectives must similarly be based on wide searches among new investments, rehabilitation efforts, or operational changes. They must also be derived from consistent evaluations of the long-term effects of these possible choices on the efficiency of activities using the infrastructure. Infrastructure owners and regional governments are also likely to have vested interests in existing concentrations of critical infrastructure and may oppose dispersion on competitive or other economic grounds. State and local governments may also have concerns about federalism, particularly where federal policies affecting infrastructure dispersion may supercede local infrastructure priorities. Notwithstanding the challenges of promoting infrastructure dispersion, Congress appears to be pursuing such policies with respect to the siting of new energy infrastructure, including LNG import terminals, oil refineries, electric transmission lines, and an Alaska gas pipeline. Even where such federal policies may be implemented successfully, however, it may still take years or decades to achieve dispersion objectives because critical infrastructure often develops slowly. For example, industry experts project that it would take five to seven years, absent community opposition, to construct a new U.S. oil refinery. It would take at least nine years to build the Alaska natural gas pipeline. For geographic concentrations of critical infrastructure that are difficult to diversify, or that may take a long time to diversify, Congress may wish to ensure their near-term ability to function, or "survivability," during and after a major geographic disaster. Particularly where resource location provides few geographic alternatives (as in the case of ports) reducing vulnerability through infrastructure protection may be effective. Such an approach would broadly align with the President's existing strategy for protecting critical infrastructure from terrorist attack as stated in the NIPP, although it would incorporate explicitly geographic vulnerabilities. In the context of the NIPP or other emergency management programs, geographic vulnerability could be viewed as a distinctive type of infrastructure vulnerability and therefore considered in federally mandated risk assessments. Increasing standards for design, construction, and operation, and retrofitting existing infrastructure to higher standards may also enhance infrastructure survivability. While there are numerous industry and government building standards for protection from earthquakes, hurricanes, and floods in regions where such hazards exist, such standards may not account for the critical nature of certain types of assets. In particular, the degree of general survivability these standards impose on critical assets may not appropriately reflect the economic and social costs that might arise should such an asset fail. Federal authority to change such standards may be limited, however, if they fall primarily under state or local jurisdiction. A principal challenge to alleviating geographic infrastructure vulnerabilities is incorporating the geographic dimension appropriately into the broader infrastructure risk management and decision-making process. One key question is whether survivability measures in place to protect against a facility-specific event would be effective against a regional event. Backup supply networks, redundant control centers, and other systems intended to "harden" infrastructure may themselves be subject to disruption from a geographic hazard. Although history does provide some guidance as to the likelihood of disruptive natural events and their potential effects, quantifying such geographic vulnerabilities in a way that allows comparison to a broader set of vulnerabilities may be analytically complex. Predicting the likelihood of future terrorist attacks, for which history provides little guidance, adds considerable uncertainty. Attempting to allocate limited public resources for critical infrastructure survivability based on geographic considerations may also be challenging. In particular, it could complicate the use of quantitative, risk-based formulas to distribute federal support for critical infrastructure protection. Increasing the private costs of infrastructure through new construction standards to improve survivability could also be controversial. In addition to policies promoting geographic dispersion and survivability, Congress may consider infrastructure recovery as a means of mitigating the impacts of geographic hazards on concentrated critical infrastructure. The federal government, through the Federal Emergency Management Agency (FEMA) and other agencies, provides a range of emergency aid programs for communities affected by disasters such as hurricanes, earthquakes, or terrorist attacks. Among other assistance, these federal programs can provide grants, loans, loan guarantees, food, and shelter to disaster victims. They may also provide long-term infrastructure assistance, such as repair of public utilities, to affected communities. While the evolving objectives of federal emergency assistance programs are a topic of ongoing debate in Congress, the programs traditionally have been intended to assist primarily in the recovery of an immediate disaster area. However, if a natural disaster, terrorist attack, or other regional incident disrupts critical infrastructure, it may have serious social or economic consequences far beyond the area where the disaster occurs. The loss of concentrated natural gas supplies in the Gulf of Mexico after hurricanes Katrina and Rita, for example, sharply increased U.S. energy prices and threatened to create significant shortages of fuel for home heating and electric power generation in New England. These natural gas shortages prompted congressional calls to increase federal aid for low income households nationwide facing high natural gas bills. In light of the far-reaching impacts like these, Congress may wish to incorporate into existing federal infrastructure recovery plans and aid programs measures that account for the distinctive vulnerabilities of concentrated critical infrastructure. Measures related to the restoration or alternative provision of critical infrastructure services away from the immediate area of a geographic incident may warrant particular attention. Geographic concentrations of critical infrastructure exist across a number infrastructure sectors. Although such concentrations often provide substantial economic and social benefits, they may also be distinctly vulnerable to catastrophic geographic disruption. Any public policy addressing critical infrastructure concentration must try to balance these benefits and potential costs. Both government and industry have taken steps to try to protect critical infrastructure from natural disasters, epidemics, and terrorist attacks. Nonetheless, questions remain as to whether these steps appropriately address such geographic vulnerabilities. If Congress concludes that more federal intervention is needed to alleviate vulnerabilities due to geographic concentration, it may employ a number of policy options to encourage geographic dispersion (including eliminating policies that encourage concentration ), ensure survivability, or ensure that effective infrastructure recovery capabilities are in place to mitigate impacts of concentrated infrastructure disruption. Because geographic hazards exist today, and geographic dispersion would likely take decades to achieve, addressing geographic vulnerabilities may call for a combination of options. In addition to these issues, Congress may assess how geographic infrastructure vulnerability and survivability fit together in the nation's overall infrastructure policies. As Congress evaluates diverse proposals with the potential to affect critical infrastructure development—directly or indirectly—Congress may consider whether such proposals are likely to relieve or exacerbate geographic vulnerability. The economic or social benefits of adding capacity (e.g. refinery, airport, shipping) to an existing concentration of critical infrastructure, or developing additional infrastructure in a new location, may be outweighed by the increased geographic risk implicit in such an expansion. Fiscal implications, especially related to the economic efficiency of public critical infrastructure and the efficient use of federal funds for infrastructure projects, may also be an important consideration. Reviewing how such infrastructure priorities fit together could be an oversight challenge for Congress. | "Critical infrastructure" consists of systems and assets so vital to the United States that their incapacity would harm the nation's physical security, economic security, or public health. Critical infrastructure is often geographically concentrated, so it may be distinctly vulnerable to events like natural disasters, epidemics, and certain kinds of terrorist attacks. Disruption of concentrated infrastructure could have greatly disproportionate effects, with costs potentially running into billions of dollars and spreading far beyond the immediate area of disturbance. Hurricane Katrina in 2005, and Hurricane Ivan in 2008, have demonstrated this kind of geographic vulnerability by disrupting much of the U.S. energy and chemical sectors. Congress has been examining federal policies related to the geographic concentration and vulnerability of critical infrastructure. In the 109th Congress, the Energy Policy Act of 2005 (P.L. 109-58) facilitated the construction of new liquefied natural gas import terminals in diverse ports. Provisions in the Pipeline Safety Improvement Act of 2006 (P.L. 109-468) require studies to identify geographic areas in the United States where unplanned loss of oil pipeline facilities may cause oil shortages or price disruptions. The 110th Congress is considering additional policies which may affect critical infrastructure concentration. Prominent among these are legislative proposals such as H.R. 6566, H.R. 6709, S. 3202, and S. 3126, which would lift federal moratoriums on, or otherwise encourage, offshore oil and natural gas development outside the western Gulf of Mexico. Geographic concentrations of U.S. critical infrastructure typically have developed through some combination of market influences, including resource location, agglomeration economies, scale economies, community preferences, and capital efficiency. Congress and federal agencies also have adopted policies affecting the capacity and location of critical infrastructure, including prescriptive siting, economic incentives, environmental regulation, and economic regulation. Some federal policies have been developed specifically to address perceived threats to critical infrastructure. These influences often have been in place for decades, gradually driving critical infrastructure to its geographic configuration today. Some analysts may argue that little government intervention is necessary to alleviate geographic vulnerabilities of critical infrastructure because the private sector will adjust its practices out of its own financial interest. However, if Congress concludes that federal intervention is needed, it may employ a number of policy options to encourage geographic dispersion (including eliminating policies that encourage concentration ), ensure survivability, or ensure that effective infrastructure recovery capabilities are in place to mitigate impacts of concentrated infrastructure disruption. Addressing geographic vulnerabilities may call for a combination of options. Congress may also consider whether other legislative proposals with the potential to affect critical infrastructure development—directly or indirectly—are likely to relieve or exacerbate geographic vulnerability. The economic efficiency of public critical infrastructure and the efficient use of federal funds for infrastructure development may also be important considerations. |
I n order to safeguard "the complete independence of the courts of justice," Article III of the U.S. Constitution provides that "the Judges, both of the supreme and inferior Courts" of the United States, "shall hold their Offices during good Behaviour" and receive a salary that "shall not be diminished during their Continuance in Office." By granting U.S. Supreme Court Justices, judges of the U.S. Courts of Appeals and U.S. District Courts, and other such "Article III" judges a guaranteed salary and "the practical equivalent of life tenure," the Founders sought to insulate the federal courts from political pressures that might influence judges to favor or disfavor certain litigants instead of neutrally applying the law to the facts of a particular case. Because Article III judges ordinarily hold their positions for life, and because federal judges can decide issues of great legal and political significance, the decision whether or not to elevate any particular judicial candidate to the federal bench can be momentous. The U.S. Constitution empowers the President to nominate candidates for Article III judgeships, but also vests the Senate with the role of providing "advice" and affording or withholding "consent" with respect to the President's nominees. To carry out this "advice and consent" role, the Senate typically holds a hearing at which Members of the Senate Judiciary Committee question the nominee. After conducting this hearing, the Senate generally either "consents" to the nomination by voting in favor of the nominee's confirmation or instead rejects the nominee. Ideally, "the questioning of nominees at confirmation hearings enables [S]enators to obtain useful and indeed necessary information about nominees." To that end, Senators commonly ask questions that are intended to enable the Senate "to evaluate not only the nominees' qualifications, but also their beliefs and probable voting patterns on the Court." Such questions frequently include inquiries "about specific cases, judicial philosophy, and attitudes on issues that are likely to come before the Court." However, judicial nominees have often refused to answer certain questions at their confirmation hearings—or have volunteered only perfunctory responses—claiming that fully answering certain questions could violate various ethical norms governing judges and judicial candidates or impair the independence or fairness of the federal judiciary. To name several notable examples, then-Judge Ruth Bader Ginsburg stated during her Supreme Court confirmation hearing she could offer "no hints, no forecasts, [and] no previews" of how she might rule on questions that might come before the Court. Similarly, then-Judge Antonin Scalia refused to state his opinion on any prior Supreme Court decisions, declining even to discuss Marbury v. Madison , the foundational case establishing the power of courts to review laws under the Constitution. Some commentators and Members alike have expressed frustration regarding nominees' reticence to reveal their jurisprudential views during their confirmation hearings. While by no means the consensus view, some argue that if prospective judges refuse to divulge how they will rule on controversial legal issues once they reach the bench, then Senators cannot cast a fully informed vote when deciding whether to confirm or reject the nominee. At the same time, however, even though many wish that federal judicial nominees were more forthcoming during their confirmation hearings, there is nonetheless "relative agreement among nominees, senators, and commentators" alike that "there must be some limitations on a potential Justice's answers" during the confirmation process. For instance, most commentators agree that a nominee should not make "[e]xplicit or implicit promises" to rule in a certain way in future cases during his or her confirmation hearing, as "such promises if sought and given would . . . compromise judicial independence and due process of law" by depriving litigants of their constitutional entitlement to a fair adjudicator. These commentators further maintain that the integrity of the federal judiciary would suffer if a judge's responses to Senators suggested that his "confirmation ha[d] been purchased through the pledge of future conduct in office." In response to concerns regarding the proper conduct of judges and judicial candidates, judges and bar associations have promulgated a variety of "canons" of judicial ethics—that is, self-enforcing, aspirational norms intended to promote the independence and integrity of the judiciary. Among other things, these canons provide nominees with general guidance regarding which sorts of statements by judges and judicial candidates are appropriate or inappropriate. As discussed below, most commentators agree that the canons discourage federal judicial nominees from pledging to reach predetermined results in future cases. However, scholars, nominees, and Members of Congress have not reached a consensus regarding the extent to which ethical canons otherwise constrain a nominee from answering other types of questions at his or her Senate confirmation hearing. Beyond the canons of judicial ethics, historical practice reveals the constitutional norms that have influenced what questions a federal judicial nominee should or must refuse to answer. Here, too, however, different nominees have reached different conclusions regarding which types of responses are improper. As a result, the boundaries between proper responses and improper responses remain unsettled. This report examines the relevant considerations with respect to the questioning of judicial nominees. The report begins by discussing applicable canons of judicial ethics that may discourage judicial nominees from answering certain questions posed by Members of Congress. The report then proceeds to discuss which types of questions prior federal judicial nominees have answered or declined to answer, focusing on nominees for the U.S. Supreme Court. The report concludes with some takeaways for Members. The federal judiciary, state courts, state legislatures, and various bar associations have all developed codes of ethical standards intended to guide the conduct of judges and judicial candidates. As explained below, many of these codes contain provisions that could discourage nominees for federal judgeships from answering certain types of questions during their confirmation hearings. Each of the ethical rules discussed below purport to constrain what a federal judicial nominee may permissibly say during the confirmation process; none of the ethical rules, however, affirmatively obligate nominees to respond to particular questions. Moreover, the applicable ethical rules purport only to prohibit the nominee from answering certain questions; they do not explicitly purport to prohibit Members from asking those questions. As the following sections explain, however, canons of judicial ethics are generally self-enforcing, with the result that there is virtually no case law and only minimal commentary analyzing how these codes of judicial conduct apply in the specific context of confirmation hearings for appointed federal judges. Although it is possible to draw analogies from other contexts—especially statements and promises that candidates for elected judgeships at the state level make during their campaigns—neither the canons nor the advisory opinions interpreting them definitively address how the various ethical rules apply in the specific context of a confirmation hearing before the U.S. Senate. Further complicating matters is the fact that not all of the canons discussed below apply equally to all nominees. Perhaps for these reasons, neither judicial nominees nor Members of Congress nor commentators have reached a consensus regarding the precise range of responses that are permissible under the relevant canons of judicial conduct. Some nominees have suggested that ethical considerations prohibit judicial candidates from making virtually any statement about any legal issue that could conceivably come before the federal judiciary. Some scholars, by contrast, take the opposite position—that the applicable canons "impose[] surprisingly few restraints on the scope of a nominee's responses." According to this view, "a nominee's answers before the Senate Judiciary Committee[] will violate" the applicable codes of judicial conduct "only where they evince a settled intention to decide certain cases in a certain manner," such as "promising to reach a predetermined outcome" in a future case "irrespective of the arguments of the parties or the discrete facts of the presented case." Still other commentators take the intermediate position that the applicable ethical rules grant judicial nominees the flexibility to "make a personal judgment about how to fulfill the ethical requirements of the role of a judge in responding to questions posed by Senators during the confirmation process"—and, thus, a personal judgment about which types of responses would or would not run afoul of ethical norms. The first relevant set of ethical standards is the Code of Conduct for United States Judges (Code of Conduct) promulgated by the Judicial Conference of the United States (Judicial Conference). The Code of Conduct "prescribes ethical norms for federal judges as a means to preserve the actual and apparent integrity of the federal judiciary." It contains a series of ethical "canons" intended to "provide guidance to [federal] judges and nominees for judicial office" regarding proper judicial behavior. By its terms, the Code of Conduct "applies to" most Article III judges, including "United States circuit judges" and "district judges." The Code of Conduct is therefore especially relevant for nominees to the U.S. Supreme Court, many (though not all) of whom tend to be sitting federal judges. Significantly, the Code of Conduct is not a binding set of laws per se, but is rather a set of "aspirational rules" by which federal judges should strive to abide. "The Code of Conduct contains no enforcement mechanism," and "the Code is not designed or intended as a basis for civil liability or criminal prosecution." "The only remedies for violation of the Code are the institution of a disciplinary complaint" against the offending judge "or a motion to disqualify" the judge from a pending case, and neither of those remedies is granted with great frequency. Furthermore, not every violation of the Code of Conduct warrants discipline or disqualification. Thus, while the Code of Conduct may limit the types of responses a sitting federal judge may provide during his or her confirmation hearing, a nominee who transgresses those limits might not ultimately face any practical consequences as a result of that transgression. It is uncontroversial that the Code of Conduct at least permits a judicial nominee to appear at his or her confirmation hearing for questioning. However, the extent to which the Code of Conduct restricts what the nominee can say during that hearing is less certain. Canon 3(A)(6) of the Code of Conduct provides that, with certain exceptions unrelated to judicial confirmation hearings, a "judge should not make public comment on the merits of a matter pending or impending in any court." This rule is intended to ensure that federal judges "perform the duties of the office fairly [and] impartially." While it is fairly clear that a sitting federal judge who has been nominated for elevation to a higher federal court should generally refrain from directly commenting about the merits of a pending case —especially a case arising from the nominee's own court —it is less clear whether (or to what extent) Canon 3(A)(6) discourages judicial nominees from answering more general questions about their jurisprudential views, controversial legal issues, and the soundness of judicial precedents that litigants may challenge in the future. For one, neither Canon 3(A)(6) nor the cases and commentary interpreting it specify how broadly the term "impending in any court" sweeps. As at least one court has recognized, "[t]here is almost no legal or political issue that is unlikely to come before a judge of an American court" at some point or another. Perhaps for that reason, some nominees have taken the position that "no nominee should express any view on most questions of law" because "virtually all legal issues may eventually be heard by" a federal court. However, at least one scholar has taken the opposite position—that a matter is "impending" within the meaning of Canon 3(A)(6) only if there is "a discrete controversy[] with identifiable facts" and "specific litigants" that "is poised for litigation, though not actually filed." According to this definition, "a general issue" about law or jurisprudence—"even a highly contentious one that might someday reach the Supreme Court—would therefore lack the defining characteristics of an action or proceeding until it was actually embodied in a definable controversy between known parties." This scholar therefore maintains that the Code of Conduct permits judicial nominees to "explain how they would have decided well-known Supreme Court cases" like Roe v. Wade , even though an abortion case may well come before that nominee in the future. This scholar further contends that "pure questions of law, even those likely to be considered by the court, are never 'impending'" for the purposes of Canon 3(A)(6). Apart from whether a nominee's comments would concern an "impending" case, it is also unclear what kinds of responses would amount to a public comment "on the merits." "Canon 3[(A)(6)] does not define 'on the merits,'" and few if any legal opinions provide meaningful guidance regarding what types of comments during a Senate confirmation hearing would impermissibly pertain to the "merits" of a pending or impending case for the purposes of the Code of Conduct. Thus, while it is clear that the Code of Conduct may constrain judicial nominees from answering certain questions during the confirmation process, nominees and commentators have not reached a consensus regarding the scope of those constraints. Another pertinent set of ethical standards is the ABA Model Code of Judicial Conduct (Model Code) promulgated by the American Bar Association (ABA). The Model Code "is intended . . . to provide guidance and assist judges in maintaining the highest standards of judicial and personal conduct, and to provide a basis for regulating their conduct through disciplinary agencies." Thus, like the Code of Conduct described above, the Model Code "establishes standards for the ethical conduct of judges and judicial candidates," including nominees for appointed judgeships. Nevertheless, the extent to which the ethical principles embodied in Model Code constrain federal judicial nominees remains somewhat unclear because, as the name suggests, the Model Code is merely a " model template[] of legal and judicial ethics." In other words, the Model Code is not itself "binding on judges unless it has been adopted in" the state in which the judge is stationed or in which the judicial candidate is seeking office. "The ABA does not enforce the [Model] Code or discipline judges for violating it. Instead, the ABA offers its Code as a model for jurisdictions to adopt, and those that do are responsible for creating a mechanism to enforce it." Although many states have adopted binding standards of judicial conduct that are similar or identical to those set forth in the Model Code, variances between states do exist, with the consequence that the principles discussed in this section of the report will not necessarily apply equally to every judicial nominee. Nevertheless, the Model Code still provides guidance regarding the sorts of judicial conduct that are proper and improper, and judges commonly consult the Model Code to resolve ethical quandaries. Therefore, the following subsections of this report analyze provisions of the Model Code that could discourage federal judicial nominees from answering certain questions at their confirmation hearings. First, the Model Code prohibits judges and judicial candidates from making "pledges, promises, or commitments" regarding "cases, controversies, or issues that are likely to come before the court . . . that are inconsistent with the impartial[] performance of the adjudicative duties of judicial office." As the commentary to the Model Code explains, this prohibition is intended to promote the independence, integrity, and impartiality of the judiciary by insulating the judiciary from political influence: [A] judge plays a role different from that of a legislator or executive branch official. Rather than making decisions based upon the expressed views or preferences of the electorate, a judge makes decisions based upon the law and the facts of every case. Therefore, in furtherance of this interest, judges and judicial candidates must, to the greatest extent possible, be free and appear to be free from political influence and political pressure. Significantly, the commentary to the Model Code squarely states that the prohibition against "pledges, promises, or commitments" applies when a judicial candidate is "communicating directly with an appointing or confirming authority" —a term defined to include "the United States Senate when sitting to confirm or reject presidential nominations of federal judges." As courts interpreting analogous state ethical rules have explained, "[w]hether a statement is a pledge, promise or commitment is objectively [discernible]. It requires affirmative assurance of a particular action. It is a predetermination of the resolution of a case or issue." Thus, "in determining whether a 'pledge, promise, or commitment' has been made, the question is whether 'a reasonable person would believe that the candidate for judicial office has specifically undertaken to reach a particular result.'" The clause thereby "prohibits a candidate from promising that he will not apply or uphold the law." There do not appear to be any judicial cases or advisory opinions clarifying what types of statements qualify as "pledges, promises, and commitments" in the specific context of a confirmation hearing for an appointed federal judgeship. However, because the Model Code purports to apply equally to candidates for appointed and elected judgeships alike, cases analyzing the "pledges, promises, and commitments" clause in the context of campaigns for elected judgeships are illustrative. In particular, cases discussing whether a nominee for an elected judgeship may answer surveys from advocacy groups seeking to discern the nominee's views on controversial legal issues can illuminate whether the "pledges, promises, and commitments" rule might likewise constrain a federal judicial nominee from answering similar questions during his or her Senate confirmation hearing. Advocacy groups commonly submit "questionnaires to candidates for election or retention" for state judgeships asking candidates to state their views on disputed legal questions, such as "whether they agree with Roe v. Wade , which held many forms of abortion legislation unconstitutional." As the commentary to the Model Code explicitly states, "depending upon the wording and format of such questionnaires, candidates' responses might be viewed as pledges, promises, or commitments to perform the adjudicative duties of office other than in an impartial way." Nevertheless, courts generally agree that state ethical canons derived from the Model Code do not categorically prohibit candidates from answering such questions in surveys—so long as those candidates do not pledge to issue specific rulings irrespective of the law or the facts. However, in order to clarify that such responses represent the candidate's personal views rather than a commitment to rule in specific ways, the Model Code admonishes judicial candidates to "acknowledge the overarching judicial obligation to apply and uphold the law, without regard to [the judge's] personal views," when responding to such questionnaires. Thus, by analogy, federal judicial nominees may be able to generally answer questions about their jurisprudential philosophies during their Senate confirmation hearings without running afoul of the "pledges, promises, and commitments" clause, but they should not commit to reaching particular results in specific cases if they are confirmed. To that end, state courts and disciplinary bodies most commonly impose discipline under the "pledges, promises, and commitments" clause when a judicial candidate makes campaign promises to favor or disfavor certain classes of litigants in their rulings—such as pledges to rule against criminal defendants and in favor of children, crime victims, and police officers. The rule that a judicial candidate should not attempt to garner a larger share of the popular vote by promising to mechanically rule in particular ways would appear to apply equally to a judicial nominee seeking to induce Senators to vote in favor of his confirmation. Indeed, the drafting history of the Model Code states the following: Although candidates for appointive judicial office are by definition not submitting themselves to the voting public at large, they are trying to influence a much smaller "electorate" . . . . It is just as improper in these small-scale "campaigns" to make pledges and promises that are inconsistent with the impartial performance of judicial duties as it is in campaign for elected office, with town meetings and television advertisements. The commentary to the Model Code emphasizes that "pledges, promises, or commitments must be contrasted with statements or announcements of personal views on legal, political, or other issues, which are not prohibited" so long as the judicial candidate also "acknowledge[s] the overarching judicial obligation to apply and uphold the law, without regard to his or her personal views." Thus, according to the drafting history of the Model Code, a nominee may "announce[] his or her personal views—even strongly held personal views—on a matter that is likely to come before the court" without violating the "pledges, promises, or commitments" rule as long as that announcement does not "demonstrate[] a closed mind on the subject" or "include[] a pledge or a promise to rule in a particular way if the matter does come before the court." Some courts interpreting state ethical rules derived from the Model Code have therefore concluded that most statements identifying a point of view will not implicate the "pledges or promises" prohibition. The rule precludes only those statements of intention that single out a party or class of litigants for special treatment, be it favorable or unfavorable, or convey that the candidate will behave in a manner inconsistent with the faithful and impartial performance of judicial duties . . . . The foregoing analysis suggests that federal judicial nominees will not violate the "pledges, promises, or commitments" rule if they answer questions regarding their personal opinions on controversial legal or political issues during their confirmation hearing—as long as they do not promise to rule in a particular fashion in future cases presenting those issues. Critically, however, as explained in the following subsection, a comment by a judicial nominee could conceivably qualify as an impermissible "public statement" under the Model Code even if it does not qualify as an impermissible "pledge, promise, or commitment." Moreover, as discussed in greater detail below, even if a public announcement regarding the candidate's jurisprudential views does not itself violate the "pledges, promises, and commitments" clause, successful candidates may nonetheless potentially be disqualified from hearing certain cases after taking the bench if their prior statements would lead a reasonable person to question their impartiality. With certain exceptions not relevant here, the Model Code also prohibits judges and judicial candidates alike from making "any public statement that might reasonably be expected to affect the outcome or impair the fairness of a matter pending[] or impending[] in any court." This prohibition serves to avoid the public perception that a "judge has either pre-judged [a] matter or that the judge has such a strong bias that he cannot render or provide an arena where the jury can render an impartial decision based solely on the evidence." Because this "public statement" rule applies regardless of the forum in which the judge or candidate makes the statement, the Model Code thereby discourages federal judicial nominees from making certain types of public statements during their confirmation hearings. The Model Code defines an "impending" matter to include any "matter that is imminent or expected to occur in the near future." Thus, by its plain terms, the "public statement" prohibition appears to apply to a broad array of legal disputes, including those that have not yet ripened into actual lawsuits. Nonetheless, the rule's scope is not unlimited; the annotations to the Model Code clarify that the term "impending" "does not include 'every possible social or community issue that could come before the court.'" Instead, "impending matters are those that if they continue on their regular course will end up in a court." The annotations to the Model Code also state that "[o]nce a case is fully resolved and no longer pending, a judge is free to engage in any extrajudicial comments" about the case. One might reasonably interpret this annotation to grant federal judicial nominees some leeway to comment about cases previously decided by the Supreme Court or other courts. Nevertheless, statements about a prior case which implicate issues that are likely to recur in a future case could conceivably still fall within the Model Code's prohibitions. Neither the case law nor the annotations to the Model Code provide significant guidance regarding what types of public statements made during the federal confirmation process may impermissibly "affect the outcome or impair the fairness" of a pending or impending matter within the meaning of the rule. However, the annotations to the Model Code do at least suggest that "[j]udges may . . . express their disagreement and criticism about the present state of the law as long as they do not appear to substitute their concept of what the law ought to be for what the law actually is." Public hearings are not the only occasion where a federal judicial nominee could conceivably make statements that implicate ethical norms or rules. In addition to publicly appearing before the Senate for questioning, it is common for federal judicial nominees to meet privately with Members for courtesy visits in advance of their confirmation hearings. Some commentators have expressed concern that judicial candidates may make "commitments on particular issues or cases" during these meetings. As noted above, the Model Code prohibits judicial nominees from pledging to rule in a certain way, whether they do so publicly in their confirmation hearings or privately during courtesy visits with Members. Additionally, however, the Model Code prohibits nominees who are sitting federal or state judges from "mak[ing] any nonpublic statement that might substantially interfere with a fair trial or hearing." There are no cases applying this "nonpublic statement" rule in the federal judicial confirmation context, and cases interpreting the rule tend to arise in contexts that are not factually analogous to the judicial confirmation process. Moreover, the commentary to the Model Code provides little to no guidance regarding how the prohibition on nonpublic statements applies in the judicial confirmation process. Thus, it is unclear whether and to what extent the Model Code constrains nominees' conduct during private meetings with Members beyond prohibiting them from pledging to rule in particular ways if confirmed. Beyond the need to comply with specific ethical norms, another reason that some nominees may avoid answering certain questions during their confirmation hearings is the need to refrain from making public statements that would mandate their disqualification from future cases. Several federal statutes, as well as several canons of judicial conduct, require federal judges to recuse themselves from adjudicating particular cases under specified circumstances. Of particular relevance here, 28 U.S.C. § 455(a)—with limited exceptions —affirmatively requires "any justice, judge, or magistrate judge of the United States" to "disqualify himself in any proceeding in which his impartiality might reasonably be questioned." As explained below, courts have concluded that a judge's extrajudicial statements or comments can sometimes mandate that judge's disqualification from particular cases pursuant to Section 455(a). The "need to avoid frequent disqualification"—and, by extension, a judicial nominee's need to avoid making public statements that would warrant his or her recusal in future cases—is arguably particularly pressing "in the case of Supreme Court justices." Because "the Supreme Court is the ultimate tribunal on matters that are frequently of urgent public importance," some have argued that "[t]he nation is entitled, where possible, to decisions that are made by a full Court." Unlike in the lower courts, where a district or circuit judge from the same court may step in to take the place of a disqualified judge, neither retired Justices of the Supreme Court nor lower court judges may hear a case in a recused Justice's stead. Thus, the disqualification of a Supreme Court Justice from a particular case increases the likelihood that the Court will be evenly divided and thereby unable to create binding precedent for future cases. "The standard for disqualification under § 455(a) is an objective one. The question is whether a reasonable and informed observer would question the judge's impartiality" as a result of the judge's conduct. Thus, "[t]he judge does not have to be subjectively biased or prejudiced" to mandate disqualification under Section 455(a), "so long as he appears to be so." "[D]isqualification from the judge's hearing any further proceedings in the case" is "mandatory for conduct that calls a judge's impartiality into question." Significantly, Section 455(a) "is not intended to give litigants a veto power over sitting judges, or a vehicle for obtaining a judge of their choice." Unjustified recusals "contravene public policy by unduly delaying proceedings, increasing the workload of other judges, and fostering impermissible judge-shopping." As a consequence, in order to avoid undesirable and unwarranted recusals, courts "assume the impartiality of a sitting judge and 'the party seeking disqualification bears the substantial burden of proving otherwise.'" Section 455 is generally "intended to be self-enforcing, meaning that the recusal issue is supposed to be raised first by the judge and not the parties." Nevertheless, Section 455's "standards are not completely self-policing," as "a party [to the litigation] certainly may file a motion" to disqualify a judge if appropriate, and "a federal trial judge's refusal to disqualify himself" is subject to appellate review. However, a federal appellate court will generally overturn a district court judge's decision not to recuse himself only if that "decision was not reasonable and [wa]s unsupported by the record." Section 455(a) is similar to the Code of Conduct discussed above to the extent that both strive to promote impartiality in the federal judiciary. Nonetheless, courts have recognized "that the Code of Judicial Conduct does not overlap perfectly with § 455(a): it is possible to violate the Code without creating an appearance of partiality; likewise, it is possible for a judge to comply with the Code yet still be required to recuse herself." Thus, when assessing whether a federal judge's public statement or comment mandates his or her recusal from a case, courts have considered—but have not treated as dispositive—whether the statement in question violates Canon 3(A)(6) of the Code of Conduct. As some courts have observed, however, there is "little guidance on when public comments" made outside the context of a hearing or bench ruling "create an appearance of partiality for which § 455(a) recusal is the appropriate remedy." In particular, there are very few cases analyzing whether a judge's statement in the confirmation context can mandate that judge's disqualification from particular cases once that judge reaches the bench. Instead, the most common scenario in which a judge's public comments disqualify that judge from adjudicating a case is when the judge makes statements to the media about a case over which he or she is presently presiding. Such situations are only minimally illuminating, however, as a judge who volunteers statements to the media about a case over which he is actively presiding would seem to pose a materially greater risk to judicial integrity than a nominee who simply answers questions in the abstract regarding his or her jurisprudential views during a Senate confirmation hearing. In re African-American Slave Descendants Litigation is one of the few Section 455(a) cases that directly discuss when, if ever, a federal judge must disqualify himself or herself on the basis of statements he or she made during the judicial confirmation process. The plaintiffs in African-American Slave Descendants moved to recuse the district judge assigned to the case, claiming that certain "statements [the judge] made to the United States Senate Judiciary Committee during [his] judicial confirmation" reflected "bias against either the [p]laintiffs or their lawsuit." Critically, however, the challenged statements "merely discussed [the nominee's] general legal views" on issues like "judicial restraint and the constitutional doctrine of separation of powers." The district judge therefore reasoned that his prior comments were "not so case-specific that a reasonable person would believe that they would predetermine his decision in [the plaintiffs' case] some two decades later." The court thus determined that the plaintiffs had failed to "proffer[] any valid reasons for recusal based on [the judge's] statements made in [a] questionnaire submitted to the United States Senate during his judicial confirmation." Under different circumstances, however, historical practice supports the notion that a judge's prior public comments about disputed and controversial legal issues may warrant that judge's recusal from a future case. In 2003, for instance, Justice Scalia "gave a public speech . . . in which he spoke critically of an interpretation of the Establishment Clause that would disallow the 'under God' phrase to remain in the pledge of allegiance." When the Supreme Court later granted certiorari to decide a case presenting exactly that issue, Justice Scalia "announced that he would not sit on the case." Although Justice Scalia "did not explain why he would not participate" in the case, commentators have almost uniformly surmised that Justice Scalia determined that his prior public comments mandated his recusal. The "distinction between a federal judge's expression of personal philosophy . . . and his expression of an opinion on some facet of a particular case which is before him" can potentially explain why recusal was warranted in the pledge of allegiance case but not in African-American Slave Descendants . Several judges have suggested that non-case-specific comments about jurisprudential philosophy are less likely to mandate recusal in future cases than questions about specific cases or issues that the judge may be called upon to adjudicate in the future. As a result, federal judicial nominees may be more inclined to answer general questions about their legal views than case-specific questions they may need to adjudicate if the Senate ultimately confirms them. As explained above, not only are the rules governing judicial ethics largely self-enforcing, they do not always provide clear answers regarding which types of conduct are permissible or impermissible. As a result, judges and judicial candidates often must decide for themselves whether various actions—including answering questions at a confirmation hearing—violate ethical standards. Judicial nominees developing their own standard for responding to Senators' questions may look to historical practice for guidance, customs that are informed by both ethical and constitutional considerations. More generally, historical practice can be an important resource for defining constitutional norms, particularly in interpreting the "scope and exercise" of the "respective powers" of the three branches of government. For instance, during the hearing on whether to confirm then-Associate Justice William Rehnquist to the position of Chief Justice, the nominee initially declined to respond to a question from Senator Arlen Specter asking whether he thought that Congress could strip the Supreme Court of the ability to hear constitutional challenges. Senator Specter pressed the issue, stating that he believed this was an appropriate question on a fundamental issue. Justice Rehnquist responded by saying that he thought that Justice Sandra Day O'Connor, in her own confirmation hearings, "was asked similar questions" and "took much the same position." The Senator stated that he did not believe this was true. The next day, Justice Rehnquist reversed course, stating that while he continued to "have considerable reservations about" answering the question, he would "try to give" an answer in light of the fact that "one of [his] colleagues," Justice O'Connor, "ha[d] felt that [it] was proper" to respond to such questions. The general standard that many nominees invoke when responding to Senate questioning has come to be known as the "Ginsburg Rule." During then-Judge Ruth Bader Ginsburg's confirmation hearing, she stated that she could offer "no hints, no forecasts, [and] no previews" of how she might rule on questions that would come before the Supreme Court. In her opening statement, she warned Senators that Because I am and hope to continue to be a judge, it would be wrong for me to say or to preview in this legislative chamber how I would cast my vote on questions the Supreme Court may be called upon to decide. Were I to rehearse here what I would say and how I would reason on such questions, I would act injudiciously. Judges in our system are bound to decide concrete cases, not abstract issues. Each case comes to court based on particular facts and its decision should turn on those facts and the governing law, stated and explained in light of the particular arguments the parties or their representatives present. A judge sworn to decide impartially can offer no forecasts, no hints, for that would show not only disregard for the specifics of the particular case, it would display disdain for the entire judicial process. Although the refusal to stake out a position on matters that are likely to come before the Court has become known as the Ginsburg Rule, the principle precedes Justice Ginsburg's hearing. Indeed, according to one recent study, the three Supreme Court nominees who most frequently "refuse[d] to answer a question on the ground that answering would create the reality or appear of bias, would interfere with judicial independence, or would be inappropriate for some other, similar reason," all predate Justice Ginsburg's hearing. This section of the report examines nominations to the Supreme Court and describes the norms that have developed surrounding senatorial questioning and nominees' responses. This review focuses on Supreme Court confirmation hearings rather than lower courts, because Supreme Court nominations have traditionally involved a more comprehensive examination of the nominee. This section begins by briefly reviewing the development of the modern judicial confirmation hearing, and then discusses the general constitutional concerns underlying the exchanges between Senators and judicial nominees. Finally, it explores trends in the types of questions that nominees are willing to answer. In considering this final issue, however, it is important to keep in mind that due to the wide variety of senatorial questioning and the inherently personal nature of a candidate's decision to answer a particular question, there will almost always be exceptions to the general tendencies described below. Nominees to the Supreme Court today go through a confirmation hearing before the Senate Judiciary Committee. But this was not always the case: the modern confirmation hearing, with nominees testifying in person, in a public hearing, before the Committee, is generally traced to the 1955 confirmation hearing of Justice John Marshall Harlan II. Since then, the number of questions that Senators have asked each nominee has increased, as the Senate Judiciary Committee has grown in size and as individual Senators ask more questions of the nominees. Scholars and jurists have pointed to the failed confirmation of Judge Robert Bork, in 1987, as a watershed moment in the development of the modern confirmation hearing. President Ronald Reagan nominated Bork to the Supreme Court in 1987. The confirmation hearings were highly contentious, and the nomination was ultimately defeated by a vote of 58-42. Many have argued that Bork's nomination failed because he was too forthcoming or because the Senate improperly politicized the confirmation process, and that, as a result, subsequent nominees have been less willing to express their own views on legal issues. Others have raised, as relevant here, two challenges to this conventional wisdom. First, some have argued that "Bork's nomination did not fail because he answered too many questions; it failed because he gave the wrong answers." Second, as suggested above, nominees have declined to answer certain questions since the advent of the modern confirmation hearing, predating the Bork hearing by more than thirty years: in 1955, then-Judge Harlan "avoided answering a question on civil rights" a mere "two questions into his" testimony. Studies by legal scholars suggest that as a general matter, judicial candidates' candor, or willingness to be fully forthcoming in response to questions, has not significantly decreased over time. But the types of issues discussed at these hearings have changed. According to one study, Senators today are more likely to ask questions about a nominee's judicial views, seeking a nominee's "opinions, thoughts, assessments, interpretations, or predictions." Looking to past confirmation hearings, nominees to the Supreme Court have cited three related but distinct constitutional concerns to justify not answering certain types of questions. First, nominees have voiced concerns about answering specific legal questions outside of the normal adversarial process envisioned by the Constitution. Specifically, Article III of the Constitution provides that judges may hear "cases" and "controversies." The Supreme Court has interpreted this provision to prohibit so-called "advisory opinions" that do not present a true controversy. Instead, judges resolve discrete disputes through the adversarial process. As the Supreme Court explained in one case, standing requirements "tend[] to assure that the legal questions presented to the court will be resolved, not in the rarified atmosphere of a debating society, but in a concrete factual context conducive to a realistic appreciation of the consequences of judicial action." Consequently, nominees to the Supreme Court have been reluctant to respond to hypotheticals posed by Senators, citing concerns about their ability to rule on an issue absent briefing and argument from adversarial parties. The second constitutional concern is grounded in the Constitution's due process guarantees, and specifically in the assurance that cases will be resolved by unbiased judges. An "impartial judge" is a "necessary component of a fair trial." Consequently, nominees have avoided giving answers that would appear to "prejudge" future cases that might come before the Court, so as to avoid depriving future parties of impartial due process of law. The final constitutional justification for declining to respond to certain questions is closely related to this concern about due process, but is grounded in separation-of-powers concerns. As discussed above, Article III is understood to establish an independent judiciary insulated from political pressures. Accordingly, courts have policed attempts by Congress to influence the decision of cases and controversies properly within the purview of the judicial branch, where Congress has "passed the limit which separates the legislative from the judicial power." Citing the importance of judicial independence from the legislative branch, nominees have avoided making any "pledge" or "promise" on how they would rule on a particular case or issue in exchange for confirmation. The constitutional concerns motivating judicial nominees to decline to answer certain questions, however, must be counterbalanced against the constitutional responsibility of the Senate to give advice and consent to presidential nominees. The Senate essentially holds the power to "veto . . . the President's power of appointment." Senators have stated that candidate evasiveness frustrates their ability to perform their constitutional role—and in some cases, have in fact withheld votes because a candidate declined to answer questions. Nominees themselves have acknowledged that Senators may feel obligated to ask questions that the nominees nonetheless believe that they may not answer. Supreme Court nominees have generally declined to stake out positions on issues or factual circumstances that are likely to come before the Court in future cases, resulting in a practice referred to by some as the Ginsburg Rule. This standard has required nominees to assess whether various issues are likely to come before the Court, and nominees may disagree with Senators regarding that likelihood. Nominees have also typically declined to answer questions that do not expressly ask for their views on a particular case, if answering would nonetheless "suggest[]" that the nominee has prejudged a case. Because nominees are unlikely to answer direct questions regarding their views on particular issues, to attempt to determine how a nominee might resolve cases if appointed to the Supreme Court, Senators have instead asked about a nominee's judicial philosophy, prior statements on various issues, views on previously decided cases of the Supreme Court, and views on particular issues relating to the Court's procedures. This section of the report explores each of these categories of questions in more depth, but as a general matter, nominees are more willing to talk about issues or cases that they believe are "settled" or "fundamental." One exchange from the 1971 hearing on then-Assistant Attorney General Rehnquist's confirmation to the Court as an Associate Justice illustrates this dynamic. A Senator noted that the nominee had stated during the hearings that it "would be inappropriate to advance a definition of due process." The Senator contrasted this reluctance with a prior statement of the nominee: in a 1959 law review article, Rehnquist had argued that the Senate should "thoroughly inform[] itself on the judicial philosophy of a Supreme Court nominee," asking, in reference to the 1957 confirmation of Justice Charles Evans Whittaker, "what could have been more important to the Senate than Mr. Justice Whittaker's views on equal protection and due process?" In response, the nominee said that he had not "changed [his] mind that the Senate ought to be interested in a nominee's views," but said that he had gained "an increasing sympathy for the problem of the nominee to respond to very legitimate questions from the Senators without in some way giving the appearance of prejudging issues that might come before him." He was willing to respond to the Senator's question by "advert[ing] to settled doctrines of due process," affirming doctrines that were "so well settled" that a nominee "need have no reservation" about stating them. In response to further questioning, Rehnquist also generally described how he would approach any case presenting an un settled question of due process, stating that he would look to precedent and ratification debates, but would not rule on the basis of his "subjective notions of fairness." Other nominees may stake out clear "lines" regarding the types of questions they are willing to answer and refuse to transgress those lines even with respect to settled issues. Some nominees taking this position have stated concerns about a "slippery slope." Then-Judge Samuel Alito invoked this view to avoid taking a position on a hypothetical that, from his perspective, "seem[ed] perfectly clear." A Senator had asked whether it would be constitutional for the Senate to require sixty votes, rather than a majority, to confirm a nominee to the Supreme Court. Alito responded by saying that he did not think that he should answer "constitutional questions like that." The Senator pressed him, asking whether it would be constitutional for the Senate to allow a majority vote rather than a two-thirds vote for impeachment. Judge Alito at first seemed about to answer the question, saying, "there are certain questions that seem perfectly clear, and I guess there is no harm in answering," but ultimately declined to do so, saying that this was a "slippery slope," and if he "start[ed] answering the easy questions," he would then "be sliding down the ski run and into the hard questions." Then-Judge Ginsburg made a similar statement in her confirmation hearing when she declined to discuss a certain case involving an executive branch policy that she believed might be adopted again by a future Administration. She said: I sense that I am in the position of a skier at the top of that hill, because you are asking me how I would have voted in Rust v. Sullivan . . . . Another member of this committee would like to know how I might vote in that case or another one. I have resisted descending that slope, because once you ask me about this case, then you will ask me about another case that is over and done, and another case. So I believe I must draw the line at the cases I have decided. To take another example, then-Judge Antonin Scalia refused to state his opinion on any prior Supreme Court decisions, declining even to discuss Marbury v. Madison , the foundational case establishing the power of courts to review laws under the Constitution. He acknowledged that other nominees had "tried to answer some questions and not answered the other," but concluded that he would not take that path. He reasoned that if his answer would be obvious—as if he were to endorse the holdings of Marbury v. Madison —then the Senators "do not need an answer, because your judgment of my record and my reasonableness and my moderation will lead you to conclude, heck, it is so obvious, anybody that we think is not a nutty-nutty would have to come out that way." On the other hand, if his views on an issue were not obvious, then he believed that his announcement of those views would "really prejudice[e] future litigants." Nominees seem most willing to discuss their general philosophies of law, including their approaches to constitutional and statutory interpretation. Thus, for example, then-Judge Clarence Thomas was asked repeatedly whether he believed in natural law as a principle of constitutional interpretation, to which he responded in the negative. Similarly, then-Judge Neil Gorsuch was asked to explain his commitment to originalism. And in response to a line of questioning that asked whether she believed in the idea of a living Constitution, then-Solicitor General Elena Kagan responded by explaining that while she believed the Constitution's general principles may be applied to new circumstances in new ways, she did not "like what people associate" with the term "living Constitution." Prior Supreme Court nominees have also given examples of jurists whom they admire —although then-Judge Ginsburg, at least, "stay[ed] away from the living" when naming her legal role models. Judicial candidates may also discuss their general approach to evaluating precedent and stare decisis, the doctrine governing when courts should adhere to previously decided cases. Senators will sometimes ask for a nominee's views on stare decisis as a way of gauging whether he or she would be willing to overturn certain, often controversial, Supreme Court cases. For example, Senator Arlen Specter engaged in a lengthy discussion with then-Judge John Roberts about stare decisis in the context of the two primary Supreme Court cases establishing a right to an abortion. The nominee spoke generally about the principles of stare decisis, going so far as to say that certain factors in the analysis were "critically important," but repeatedly declined to say how he would apply principles in a particular case—or whether he agreed or disagreed with those prior Supreme Court cases. Supreme Court nominees are generally willing to discuss their own prior work, including both prior judicial opinions and extra-judicial statements. If nominees have written about a particular issue, they may explain their position on that topic even if they otherwise would have declined to stake out positions on issues that are likely to come before the Court. This practice may also account for some variance in the topics that different nominees are willing to discuss: in his hearing, then-Judge John Roberts explained that he was unwilling to comment on whether particular decisions were correctly decided, notwithstanding the fact that Justice Ginsburg in her confirmation hearing had discussed some particular issues—namely, her view of Roe v. Wade —because she, unlike Judge Roberts, "had written extensively on that subject and she thought that her writings were fair game for discussion." Sometimes nominees use the hearing to disclaim prior statements or explain that they would not adhere to a particular view as a Supreme Court Justice. For example, Chief Justice Roberts was asked in his confirmation hearing about certain memoranda he wrote while working in the Reagan Administration expressing the view "that bills stripping the Court's jurisdiction were constitutionally permissible." The nominee said that if he "were to look at the question today," he did not "know where [he] would come out." He later added, "I certainly wouldn't write everything today as I wrote it back then, but I don't think any of us would do things or write things today as we did when we were 25 and had all the answers." At times, nominees have explained that they took certain positions only because they were acting as an advocate, distinguishing that role from the role of a judge. Other times, however, nominees have adhered to and explained their prior non-judicial statements. Notwithstanding the fact that nominees will usually discuss their previously expressed views, most Supreme Court candidates are reluctant to discuss their personal opinions on various issues. In two relatively recent hearings, when then-Judge Gorsuch was asked about his personal views on marriage equality and when then-Solicitor General Kagan was asked whether she personally believed that individuals possess a fundamental right to bear arms, both nominees declined to answer the questions and instead stated only that they accepted prior Supreme Court decisions on these issues. This approach likely stems from the modern belief, frequently echoed by nominees, that a judge's personal views should not provide a basis for deciding a case . Senators have asked generally whether nominees' personal or political views will influence their decisions in particular cases, including whether nominees' religious faith would influence their decisions. However, nominees' personal lives have, at times, became a central subject in their confirmation hearings. Perhaps the most obvious example comes from Justice Thomas's confirmation hearings, which were extended to examine sexual harassment allegations. Justice Anthony Kennedy was questioned at length regarding his memberships in clubs that restricted membership to white males—and on what that membership implied about his views on discrimination more generally. Justice Sonia Sotomayor was questioned about her membership on the board of the Puerto Rican Legal Defense Fund and her involvement with the various cases that the group supported. Senators generally recognize that they should not ask nominees about pending cases, but will sometimes ask nominees about previously decided cases. Senators may hope that nominees' views on past cases reveal their beliefs on issues that are still contested. Nominees' willingness to respond to these types of questions varies widely. As mentioned above, then-Judge Scalia refused as a general rule to give his opinion on any previously decided cases of the Supreme Court, going so far as to refuse to state whether he agreed with Marbury v. Madison , a case that he nonetheless acknowledged in the hearing as "fundamental" and one he had previously cited in his capacity as a federal appellate judge. Other Supreme Court nominees have felt free to agree with Marbury v. Madison . As with other issues, nominees' willingness to give their opinions on whether a prior case was correctly decided may turn on how likely they believe the issue presented in that case is to recur. Thus, a nominee might decline to discuss a case that presents historically unique factual circumstances if they believe that the legal issues or principles in that case may come again before the Supreme Court. For example, then-Solicitor General Kagan was asked for her "view of" Bush v. Gore , the decision of the Supreme Court that reversed the Florida Supreme Court's order requiring a recount of ballots in the 2000 presidential election. Kagan agreed that the particular circumstances of that case would "never come before the Court again," but said that "the question of when the Court should get involved in election contests in disputed elections is . . . one of some magnitude that might well come before the Court again." She said that if that were to occur, she would consider such a case "in an appropriate way." The correctness or incorrectness of some cases appears to be so well established—at least in the minds of some nominees—that some Supreme Court candidates are willing to affirm or disavow those cases without discussing how likely an issue is to recur. Such cases include not only Marbury v. Madison , but also cases in the "anti-canon," such as Dred Scott v. Sanford , Plessy v. Ferguson , and Korematsu v. United States , that almost all modern lawyers agree were wrongly decided. Of course, if a case is considered to be well established as part of either the canon or the anti-canon, prevailing views about that case are unlikely to be challenged, indicating that even if they do not expressly say so, nominees may be willing to comment on these settled cases because challenges are unlikely to arise. Because nominees are more likely to discuss cases that are generally considered to be well-established law, nominees' willingness to embrace certain cases may vary over time. Questions about the Supreme Court's decision in Brown v. Board of Education , the 1954 case that functionally overturned Plessy v. Ferguson and announced that "separate educational facilities" for children of different races "are inherently unequal," provide one example of how attitudes may shift over time. In the 1955 confirmation hearing of Justice Harlan and the 1959 hearing for Justice Potter Stewart, some Senators announced their disagreement with the Court's decision and attempted to discern whether these nominees agreed with the Court's result or reasoning. The nominees avoided giving their opinions on the case. Over the following decades, Senators continued to hold up Brown as an example of improper judicial legislating, pushing nominees to answer questions regarding the proper role of judges. But as attitudes towards Brown shifted, so did its treatment in confirmation hearings. By Chief Justice Rehnquist's 1971 hearing for confirmation to the Court, he was willing to say that Brown was "the established constitutional law of the land." In response to a question about whether Brown represented "lawmaking," he stated that "if nine Justices . . . all unanimously decide that the Constitution requires a particular result . . . . that is not lawmaking. It is interpretation of the Constitution just as was contemplated by John Marshall in Marbury versus Madison ." In her 1981 hearing, then-Judge O'Connor was asked whether she would characterize Brown "as judicial activism," and if so, whether that was right. She responded by noting that "[s]ome have characterized" Brown "as judicial activism," but observed that the decision was unanimous and stated that she assumed the Court had been "exercising its constitutional function to determine the meaning . . . of the Constitution." But she later declined to state whether she agreed with the statement in Justice John Marshall Harlan's dissenting opinion in Plessy characterizing the Constitution as colorblind, noting that "litigation in the area of affirmative action is far from resolved." Since then, Supreme Court nominees have more readily endorsed Brown . As mentioned, if a prior case is not considered settled law and if a nominee thinks issues from that case are likely to recur, the nominee may be unwilling to discuss the case at all. Alternatively, a nominee may merely acknowledge the existence of the case. Even then-Judge Scalia, who generally declined to express his views on cases, was willing to say that certain cases decided by the Supreme Court were "an accepted part of current law." For example, when Justice Kagan was pressed for her views on District of Columbia v. Heller , in which the Supreme Court recognized an individual right to keep and carry arms, Justice Kagan merely described the holding of the case and said that it was "settled law." At other times, nominees may be willing to discuss the general framework they would apply to analyze a given issue. Finally, nominees are sometimes asked questions relating to judicial procedure, and are often willing to speak generally on these matters. To take one recurring issue, Supreme Court nominees will generally offer their views on whether they support filming Supreme Court proceedings. Then-Judge Roberts and then-Judge Scalia both responded to questions regarding whether they believed the Supreme Court was overworked. Supreme Court candidates have also discussed the issues of judicial misconduct. In this vein, a number of nominees have been questioned about the process to impeach judges. For example, Justice Kennedy, who had previously opposed legislation proposing reforms to the impeachment process, explained his position during his hearing. And then-Judge O'Connor spoke about her experience as a state court judge subject to different processes. Moreover, then-Judge Scalia stated that he believed the impeachment process was appropriately a "cumbersome process." Conversely, then-Judge Ginsburg largely demurred, stating that she believed "there may be a real conflict of interest, possibility of bias and prejudice on my part" in responding to questions about the impeachment process. Finally, Senators have sometimes asked Supreme Court nominees whether they would recuse themselves under certain circumstances. Then-Solicitor General Kagan committed to recusing herself from any case in which she had been "counsel of record" and suggested that she might recuse herself "in any case in which [she had] played any kind of substantial role in the process." Similarly, then-Judge Sotomayor said that she would recuse herself from consideration of any decisions she had authored as a federal appellate judge. In his hearing, then-Judge Roberts stated that the fact that he had previously taken one position on an issue as an advocate would not require him to recuse himself in any future cases presenting the same issue. At other times, nominees have discussed cases in which they had previously recused themselves as lower court judges or spoken more generally about their views on recusal. In sum, the applicable codes of judicial conduct and historical practice provide some guidance regarding what sorts of questions a nominee may permissibly answer during his confirmation hearing. Scholars, nominees, and even Members of Congress generally agree that under ethical rules as well as norms like the Ginsburg Rule a nominee should refrain from pledging to uphold or overturn particular precedents or to decide cases in certain ways. Nominees likely need to avoid making statements that could mandate their recusal from future cases under the federal judicial disqualification statute or under applicable canons of judicial ethics. Beyond that, however, the boundaries between permissible and impermissible responses are murky—and still contested during confirmation hearings. Historical practice suggests that nominees will not only avoid clear commitments to resolve future cases in certain ways, but in many circumstances, will avoid even giving "hints" about how they may view potential disputes. General questions relating to the nominee's jurisprudential philosophy are more likely to elicit forthcoming responses than specific questions about how the nominee intends to rule in particular categories of cases. However, nominees have been more likely to speak about particular legal issues if they have previously commented on that issue, such as in judicial opinions or extra-judicial statements. Ultimately, however, there are few available remedies when a nominee refuses to answer a particular question. Although a Senator may vote against a nominee who is not sufficiently forthcoming, as a matter of historical practice the Senate has rarely viewed lack of candor during confirmation hearings as disqualifying, and it does not appear that the Senate has ever rejected a Supreme Court nominee solely on the basis of evasiveness. | The U.S. Constitution vests the Senate with the role of providing "advice" and affording or withholding "consent" when a President nominates a candidate to be an Article III judge—that is, a federal judge entitled to life tenure, such as a Supreme Court Justice. To carry out this "advice and consent" role, the Senate typically holds a hearing at which Members question the nominee. After conducting this hearing, the Senate generally either "consents" to the nomination by voting to confirm the nominee or instead rejects the nominee. Notably, many prior judicial nominees have refrained from answering certain questions during their confirmation hearings on the ground that responding to those questions would contravene norms of judicial ethics or the Constitution. Various "canons" of judicial conduct—that is, self-enforcing aspirational norms intended to promote the independence and integrity of the judiciary—may potentially discourage nominees from fully answering certain questions that Senators may pose to them in the confirmation context. However, although these canons squarely prohibit some forms of conduct during the judicial confirmation process—such as pledging to reach specified results in future cases if confirmed—it is less clear whether or to what extent the canons constrain judges from providing Senators with more general information regarding their jurisprudential views. As a result, disagreement exists regarding the extent to which applicable ethical rules prohibit nominees from answering certain questions. Beyond the judicial ethics rules, broader constitutional values, such as due process and the separation of powers, have informed the Senate's questioning of judicial nominees. As a result, historical practice can help illuminate which questions a judicial nominee may or should refuse to answer during his or her confirmation. Recent Supreme Court nominees, for instance, have invoked the so-called "Ginsburg Rule" to decline to discuss any cases that are currently pending before the Court or any issues that are likely to come before the Court. Senators and nominees have disagreed about whether any given response would improperly prejudge an issue that is likely to be contested at the Supreme Court. Although nominees have reached varied conclusions regarding which responses are permissible or impermissible, nominees have commonly answered general questions regarding their judicial philosophy, their prior statements, and judicial procedure. Nominees have been more hesitant, however, to answer specific questions about prior Supreme Court precedent, especially cases presenting issues that are likely to recur in the future. Ultimately, however, there are few available remedies when a nominee refuses to answer a particular question. Although a Senator may vote against a nominee who is not sufficiently forthcoming, as a matter of historical practice the Senate has rarely viewed lack of candor during confirmation hearings as disqualifying, and it does not appear that the Senate has ever rejected a Supreme Court nominee solely on the basis of evasiveness. |
Although a number of U.S. agencies and departments implement global health programs that might improve child survival and maternal health (CS/MH), this report focuses only on CS/MH programs conducted by the U.S. Agency for International Development (USAID) from FY2001 to FY2008. This report also discusses the interconnected nature of USAID's global health programs, such as how advancements made in addressing malaria might improve maternal and child survival. In the United Nations Children's Fund (UNICEF) report The State of the World ' s Children 2008: Child Survival , UNICEF Executive Director Ann Veneman celebrated the decline of total annual deaths among children under age five. In 2006, an estimated 9.7 million children in that age range died, representing a 60% drop in under-five mortality since 1960. Despite the decrease, Ms. Veneman asserted that a critical number of daily deaths among children under five remains high; some 26,000 die each day. Most studies that measure child mortality focus on deaths that occur before age five because 90% of childhood deaths occur during this time, while 37% occur during the neonatal period (the first 28 days), amounting to about 4 million annual newborn deaths. The majority of child deaths occur in developing countries, and almost half of them in Africa. On average, nearly 90% of all child deaths are caused by neonatal infections and five infectious diseases: acute respiratory infections (mostly pneumonia), diarrhea, malaria, measles and HIV/AIDS ( Table 1 ). According to UNICEF, undernutrition is the underlying cause of up to half of these deaths. Some health experts assert that maternal and child health are particularly important to monitor, because their mortality rates serve as a barometer for overall health conditions. Supporters of this idea often use the Millennium Development Goals (MDGs) listed in Table 2 to demonstrate the interconnected nature of health and development and to gauge improvements in child and maternal health ( Table 3 ). MDGs 4 and 5 call for a two-thirds reduction in child and maternal mortality. The ability to reach those goals, however, is affected by progress in other MDGs. For example, countries with significant undernourished populations (MDG 1) that lack sufficient access to clean water (MDG 7) tend to have higher maternal and child mortality rates (MDGs 4 and 5); undernourished women and children are also more likely to be impoverished (MDG 1) and are more susceptible to infectious diseases, such as HIV/AIDS, TB, and malaria (MDG 6). UNICEF found that 62 countries were making no progress towards the Millennium Development Goal on child survival; nearly 75% of these were in Africa. UNICEF asserts that child survival and maternal health are inextricably linked. More than 500,000 women die each year due to pregnancy-related causes, and an additional 15-20 million more suffer debilitating long-term effects, such as obstetric fistula (discussed below). The vast majority of women who die during or shortly after labor live in developing countries where maternal mortality rates are significantly higher than in industrialized nations ( Table 4 ). The United Nations Food and Agriculture Organization (FAO) maintains that almost all of these deaths could be prevented if women in developing countries had access to adequate diets, safe water and sanitation facilities, basic literacy, and health services during pregnancy and childbirth. UNICEF estimates that 20% of all maternal deaths are linked to undernutrition and that about 75% of maternal deaths are caused by obstetric complications including hemorrhage, sepsis, hypertensive disorders (mostly eclampsia), prolonged or obstructed labor, and unsafe abortions. Maternal mortality and morbidity rates are generally higher for mothers younger than 20 years who typically have more pregnancy and delivery complications, such as toxemia, anemia, premature delivery, prolonged labor, and cervical trauma, and are at higher risk of delivering low birth weight babies. Pregnancy-related complications are the leading cause of death among 15- to-19-year-olds around the world, and their babies have higher morbidity and mortality rates. The United Nations estimates that adolescents give birth to 15 million infants each year. Girls aged between 15 and 19 years are twice as likely to die from childbirth as women in their twenties, and those younger than 15 years are five times as likely to die. A survey conducted in Mali indicated that the maternal mortality rate for girls aged between 15 and 19 years was 178 per 100,000 live births and 32 per 100,000 for women aged between 20 and 34 years. Causes of maternal death vary significantly among regions. Data collected from 1990 through 2006 indicate that hemorrhage caused about 34% and 31% of maternal deaths in Africa and Asia, respectively. In industrialized nations and Latin America and the Caribbean, hemorrhage caused an estimated 13% and 21% of maternal deaths, respectively ( Table 5 ). The United Nations has found that regions with the lowest proportions of skilled health attendants at birth also have the highest maternal mortality rates. In sub-Saharan Africa, 43% of women gave birth with the assistance of a skilled birth attendant, 65% in south Asia, and 99% in industrialized nations. One in every 22 women in sub-Saharan Africa will likely die from pregnancy-related causes, as will one in every 59 Asian women. In industrialized nations, meanwhile, one in every 8,000 woman faces the probability of dying from pregnancy-related causes. UNICEF has found that health systems in many countries do not have the capacity to reduce mortality nationwide. Of the 68 priority countries that account for 97% of all maternal and child deaths, 54 (80%) have health workforce densities below the critical threshold (2.5 health workers per 1,000 people) for significantly improving their health conditions and reaching the health-related MDGs ( Table 6 ). South Africa and Swaziland are the only two sub-Saharan African countries among the 68 priority countries that have reached the minimum standard. Child and maternal survival rates are higher in areas with ample numbers of health workers to administer immunizations, easy access to clean water, controlled mosquito populations, and sufficient access to nutritious food. While the greatest shortage of health care workers in absolute terms is in southeast Asia (mostly in Bangladesh, India, and Indonesia), sub-Saharan Africa suffers from the greatest proportional shortage of health care workers in the world. WHO estimates that there are 57 countries with critical shortages of health care workers, of which 36 are in Africa and none in industrialized nations. Globally, WHO estimates that an additional 4.3 million health workers are needed, and that on average, countries across Africa would need to increase their number of health workers by about 140% in order to meet the minimum threshold of 2.5 health care professionals per 1,000 people. The U.S. Agency for International Development is the lead U.S. agency responsible for improving child survival around the world. According to USAID, research that it supported during the 1970s and 1980s has been used to develop interventions and technologies now used to save millions of children. Over the past 20 years, USAID has committed more than $6 billion in support of global child survival efforts. About half of those funds were committed from FY2001-FY2008, when Congress appropriated $3.4 billion to child survival and maternal health efforts. Recognizing that six health problems (acute respiratory infections, diarrhea, malaria, HIV/AIDS, measles, neonatal complications) cause about 90% of all child deaths in developing countries and that undernutrition contributes to half of these, USAID allocates a significant proportion of its child survival funds to addressing these health issues. This section summarizes information USAID has presented about its efforts to improve child and maternal health. The United Nations Food and Agriculture Organization (FAO) argues that the vast majority of the nearly 10 million children who die each year "would not die if their bodies and immune systems had not been weakened by hunger and malnutrition." Ten WHO-supported community-based studies conducted from 1991 through 2001 of children under age five found that children who are mildly underweight are about twice as likely to die of infectious diseases as children who are better nourished; for those who are moderately to severely underweight, the risk of death is five to eight times higher. The studies also indicated that 45% of children who died after contracting measles were malnourished, as were more than 60% of children who died after the onset of severe diarrhea. Good nutrition can improve child survival, health, and cognitive development, while undernutrition impairs the immune system. Children with impaired immune systems disproportionately suffer from common childhood illnesses such as diarrhea, pneumonia, and measles. Undernourished children have also been found to be more susceptible to other infectious diseases such as malaria and tuberculosis. This section discusses USAID's nutrition programs, which focus on micronutrient supplementation and fortification and infant and young child feeding (IYCF). "USAID-supported micronutrient programs add vital immune-building micronutrients including zinc, vitamin A, iron, and iodine to processed foods such as rice and sugar." USAID funds are also used to expand research on biofortified crops, which could improve the micronutrient content of basic foods, such as maize enhanced with vitamin A, iron, and zinc; beans enhanced with iron and zinc; and sweet potatoes enhanced with vitamin A. Micronutrient supplementation and other USAID nutrition programs are integrated with other interventions, including safe water, hygiene and sanitation. USAID estimates that more than "two-thirds of malnutrition-related infant and child deaths are associated with poor feeding practices during the first two years of life." According to USAID, "less than one third of infants in most countries are exclusively breastfed during the first six months of life." Early cessation of breastfeeding and introducing foods either too early or too late expose infants to disease. USAID contends that the foods that are introduced are often nutritionally inadequate and unsafe. One USAID-supported study showed that "exclusively breastfed infants have 2.5 times fewer episodes of childhood diseases, are four times less likely to die of acute respiratory infection, and are up to 25 times less likely to die of diarrheal diseases." The study also indicated that continued breastfeeding during acute episodes of diarrhea protects infants from loss of energy and protein during illness. In communities affected by HIV/AIDS, USAID works with its implementation partners to integrate safe infant feeding practices with programs that prevent mother-to-child HIV transmission (PMTCT). USAID spends about $30 million each year on nutrition programs, which include Vitamin A, iodine, food fortification, anemia packages, and zinc. UNICEF asserts that pneumonia can be largely prevented if indoor pollution is minimized and if children are adequately nourished, exclusively breastfed, and receive Vitamin A and zinc supplements (as necessary). Children should also receive the full series of immunizations against infections that directly cause pneumonia, such as Haemophilus influenzae type b (Hib), and those that can lead to pneumonia as a complication (e.g., pertussis). International health organizations also seek to expand access to vaccines that protect against Streptococcus pneumoniae, the most common cause of severe pneumonia among children in the developing world. USAID reports that since 2002, it has supported the administration of immunizations to almost 500 million children and the treatment of more than 375 million cases of child pneumonia. In the mid-1990s, UNICEF and WHO developed the Integrated Management of Childhood Illness (IMCI) with USAID support. The strategy integrates interventions for diarrhea, acute respiratory infections, malnutrition, and malaria. In recent years, USAID has expanded the IMCI strategy. Approximately 40% of the world's population, mostly those living in the world's poorest countries, are at risk of malaria. Every year, more than 500 million people become severely ill with malaria. Most cases, and most deaths, are in sub-Saharan Africa, though Asia, Latin America, the Middle East, and parts of Europe are also affected. The disease is particularly deadly for children; at least 1 million infants and children under age five in sub-Saharan Africa die each year from malaria—approximately one every 30 seconds. USAID has been engaged in malaria eradication efforts since the 1950s. In 2005, the President proposed the President's Malaria Initiative (PMI), an interagency effort that aims to increase support for U.S. international malaria programs by more than $1.2 billion from FY2006 through FY2010 in 15 targeted countries and reduce the number of malaria deaths by 50% in those countries by 2010. USAID coordinates all PMI activities, which are implemented in partnership with the Centers for Disease Control and Prevention (CDC) of the Department of Health and Human Services (HHS). Advancements made under the initiative are not reported by agency, thus it is not possible to distinguish USAID's contributions to U.S. anti-malarial programs. In January 2008, USAID reported that in its first year, PMI reached more than 6 million people and within two years, reached more than 25 million. Activities included indoor residual spraying in 10 PMI countries, benefitting more than 17 million people; procuring and distributing more than 4.7 million long lasting insecticide-treated nets (LLITNs) and retreating more than 1.1 million insecticide-treated nets (ITNs); procuring 12.6 million malarial treatments, including the distribution of 6.2 million; training more than 28,000 health workers in the correct use of malarial treatment; and purchasing more than 4 million anti-malarial tablets to reduce the impact of malaria in pregnancy. HIV/AIDS is preventable and treatable, but not curable. Most of the 420,000 children who acquired HIV in 2007 contracted the virus from their HIV-infected mothers during pregnancy, birth, or breastfeeding. With successful interventions the risk of mother-to-child HIV transmission can be reduced to 2%. About 33% of HIV-positive pregnant women in most resource-limited countries—where the burden of HIV is highest—receive drugs that can prevent mother-to-child HIV transmission (PMTCT). Nevirapine, a drug widely used to prevent mother-to-child HIV transmission, costs between $0.29 and $0.40 per dose. A Nevirapine tablet is taken by the mother at the onset of labor and Nevirapine syrup is given to the infant within 72 hours of birth. WHO asserts that it is critical that children are diagnosed early and provided with antiretroviral therapy (ART) as early as possible, as the course of HIV infection is faster and more aggressive in children. The cost of ART is significantly higher for children than for adults. UNAIDS estimates that an annual supply of generic ARTs costs about $260 per child, while the same regimen for adults costs about $183. Fixed-dosed treatments, in which two or three different drugs are combined in a single pill, have proved to be most effective, though they are more expensive for children. In 2005, a one-year supply of a standard three-drug regimen for an adult costs an average of $148 in low-income countries, but the regimen for children cost $2,000 per child and $800 for a generic version. The Clinton Foundation, however, was able to negotiate with pharmaceutical companies to charge lower prices for pediatric ARTs in its programs—about $0.16 per day or $60 per year. Health experts point out that ART is not the only treatment that can be used to reduce child mortality among HIV-positive children. Treatment of opportunistic infections, such as pneumonia, can also improve child survival among HIV-positive children. Cotrimoxazole—a drug used to treat pneumonia—has been found to reduce mortality in children with HIV/AIDS by about 30% and costs about $0.03 per day or $10 per year. It is estimated that only 10% of the 4 million children who need the drug are receiving it. USAID reports that since 1986, it has spent $6 billion on HIV/AIDS interventions in more than 100 countries. Since the inception of the President's Emergency Plan for AIDS Relief (PEPFAR), USAID stopped reporting its projects' outcomes. Instead all participating agency and department outcomes are reported as PEPFAR advancements. Through September 2007, PEPFAR implementing agencies and departments have provided more than $289.2 million to initiatives that have offered care and support to some 2.7 million orphans and vulnerable children (OVC). PEPFAR's food and nutrition programs reached some 332,000 OVC, 50,000 pregnant or lactating women, and an additional 20,000 severely malnourished individuals who were on ART. PEPFAR's child-focus programs support training for those who care for OVC, promote the use of time- and labor-saving technologies, support income-generating activities, and connect children and families to essential health care and other basic social services. The Administration asserts that support for people living with HIV/AIDS who receive treatment, care, and support services should also be considered when analyzing support for children, as HIV-infected adults receiving support are better able to provide a nurturing, protective environment for their children. Through September 2007, PEPFAR has committed some $1.5 billion for programs that offer care and support to people living with HIV/AIDS. In FY2006 and FY2007, PEPFAR partnerships dedicated nearly $191.5 million to pediatric treatment for some 85,900 children and from FY2004 through FY2007, PEPFAR-implementing agencies supported PMTCT services for women during more than 10 million pregnancies. PMTCT services included the provision of ART to HIV-positive women in over 827,000 pregnancies, preventing an estimated 157,000 infant HIV infections. Through research, UNICEF, WHO, and USAID found that diarrhea could be prevented and treated with Oral Rehydration Salts (ORS) and fluids, breastfeeding, continued feeding, and selective use of antibiotics and zinc supplementation for 10-14 days. USAID reports that since 2002, it has provided more than $1.5 billion in support of the treatment of almost 5 billion episodes of child diarrhea with lifesaving ORS. USAID also controls diarrheal disease by training health workers, promoting breastfeeding, applying social marketing and modern communication techniques, and expanding community capacity to administer ORS. USAID's anti-diarrhea programs also focus on hygiene, which plays a significant role in the transmission of diarrhea. USAID estimates that handwashing with soap can decrease diarrhea prevalence among children by 42% to 46%. While soap is found in most households, USAID contends that handwashing with soap is not common in poorer communities and that soap is usually reserved for bathing or washing clothes and dishes. In one USAID-supported study, 1% of mothers in Burkina Faso used soap to wash their hands after using the toilet and 18% after cleaning a child's bottom. In slums in Lucknow, India, 13% of mothers were observed using soap after cleaning up a child and 20% after going outside to defecate. USAID supports public-private partnerships that promote handwashing with soap and other hygienic practices, such as safe storage and treatment of water, which can reduce diarrhea prevalence by 30% to 40%. WHO asserts that measles immunization is one of the most cost-effective public health interventions available for preventing childhood deaths and that it carries the highest health return for the money spent, saving more lives per unit cost than any other health intervention. The vaccine, injection equipment and operational costs amount to less than $1 per dose. The vaccine, which has been available for more than 40 years, costs about $0.33 per bundled dose (vaccine plus safe injection equipment) if bought through UNICEF. In many countries where the public health burden of rubella and/or mumps is considered to be important, the measles vaccine is often incorporated with rubella and/or mumps vaccines as a combined, live-attenuated (weakened) measles-rubella (MR) or measles-mumps-rubella (MMR) vaccine. If bought through UNICEF, a MR vaccine costs about $0.65 per bundled dose, and MMR costs about $1.04 to $1.50 per bundled dose. Immunization coverage rates for measles vaccination vary significantly by region. WHO and UNICEF estimate that in 2006 about 80% of all children were vaccinated, up from 72% in 2000. From 2000 to 2006, an estimated 478 million children from nine months to 14 years of age received measles vaccinations through supplementary immunization activities in 46 out of the 47 priority countries with the highest burden of measles. These accelerated activities have resulted in a significant reduction in global measles deaths. Overall, global measles mortality decreased by 68% between 2000 and 2006. The largest gains occurred in Africa, where measles cases and deaths fell by 91%. USAID does not indicate how it specifically addresses measles, though it asserts that immunization programs are one of its greatest public health success stories. USAID-supported immunization programs "train health workers; strengthen planning capacity; and improve the quality of service delivery and vaccine administration" in more than 100 countries. USAID also partners with others, such as Global Alliance for Vaccines and Immunization (GAVI), the Vaccine Fund, and the Bill and Melinda Gates Foundation to bolster countries' capacity to administer vaccines. USAID's maternal health programs seek to ensure healthy pregnancy outcomes in low-resource environments through a wide range of interventions, including nutritional supplementation for mothers, treatment for parasitic worms that disrupt nutrient absorption, tetanus toxoid immunizations, prevention of mother-to-child HIV transmission, intermittent treatment for malaria, and detection and treatment of syphilis. USAID advocates that families plan for all births to be attended by a skilled birth attendant and that communities develop contingency plans for accessing emergency obstetric care for mothers who deliver at home—the preferred method in many cultures. USAID trains birth attendants to avert infant deaths by facilitating infant breathing, resuscitating, and caring for the infant in the event of birth asphyxia; ensuring hygienic cord and eye care; and encouraging immediate breastfeeding. Community-based maternal health interventions include teaching families and communities to recognize birth complications and where to bring a mother for emergency care, identifying transportation to a hospital ahead of time, identifying a blood donor for the mother, and creating a savings plan for health care costs. This section discusses how USAID reports it addresses key causes of maternal mortality. USAID estimates that 32% of all maternal deaths are caused by postpartum hemorrhage. Low-cost interventions can prevent and treat the condition. In order to avert postpartum hemorrhage deaths, USAID urges communities to ensure that all mothers give birth in the presence of a trained health care practitioner who can administer drugs that slow or stop the bleeding and apply other life-saving techniques to prevent and treat postpartum hemorrhage. USAID-supported programs train birth attendants to actively manage the third stage of labor, which includes controlled traction of the umbilical cord, uterine massage, and the use of oxytocin—a drug that slows the flow of blood. USAID reports that this intervention can prevent 60% of hemorrhages. On average, sepsis or other infections cause nearly 10% of all maternal deaths in Africa, Asia, Latin America, and the Caribbean. A number of factors contribute to this problem. A USAID-supported study identified unhygienic delivery practices as a key cause of the affliction. Common practices such as introducing unclean hands, local herbs, or cloths inside the vagina during or after delivery and delivering in unclean conditions all contribute to sepsis. In addition, untrained delivery attendants might also use unclean instruments to cut the umbilical cord. USAID supports efforts to distribute delivery kits and ensure the presence of a trained delivery attendant at each birth to prevent mothers and babies from contracting sepsis. In addition, USAID trains birth attendants to identify signs of infection and to use antibiotics and other measures, where necessary. Hypertensive disorders cause about 9% of maternal deaths in Africa and Asia and nearly 26% of maternal deaths in Latin America and the Caribbean. USAID trains health care providers to recognize the signs and symptoms of pre-eclampsia (high blood pressure and proteinuria) and of eclampsia (convulsions) and to treat mothers with anti-convulsant drugs and supportive care. A mother might experience prolonged or obstructed labor if she is unable to deliver her baby for any number of reasons, including the position of the baby, the direction in which the baby faces, or if the baby's head can not fit through the mother's pelvis. If the delivery complication is not resolved, the baby may die or the mother and/or baby can suffer life-long debilities. Obstetric fistula is one of the most common consequences of prolonged or obstructed labor for pregnant women in low-resource settings. Young girls and women who were stunted due to undernourishment, and who live in areas without obstetric care, are more likely to develop obstetric fistula because of their underdeveloped pelvic regions. In Kenya, one study found that 45% of all fistula cases were among adolescents. Obstetric fistula can be prevented by delaying pregnancy until the girl's pelvic region is fully developed, ensuring that women have ready access to emergency obstetric care in the case of prolonged labor, and removing the fetus through a caesarean surgery when needed. USAID reports that it has supported fistula prevention programs since 1989 and repair programs since 2005. Obstetric fistula prevention programs are commonly integrated with other programs that address the major causes of maternal death and disability. Key activities include increasing access for women to emergency obstetrical care, encouraging the postponement of child marriage and sexual debut, training families and community health practitioners to identify the signs of prolonged or obstructed labor, increasing access for women to emergency obstetrical care, and reducing stigma about obstetric fistula. WHO estimates that complications due to unsafe abortion procedures account for 13% of maternal deaths worldwide, amounting to 67,000 deaths each year. There are significant regional variations, however. In Latin America and the Caribbean, the practice accounts for 12% of maternal deaths on average, while in Africa, about 4% of women die after attempting an unsafe abortion. USAID reports that its international family planning programs help to avoid these deaths and that it has helped to avert an estimated 4 million maternal deaths over the last 20 years. From FY2001 to FY2003, appropriations to USAID's CS/MH programs, in current terms, grew by about 8%, and overall support for USAID's global health programs grew by about 28% ( Table 7 ). The bulk of that growth came from increases in appropriations to HIV/AIDS and other infectious diseases (OID), which each grew by 65% and 24%, respectively. Higher appropriations for HIV/AIDS programs during this time period reflect support for the President's International Mother and Child HIV Prevention Initiative. The majority of OID funds were directed to tuberculosis and malaria programs. Throughout these years, Congress also demonstrated its strong support for the Global Fund to Fight HIV/AIDS, Tuberculosis, and Malaria (Global Fund) with increased appropriations for U.S. contributions to the Fund ( Table 7 and Figure 1 ). From FY2004 through FY2008, U.S. support for global HIV/AIDS, TB, and malaria programs began to dominate discussions about USAID's health programs. While some Members applauded the Administration's focus on HIV/AIDS, particularly through the President's Emergency Plan for AIDS Relief (PEPFAR), they questioned why the Administration requested less for other global health interventions, particularly those related to child survival, maternal health, family planning, and reproductive health. Other Members challenged the Administration to consider the ability of recipient countries to absorb burgeoning HIV/AIDS funds because of overtaxed health infrastructures. Congress urged the Administration to better integrate HIV/AIDS and other health programs, particularly those related to TB and nutrition. Still, appropriations to HIV/AIDS, TB, and malaria far outpaced support for USAID's other health programs. From FY2004 through FY2008, Congress provided $19.7 billion for global HIV/AIDS, TB, and malaria programs. During that same time period, Congress appropriated $4.6 billion to USAID's child survival and maternal health, vulnerable children, and family planning and reproductive health initiatives ( Table 8 and Figure 2 ). Congress has consistently boosted appropriations to USAID's global health programs throughout the Administration of President George W. Bush, though mostly for specific diseases. From FY2001 through FY2008, Congress has supported the President's calls for higher spending on targeted, disease-specific U.S. programs through three key initiatives: the President's International Mother and Child HIV Prevention Initiative (FY2002-FY2004), PEPFAR (FY2004-FY2008), and the President's Malaria Initiative (FY2006-FY2010). At the same time, appropriations to other health issues, such as child survival and maternal health have changed little (with the exception of FY2008, when appropriations to CS/MH activities increased). While most health experts applaud the recent increase in U.S. commitment to countering the global spread of diseases like HIV/AIDS, many remained concerned that other health programs that offer life-saving interventions for women and children are overlooked and underfunded, particularly in sub-Saharan Africa. The World Health Organization asserts that some two-thirds of child deaths are preventable through practical, low-cost interventions. Those expressing concern about the apportionment of U.S. global health funds argue that HIV/AIDS, TB, and malaria are not the only diseases killing people. In addition to proposing an increase in funding for CS/MH programs, some observers urge Congress to boost support for other health issues that affect child survival and maternal health. Some urge Congress to consider how voluntary family planning could improve maternal and child health. According to USAID, family planning activities protect the health of women by reducing high-risk pregnancies and the health of children by allowing sufficient time between pregnancies; prevent HIV/AIDS with information, counseling, and access to male and female condoms; reduce abortions; and protect the environment by stabilizing population growth. Others oppose funding family planning for a number of reasons, including concern that in some countries abortions and coercive practices may occur in family planning programs. Family planning can help improve the morbidity and mortality rates of adolescent girls. In many rural areas of developing countries, girls are married and begin to have children in their teen years. Some research indicates that mothers younger than 20 years of age are at higher risk of delivering low-birthweight babies and suffer more pregnancy and delivery complications, such as toxemia, anemia, premature delivery, prolonged labor, and cervical trauma. Girls between 15 and 19 years of age are twice as likely to die from childbirth as women in their twenties, and those younger than 15 years of age are five times as likely to die. Young girls are also more likely to develop obstetric fistula. In Kenya, one study found that 45% of all fistula cases were among adolescents. Obstetric fistula can be prevented by delaying pregnancy until the girl's pelvic region is fully developed and performing caesarean surgery when needed. The condition can be repaired for about $300, a cost that is prohibitive to most young girls and women in the most affected countries. Some observers advocate that Congress increase spending on health systems, because to significantly reduce maternal and child mortality, governments must be able to effectively undertake a range of health strategies, including ensuring income and food levels; the nutritional and health status of mothers; access to immunizations, oral rehydration therapy, and maternal and child health services (including prenatal care); safe drinking water; and basic sanitation. Improvements in these areas are significantly affected by the strength of health systems and availability of health workers. UNICEF has found that without donor support, health systems in many countries cannot deliver essential interventions (such as vaccinations) sufficiently enough to reduce mortality nationwide. Supporters of strengthening health systems urge Congress to direct USAID to better coordinate its health assistance with other donors and with respective health ministries to improve efficiency and overall health outcomes. Proponents of this idea point to WHO's International Health Partnership and related Initiatives (IHP+)—a coalition of international health agencies, governments, and donors committed to improving health and development outcomes in developing countries and reaching the health-related MDGs. The IHP+ encourages donors to create a compact with countries to commit development partners and governments to support one results-oriented national health plan in a harmonized way that will ensure predictable, long-term financing from both national and international sources. A compact is a contract through which the international community and the recipient country reach consensus on results based on mutual accountability. Country compacts bind all donors and respective government agencies to one single country health plan, one monitoring and evaluation plan, one budget (with external funding harmonized with recipient countries' budget cycles), one reporting and validation process, and benchmarks for government performance. Global health experts increasingly underscore the role recipient governments should play in improving health systems. Some critics contend that donors must consider the role that political will plays in minimal health spending by many developing countries. According to the International Monetary Fund (IMF), when asked about the most important reason health funds go unspent, some 29% of health practitioners who were surveyed cited a lack of political will, and only 1% blamed IMF or World Bank restrictions. According to WHO, on average each year, the 57 countries with severe shortages of health workers spend about $33 per person on health; comparatively, each year the U.S. government spends approximately, $2,548 per capita on health. The entire continent of Africa spends less than 1% of the world's expenditure on health. African leaders have pledged to increase spending on health. In April 2001, Members of the African Union (AU) and the Organization of African Unity (OAU) signed the Abuja Declaration on HIV/AIDS, Tuberculosis, and Other Infectious Diseases , in which signatories pledged to spend at least 15% of their national budgets on health care. According to the Progress Report on the Implementation of the Plans of Action of the Abuja Declarations on Malaria (2000), and HIV/AIDS and Tuberculosis (2000/1 to 2005) , 33% of AU States had allocated 10% or more of their national budgets to the health sector by 2004, 38% spent between 5% and 10% on health care, and 29% indicated reserving less than 5% of their national budgets for health systems. Only Botswana reported spending at least 15% on health. Although most health experts agree that African governments need to boost their health budgets, some counter that poor political will is not the primary cause of low health spending. Instead, opponents argue that structural adjustment programs and conditional lending practices have limited African governments' abilities to increase investments in public health and health worker education. Shrunken health budgets have led to a decline in the quality of education and training opportunities for medical students, a perpetual shortage of health supplies and equipment (e.g., sanitation gloves and hypodermic needles), insufficient medicine and vaccine stocks, and a brain drain of African health workers. The International Development Research Center maintains, however, that discussions about the impact of structural adjustment, conditional lending, and health reform on public health infrastructures are often laden with biased terminology that observers use to make "sweeping triumphalist or catastrophist arguments." The organization found that results of structural adjustment, conditional lending, and health reform were mixed and that the organization could "support neither the opinion of those who believe the erosion of public expenditure on health is a characteristic feature of adjustment, nor of those who hold the opposite view." Below is a list of bills introduced to date in the 110 th Congress to directly and indirectly improve maternal and child health. H.Amdt. 360 to H.R. 2764 , Consolidated Appropriations Act of 2008, increased support for maternal and child health by $5 million for FY2008. The amendment was incorporated into the bill, which was enacted and became P.L. 110-161 . H.R. 5501 and S. 2731 , Tom Lantos and Henry J. Hyde United States Global Leadership Against HIV/AIDS, Tuberculosis, and Malaria Reauthorization Act of 2008, authorize $50 billion and $48 billion, respectively, for international HIV/AIDS, TB, and malaria interventions and require that women receiving drugs to prevent mother-to-child HIV transmission are also provided with or referred to appropriate maternal and child services. The House version, which passed by recorded vote, 308-116, calls for linkages to and referral systems for NGOs that implement multi-sectoral approaches for access to HIV/AIDS education and testing in family planning and maternal health programs supported by the United States. The Senate version does not include language on family planning. The Senate passed H.R. 5501 by voice vote, 80-16, with a substitute amendment that inserted the language of S. 2731 after amendments were made on the Senate floor. H.R. 1302 and S. 2433 , Global Poverty Act of 2007, require the President to develop and implement a comprehensive strategy to advance U.S. efforts to promote the reduction of global poverty, the elimination of extreme global poverty, and the achievement of the Millennium Development Goal of reducing by one-half the proportion of people worldwide, between 1990 and 2015, who live on less than $1 per day. Language in the bills indicates that improving maternal and child health is part of this comprehensive strategy. The House passed the bill by voice vote on September 25, 2007, and referred it to the Senate Foreign Relations Committee. The Senate version was placed on the Senate calendar on April 24, 2007. H.R. 2266 and S. 1418 , U.S. Commitment to Global Child Survival Act of 2007, provide assistance to improve the health of newborns, children, and mothers in developing countries, and for other purposes. The House version was referred to the House Foreign Affairs Committee. The Senate version was reported out of the Senate Foreign Relations Committee and placed on the Senate legislative calendar. H.R. 1225 , Focus on Family Health Worldwide Act of 2007, amends the Foreign Assistance Act of 1961 to improve voluntary family planning programs in developing countries, and for other purposes. The bill was referred to the House Foreign Affairs Committee. H.R. 2114 , Repairing Young Women's Lives Around the World Act, provides a U.S. voluntary contribution to the United Nations Population Fund for the prevention, treatment, and repair of obstetric fistula. The bill was referred to the House Foreign Affairs Committee. H.R. 2604 , United Nations Population Fund Women's Health and Dignity Act, provides financial and other support to the United Nations Population Fund to carry out activities to save women's lives, limit the incidence of abortion and maternal mortality associated with unsafe abortion, promote universal access to safe and reliable family planning, and assist women, children, and men in developing countries to live better lives. The bill was referred to the House Foreign Affairs Committee. S. 1998 , International Child Marriage Prevention Act of 2007, authorizes funds to reduce child marriage, and for other purposes. The bill was referred to the Senate Foreign Relations Committee. S. 2682 , United Nations Population Fund Restoration Act of 2008, directs U.S. funding to the United Nations Population Fund for certain purposes including maternal and child health. The bill was referred to the Senate Foreign Relations Committee. H.Res. 1045 , Global Security Priorities Resolution, while acknowledging a need to address the threat of international terrorism and protect the global security of the United States, calls for reducing the number and accessibility of nuclear weapons and preventing their proliferation. The resolution estimates that "the savings generated in the long term by significant reduction of nuclear armaments will be appreciable, with estimates as high as $13 million annually." The resolution directs a portion of these savings towards child survival, hunger, and universal education, and calling on the President to take action to achieve these goals. The resolution was referred to the House Foreign Affairs Committee. H.Res. 1022 , affirms the House's commitment to promoting maternal health and child survival at home and abroad through greater international investment and participation and recognizes maternal health and child survival as fundamental to the well-being of families and societies, and to global development and prosperity. The House agreed to suspend the rules and agree to the resolution, as amended, but the motion to reconsider was agreed to without objection. | Appropriations for child survival and maternal health programs (CS/MH) have grown by about 22% during the tenure of President George W. Bush. Most of that growth occurred in FY2008, when Congress provided $521.9 million for CS/MH programs, up from $361.1 million in FY2001. Although Congress provided support during this time for other global health initiatives that affect CS/MH, such as some $19.7 billion for international programs that prevent and treat human immunodeficiency virus/ acquired immunodeficiency syndrome (HIV/AIDS), tuberculosis (TB), and malaria, other global health interventions are discussed only as they relate to USAID's CS/MH programs. According to latest estimates, 9.7 million children under the age of five died in 2006; some 26,000 each day. The majority of those deaths occurred in developing countries, and almost half of them in Africa. On average, nearly 90% of all child deaths are caused by neonatal infections and five other diseases: acute respiratory infections (primarily pneumonia), diarrhea, malaria, measles, and HIV/AIDS. Undernutrition contributes to more than half of these deaths. More than 500,000 women die each year due to pregnancy-related causes, and many more suffer debilitating long-term effects, such as obstetric fistula. Most of these deaths occur in developing countries. About 20% of global maternal deaths are linked to undernutrition, and about 75% result from obstetric complications, most often hemorrhage, sepsis, eclampsia, and prolonged or obstructed labor. While most health experts applaud the recent increase in U.S. commitment to global health, many remain concerned that funding is largely aimed at specific diseases, such as HIV/AIDS and malaria. Other health programs that offer life-saving interventions for women and children are overlooked and underfunded, they contend, particularly in sub-Saharan Africa. In addition to proposing an increase in funding for CS/MH programs, some observers urge Congress to boost support for health systems so that countries can better address a wide range of health issues that affect child survival and maternal health. This report will be updated at the end of the 110th Congress. |
Geographically and by population, Poland is the largest of the countries recently admittedinto the European Union (EU) and NATO; with 38 million citizens, Poland is now the 6th mostpopulous country in the EU. And with strong growth rates and a GDP exceeding $200 billion, it isa major player economically, especially in Central and Eastern Europe. Some foreign policy analystsargue that, if it continues on its current path, Poland may well emerge as a leading nation in Europe-- particularly within the EU and NATO. This report provides background information on recentU.S.-Polish relations, a summary of Poland's political situation and economic conditions, and adescription of Poland's major foreign policy initiatives, mainly with neighboring states. Poland and the United States have enjoyed close relations over the years. The Reagan andGeorge H. W. Bush administrations actively supported Poland's efforts to shake off communism. The Clinton Administration strongly advocated Poland's candidacy for NATO membership,beginning with Clinton's speech before the Polish parliament in 1994 and ending with his signatureon the instruments of ratification on May 21, 1998. President George W. Bush visited Poland duringhis first official trip to Europe in June 2001; then-National Security Advisor Condoleezza Rice hascharacterized Poland as a "strategic partner" to the United States. (1) Warsaw has been a particularly reliable supporter and ally since the terrorist attacks ofSeptember 11; it has aided U.S. efforts in the global war on terrorism, and has contributed troops tothe U.S.-led coalitions in both Afghanistan and Iraq. Over the past year, however, many Poles haveconcluded that their country's involvement in Iraq has increasingly become a political liability,particularly on the domestic front. With elections likely in 2005, the government announced inDecember 2004 that it would maintain a presence in Iraq, but that troop levels would be drawn downafter the January 30 Iraqi elections. Some Poles are of the view that their loyalty to the United Stateshas gone unrewarded, and hope that the Bush Administration still might respond favorably to Polishrequests for increased military assistance, Iraq reconstruction contracts to Polish firms, and changesto in U.S. visa policy. Poland has been a staunch supporter, both diplomatically and militarily, of the U.S.-led waron terrorism. In a March 2002 address, Polish President Kwasniewski pressed the internationalcommunity to restrain its criticisms of the United States; he reminded his audience that "Americansoldiers ... were the first to stand up to the evil" of terrorism. In December 2004, after visitingPoland to assess its efforts in the war on terrorism, a team of EU officials announced that they hadfound the counter-terrorism services to be "professional and enthusiastic." (2) Poland has also supported EUefforts to improve law enforcement cooperation against terrorism. Poland has contributed military engineers, logistics personnel, and commandos to theInternational Security Assistance Force (ISAF) in Afghanistan, where Poles are assisting in mineremoval. Currently, 200 Polish troops -- chiefly combat engineers -- serve in Bagram. During aJuly 2004 visit to Kabul, Polish Prime Minister Marek Belka urged other NATO members toincrease their troop commitments to ISAF; he mentioned Germany by name. (3) Most observers believe that the Poles' determination to cooperate with the United States inthe global war on terrorism spans political parties, and that this resolve will remain unchanged,regardless of who might win the next elections. When Poland joined the U.S.-led coalition in the war to topple Saddam Hussein in early2003, it was acting with historical consistency. During the 1991 Gulf War, Warsaw joined themultinational coalition that pushed Iraq out of Kuwait, providing rescue ships and medical staff. After the conflict, Poland served as the United States' diplomatic go-between, and represented U.S.interests in Baghdad for the next decade. It was the first time the United States had called upon aformer communist country to play such a role. (4) Unconfirmed reports have indicated that, in 2003, approximately 200 Polish special forcestroops participated in Operation Iraqi Freedom -- the initial combat portion of the Iraq conflict. Itis said that the commandos were already present in Iraq before hostilities were launched, and thatthey worked in close cooperation with U.S. Navy SEALs and other special operations units. Since the end of declared hostilities, Poland has also contributed substantially to post-warpeacekeeping efforts. Its military contingent of 2,500 troops made it the third largest in themultinational stability force. On August 25, 2003, Poland assumed command of one of threemilitary sectors. At its peak, the command consisted of more than 9,000 troops, from Europe, Asia,and Latin America; the Polish-led division has also received intelligence, communications, andlogistics support from NATO. Because some countries have reduced or withdrawn their troops, totalstrength of the Polish-led contingent as of June 2005 was estimated at around 4,000. Several incidents related to Iraq captured the attention of Poles at home. In July 2004, agroup calling itself the Al Qaeda Organization in Europe posted on its website a warning that Polandand Bulgaria would suffer terrorist attacks similar to the March 2004 bombings in Madrid unlessthey pulled their troops out of Iraq. The Polish deputy defense minister said the government wouldnot cave in to such demands, but the Madrid bombings may have increased Poland's sense ofvulnerability to such attacks. In October, armed insurgents in Iraq kidnaped a Polish citizen; she wasreleased unharmed the following month. Finally, Poland has suffered several casualties in Iraq; todate, it has lost 17 military troops and 4 civilians, including a well-known television reporter. Over100 Poles have been wounded. In May 2004, following revelations of prisoner abuse at Abu Ghraib, a poll found that Polishopposition to the troop deployment had surged from 60% to 74%. Later that month, shortly beforea parliamentary confidence vote, Defense Minister Szmajdzinski said that the Poland wanted to"significantly reduce our presence" after Iraq's January 2005 elections. In a series of subsequentpronouncements -- some contradictory -- government officials continued to affirm that their country'stroop levels would be reduced. Finally, in December, dates and numbers were provided: Polandwould withdraw up to 700 troops after the Iraqi elections, and that a decision on the remainder ofits contingent would be made after the vote. In early February, during a joint press conference withSecretary of State Rice, Polish Foreign Minister Rotfeld stated that the Iraqi elections had "totallychanged our optics on Iraq." This new perspective does not appear to have affected the pulloutdecision, however; the government has since announced that as many as 300 additional troops wouldreturn to Poland by August, and that all Polish soldiers would exit Iraq when the UN multinationalforces mandate expires in December 2005. Warsaw will likely continue to support NATO trainingof the Iraq officer corps. (5) Although the reaction to the March 11, 2004 Madrid bombing and the inmate mistreatmentat Abu Ghraib were the main reasons cited by the media for Poland's downsizing of its militarycontingent in Iraq, other factors also played a role. For example, the stabilization mission in Iraq hasbeen a difficult one for Poland in terms of both scope and location. Iraq has been the country'sbiggest combat deployment, and the country's climate has presented special challenges. In addition,the cost of the Iraq mission has been burdensome to Poland. In an April 2005 announcementdetailing further troop cutbacks, Defense Minister Szmajdzinski stated that the deployment had costPoland $210 million. (6) Polish officials also note that the cost of the Iraq mission has necessitated a postponement ofPoland's defense modernization. Observers point out that, despite the human casualties and financial costs their country hasborne, Poland has not reaped significant, tangible benefits for its presence in Iraq. In particular,Polish officials and others note three sensitive areas related to the United States: Iraq reconstructioncontracts, military assistance, and a waiver from U.S. visa requirements. (7) Iraq Reconstruction Contracts. In an October2004 interview, former Polish Foreign Minister Cimoszewicz was asked to comment on Poland'sexpectations of being awarded "lucrative" contracts to help rebuild Iraq; he replied that "[i]t is truethat many Polish companies expected to become involved in the economic reconstruction of Iraq,and that has not happened." (8) The Economist Intelligence Unit (EIU) noted that "Washington'sdecision to reward the biggest [Iraq reconstruction] contracts to a few US companies has stokedresentment in Poland." (9) U.S. officials were aware of this disappointment and tried to correct the situation. In December2004, for example, it was announced that Iraq had agreed to purchase military materiel from Poland,including helicopters and ground transportation vehicles, and in late January another Polish defensecompany landed a large contract. Other contracts reportedly were under negotiation. Someobservers suggest that perhaps Poland's expectations for offsetting contracts were too high. Military Aid. On defense-related assistance,Polish officials note that their army is still in transition, and that Iraq has put a severe strain on itsresources; Deputy Defense Minister Janus Zemke commented that "[w]e simply will not be able tosqueeze more of our own budget for military procurement. At the same time, these huge outlays forIraq are delaying the final transformation of our armed forces. It is a fundamental problem." Polesalso have complained that their country received U.S. military aid packages similar in size tocountries that had sent far smaller contingents to Iraq. Some Polish policymakers hoped that theUnited States would help offset the steep costs by stepping up its military assistance to Warsaw. InFebruary 2005, President Bush pledged to seek $100 million in such aid to Poland. The funds weresubsequently requested, as part of a supplemental appropriations bill. Congress approved a $200million "Solidarity Fund" intended to help countries that had contributed troops to Iraq. However,because the contingency fund covers several countries, it is uncertain whether Poland will receivethe full amount that President Bush sought to provide. Poland will also likely receive $32 millionin regular military assistance requested by the Administration for FY2006. (10) Visa Waiver. Finally, Warsaw has hoped for awaiver of the U.S. government requirement that Poles traveling to the United States for three monthsor less carry a visa; currently applicants pay a $100 non-refundable fee, and then submit to aninterview at a U.S. embassy or consulate. U.S. policy is grounded in the belief that if somecountries, including Poland, received a waiver of the visa requirement, too many of their citizenswould travel to the United States and remain illegally. Analysts note that Poland has failed to meetthe qualifications for the visa waiver program. The Polish government argues, however, that Polandis no longer under Communism, and is no longer desperately poor -- two major incentives in the pastto leave the country. They also point out that millions of illegal immigrants are already living in theUnited States. Polish leaders have raised the issue with their U.S. counterparts. At the conclusionof the latest Bush/Kwasniewski meeting, the two sides announced that they had agreed upon a"roadmap" of steps aimed at helping resolve the issue. Although details of the plan have not yet beenmade public, it would reportedly eliminate certain outdated information requirements. Also,Members of Congress have submitted legislation on this issue; in the 109th Congress, SenatorsSantorum and Mikulski introduced S. 635 , which would add Poland to the list of 27countries on the visa waiver program. Representative Jackson-Lee's bill, H.R. 634 ,would do the same thing, with certain conditions. (11) Other Members of Congress, however, generally oppose theexpansion of the visa waiver program because of security concerns. Poland has had an eventful political scene in recent years. Since 2001, two prime ministershave fallen; analysts believe that both turnovers may be attributed to what the Financial Times (FT) called "the constant drip of scandals and sleaze in the Polish body politic." (12) And although it hassteered the nation into the EU, nurtured a strong economy, and weathered two confidence votes, thecurrent government's days are numbered, in the eyes of many. In their last parliamentary elections, held in October 2001, Poles ejected the incumbentcenter-right parties. Leszek Miller, head of the Democratic Left Alliance (SLD) became the newprime minister, replacing Jerzy Buzek of Solidarity Electoral Action (AWS). The SLD joined incoalition with the Union of Labor (UP), and the Polish Peasants' Party (PSL); together, theycommanded a majority of the seats in the lower house of parliament, the Sejm . The centrist,pro-market Civic Platform (PO) party became the main opposition; the remainder of the seats wasdivided among the radical nationalist Self-Defense party, and the League of Polish Families (LPR),an ultra-conservative party aligned with the Catholic church. AWS failed to pass the thresholdrequired to be seated in parliament. (13) In the meantime, Poland has been rocked by several high-profile scandals. In March 2004,as a result of one of the incidents, more than two dozen MPs left the SLD. The defectionsprecipitated Miller's resignation and left his successor, former Finance Minister Marek Belka, in aweak position. The SLD can boast of two years of robust economic growth, as well as the attainment ofPoland's long-sought entry into the European Union, but these achievements may not be enough forPolish voters. Indeed, many believe that in the next elections, the SLD, tainted by scandals andhobbled by the growing unpopularity of involvement in Iraq, will lose even more support and thatthe center-right parties will prevail. Some observers believe that two parties -- the PO and theconservative Law and Justice (PiS) -- may win enough votes to form a government, but may needthe support of LPR. Elections are scheduled for September 2005. (14) In October 2000, Aleksander Kwasniewski of the SLD won a resounding electoral victoryand a second five-year term as President. For most of his tenure, Kwasniewski consistently toppedpublic opinion polls, and was usually voted the most popular politician in the country. However,because of a two-term limit, he will be unable to run in the next presidential elections, which are set for October 2005. The Polish economy is among the most successful transition economies in east centralEurope; all of the post-1989 governments have generally supported free-market reforms. Today theprivate sector accounts for over two-thirds of economic activity. In recent years, Poland has for themost part enjoyed rapid economic development. After two years in the doldrums, Poland's GDPgrew by 3.8% in 2003, and is estimated to have reached 5.3% in 2004. Forecasters predict thatPoland's economy will continue to grow in the 4-5% range in 2005. Unemployment, however, stoodat 19.3% in April 2005 -- the highest in the European Union. The Polish economy's rebound from its 2001-2002 slump was largely led by an increase inexport sales, a testament to the importance that trade -- which accounts for nearly half of GDP --plays in Poland's economy. Once reliant upon sales to the Soviet bloc, Poland today sends itsexports overwhelmingly to countries belonging to the EU, which Poland, along with 9 other mostlyeastern European countries, joined on May 1, 2004. In 2003, Germany alone purchased one-thirdof Poland's exports and supplied one-fourth of its imports. Economic report cards issued by international organizations have given Poland mixedreviews. In a review measuring progress on reforms, the European Bank for Reconstruction andDevelopment ranked Poland fourth-highest among 27 former communist countries; while praisingPoland's price liberalization and business privatization, it recommended that the country improveits investment climate, reform its labor market, restructure its agricultural sector, and tighten its fiscalpolicy. Transparency International's 2004 Corruption Perceptions Index put Poland in 67th place outof 145 countries and last among EU members. The Organization for Cooperation and Developmentin Europe found Poland's labor market to be the "worst performing in all its 30 rich-countrymembers," faulting Poland's "high payroll tax, minimum wage, and firing restrictions [as]impediments to hiring new labor." Finally, in the World Economic Forum's 2004 GlobalCompetitiveness Index, Poland appeared in 60th place out of 105 countries, a decline from 45th placein 2003. (16) For both commercial and political reasons, agriculture is an important part of Poland'seconomy. The farming sector is highly inefficient by U.S. and west European standards: althoughagriculture is responsible for about one-fifth of all employment, it accounts for only 3% of GDP. Nonetheless, Poland is the largest food producer of the ten countries that recently joined the EU, andagriculture was a major sticking point in Warsaw's accession negotiations. Poland's farmers largelyopposed membership, fearing that competition with western European producers, who are moreefficient and receive higher subsidies, would drive many Poles out of business. These sentimentswere exploited by Andrzej Lepper, populist leader of the Self Defense party. Lepper sought to attractsupport by various -- often illegal -- means, including destroying railcar loads of imported grain,blockading highways, and occupying the agricultural ministry building. Despite their misgivings, nearly all Polish farmers applied for EU subsidies. After Polandbecame an EU member, agricultural exports and commodity prices rose steeply, and producers --including Mr. Lepper -- began to receive checks from Brussels. In addition, the EU has pledged tofund half of the cost of modernizing Polish farms. The rather sudden economic advantages of beingin the EU have impressed rural Poland, and have already dampened support for anti-EU politicalprotest parties. (17) Corruption is a common theme that runs through discussions of Poland's political andeconomic scene. Although most observers deplore what they characterize as widespread graft, somecontrarians have argued that, because Poland now has free and active media, this issue may be akind of reverse iceberg. According to this view, instances of corruption are being revealed in alltheir detail today, rather than being swept under the carpet, as they were in the past. Not only havethese recent cases been reported in newspapers, commission investigations have been aired onnational telecasts. The fact that one hears so much about corruption may actually be a good thing,they argue, as it could result in more active pursuit of such crimes by law enforcement authoritiesand in lower societal tolerance of corruption, especially at higher levels of business andgovernment. (18) Nevertheless, some worry that Poland's most recent high-profile political scandals may beinflating its reputation for graft and contributing to the creation of an anti-business atmosphere. Butin spite of its poor recent showing in surveys that attempt to measure corruption andcompetitiveness, Poland has continued to attract foreign funding. To encourage continuedinvestment, Poland maintains a low corporate tax rate -- about one-half that of Germany. Over thepast year, there have been reports of several U.S.-based firms entering or expanding their activitiesin the Polish market, including Boeing, Smithfield Foods, Wrigley, and General Motors. Like most of the former Warsaw Pact countries, Poland was quick to shift its security orientation to the West after the collapse of Communism. It signed up for NATO's Partnership forPeace program in 1994, and began the process of defense modernization. In 1999, along withHungary and the Czech Republic, Poland became a full-fledged member of NATO. Modernization. Modernization has been high onthe list of defense priorities. In 2003, Poland signed a $3.5 billion contract with U.S. aircraftmanufacturer Lockheed Martin for 48 new F-16 fighters. Poland is using U.S. Foreign MilitaryFinancing to purchase communications equipment, navigational aids for airfields, Humvees, and C130 cargo aircraft. (19) Polish officials maintain that the assistance is being spent well and has benefits for the United States,as much of the funds are being re-invested in U.S. industries on items that are interoperable withU.S. equipment. Poland has set a goal of having 60% of its military be professional by 2006. Observers note that the Iraq deployment is providing the Polish military with invaluable experience,not the least of which includes commanding a multinational division. (20) NATO. Since beginning accession negotiations,Poland has sought to meet its NATO obligations. Between 1999 and 2002, the government spentaround 2.0% of GDP on defense, equal to or slightly above the non-U.S., alliance-wide average. ThePoles have also sought to comply with NATO's Prague Capabilities Commitment, the most recentof the alliance's initiatives to enable members collectively to respond better to out-of-area missions. Warsaw has done so by developing so-called "niche capabilities;" for example, as noted above,Poland already is able to deploy experienced special forces units, and is acquiring tactical airlift. Inaddition, Poland will be developing units trained in counter-nuclear, biological, and chemicalwarfare. Poland has also negotiated over the use of its territory for NATO and U.S. military facilities. In June 2004, the alliance opened a Joint Force Training Center in Bydgoszcz for high-rankingofficers. Poland has been modernizing its airfields. Airstrips are being rebuilt according to NATOspecifications, but will also be able to meet U.S. standards; for example, they will be able toaccommodate C-17 transport aircraft. Poland can offer large field training areas where allies couldconduct live-fire exercises with, for example, tanks or attack helicopters, and Poland also has areasthat would be suitable for Stryker armored combat vehicle training maneuvers. Missile Defense. Poland has taken a differentpath than some European countries on the issue of the U.S. missile defense system; Warsaw maybecome a participant in the program. Both sides reportedly are interested and have established aJoint Missile Defense Working Group. In July 2004, Washington and Warsaw announced that theyhad begun "preliminary" discussions on basing interceptor missiles on Polish soil (the CzechRepublic is also said to be under consideration). Poland's foreign policy ranges energetically in all directions of the compass, but it is to theeast and west that Poland's major initiatives have been directed. To the east, Poland has been achampion of democracy in Ukraine and has had an active diplomacy toward Belarus and Russia. And to the west, Poland strenuously worked to integrate with pan-European institutions -- the EUand NATO -- the cornerstone of its post-communist period foreign policy. Ostpolitik. Poland has sought to encouragedemocratization of Belarus and Ukraine not only on principle, but also for the practical reason thatdoing so should improve Poland's security by establishing a buffer zone between itself and Russia. Belarus. Recent relations between Warsaw and Minskhave been tense. Poland criticized the conduct of Belarus' October 2004 parliamentary elections andreferendum permitting strongman Alexander Lukashenko to serve a third presidential term. Warsawalso urged Belarus "to drop authoritarian practices that are inconsistent with the main Europeanvalues of all modern democratic countries." The official Belarusian press bureau accused the Polishmedia of "tendentiousness" in covering the October votes. Poland's recent approach to Belarus hasstressed maintaining some low-level ties as well as links to civil society, while shunning high-levelgovernment-to-government contacts. Key issues for Warsaw include border security and the statusof the ethnic Polish minority in Belarus. President Kwasniewski characterized Polish policy towardBelarus as one of "determination and delicacy." (21) Ukraine. Poland has for years encouraged Ukraineto integrate with the West and thereby wean itself from Russian influence. Poland played a key rolein helping defuse Ukraine's 2004 political crisis. On October 31, Ukraine held presidential elections,and a runoff vote was held on November 21. Giant protests erupted after it became clear that thevotes had been far from free and fair. Poland -- including the parliament, the government, andprivate citizens -- became involved at the outset. In October, the Sejm passed a measure urging theUkrainian government to "respect democratic standards." (22) Later, thousands of Poles demonstrated throughout their countryin support of Ukraine's "orange revolution." After the first runoff, former Ukrainian PresidentKuchma contacted Kwasniewski and asked him to help negotiate a peaceful settlement. Kwasniewski served as a mediator, along with Lithuanian President Vladas Adamkus and by JavierSolana, head of the EU foreign policy office. These negotiations led to a new vote, in whichdemocratic reformer Viktor Yushchenko was elected. Some EU governments seeking good relationswith Moscow initially opposed the EU aiding Ukraine out of concern of offending Moscow; westernEuropean diplomats state that it was Poland that persuaded the EU to assist Ukraine. Russia. During the current decade, Poland hasattempted to normalize its ties with Russia, which were strained after the expulsion in 2000 of nineRussian diplomats on charges of spying, among other issues. During his inaugural address inOctober 2001, Prime Minister Miller said that Poland would seek to carve out a role as the linkbetween the West and the countries of the former Soviet Union. The following month, PresidentKwasniewski indicated that Poland could act as a go-between for the West and Russia. (23) Poland has had severalconcerns with Russia over the past couple of years, however. First of all, it has had to contend withRussian resentment over its efforts to build ties with -- and inculcate democracy in -- Ukraine andBelarus. In addition, Russian President Putin was reportedly angry over the manner in which thePolish media covered the terrorist incident in Beslan, as well as the ongoing conflict in Chechnya. At the same time, Poland has tried to placate Russia for economic as well as geopolitical reasons:Russia is its chief supplier of oil and natural gas. During a December interview with a journalist, Kwasniewski faulted Russia's interventionin the Ukrainian elections, concluding that "[e]very major international power would rather seeRussia without Ukraine." (24) The remark drew a sharp response from Russian President Putin,who attacked Kwasniewski's motives and essentially told him to mind his own business ("I thinkPoland has enough problems of its own that need solving.") The spat was quickly patched over, butit revealed a sensitivity over the opposing roles played by the former allies in the Ukrainian politicaldrama. European Union. In May 2004, as noted above,Poland fulfilled a long-term foreign policy goal when it joined nine other countries in becoming amember of the European Union. Poland has reaped tangible economic benefits from membership,and has been an active political player in the EU. Warsaw was not reluctant to assert itself beforejoining the EU and will likely be even less hesitant to do so now that it is a member. On severalissues, Poland staked out positions intended to advance its interests and values: EU Security Policy. Poland's initial skepticism aboutthe European Security and Defense Policy has changed to "cautious enthusiasm," according to oneobserver. Poland supports the development of an EU military capability, but not at the cost ofweakening NATO. In a February 2005 interview, Defense Minister Szmajdzinski was insistent thatany EU defense structure should "complement and not ... compete with NATO." This is in line withU.S. policy. Poland also announced that it would join the newly-created European military police,a 900-strong force intended for international deployment. (25) Christian Heritage. Poland, joined by Italy and severalother mostly Roman Catholic countries, called for the preamble of the EU "constitution" to refer tothe Christian heritage shared by a majority of EU citizens. The measure was voted down by otherEU members, but Pope John Paul II lauded Poland for its efforts. Some observers have commentedthat, like the United States but unlike many of its more secular fellow European countries, Polandexhibits a relatively strong concern for religious values. (26) Turkey. Despite its call for EU recognition ofEurope's Christian heritage, Poland has "vigorously" supported Turkey's ambition to join the EU. Former Polish Foreign Minister Cimoszewicz argued that Turkey should belong because it "is proofthat the fundamental values of Western democracy can also be applied in Islamic countries." Analysts also argue that Poland's support is based on its belief that the inclusion of Turkey,traditionally a strong U.S. ally, would strengthen the transatlantic link. Finally, Warsaw reportedlybelieves that Turkish membership would improve the prospects of Ukraine being invited to join --a major Polish foreign policy goal. (27) Taxes. Poland and other countries have objected toFrance's proposal to reduce EU structural funds to member states that maintain below-averagecorporate tax rates. Critics charge that the practice, known as "fiscal dumping," is used to attractforeign investment; they argue that countries that maintain low tax rates should not be compensatedby EU subsidies. Poland opposes France and Germany's proposal for a minimum, EU-widecorporate income tax, noting that, for example, its value-added tax is relatively high. (28) Bilateral Issues. Poland also has crossed swords withindividual players within the EU; over the past year, Warsaw has had differences with Germany,France, and Spain on both EU and other matters. Polish-German relations were strained in 2004 byissues that harked back to World War II. The contretemps began when a German group (thePrussian Claims Society) demanded that the Polish government make compensatory payments to thefamilies of ethnic Germans who had been expelled from Polish territory in 1945-46. The claimcaused an uproar in Poland, and some members of the Sejm called for Germany to pay reparationsfor Poland's World War II losses. In November, the two governments agreed to dismiss such claims. Poland also has dueled with France (its biggest foreign investor) over Iraq, tax policy, and EU votingrights, and with Spain over the distribution of EU structural funds. (29) Since the collapse of communism, Poland has conducted active and independent domesticand foreign policies. Successive governments have advanced economic reforms that generally haveresulted in a successful transformation to a market economy. Corruption remains a serious problem,but the print and broadcast media have increasingly put a spotlight on corruption cases, a practicethat some analysts believe should result in reduced public tolerance and an increase in legal prosecutions. Despite reports of graft, foreign investors have continued to enter Polish markets,helping fuel steady economic growth. Poland has had a dynamic political life as well, with each ofthe post-1989 elections resulting in a change in government from left to right or vice versa. Pollssuggest that this pattern may continue with the next parliamentary elections, scheduled for lateSeptember 2005. Poland's external relations, deeply influenced by its history, have also been dynamic. Warsaw has integrated into the NATO and EU, and has proactively promoted its perceived nationalinterests in those institutions, as well as bilaterally with neighboring states. In addition to joiningthe alliance, Poland has looked to its security by modernizing its military; it has been acquiring newweapons systems and reorganizing and downsizing its armed forces. To the east, Poland has soughtto promote democracy in Ukraine and to normalize relations with Belarus and Russia. To the west,Poland has shown a willingness to confront its new EU partners on issues of national importance. Poland's relations with the United States have been positive, particularly since 9/11. Warsaw hassupported U.S. policies in the global war on terrorism, in Afghanistan and in Iraq -- where it assumeda leading role. But over the past year, Poles have increasingly expressed disillusionment with theIraq mission and disappointment that the United States has not rewarded their country's loyalty andsacrifices. The government has announced a phased troop withdrawal. Some analysts argue that, if it continues on its current path, Poland may well emerge as aleading nation in Europe. Although most analysts do not anticipate major changes in Polish foreignpolicy in the near future, some believe that it is inevitable that Poland will draw closer to the EUover the long term. | Poland and the United States have enjoyed close relations, particularly since the terroristattacks of September 11, 2001. Warsaw has been a reliable supporter and ally in the global war onterrorism and has contributed troops to the U.S.-led coalitions in Afghanistan and in Iraq -- whereit assumed a leading role. Over the past year, however, many Poles have concluded that theircountry's involvement in Iraq has increasingly become a political liability, particularly on thedomestic front. With elections scheduled for September 2005, the government has announced aphased troop withdrawal. Some Poles have argued that, despite the human casualties and financialcosts their country has borne, their loyalty to the United States has gone unrewarded. Many hopethat the Bush Administration will respond favorably by providing increased military assistance, byawarding Iraq reconstruction contracts to Polish firms, and by changing its visa policy. Poland has had an eventful political scene in recent years. Since 2001, two prime ministershave fallen. Many attribute these turnovers to a series of high-profile scandals. Although the currentgovernment has steered the nation into the EU and nurtured a strong, export-based economy, pollsindicate that it may be replaced in the next elections. However, regardless of which parties form thenext government, Poland's foreign policy will not likely undergo drastic changes. Poland'sexport-dependent economy has performed relatively well in recent years; the agricultural sector inparticular has responded positively to EU membership. A NATO member since 1999, Poland has been restructuring and modernizing its military toenable it to respond to out-of-area missions -- an alliance priority. Poland has sought to nurturedemocracy in Ukraine and Belarus, and to normalize ties with Russia. Poland has been an activemember of NATO and, since May 2004, the European Union. Poland was not reluctant to assertitself in a number of issue areas before joining the EU and will likely be even less hesitant to do sonow that it is a member. Some analysts argue that, if it continues on its current path, Poland maywell emerge as a leading nation in Europe. Although most analysts do not anticipate major changesin Polish foreign policy in the near future, some believe that it is inevitable that Poland will drawcloser to the EU over the long term. This report provides political and economic background on Poland and evaluates currentissues in U.S.-Polish and Polish-European relations. This report will be updated after Poland's 2005elections. For additional information, see CRS Report RL32967 , Poland: Foreign Policy Trends ,by [author name scrubbed]. |
JP Morgan Chase (JP Morgan), the nation's largest bank holding company by asset size, had established a reputation for quality risk management. On May 10, 2012, Jamie Dimon, the bank's chairman and chief executive officer (CEO), held an unplanned conference call. As reflected in the firm's first quarter 2012 filings with the Securities and Exchange Commission (SEC), Mr. Dimon reported that, during the early part of the second quarter, a London-based office of the bank (insured depository) unit, the Chief Investment Office (CIO), sought "to hedge the firm's overall credit exposure" and incurred "slightly more than [a] $2 billion trading [paper] loss on … synthetic credit positions." The CEO characterized the trading strategy behind the loss as "flawed, complex, poorly reviewed, poorly executed and poorly monitored [and noted that] the portfolio has proven to be riskier, more volatile and less effective as economic hedge than we thought." He also said that the portfolio still contained securities with "a lot of risk and volatility going forward.... It could cost us as much as $1 billion or more…. [I]t is risky, and it will be for a couple of quarters." The loss was charged to the bank's corporate and private equity division, which houses the CIO. During the conference call, Mr. Dimon also indicated that the loss would be partially offset by a $1 billion gain from the sale of securities by the unit, resulting in an $800 million second quarter loss for the division. The May conference call occurred several weeks after a routine April 13, 2012, conference call in which Mr. Dimon reported on the bank's first-quarter earnings. During the April call, he referred to concerns raised over the bank's exposure to the money-losing trades (which he derided in the May call) as "a complete tempest in a teapot." The losses described in the May conference call were mark-to-market paper losses that had not been booked by the bank. While some analysts speculated that JP Morgan would not lose much more than the $2 billion, others speculated that the bank would ultimately lose as much as $5 billion or more. Final losses will depend on various unknowns, such as the proportion of the suspect trades that have not been liquidated or unwound, future movements of the indexes, the speed at which the bank tries to unwind those trades, and the size of the subsequent losses from the remaining positions. During the May conference call, Mr. Dimon said that the bank would be unwinding the trades in a deliberate manner. During a subsequent conference call on July 13, 2012, bank officials detailed key developments during the second quarter of 2012. During the call, Mr. Dimon indicated, with respect to the suspect trades, the CIO lost $1.6 billion and $4.4 billion, respectively, during the first and second quarters of 2012. Mr. Dimon also indicated that the CIO's total trading risk in the trades had been "significantly reduced." JP Morgan's shareholders have borne and will bear the impact of losses. The day after the May conference call, JP Morgan's stock price fell by about 9% and the value of its market capitalization fell by about $14 billion. On May 21, 2012, the bank announced that it was suspending a previously planned $15 billion stock buyback that regulators from the Federal Reserve approved in March 2012 after performing stress tests on the bank's capital. At about the same time, the bank decided to maintain its quarterly dividend of $0.30 a share. Buybacks can help boost the price of a company's shares. Since the May conference call, several class action shareholders suits, alleging that the bank misled investors, have also been filed. According to news reports, after the conference call, Fitch Ratings, a major credit rating agency, downgraded JP Morgan's short-term and long-term debt by a notch. Both are still categorized as investment grade debt. The reports also indicated that Fitch indicated that the $2 billion loss was "manageable." The rating agency also noted that the size of the loss and the "ongoing nature of these positions implies a lack of liquidity [and that the loss] also raised questions over JPM's risk appetite, risk management framework, and its practices and oversight." Several bank analysts have indicated that the report of the losses raised concerns about the quality of JP Morgan's risk management. However, there appears to be general consensus that the losses are relatively small when compared with the size of the bank's overall balance sheet. This view appears to be shared by officials at the Office of the Comptroller of the Currency (OCC), the financial regulator that oversees JP Morgan's national bank and various subsidiaries. On June 6, 2012, Comptroller of the Currency Thomas Curry testified that, "given the scale of the bank, the loss by JPMC affects its earnings, but does not present a solvency issue." The May conference call had a variety of other ripple effects both inside and outside of JP Morgan. The head of the bank's CIO stepped down. JP Morgan is conducting internal investigations of the losses, which are being overseen by the company's board. One outcome of the probe, T he CIO Task Force Update , was completed in July 2012. Among other things, the report, which described itself as a product of a JP Morgan "management review and assessment of circumstances surrounding the CIO's losses," criticized the CIO for "ineffective" risk management and exercising "poor" judgment with respect to various trades during the first quarter of 2012. Mr. Dimon also indicated that the board of directors would be examining whether bank employees responsible for the losses would be subject to the bank's heretofore unused compensation "clawback" policy. The policy enables the bank to require the return of certain compensation given to senior employees, including "unvested stock" and "cash bonuses," following actions deemed to be unsatisfactory, including "bad judgment." Meanwhile, OCC officials have indicated that the agency is "evaluating the compensation process of the CIO and will assess the bank's determination on clawbacks as part of that analysis [and] if corrective action is warranted." Various agencies, including the United Kingdom's financial services regulator (the Financial Services Administration), the SEC, the Commodities Futures Trading Commission (CFTC), the Federal Reserve (the Fed), the OCC, and the Federal Deposit Insurance Corporation (FDIC), have launched probes of various aspects of the trades. The Department of Justice (DOJ) and the Federal Bureau of Investigation (FBI) have begun probes aimed at determining whether there was criminal wrongdoing surrounding the trades. Congress has held hearings that have both touched on and been exclusively devoted to JP Morgan's trading losses. Key congressional interest derives from two broad concerns: (1) what the losses may help reveal about the efficacy of bank regulatory monitoring and oversight; and (2) potential insights that the losses may provide on implementation of various provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA; P.L. 111-203 ). This report provides general background on JP Morgan and its regulation; the CIO, the unit responsible for the losing trades; and the losing trades themselves. It examines various aspects of JP Morgan's operations with respect to the trades. This report is drawn from media reports, congressional testimony, and other sources. It will be updated as information from governmental investigations, shareholder lawsuits, official reports from JP Morgan, and other investigations develops. The report also examines several public policy issues involving large banks such as JP Morgan that have become more visible due to the trading losses. These issues include potential regulatory lapses and shortcomings in the regulatory reach; risk management at JP Morgan's CIO; Section 619 of the DFA, also known as the Volcker Rule; systemic significance of the losses; potential broader implications of the losses for other large banks; and the doctrine of "too big to fail" in the context of the JP Morgan trade losses. JP Morgan conducts business in some 60 countries, has more than $2 trillion in assets, and maintains 5,500 bank branches. The JP Morgan of today began as JP Morgan, a commercial bank, in the 19 th century. It has subsequently grown into a diversified financial complex through a series of acquisitions and mergers that have included Chase Manhattan, a commercial bank; Bear Stearns, an investment bank; and the banking operations of Washington Mutual, a thrift institution. In 2011, JP Morgan reported gross profits of about $99 billion and net profits of $19 billion. The bank engages in mortgage lending, credit card issuance, investment banking, and asset management. It is also serves as a primary dealer in U.S. government securities. Overall, the financial services company has several broad business lines: (1) retail financial services, (2) treasury and securities services, (3) card services, (4) investment banking, (5) commercial banking, (6) asset management, and (7) corporate/private equity. The Chief Investment Office (CIO) is a part of the corporate/private equity line, which also houses the company's risk management unit, the private-equity arm, and the treasury office. The CIO is tasked with the responsibility of "managing structural interest rate, currency and certain credit risks that are created from the day-to-day operations of the firm's primary lines of business across the company." The unit also "manages the [JP Morgan] firm's investment exposure while helping to advise lines of business on their own investment strategies [and] is responsible for managing the firm's interest rate risk, foreign exchange risk and other structural risks, each of which are critical measures for the firm." In congressional testimony on June 13, 2012, Mr. Dimon spoke about the CIO's mission and the scope of its activities: Like many banks, we have more deposits than loans—at quarter end, we held approximately $1.1 trillion in deposits and $700 billion in loans. CIO, along with our Treasury unit, invests excess cash in a portfolio that includes Treasuries, agencies, mortgage-backed securities, high quality securities, corporate debt and other domestic and overseas assets. This portfolio serves as an important source of liquidity and maintains an average rating of AA+. It also serves as an important vehicle for managing the assets and liabilities of the consolidated company. In short, the bulk of CIO's responsibility is to manage an approximately $350 billion portfolio. Before Jamie Dimon became the bank's CEO, JP Morgan's CIO was not a discrete unit, but was part of the bank's treasury unit. As is the case with bank chief investment offices, bank treasury units are also concerned with asset/liability management. Other large banking complexes have functions that are similar to what JP Morgan's CIO does, but many have organized them differently. For example, media accounts indicate that Bank of America has a chief investment officer who reports to the company's chief financial officer (CFO). Citigroup's treasurer is reported to directly oversee a comparable portfolio through his oversight of the bank's chief investment office as well as deputy treasurers in other countries. In addition, according to some reports, at Wells Fargo, the CIO is divided between the CFO and the head of the investment banking and trading division. Citigroup apparently has a centralized office that reports to its treasurer to hedge liability risks for the New York bank, but lacks an individual unit that engages in the kind of macroeconomic hedging that JP Morgan's CIO officially does. According to various reports, but unconfirmed by the Congressional Research Service (CRS), a major difference between JP Morgan's CIO and comparable units at other large banks involves the composition of their portfolios. Similar units at other large banks are said to hold smaller proportions of relatively risky instruments than JP Morgan's CIO and tend to have "financial filings [that indicate] that their holdings are concentrated in low-risk, low-return assets such as Treasuries, government-backed mortgages and corporate and municipal bonds." After becoming JP Morgan's CEO in 2005, Jamie Dimon hired Ina Drew, a veteran trader and manager, to head the CIO. According to media accounts, Ms. Drew reported directly to Mr. Dimon. Former JP Morgan employees who worked with Ms. Drew have told reporters that she received the CEO's authorization to ramp up the unit's investments in relatively risky financial products such as asset-backed securities, equities, credit derivatives, and nations' sovereign debt. Financial reporting for the bank's corporate/private equity line of business is divided between the private equity side and the corporate side. JP Morgan's CIO and its treasury unit are the only money-making units in the corporate unit. According to the bank's financial disclosures from 2008 to 2011, the corporate unit reported net income of, respectively, $1.2 billion, $3.1 billion, $670 million, and $411 million. During those years, the CIO was widely characterized as a significant "profit center" for the bank. According to JP Morgan's financial filings, Ms. Drew earned $15 million in 2010 and $14 million in 2011, making her one of the company's highest paid officials. In 2006, Ms. Drew hired Achilles Macris to supervise trading in the CIO in London. Various reports have alleged that, with Mr. Dimon's approval, the London unit expanded into riskier types of derivatives. In 2011, in what some suggest may have reflected aggressive risk taking, Macris is claimed to have halted the use of risk-control caps, which had required traders to exit positions when their losses exceeded $20 million. In June 2012 testimony, Mr. Dimon denied the assertion that the caps were removed. In July 2012, however, a report on the bank's internal probe of the trades, t he CIO Task Force Update , stated that the securities that had caused the CIO's trading losses were subject to "no limits by size, asset type or risk factor" for trading in the securities that resulted in the losses. According to media reports, in late March 2012, the London unit began experiencing big trading day gains that were often followed by larger losses on the following day. As reported in an article in the New York Times during the period, Mr. Dimon was assured by Ms. Drew and her associates that the volatility was "manageable." According to the reports, extreme trading patterns, but with fewer gains offsetting the losses, reappeared a few days after JP Morgan reported its first quarter financials on April 13, 2012. Mr. Dimon's subsequent investigation of the situation reportedly revealed a problematic trading scenario in the CIO's London office. The May 2012 conference call in which Mr. Dimon reported the multi-billion dollar trading loss then followed. Several media articles have attempted to chronicle the nature of the CIO's trades that culminated in the bank's large losses. Using a combination of techniques, including discussions with the CIO's trading counterparties and analysis of the markets surrounding the alleged trades, the authors of the articles have pieced together a common narrative on the likely nature of the losing trades. However, as one such article noted, the "details [of the trades] remain obscure." To date, the most authoritative, albeit general, discussion of the losing trades comes from two sources. These are congressional testimony from JP Morgan's Michael Cavanagh, CEO of the company's Treasury and Securities Services, and from Thomas Curry, Comptroller of the Currency, the head of the OCC, which regulates national banks and had examiners at JP Morgan when the trades occurred. Discussing findings in JP Morgan's CIO Task Force Update during a July 12, 2012, conference call, JP Morgan's Cavanagh observed, The [synthetic credit portfolio's] primary purpose had been to provide a partial offset to losses we would suffer elsewhere in CIO, and the Company, in a stressed credit environment. The portfolio got started about five years ago. It was generally short credit. But also included some long positions in order to reduce the cost of carrying credit protection. And consistent with its objective, the portfolio produced gains in the stressed period of 2008 to 2010, and was breakeven or positive from each year from 2007 to 2011, and all-in, it generated about $2 billion in gains during that period…. In late 2011, CIO was directed to reduce the synthetic credit portfolio's risk and risk weighted assets. That direction came as part of the annual budgeting process, in which we develop the firm's capital plans including our glide path to Basel III. [T]he synthetic credit team and CIO hoped to … move their portfolio's risk position from a net short position to a neutral one, while reducing risk weighted assets in the process. They also hoped to retain some protection against Corporate credit defaults which was a synthetic credit portfolio's historical mission. So a lot of things going on that they were trying to accomplish, and found it difficult to find a balance that they liked. To simplify what they did, it amounted to them going long investment grade indices while increasing short positions in junior tranches in high yield indices. And the size of the portfolio grew dramatically as they continued to add positions later in the quarter, when they were struggling to balance the portfolio, as the market began to move against them. So a question of why they didn't just pursue an outright reduction of the portfolio. And it appears, and that's all it is, an appearance, that they thought about it a bit but they believed that it would be more expensive than the approach they chose, which obviously proved to be wrong, and were focused on thinking about high execution costs to reduce the portfolio in size and the loss carry of a reduced portfolio, and so they went ahead with the approach they had…. [W]hat they did do was [to] increase the size and complexity of the portfolio dramatically in the first quarter [of 2012], and along with it, the sensitivity to a variety of risks … all of which contributed in some part to the losses…. [With respect to] the growth of the portfolio in the first quarter ... the total notional size of the portfolio ... tripled. [The] significantly increased size and complexity of the portfolio left little margin for error when the expected pricing relationships across the portfolio began to break down and generate losses. It was a very risky approach they took that should have been discussed and vetted at more senior levels but it was not …. … [The] portfolio experienced losses in late March and early April. Around this time, market visibility of the synthetic credit positions becomes a concern, particularly after press reports on April 6. At that point, Doug and Jamie asked for a review of the portfolio in preparation for the earnings release a few days later. Ina spear-headed the review with engagement by John Hogan, Doug Braunstein, and others. The main output of that review was forward scenario analysis that produced a probable P&L range for the second quarter on the portfolio from positive $350 million to negative $250 million, with a bias to the positive end. So at that time, the group got comfortable that the portfolio's risk was manageable, though in need of heightened attention going forward…. … On April 13, this period ends and we announce our first-quarter results…. In late April, losses pick up and the heightened monitoring that followed the earnings call gets taken to another level, when a senior team from Corporate Risk is sent to examine the portfolio from the bottom up. They begin providing daily updates and constructing independent analysis of the portfolio that becomes the basis for risk measurements that the new CIO team picks up a few weeks later…. According to Comptroller of the Currency Curry, In 2007 and 2008, the bank constructed a portfolio designed to partially offset credit risk using credit default swaps to help protect the company from potential credit losses in a stressed global economy…. In late 2011 and early 2012, bank management revised its strategy and decided to offset its original position and reduce the amount of stress loss protection. The instruments chosen by the bank to execute the strategy were not identical to the instruments used in the original position, which introduced basis, liquidity, and other risks. As the new strategy was executed in the first quarter, actual performance deviated from expectations, and resulted in substantial losses in the second quarter.… JP Morgan is generally regarded as a complex financial institution; the regulation of JP Morgan is similarly multifaceted. JP Morgan's organizational structure starts with a financial holding company, which controls a variety of subsidiaries, each with its own focus within the financial services industry. JP Morgan's holding company and many of its subsidiaries have their own primary prudential regulators, depending upon the financial service that they provide. In addition, many financial activities are subject to regulation regardless of the entity that carries it out. Figure 1 illustrates how different financial regulatory agencies are responsible for prudential regulation of the units of JP Morgan that are believed to have carried out the derivatives trades, and the way that financial regulatory agencies regulate derivatives trading activities and venues. The following is a more detailed explanation of the respective roles of the regulators that appear in Figure 1 . The OCC is the primary prudential regulator for federally chartered insured depositories, including the relevant subsidiary of JP Morgan. Prudential regulators typically provide institution-based regulation, such as examination authority for safety and soundness. Insured depositories may be subject to the regulations of multiple prudential regulators; the primary prudential regulator depends on the firm's charter. Prudential regulators coordinate their examinations and standards through the Federal Financial Institutions Examination Council (FFIEC), of which the OCC is a part. The OCC has a targeted large bank supervision program for complex firms such as JP Morgan. The OCC's large bank program covers oversight of risk management, including expectations that the sophistication of a depository's risk management program match the complexity of the risks that the firm faces. The OCC testified to being in the process of raising these prudential standards, specifically to "increasing the awareness of risks facing banks and the banking system, reducing risk to manageable levels, and raising expectations for management, capital, reserves, liquidity, risk management, and corporate governance and oversight." At the June 6, 2012, hearing, the OCC provided information about its team that examines JP Morgan's depository subsidiary. The team includes 65 examiners onsite at JP Morgan, with additional support from other subject matter experts at the OCC. The scope of these examiners' duties included reviewing all activities of the depository, "including commercial and retail credit, mortgage banking, trading and other capital markets activities, asset liability management, bank technology and other aspects of operational risk, audit and internal controls, and compliance with the Bank Secrecy Act, and anti-money laundering laws and the Community Reinvestment Act." As mentioned above, OCC officials have testified that they do not believe that the trading losses pose a significant threat to the solvency of JP Morgan or to the stability of the U.S. financial system. At the hearing, the OCC testified that the additional capital that JP Morgan has raised since the financial crisis provides a more than adequate buffer to prevent the firm from failing. Nor did the OCC find any evidence of contagion from the disclosure of the JP Morgan trades to concerns with other large U.S. banks. The Federal Reserve is the primary prudential regulator of JP Morgan's holding company. The bank holding company controls the depository subsidiary (and many other subsidiaries). Like the OCC, the Fed's examinations and regulatory standards are coordinated with other prudential regulators through the FFIEC. The Fed has had examination teams for large complex banking organizations (LCBOs) such as JP Morgan for more than a decade. The Dodd-Frank Act grants the Federal Reserve authority to regulate firms designated as systemically important financial institutions (SIFIs). SIFIs are sometimes referred to as too-big-to-fail firms, a designation that is controversial. Although implementation of this authority has not yet occurred, and JP Morgan has yet to be designated a SIFI, it appears likely that JP Morgan will be designated a SIFI when the appropriate rulemaking is final. The DFA instructs the Fed to establish heightened prudential standards for SIFIs, including more stringent standards for capital, leverage, and risk management. The Federal Reserve is also the central bank of the United States. JP Morgan's depository has access to Fed lender-of-last-resort (LOLR) functions, such as the discount window. The Fed also has the ability to provide additional financial resources to troubled financial firms. The DFA mandates that such emergency credit facilities not be targeted to a single firm; rather, programs for extraordinary credit facilities must be made more widely available. This DFA provision prevents a JP Morgan rescue along the lines of the Maiden Lane arrangements that were created for Bear Stearns and American International Group (AIG) during 2008. FDIC-insured depositories must comply with FDIC regulations. Although the FDIC is not the primary prudential regulator of JP Morgan's depository, the firm must still comply with all applicable FDIC rules. (The FDIC is the primary prudential regulatory for federally insured depositories with a state banking charter.) The FDIC coordinates prudential standards with the OCC and the Fed through the FFIEC. The FDIC has an interest in the standards supervised by the OCC and the Fed in part because the FDIC would have to compensate JP Morgan depositors in the event that JP Morgan failed with such large losses that there was not enough money to fully pay insured depositors. The DFA grants the FDIC new authorities for SIFIs that fail. In the unlikely event that trading losses were to cause JP Morgan to fail, the FDIC could dissolve the entire firm, not just the depository subsidiary, if the failure threatened financial stability. Under the FDIC's resolution authority, JP Morgan shareholders and unsecured creditors would have to experience losses. However, the FDIC would not have to treat similarly situated creditors similarly, if doing so resulted in a threat to financial stability. JP Morgan counterparties to certain qualified financial contracts, including financial derivatives, would retain their ability to accelerate their contracts and net them out. The Comptroller of the Currency has testified that the CIO's "activities are conducted globally but managed and controlled out of JPMC's New York offices … activities [that] are supervised by OCC staff assigned to the JPMC headquarters in New York." Questions have, however, been raised over the effectiveness of bank regulatory oversight and supervision surrounding the trades in question. For example, James Barth, the senior finance fellow at the Milken Institute and the Lowder Eminent Scholar in Finance at Auburn University, has commented: The huge loss at J.P. Morgan Chase, even if it grows to $4 billion or slightly higher, does not put a big dent in the overall financial soundness of the bank. Nor does it pose a systemic risk. Our concern should be whether this is an isolated incident.… The solution is not tougher regulations based upon the J.P. Morgan Chase loss. Instead, it is the enforcement of existing regulations. Regulators already have the authority to prevent excessively risky activities. They simply must use that authority. If regulators won't use the powers they possess, what good does it do to give them even tougher powers? In this context, Senator Sherrod Brown has drawn attention to a letter he requested and then received from the OCC in which the agency reported that its examiners were not aware of the level of trading risks at the CIO until April 2012. Fed Governor Daniel Tarullo has, however, suggested that it is unrealistic to expect bank regulators to track trades that are specialized in nature and that are relatively small in the overall context of a bank's activities: [W]e do already, within our supervisory process, look at market indicators, including aggregated market information, to try to identify trends that might be relevant to the particular institution. But that—our ability to do that obviously depends on the relative granularity or specificity of the information…. I think, in this case, for example, I believe there were products which, although they could be a big part of the market, JP Morgan could be a big part of a market, for the overall financial markets, were still relatively small. So unless there's reporting on more specific products like that, our normal look at market information wouldn't have—wouldn't have revealed this. So it has to come internally. Going forward, the OCC, JP Morgan's principal regulator, has said that it is Undertaking a two-pronged review of our supervisory activities and response. The first component is focused on evaluating the adequacy of current risk controls and risk governance at the bank, informed by their application to the positions at issue. The second component evaluates the lessons learned from this episode that could enhance risk control and risk management processes at this and other banks and improve OCC supervisory approaches. The SEC is the regulator for securities markets and corporate governance. The SEC also jointly regulates certain financial derivatives with the Commodity Futures Trading Commission (CFTC). As securities markets regulator, the SEC is not primarily concerned with the trading gains or losses of any single market participant; rather, the SEC's regulatory authority is primarily directed at ensuring appropriate disclosures by publicly traded firms, transparency and efficiency of trading platforms, properly aligned incentives for CEO compensation, and an absence of conflicts of interest by securities market professionals. The SEC also has authority to enforce securities laws related to executive compensation. The DFA prohibits compensation that inappropriately rewards excessive short-term risk-taking. SEC Chair Mary Schapiro has said that the JP Morgan trades in question did not occur in a broker-dealer supervised by the SEC and thus the agency has no direct oversight of the trades. Moreover, she has said that the agency does not oversee broad-based credit default swap indices, which are according to various reports at the center of the trades. She has indicated that the agency's inquiry into the trades will include an examination of the truthfulness and accuracy of JP Morgan's financial disclosure, particularly its earnings statements and its first quarter 2012 financial disclosures. The CFTC regulates certain financial derivatives activities, in some cases jointly with the SEC. This authority includes requiring certain derivatives to be standardized and traded through central clearinghouses and on exchanges. It also includes regulating the safety of trading platforms, including elements such as position limits, capital, and margin. In some cases, CFTC authority might also extend to investigations of alleged market manipulation by some derivatives traders. Like the SEC, the CFTC is not primarily concerned with trading gains or losses of individual market participants. Rather, the CFTC generally requires that markets be transparent and free of conflicts of interest. CFTC Chair Gary Gensler has said that the agency is responsible for regulating the "credit derivative products" and that the agency has launched a probe of the JP Morgan losses. There have been some reports that the market in those securities may have suddenly become illiquid while JP Morgan was trading them. Among other things, the CFTC's probe may address whether the bank or its counterparties were responsible for or suffered from inappropriate or even possibly illegal market manipulation. Swap Dealer Registration. Title VII of the DFA gave the CFTC the power to require swap dealers and major swap participants (MSPs) to register and report to the CFTC and, similarly, the power to require security-based swap dealers (SBSDs) to register with the SEC. The goal of this appears to have been to bring swap dealers and their activities under more regulatory scrutiny. Testifying at the May 22, 2012, Senate Banking hearing, CFTC Chair Gensler noted that his agency had the authority to monitor credit derivatives markets for fraud and manipulation. However, he noted that the CFTC did not yet regulate JP Morgan as a swaps dealer because it had not yet finalized the DFA swap dealer registration rules. He then agreed with a committee member's description of the situation as a regulatory "no man's land." International Coordination Issues . Title VII (§722(d)) of the DFA also states that reforms to swap markets shall apply to activities outside the United States if they have "a direct and significant connection with activities in, or effect on, commerce" of the United States. The CFTC reports that it is currently close to publishing a release on the cross-border application of swaps market reforms. The release will provide interpretive guidance as to how swaps reforms apply to cross-border swap activities. It will include guidance as to when overseas swap market participants and swap dealers can comply with DFA reforms via reliance on comparable foreign regulatory regimes. Similarly, SEC Chair Schapiro stated that the SEC is working on a cross-border release expected to issue similar guidance, which will be released "soon." This issue is applicable to the JP Morgan situation because many of the trades were conducted in London, although the losses on the trades are expected to be absorbed by the U.S. holding company. Similarly, during the 2008 financial crisis, derivatives losses for AIG affected the U.S.-based holding company, resulting in a government-funded financial rescue—although most of AIG's derivatives losses were from transactions originating in London. One policy issue that has been raised by CFTC Chair Gensler, at a hearing in May 2012, is how best to supervise overseas derivatives activities of U.S.-based firms with sufficient stringency, while enabling them to effectively compete with overseas firms that may have more operational flexibility. JP Morgan's trading losses have helped to revive discussions over the doctrine of "too big to fail" financial institutions. This is the view that the federal government would not allow big, complex, highly interconnected institutions like JP Morgan to fail because the ensuing damage of such a failure to the nation's financial system would be devastating. Following the financial panic of 2008, the demise of the investment banking firm Lehman Brothers has figured prominently in discussions surrounding the doctrine's merits. More recently, referencing JP Morgan's trading losses, financial columnist Holman Jenkins contended that economic realities appear to dictate implicit national support for the doctrine: [I]f we're going to have a government-insured banking system that repeatedly encounters and perhaps causes financial turbulence, then having most of the risk concentrated in a handful of very large banks is a regulatory convenience. It makes it easier for Washington to stabilize the system by stabilizing just a few institutions…. The U.S. is committed to a system resting on a small number of giant, government-aligned institutions…. Central banks everywhere, trying to goose sluggish economies and prop up fragile banking systems, are creating giant pools of liquidity that must go somewhere. That some pooled up at J.P. Morgan, finding its way into a large, hedgeable portfolio of relatively safe corporate bonds, is hardly surprising. Others, however, say that the lessons that should be drawn from the bank's losses are at odds with the concept of "too big to fail." For example, Sheila Bair, senior advisor to the Pew Charitable Trusts and the former chair of the FDIC, observed, This is still a very serious issue. I think it does underscore that even with very good management these institutions are just too big to manage, and especially when dealing with very complex derivatives instruments trying to hedge risk in large securities trading books, even the best of managers can stumble. And so it does I think require, suggests smaller, simpler institutions, ones that have more focused management on particular business lines. A related part of the "too big to fail" discourse is a discussion on the implications of the losses for whether Congress should consider reinstating parts of the Glass-Steagall Act of 1933 (P.L. 73-66), also known as the Banking Act of 1933. The act separated commercial banking from investment banking, making them separate lines of commerce. Some have argued that JP Morgan's trading losses offer evidence on the desirability of separating commercial banking from investment banking through Glass-Steagall-like regulation. However, because JP Morgan's losses did not occur in the investment banking part of the firm, but rather occurred in a unit connected to the depository banking part, citing the bank's trading losses may not effectively advance the argument. To help monitor systemic risk in the financial system and coordinate several federal financial regulators, Title I of the DFA created the Financial Stability Oversight Council (FSOC). The council is composed of the heads of financial regulatory agencies and a state insurance regulatory representative. The act also provides criteria for designating firms as systemically important financial institutions (SIFIs) and requires that SIFIs be subject to a number of heightened prudential standards compared with non-SIFI banks. The act also directs the Federal Reserve to monitor and regulate SIFIs, in addition to the functional regulators that supervise each SIFI subsidiary. As mentioned earlier, no financial institutions have yet been officially designated as SIFIs. FSOC's proponents say that it was "established to promote a more comprehensive approach to monitoring and mitigating systemic risk." Others, however, including Representative Jeb Hensarling, vice chair of the House Committee on Financial Services, have characterized FSOC as a mechanism that bolsters what they consider to be the flawed doctrine of "too big to fail." If JP Morgan were designated a SIFI, a number of policy issues would apply. In particular, the DFA requires the Federal Reserve to monitor and enforce heightened standards for SIFIs for (1) risk-based capital, (2) leverage limits, (3) liquidity requirements, (4) resolution plan, (5) concentration limits, (6) contingent capital, (7) short-term debt limits, and (8) overall risk-management standards. According to at least one regulatory official, FSOC discussed the JP Morgan trading losses, but did not believe that the losses were large enough to be a threat to JP Morgan's solvency or a threat to financial stability. According to news reports, FSOC is examining the JP Morgan trading loss "so that mistakes in judgment at individual banks are less likely to threaten the broader financial system and economy." Systemic risk refers to the possibility that the financial system as a whole might become unstable, rather than to the financial condition of individual market participants. It has been widely argued that stable financial systems do not transmit or magnify shocks to the broader economy. A firm, person, government, financial utility, or policy might create systemic risk if (1) its failure causes other failures in a domino effect; (2) news about its assets signals that others with similar assets may also be distressed, in what is frequently referred to as contagion; (3) it contributes to "fire sales" during asset price declines; or (4) its absence prevents other firms from using essential services, called critical functions. JP Morgan's trading losses are generally deemed to be too small to be a significant threat to current financial stability, a view shared by the officials from the OCC and the Treasury Department. Still, it could be argued that the JP Morgan trading losses illustrate a potential source of systemic risk. When large firms trade in markets with low volume, as reportedly was the case for the bank's loss-generating trades, they may have trouble liquidating their positions without affecting market prices. Under these conditions, their losses may be much greater than their risk-management models anticipated, if the models assumed normal conditions. As Comptroller of the Currency Thomas Curry observed, "this asset-liability management function [the location of JP Morgan's CIO] is separate from JPMC's investment banking business, where most trading and market making takes place." This quote helps emphasize the fact that, at JP Morgan and other LCBOs, most of the trading is done in their investment bank subsidiaries, not in CIO or CIO-like bank depositary-related units. This is one reason why concerns have arisen over whether JP Morgan's losses signal the potential for problematic losses at other such banks as well. According to financial columnist Andrew Ross Sorkin, Well, the issue here in terms of why we should really care, the true context is that a Jamie Dimon, who's been exalted, as you said in your interview with him, as one of the great risk managers, to make a mistake, we've got a problem because it means that other banks could also make a mistake. And they could potentially make a mistake on a much grander scale. And who gets left holding the bag if that happens? The taxpayers. The same concerns arise for some who observe the environment in which large banks operate. The argument is that large banks such as JP Morgan are under pressure to make profits by investing in higher yielding but riskier securities in an environment in which there is muted demand for conventional commercial loans. Many of their potential corporate customers are hoarding their cash. An additional incentive to search for higher yield is said to come from the fact that safe investment alternatives like investment-grade government bonds currently have such low yields that it is hard for banks to profit from the yield spread between them and their deposits. In sum, it is argued that banks such as JP Morgan face heightened pressures to invest in riskier but potentially higher rewarding securities. On the other hand, at least two arguments have been advanced to refute the notion that JP Morgan's losses have any bearing on the likelihood of problematic losses at other large banks. One argument is that, time after time, banks' greatest exposure to losses has come from their loan making, not the kinds of trades that appear to have led to JP Morgan's losses. The other argument is that, since the financial panic, the banking system has generally become significantly better capitalized. Section 619 of the Dodd-Frank Act is commonly referred to as the Volcker Rule, after Paul Volcker, former chairman of the Board of Governors of the Federal Reserve System, or the Merkley-Levin Amendment, after its sponsors, Senators Jeff Merkley and Carl Levin. It prohibits banking entities from engaging in proprietary trading or affiliating with certain classes of firms that speculate in financial markets. This is an approach that Chairman Volcker advocated and Senators Merkley and Levin pursued by introducing legislation in March 2010 that contributed to the development of the final language of Section 619. Under the conformance regulations, firms are not required to comply with the Volcker Rule until July 21, 2014. Since April 19, 2012, however, they are on notice that they are to engage in good faith efforts to achieve compliance by the 2014 date. One of the concerns of policymakers is whether the JP Morgan trading strategy that led to the recent losses would have been permissible were the Volcker Rule in force. At present, however, there is no final rule implementing the statute. In addition, it could be argued that there is insufficient specific information about the bank's transactions that resulted in the losses to meaningfully address that policy question even if the rules were in place. Also, there are some indications that the proposed rule that was issued by the agencies on November 7, 2011, will continue to evolve. The language of the statute and the proposed regulation, however, provide insight into the multiplicity of details and complexity of documentation that would be required for a banking firm to justify a trade of the magnitude reported for the JP Morgan transactions as a risk-mitigating hedging activity. With respect to proprietary trading, Section 619 states that "[u]nless otherwise provided in [Section 619], a banking entity shall not … engage in proprietary trading." It defines the term banking entity broadly to include bank and financial holding companies and their affiliates. The trades resulting in billions of dollars in losses were executed by a JP Morgan unit that is part of a national bank, and, thus, a banking entity that will be subject to the Volcker Rule's ban on proprietary trading. The proposed regulation generally tracks the statutory definition of proprietary trading and defines proprietary trading as "engaging as principal for the trading account of the covered banking entity in any purchase or sale of one or more covered financial positions. Proprietary trading does not include acting solely as agent, broker, or custodian for an unaffiliated third party." Section 619's prohibition of proprietary trading attempts to prevent depository banks with access to the taxpayer-assisted safety net from speculating in financial markets. It can be difficult to distinguish a bank speculating for itself from a bank acting on behalf of customers or a bank hedging to improve safety and soundness. Section 619, therefore, provides for a number of exemptions, including but not limited to risk-mitigating hedging, trades in U.S. Treasury securities, market-making, and certain customer-driven services. Application and implementation of Section 619 will ultimately depend upon how financial regulators interpret proprietary trading and its exemptions. One of the exemptions provided in Section 619 is for trades that are intended to reduce the risks of the bank. Specifically, Section 619 exempts ''risk-mitigating hedging activities in connection with and related to individual or aggregated positions, contracts, or other holdings of a banking entity that are designed to reduce the specific risks to the banking entity in connection with and related to such positions, contracts, or other holdings." In general, the criteria attempt to ensure that the proposed trade is being used to offset risks to the bank's existing portfolio, not to take advantage of perceived new speculative opportunities. Among the qualifications are that the banking entity must already be exposed to the risk being hedged, that the hedge not earn appreciably more profits than the firm would lose on the hedged position, and that the hedge be reasonably correlated to the risk being hedged. Hedging to mitigate risks in a banking entity's portfolio is not only a regular activity but it is one that protects the banking entity's safety and soundness. In proposing the regulation, the agencies noted the difficulties in distinguishing risk-mitigating hedging from speculative proprietary trading retrospectively. As with any of the otherwise proprietary trading activities that Section 619 permits, risk-mitigating hedging activities are subjected to certain prudential backstops: (1) they may not be conducted unless they are authorized under other law; (2) they may be subjected to further limitations by the agencies; (3) they must not result in "a material conflict of interest" between the banking entity and its customers; (4) they must not result in a "material exposure by the banking entity … to high risk assets or high-risk trading strategies"; and (5) they must not threaten the safety and soundness of the banking entity or U.S. financial stability. Deemphasizing the potential merits of the proposed rule, other observers such as Senator Richard Shelby, ranking Member of the Committee on Banking, Housing, and Urban Affairs, have suggested that it would be easier to ensure bank safety and soundness by simply ensuring that banks are subject to robust capital requirements. Some critics argue that the proposed rule is too permissive and will fail to prevent speculative trading. They argue that a large and complex banking organization will likely be able to justify almost any speculative trade as being "reasonably correlated" to other positions held by the institution. Critics argue that the definition of hedge should be narrowed and that firms should not be able to justify trades by reference to the general condition of the banking entity. Other critics argue that the proposed rule is too strict and will prevent legitimate hedging activities. They point out that prudential hedging must address a variety of sources of risks, not just the risks of individual assets. For example, when a bank provides a loan commitment to an industrial manufacturer, the bank is exposed to counterparty risk (the risk that the manufacturer will default), interest rate risk (the risk that interest rates will move in a disadvantageous direction during the period of the loan commitment), and a number of other risks. These critics point out that the natural diversification of large portfolios makes measuring risk more complex. According to this perspective, firms should be able to use hedging strategies that address residual risks after a portfolio is netted, which might not be easy to document to satisfy the conditions in the proposed rule. Criticism has been leveled by industry participants. Professor Hal Scott, for the Committee on Capital Markets Regulation, sees the criteria as indicating "a belief on the part of the Agencies that hedging should be more precise a practice than it generally is, not producing excess profit or loss." Morgan Stanley recommended that the agencies dispense with the "list of specific criteria because of the possibility of interpreting it as requiring the matching of principal positions with specific hedges," and adopt a more process-oriented framework. PNC Financial Services Group Inc. (PNC) took issue with the implication in the proposal that proper hedges do not result in appreciable profit. It called upon the agencies to focus not on compensation, but on the purpose for which the hedge was transacted, and reminded the agencies that "the fact that the organization managed to effectively hedge its risks in a manner that also provides incidental profits to the organization promotes—rather than jeopardizes—the safety and soundness of the entity." JP Morgan criticized both the statute and the regulation as leaving "in doubt the protection of ... numerous legitimate asset-liability management hedging activities" and described some that it had used during the financial crisis that might not be exempt under the rule and that might be analogous to the type of hedging involved in the recent losses. JP Morgan asserts that its losing trades, as described above, would qualify as a risk-mitigating hedge under the proposed rule. However, the Volcker Rule has yet to be implemented, so that it is not possible to test the bank's assertion. Going forward, there are several unanswered questions over the potential applicability of the not-yet-implemented Volcker Rule to scenarios such as the JP Morgan trades. For example, to the layman, hedging strategies are expected to lose money. Hedges are usually payments for protection from bad events—protection that the hedger hopes will not be needed. For example, if an airline signs a 10-year fuel contract at what it expects the long-run cost of fuel to be, and wishes to hedge against even higher fuel prices, then the airline might buy fuel derivatives. If fuel prices remain in the expected range, then the airline paid for protection, which it turns out it did not need, and the airline loses money on the hedge, but makes money overall. It would be very strange if people were surprised by announcements by airlines that they had lost money on fuel derivatives. The airline only expects to make money on the hedge if the price of fuel rises—which is bad for the airline overall; otherwise the airline expects to lose on the hedge. It may be that the JP Morgan trade was indeed a hedge, but it has some elements that appear to violate the common understanding of a hedge. According to public disclosures, the JP Morgan trade was designed to profit the firm if economic conditions improved in the short run. Presumably, JP Morgan's general banking business is expected to perform better if economic conditions improve. Therefore, by itself, the described trade does not fit the common understanding of hedging as described above. Modern risk management and modern banking regulation are more complex than the common understanding of hedging. Financial institutions are exposed to a variety of risks from a number of sources, some of which may occasionally move in opposite directions. For example, two of the risks that a bank faces when it extends a loan commitment are (1) the risk that the borrower will default (credit risk), and (2) the risk that interest rates will move in a disadvantageous direction during the period of the loan commitment (interest rate risk). In general, interest rate risk is usually correlated with general economic conditions and partially offsets default risk. Whereas a loan commitment to a manufacturer may be more likely to default during bad economic conditions, a loan commitment to a law firm specializing in bankruptcy cases may be less likely to default during bad economic conditions. Therefore, it is possible that there would not be a single best hedging strategy to address the performance of a portfolio of loan commitments in a bad economic environment. In practice, banks are exposed to several other risks besides credit and interest rate risk, including but not limited to market risk, reputational risk, legal risk, and liquidity risks. The JP Morgan CIO transactions might be a real hedge under this more nuanced appreciation for modern risk management. In addition to any correlations to JP Morgan's overall portfolio, a complex transaction might be used to manage the risk of another position that is slowly unwinding—which in the absence of full information might appear to "double down" on JP Morgan's overall portfolio. Or, a complex transaction might be used to manage residual counterparty risk or residual market risk even though the transaction does not address the firm's overall portfolio or correlate with a specific asset or liability. Without more details, competing characterizations cannot be ruled out. In addition to issues raised at the firm level, the JP Morgan trades raise issues of congressional oversight. The complexity of modern risk management may make it difficult for Congress to monitor enforcement of the Volcker Rule by the financial regulators. Financial regulators do not generally comment on ongoing investigations or supervisory activities. As a result, it is difficult for a third party to confirm the facts of specific transactions or know how the regulators might apply the rules to specific firms or transactions. Risk management involves the identification, analysis, assessment, control, avoidance, minimization, or elimination of unacceptable risks. Sound risk management is considered to be an integral part of bank safety and soundness. A key responsibility of bank regulators such as OCC is evaluating bank management's ability to identify and control risk. The importance of sound bank risk management has been underscored by Federal Reserve Chairman Ben Bernanke, who observed that, in addition to adequate bank management of its capital and liquidity, "the third key element of safe and sound banking ... is effective risk management. The [financial] crisis exposed the inadequacy of the risk-management systems of many financial institutions." The large reported trading losses at JP Morgan, a firm that enjoyed a reputation for quality risk management, have undermined its reputation and raised questions about the true nature of the bank's risk management. In response to a question about the possible meaning of the bank's losses, Treasury Secretary Tim Geithner responded, "I think this failure of risk management is just a very powerful case for financial reform." Based on media accounts and pending the conclusion of the various ongoing investigations into the CIO's trades, this report undertakes several tasks in this section. The report summarizes two developments that may have contributed to shortcomings in the risk management of JP Morgan's CIO and its trades: (1) Mr. Dimon's alleged emphasis on profit-making and attendant risk taking in the CIO; and (2) alleged potentially lax and ineffective oversight of trading at the CIO. It also examines two other developments that also have played a role in the diminution of the quality of the risk management: (1) alleged potential shortcomings in models used by the CIO to gauge the riskiness of trades; and (2) the composition of the risk management committee of the bank's board of directors, whose members may have lacked the experience necessary to effectively monitor the company's risk exposure. As noted earlier, various media reports allege that, after arriving at JP Morgan, Mr. Dimon played a key role in refashioning the CIO into a unit with a heightened emphasis on making profits by taking on greater trading risks. For example, one report stated that "Dimon pushed (Ina) Drew's unit … to seek profit by speculating on higher-yielding assets such as credit derivatives …. The CEO suggested positions [and] [p]rofits surged over the next five years as assets quadrupled." Allegedly lax and ineffective oversight of the CIO's trades has been cited as a key potential contributor to the unit's perceived risk management shortcomings. Mr. Dimon has testified that there were a number of risk management failings, including the following: the "CIO's traders did not have the requisite understanding of the risks they took"; "personnel in key control roles in CIO were in transition and risk control functions were generally ineffective in challenging the judgment of CIO's trading personnel"; the "CIO, particularly the synthetic credit portfolio, should have gotten more scrutiny from both senior management and the firm-wide risk control function"; and each line of business at JP Morgan "has a risk committee. [The] risk committees and the head of risk in those businesses report to the head of risk of the company, and there are periodic conversations between the risk committees and the head of risk of the company and [the bank's] … senior operating group about the major exposures [they are] taking.… [T]hat chain of command didn't work in this case…. because … [the firm] missed a bunch of these things. Augmenting these observations, JP Morgan's July 2012 CIO Task Force Update , also found that during the first quarter of 2012, the CIO's management "did not set clear objectives, properly vet the trading strategy or sufficiently examine underlying positions and correlations"; during the first quarter of 2012, CIO traders and managers of the problematic synthetic securities portfolio "did not adequately highlight issues or seek support from broader CIO or [JP Morgan] firm [level] management"; the CIO's mandate and [its successful] historical performance may have "contributed to the less than rigorous scrutiny of the unit"; during the first quarter of 2012, the CIO's review and analysis of the problematic synthetic securities portfolio "was too optimistic"; the effectiveness of the CIO's risk management group was "challenged" by lack of a "robust risk committee structure"; "transitions in key roles"; and "lack of adequate resources"; the CIO risk management group failed to "meet expectations" in various areas, including using inadequate risk limit levels, being insufficiently forceful in challenging the CIO's front office, and being insufficiently willing to communicate potential concerns over CIO risk-taking to top JP Morgan management; and the synthetic credit portfolio securities traded by the CIO problematically lacked "specific risk limits" and were subject to no limits on "size, asset type, or risk factor." In addition, media accounts of comments by past and present JP Morgan employees provide other examples of potential risk management shortcomings at the bank's CIO, which could be associated with alleged lax and ineffective management. Although these news reports may provide some insights, the reader should keep in mind that observations based on personal recollections may be subject to errors of recollection, inaccuracy, and the potential for prejudiced observations. As early as 2007, reports indicated that some JP Morgan investment banking executives were raising concerns over the CIO's growing size and the complexity of many of its trades. In reports that some current JP Morgan officials dispute, some former JP Morgan officials have said that risk managers charged with overseeing the CIO's trades tended to be marginalized by Mr. Macris, the head of the CIO's London office. Generally supportive of Mr. Macris' management, Ina Drew, head of the CIO, was reported to have intervened sparingly in Mr. Macris' management of the office. In 2011, in what some say reflected aggressive risk taking, Mr. Macris reportedly unilaterally decided to abandon risk-control caps that had previously required traders to exit positions when their losses exceeded $20 million. According to some media reports, in 2010, Joseph Bonocore, then-CIO's chief financial officer, reportedly grew concerned when he learned that traders at the London desk lost about $300 million on foreign exchange options during a few days, losses that had not been offset by offsetting gains. He supposedly took his concerns to Barry Zubrow, then-JP Morgan's chief risk officer, and Michael Cavanagh, then-bank's chief financial officer, both of whom reported to the CEO. Both men are reported to have authorized Mr. Bonocore to order a reduction to the trading position. The London desk reportedly complied with Mr. Bonocore's subsequent order to reduce the position. JP Morgan's corporate treasurer reported to the bank's chief finance officer and managed the firm's balance sheet, capital, funding, and liquidity, and worked closely with heads of all its business lines. After 11 years as the CIO's CFO, Joseph Bonocore became the bank's treasurer in late 2010. His duties were reported to include weekly reviews of the CIO's trading positions. Reports say that before leaving the position of treasurer in October 2011, Mr. Bonocore expressed general concerns over the risks that the CIO's London office had been taking. After Mr. Bonocore left, the position of treasurer remained unfilled through March 2012, the period in which the CIO suffered the large reported trading losses. Reports suggest that in 2011, several executives in the CIO's New York office developed some concerns that traders at the London desk were taking large trading positions in illiquid derivative indexes. Peter Weiland, then-CIO's chief risk officer, and some of his colleagues supposedly reportedly grew concerned that, if JP Morgan opted to sell the positions, it could incur significant losses. In late 2011, during a meeting of CIO management personnel, which was reported to include Ms. Drew, Mr. Macris, and Mr. Weiland, the group was reported to agree that the positions should be liquidated over the course of time. Subsequently, however, the London desk reportedly conducted new trades that appeared to contradict the directive. During the summer of 2011, Mr. Weiland, then-CIO's chief risk officer, reportedly began an assessment of the CIO's risk limits, which included discussions on whether restrictions needed to be tighter and more specifically delineated. According to the news reports, new limits were not implemented. An article in the Wall Street Journal reported that, while he was the CIO's risk officer, Mr. Weiland told Ms. Drew that she needed to hire more personnel with credit risk skills and to allow those CIO credit risk officers who were engaged in other duties to focus on their jobs and not other tasks. Late in January 2012, Mr. Weiland was replaced as the unit's head of risk with Irvin Goldman, a former trader who the news accounts indicate had no experience as a risk manager and who was the brother-in-law of Mr. Zubrow, the bank's chief risk officer. According to a number of reports, Ina Drew, the CIO's head, contracted Lyme disease in 2010 and took an extended leave in order to recover. During her absence, news reports said that the heads of the CIO's New York and London offices argued over the level of risk that the London office was taking, particularly the risks being taken by Bruno Iskil, a key trader in the office, who was nicknamed the "whale." Mr. Macris, head of the London office, was reported to ignore the cautionary concerns expressed by the head of the New York desk. When Ms. Drew, who worked out of New York, returned, it was reported that she was unable to reassert control over the London desk. As part of their risk management practices, banks regularly project the greatest potential losses that their portfolios might sustain during a given specific time frame, typically a day, or in a particular financial scenario, for a specific set of assumptions. Value at Risk (VaR) models are a standard means by which financial institutions like JP Morgan make such projections. Although regulators have designated VaR as the preferred method for measuring risk, they do not explicitly require financial institutions to use a standard or specific method. Financial regulators, however, acknowledge that VaR calculations can take many different forms, and do not mandate the use of any particular VaR measurement. Still, every major financial institution measures and reports VaR. As the primary prudential regulator of federally chartered insured depositories, the OCC is also charged with overseeing their risk management. The OCC expects regulated banks to use appropriate VaR methodologies and to have appropriate internal controls in place to effectively manage risk. In some instances, VaR models are also used to help decide how much capital a bank will hold against trading its assets. Mandatory SEC filings of publicly traded banks often include VaR-based calculations. Such disclosures inform investors seeking to assess a firm's financial health and the risks that it may confront. During the May 2012 conference call, JP Morgan CEO Dimon announced that the bank was amending its disclosures in the first quarter 2012 press release concerning the CIO's VaR calculations. He said that the model that the CIO had used for several years to calculate the VaR was changed during the first quarter of 2012. The replacement model projected that the unit's extreme daily loss could be up to $67 million during the quarter. Mr. Dimon indicated that the replacement model was subsequently deemed to be "inadequate," and that the older model was better and had been restored. The older model showed the unit at risk of losing as much as $129 million a day, nearly twice as much as the subsequently abandoned replacement model. Historically, it appears that changes in the composition of portfolio assets, new information about the assets, or newer techniques for computing VaR may all prompt a company to change the way in which it measures VaR. By providing enhanced insight into corporate risks, such changes may benefit both investors and regulators. In addition to JP Morgan, other large banks such as Bank of America, Morgan Stanley, and Citigroup have also changed their VaR methodologies during the past several years. Still, concerns have arisen that the JP Morgan CIO's shift to the seemingly more optimistic VaR model during the first quarter of 2012 may have been a deliberate attempt to hide awareness of the level of risk that the CIO was taking on. Christopher Finger, a founder of the RiskMetrics Group, which helped pioneer VaR models, acknowledged that on occasion banks do modify their VaR models. He added, however, that these generally modest changes tend not to result in "dramatically different results." In this context, Mr. Finger noted that the older VaR model that the CIO reinstated reported "a huge, huge increase in risk" over what the earlier replacement model showed. On the general issue of their changing VaR models, Mr. Dimon observed that the company has "an independent model review group that looks at changes in models, and [that in the bank] … [m]odels are constantly being changed for new facts." Mr. Dimon also noted that "models are backward looking … [a]nd never are totally adequate in capturing changes in businesses, concentration, liquidity, or geopolitics or things like that. So we're constantly improving them." Later, however, among other things, the July 2012 CIO Task Force Update concluded that (1) the approval process for the problematic VaR model by JP Morgan's independent model review group was inadequate because of its reliance on parallel testing by the CIO and its use of unsuitable and overly optimistic assumptions; and (2) the implementation of the CIO's model's implementation by the CIO was undermined by operational challenges. As part of its investigation of JP Morgan, the OCC may be interested in examining the corporate protocol used to authorize the changes to the CIO's VaR models. SEC Chair Mary Schapiro has emphasized that "when there are changes to the VaR model … those changes have to be disclosed." As part of its probe of JP Morgan, the agency is likely to examine the accuracy and the timeliness of the bank's disclosures on changes to its VaR models for the CIO. Many financial firms have a risk management committee that is composed of members of the board. JP Morgan has such a risk committee. It is charged with approving its risk policies and overseeing its chief risk officer. According to company documents, the committee met seven times in 2011 and had the same three members between 2008 and the second quarter of 2012. As of May 2012, the three directors on JP Morgan's risk management committee were James Crown, president of Chicago-based Henry Crown and the lead board director of the General Dynamics Corporation; Ellen Futter, a former corporate lawyer and former chair of the New York Federal Reserve Bank from 1992 to 1993, who is currently president of the American Museum of Natural History; and David Cote, CEO of Honeywell International. An article in Bloomberg reported that, unlike the risk committee of a number of other large domestic banks, no members of the committee reportedly worked at a bank or had been employed as financial risk managers. It also reported that the only committee member with experience on Wall Street, James Crown, the committee chair, reportedly has not worked in the industry in more than 20 years. Comparing the composition of the bank's risk management committee to its mandate, Anat Admati, a professor of finance at Stanford University who specializes in corporate governance, commented, "It seems hard to believe that this is good enough. It's a massive task to watch the risk of JP Morgan." According to a report from CNBC , in 2011, the CtW Investment Group, a union-based shareholder group, sent a letter to JP Morgan officials expressing concerns about the risk management committee. CNBC reported that the group complained that the panel had no one with expertise in "banking or financial regulation" and that it was "not up to the task of overseeing risk management at one of the world's largest and most complex financial institutions." At least one analyst, Barbara Matthews, a financial regulatory expert at BCM Regulatory Analytics in Washington, DC, asked whether the committee may have been out of JP Morgan's risk management "loop." She also observed, "If we find out that this is yet another example like AIG where information was not trickling up to the risk committee, that is one kind of risk management problem that frankly should have been addressed a long time ago." Mr. Dimon has defended the risk management committee, saying that it "did a great job," noting that it had successfully seen the company through the earlier financial panic. Mr. Dimon stated that the bank's board was replacing two committee members, and he also emphasized that it was unfair to blame the risk committee for the trade losses because it had depended on management to communicate key risk-based information to it, a responsibility that he said management failed to fulfill. The Dodd-Frank Act requires that each publicly traded bank holding company with $10 billion or more in assets establish a risk management committee entirely composed of independent directors. The committee is also required to have at least one member who is a risk management expert. As of July 2012, the Federal Reserve had not completed its rulemaking in this area. | On May 10, 2012, JP Morgan disclosed that it had lost more than $2 billion by trading financial derivatives. Jamie Dimon, CEO and chairman of JP Morgan, reported that the bank's Chief Investment Office (CIO) executed the trades to hedge the firm's overall credit exposure as part of the bank's asset liability management program (ALM). The CIO operated within the depository subsidiary of JP Morgan, although its offices were in London. The funding for the trades came from what JP Morgan characterized as excess deposits, which are the difference between deposits held by the bank and its commercial loans. The trading losses resulted from an attempt to unwind a previous hedge investment, although the precise details remain unconfirmed. The losses occurred in part because the CIO chose to place a new counter-hedge position, rather than simply unwind the original position. In 2007 and 2008, JP Morgan had bought an index tied to credit default swaps on a broad index of high-grade corporate bonds. In general, this index would tend to protect JP Morgan if general economic conditions worsened (or systemic risk increased) because the perceived health of high-grade firms would tend to deteriorate with the economy. In 2011, the CIO decided to change the firm's position by implementing a new counter trade. Because this new trade was not identical to the earlier trades, it introduced basis risk and market risk, among other potential problems. It is this second "hedge on a hedge" that is responsible for the losses in 2012. Several financial regulators are responsible for overseeing elements of the JP Morgan trading losses. The Office of the Comptroller of the Currency (OCC) is the primary prudential regulator of federally chartered depository banks and their ALM activities, including the CIO of JP Morgan, even though it is located in London. The Federal Reserve is the prudential regulator of JP Morgan's holding company, although it would tend to defer to the primary prudential regulators of the firm's subsidiaries for significant regulation of those entities. The Federal Reserve also regulates systemic risk aspects of large financial firms such as JP Morgan. The CIO must comply with Federal Deposit Insurance Corporation (FDIC) regulations because it is part of the insured depository. The Securities and Exchange Commission (SEC) oversees JP Morgan's required disclosures to the firm's stockholders regarding material risks and losses such as the trades. The Commodity Futures Trading Commission (CFTC) regulates trading in swaps and financial derivatives. The heads of these agencies coordinate through the Financial Stability Oversight Council (FSOC), which is chaired by the Secretary of Treasury. The trading losses may have implications for a number of financial regulatory issues. For example, should the exemption to the Volcker Rule for hedging be interpreted broadly enough to encompass general portfolio hedges like the JP Morgan trades, or should hedging be limited to more specific risks? Are current regulations of large financial firms the appropriate balance to address perceptions that some firms are too-big-to-fail? The trading losses raise concerns about the calculation and reporting of risk by large financial firms. JP Morgan changed its value at risk (VaR) model during the time of the trading losses. Some are concerned that VaR models may not adequately address potential risks. Some are concerned that the change in reporting of the VaR at JP Morgan's CIO may not have provided adequate disclosures of the potential risks that JP Morgan faced. Such disclosures are governed by securities laws. |
The length of the appointment process during presidential transitions has been of concern to observers for more than 30 years. The appointment process is likely to develop a bottleneck during this time due to the large number of candidates who must be selected, vetted, and, in the case of positions filled through appointment by the President with the advice and consent of the Senate (PAS positions), considered by that body. By the end of the first 100 days of the Reagan presidency, nominees had been confirmed for 19% of vacant PAS positions. At the same juncture at the outset of the Clinton Administration, nominees had been confirmed for 11% of these openings. The figure for the presidency of George W. Bush was 7%, and for the Obama Administration was 14%. Delays in installing new leadership would not be welcome by an Administration at any time, but they may be particularly problematic during the transition period between Presidents. In 2004, the National Commission on Terrorist Attacks Upon the United States (known as the 9/11 Commission) identified what it perceived were shortcomings in the appointment process during presidential transitions that could compromise national security policymaking in the early months of a new Administration. The commission noted that a new President is likely to need his or her top advisers in place to maintain continuity in this area. Furthermore, the President has limited time following his or her election to initiate an administrative and legislative agenda. Presidential transitions involve large-scale changes in the political leadership of the executive branch. Table 1 summarizes Office of Personnel Management (OPM) data indicating that more than 2,600 political appointees occupied positions in the 15 departments as of June 30, 2016. These officials included top-level policymaking presidential appointees, political managers, and confidential support staff. Unlike career public service executives and employees, top political officials in the federal departments and agencies nearly always serve at the pleasure of the President or agency head. These officials typically resign when the Administration changes, especially if the incoming President is from a different party. This report describes and analyzes the processes, during a presidential transition, by which top-level executive branch PAS positions have been filled in the recent past. Outside of top White House staff appointments, these are a new President's earliest and arguably most important appointments. In the next section, the usual process is described in three stages: " Selection and Vetting ," " Senate Consideration ," and " Appointment ." That section also provides examples of ways the Senate has adapted its procedures during recent presidential transitions. The report then discusses processes—recess appointments and designations under the Federal Vacancies Reform Act of 1998—that could be used by the President to unilaterally fill positions on a temporary basis. The final portion of the report provides additional information on the length of time required in the past to fill Cabinet positions and certain national-security-related subcabinet positions. This section provides related data for the five transitions since 1980: Carter-Reagan (1980-1981), Reagan-Bush (1988-1989), Bush-Clinton (1992-1993), Clinton-Bush (2000-2001), and Bush-Obama (2008-2009). This report does not cover and will not track the 2016-2017 transition process. Under the Constitution, the power to appoint the top officers of the United States is shared by the President and the Senate. The appointment process consists of three stages—selection and vetting, Senate consideration, and appointment. In the first stage, the White House selects and clears a prospective appointee before sending the formal nomination to the Senate. With the assistance of, and preliminary vetting by, the White House Office of Presidential Personnel, the President selects a candidate for the position. Members of Congress and interested parties sometimes have recommended candidates for specific PAS positions. In general, the White House is under no obligation to follow such recommendations. In the case of the Senate, however, it has been argued that Senators are constitutionally entitled, by virtue of the advice and consent clause noted above, to provide advice to the President regarding his or her selection; the extent of this entitlement is a matter of some debate. As a practical matter, when Senators have perceived that insufficient pre-nomination consultation has occurred, they have sometimes exercised their procedural prerogatives to delay, or even effectively block, consideration of a nomination. Following this selection, the candidate needs to be cleared for nomination. During the clearance process, the candidate prepares and submits several forms, including the "Public Financial Disclosure Report" (Office of Government Ethics (OGE) 278), the "Questionnaire for National Security Positions" (Standard Form (SF) 86), a supplement to SF 86 ("86 Supplement"), and sometimes a White House Personal Data Statement. The clearance process often includes a background investigation conducted by the Federal Bureau of Investigation (FBI), which prepares a report that is delivered to the White House. It also includes a review of financial disclosure materials by the OGE and an ethics official for the agency to which the candidate is to be nominated. If conflicts of interest are found during the background investigation, the OGE and the agency ethics officer may work with the candidate to mitigate the conflicts. An incoming President can, of course, begin the process of selecting the members of his or her Administration at any time. During recent decades, most major candidates have begun preparing for a potential presidency before Election Day by assigning a small number of advisors to begin developing transition plans. Since 2008, candidates and their transition advisors have been aided in the selection of personnel by a provision of the Intelligence Reform and Terrorism Prevention Act of 2004 (known as the Intelligence Reform Act). This provision directs the Office of Personnel Management (OPM) to transmit an electronic record "on Presidentially appointed positions," with specified contents, to each major party presidential candidate "not later than 15 days" after his or her nomination. The provision permits OPM to make such a record available to any other presidential candidate after these initial transmittals. The Intelligence Reform Act also included several provisions that responded to 9/11 Commission recommendations regarding the vetting process. One provision of law permits each major party presidential candidate to submit, before the general election, security clearance requests for "prospective transition team members who will have a need for access to classified information" in the course of their work. The law directs that resulting investigations and eligibility determinations be completed, as much as possible, by the day after the general election. To the degree that transition team members go on to be nominees to positions in the new Administration, this proactive clearance process might also accelerate the transition period appointment process. The Intelligence Reform Act also amended the Presidential Transition Act of 1963 (PTA). The amendments included a provision stating that the President-elect should submit, as soon as possible after the presidential election, the "names of candidates for high level national security positions through the level of undersecretary" of agencies and departments. A second provision requires the responsible agency or agencies to carry out background investigations of these candidates for high-level national security positions "as expeditiously as possible ... before the date of the inauguration." More broadly, the PTA authorizes the General Services Administration to provide resources, services, and other support associated with the presidential transition process. In earlier decades, this support was provided only after a presidential election. Since the publication of the report of the 9/11 Commission, however, this statute has been amended to authorize support for eligible candidates prior to the election. As just noted, it was amended in 2004 by the Intelligence Reform Act. Further amendments came in 2010 and 2016. The aim of extending the act to encompass the pre-election period was to "strengthen the transition planning of the multiple parties whose active involvement is necessary for a successful transition: the incumbent president, major candidates, the president and vice-president-elect, senior career officials across the government, and the transition support team at GSA." These latter amendments were first implemented during the 2016-2017 presidential transition. As amended, the PTA directs the President and incumbent Administration to establish a specified transition-related organizational infrastructure as well as to provide certain pre-and post- election support to eligible candidates and then to the President-elect. The statute also authorizes eligible candidates to fund pre-election transition activities through their campaigns. Arguably, beyond the provisions of the PTA that specifically apply to the selection and vetting of an incoming President's leadership team, the infrastructure and support provided for in the statute create conditions that have the potential to enhance, more generally, the ability for an incoming Administration to carry out these activities. Once the President has selected and vetted an individual and submitted a nomination, the Senate determines whether or not to confirm the nomination. Once received from the President, each nomination is referred to the committee with jurisdiction over the agency in which the nominee would serve or the subject matter related to the nomination. Action at the committee level is at the discretion of the committee chair. No Senate or committee rule requires that a committee, or the full Senate, act on any nomination. Most nominations, however, proceed through the process in a routine, timely fashion. During the 111 th Congress (2009-2010), the first Congress of the Obama Administration, the Senate took a median of 52 days to confirm a nomination to a full-time departmental position. The Senate confirmation process begins at the committee level. The rules and procedures of the committees frequently include timetables specifying minimum periods between steps in the process. Committee activity on nominations generally includes investigation, hearing, and reporting stages. During the investigation phase, many committees require nominees to fill out questionnaires that the committee has prepared and to provide financial and biographical information. If the committee acts on a nomination, the process typically begins with a hearing, where the nominee and other interested parties may testify and Senators may question the nominee. After the hearing—if there is one—the committee usually votes on reporting the nomination to the Senate. The committee may choose to report the nomination favorably, unfavorably, or without recommendation. The full Senate may then take up the nomination and vote on it. Confirmation of a nomination by the Senate requires a simple majority, but no Senate Rule limits how long nominations may be considered on the floor. Many nominations are taken up and considered under the terms of a unanimous consent agreement that limits debate. In the absence of unanimous consent, a cloture process might be necessary to bring an end to Senate consideration of a nomination and get to a final vote. Invoking cloture on a nomination to a position other than to the Supreme Court requires a simple majority, under an interpretation of Senate rules established on November 21, 2013. The cloture process, however, is potentially time consuming. After a nomination is called up, which a majority can do without delay, cloture can be filed on it. The cloture motion, however, does not mature until two days of session later. If cloture is then invoked, there may be up to a maximum of 30 hours of consideration of the nomination. Because of the time necessary for a majority to invoke cloture, and the high number of nominations to be considered, the Majority Leader often seeks to arrange consideration of nominations by unanimous consent. It is therefore sometimes possible for Senators to place "holds" on nominations to delay or prevent their consideration (or for other reasons unrelated to the particular nomination). A "hold" is an informal Senate practice in which a Senator requests that his or her party leader delay floor action on a particular matter, in this case a nomination. It is up to the Senate Majority Leader whether to honor the request of the Senator wishing the hold or to try to bring the nomination to a vote. A "hold" will not necessarily have the effect of killing a nomination, because cloture could be attempted, but it could signal that the Senate may not be able to consider the nomination expeditiously. Although the Senate confirms most nominations, some are not confirmed. Rarely, however, is a nomination voted down on the Senate floor. Most stall in committee, either by committee inaction or after an unsuccessful vote to report. The committee might not forward the nomination for a variety of reasons, including opposition to the nomination, inadequate amount of time for consideration of the nomination, or factors that may have nothing to do with the merits of the nomination. If a nomination is not acted upon by the Senate by the end of a Congress, it is returned to the President. Pending nominations also may be returned automatically to the President at the end of the first session of a Congress or at the beginning of a recess of 30 days or longer, but the Senate rule providing for this return is often waived. The 9/11 Commission, which expressed concern about delays in the confirmation process for the nation's national security team, recommended that the Senate change its rules to require that all action on these nominations, such as hearings, committee meetings, and floor votes, be conducted within 30 days of the Senate's receipt of the nomination. The Senate adopted a sense of the Senate resolution stating that the 30-day target should be the goal. Such sense of the Senate language is not binding on the chamber, but represents a position that at least a majority of the Senators endorsed. Under regular procedure, Senate action on nominations is triggered by the President's submission of the nomination to the Senate. During recent Presidential transitions, however, it appears that the Senate has developed a flexible, informal process to allow quick action on nominations to Cabinet and other high-level positions. After recent Presidents were sworn-in on January 20, one of their first official acts was to send to the Senate many, if not all, of their nominations to Cabinet positions and some other high-level positions. The Senate confirmed many of those individuals on January 20 or soon thereafter. If the Senate did not act quickly, the President could be in the position of trying to make new policy without his top people in place to carry out his plans. But the tight timeline would typically allow the Senate little time to review the nominations to some of the most important positions in the federal government. The Senate developed a method for handling this situation; committees act on "anticipated" or "expected" nominations. As shown in Appendix A , which is discussed in detail later in this report, Senate committees held hearings on most nominations to Cabinet positions at the outset of the Reagan, Clinton, George W. Bush, and Obama Administrations before inauguration day. Some committees also took votes in relation to the anticipated nominations before January 20 during these transitions. During the transition from President Carter to President Reagan, for example, Senate committees held confirmation hearings and voted to recommend confirmation of Reagan's nominees to be secretaries of Defense, State, and Treasury before the formal submission of the nominees on January 20. That allowed the full Senate to vote almost immediately on those nominations. The Senate followed the same pattern for the three positions during the transition from President George H. W. Bush to President Clinton, and Senate committees reported nominations to two of the positions during the transition from President Clinton to President George W. Bush. During the transition from President George W. Bush to President Obama, Senate committees held pre-inaugural hearings for at least 16 anticipated nominations. At least two of these anticipated nominations were publicly endorsed by Senate committees before they were considered by the full Senate. For example, the Senate Foreign Relations Committee voted in relation to the nomination of Alexander M. Haig, Jr., to be President Reagan's Secretary of State on January 15, 1981, during the final session of its confirmation hearing on the nomination. The chair of the committee moved "that in anticipation of the nomination, that it be approved, subject to the formal receipt of it from the new President of the United States." When the Senate Finance Committee acted upon the nomination of Lloyd Bentsen to be President Clinton's Secretary of the Treasury on January 12, 1993, the chair made the following motion before the hearing began: "I would ask that a vote be undertaken in the following form. The resolution will read, 'The Committee on Finance, having under consideration the perspective (sic) nomination of Lloyd Bentsen to be Secretary of the Treasury, recommends that the nomination be confirmed when received by the Senate.'" The Senate Armed Services Committee, on January 19, 2001, acted on the "expected" nomination of Donald H. Rumsfeld to be Secretary of Defense. The committee voted to recommend that the full Senate confirm the Rumsfeld nomination. The language in the committee's legislative calendar for the 107 th Congress notes that "On January 19, 2001, the Committee voted by a roll call vote of 19-0 in favor of a motion that the Committee recommend the Senate give its advise and consent to the nomination when it was received by the Senate from the President and without referral to the Committee." Other nominations to Cabinet or top-level positions also have been approved by committees in advance of their actual submission. On January 18, 2001, for example, the Senate Energy and Natural Resources Committee voted in relation the nomination of Spencer Abraham to be Secretary of Energy. During the committee meeting, the chair said that the committee's actions were "in keeping with the past practices of the committee in reporting cabinet nominations made by incoming presidents prior to their official receipt by the Senate…." In that case, the motion agreed to by the committee was to "move that the committee report favorably on the proposed nomination and recommend that when the nomination is received the Senate give its advice and consent." In January 2009, Senate committees formally endorsed at least two anticipated nominations prior to their submission to the Senate by President Obama. On January 15, the Senate Foreign Relations Committee agreed to a motion to "report the nomination of Sen. Hillary Rodham Clinton of New York to be secretary of State pending the receipt of formal nomination papers." A letter from the chair and ranking member of the Senate Committee on Agriculture, Nutrition, and Forestry, introduced into the Congressional Record on January 20, indicated that members of the committee unanimously supported the nomination of Thomas J. Vilsack to be Secretary of Agriculture. According to the letter, In anticipation of the [Vilsack] nomination, the Committee conducted a hearing on January 14, 2009, in public session, to carefully review the credentials and qualifications of Secretary-designate Vilsack. Governor Vilsack was the only witness at the hearing. After the hearing and after Committee Members had the opportunity to review responses to written questions submitted for the record, the Committee polled all Members of the Committee to ascertain their positions regarding this nominee. We are pleased to report that the Committee on Agriculture, Nutrition, and Forestry unanimously supports the nomination of Thomas J. Vilsack for the position of Secretary of Agriculture. In the third and final stage of the appointment process, the confirmed nominee is given a commission signed by the President, with the seal of the United States affixed thereto, and is sworn into office. The President may sign the commission at any time after confirmation, and the appointment process is not complete until he or she does so. Once the appointee is given the commission and sworn in, he or she has full authority to carry out the responsibilities of the office. The length of the time between confirmation and appointment varies in accordance with the preferences of the Administration and appointee. The Constitution and federal statutes provide several authorities for temporarily filling vacancies in PAS positions: the Federal Vacancies Reform Act of 1998, the President's constitutional recess appointment power, and position-specific temporary appointment provisions. Each of these authorities, discussed below, might be used during a presidential transition as well as later in the President's term. Congress has provided limited statutory authority for temporary presidential appointments under the Federal Vacancies Reform Act of 1998 (Vacancies Act). Appointees under the Vacancies Act are authorized to "perform the functions and duties of the office temporarily in an acting capacity subject to the time limitations" provided in the act. A temporary appointment under the Vacancies Act ordinarily may last up to 210 days (approximately seven months). During a presidential transition, however, the 210-day restriction period does not begin to run until either 90 days after the President assumes office (i.e., mid-April), or 90 days after the vacancy occurs, if it is within the 90-day inauguration period. Furthermore, the time restriction is suspended if a first or second nomination for the position has been submitted to the Senate for confirmation and is pending. When an executive agency position requiring confirmation becomes vacant, it may be filled temporarily under the Vacancies Act in one of three ways. First, the first assistant to such a position may automatically assume the functions and duties of the office. This provision may be of limited utility to a new President, because he or she probably would not yet have installed a first assistant of his own choosing. Nonetheless, if the first assistant who becomes the acting leader is a career executive, he or she might lend continuity to agency operations and reduce organizational confusion and paralysis during the transition. The Vacancies Act also provides that the President may direct an officer in any agency who is occupying a position requiring Senate confirmation to perform the tasks associated with the vacant position. Although this option would allow a new President to authorize one of his or her confirmed appointees to perform key tasks, it might be of limited utility in the early months of the new Administration when PAS positions in general are thinly staffed. Individuals the President might designate to serve under this provision include appointees of the President's party who are incumbents in fixed-term membership positions on boards and commissions and holdover appointees from the previous Administration who support the President's policy preferences. Finally, the Vacancies Act provides that the President may temporarily fill the vacant position with any officer or employee of the subject agency who has been occupying a position for which the rate of pay is equal to or greater than the minimum rate of pay at the GS-15 level, and who has been with the agency for at least 90 of the preceding 365 days. Under this provision, the President could draw, for example, from among an agency's career Senior Executive Service (SES) members, and this might allow him or her to select, as a temporary office holder, an individual who supports his or her policy preferences. As the presidency lengthens, more of the new President's lower level political appointees (non-career SES and Schedule C) will meet the longevity requirements of the Vacancies Act, providing the President with an additional pool of individuals from which to draw. Notably, the U.S. Court of Appeals for the D.C. Circuit has held that a provision of the Vacancies Act limits the conditions under which an individual may serve in both an acting capacity in, and as the nominee to, the same position. The court's opinion appears to allow an individual to serve on this basis only if the individual has been confirmed as the first assistant to the vacant position or has served as first assistant for more than 90 of the preceding 365 days. A second form of limited-term appointment without Senate confirmation is a presidential recess appointment. The President's authority to make recess appointments is conferred by the Constitution, which states that "[t]he President shall have Power to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session." A recess appointment expires at the sine die adjournment of the Senate's "next session." As a result, a recess appointment may last for less than a year, or nearly two years, depending on when the appointment is made. Although a new President might elect to use his or her recess appointment authority during a Senate recess soon after he or she takes office, should such a recess arise, four recent Presidents used it sparingly during their first calendar years in office. President George H.W. Bush made five such appointments in November and December of 1989. President Clinton did not use this authority until 1994. President George W. Bush made one recess appointment during the Senate's August recess in 2001. President Obama did not make recess appointments until his second year in office. President Reagan did not use this authority during his first six months in office, but he made 34 recess appointments between August and December of 1981. Starting in the 110 th Congress, the Senate and House have sometimes used certain scheduling practices as a means of precluding the President from making recess appointments. The practices do this by preventing the occurrence of a Senate recess of sufficient length for the President to be able to use his recess appointment authority. In a June 26, 2014, opinion, the U.S. Supreme Court held that the President's recess appointment power may be used only during a recess of 10 days or longer. Seemingly, the Senate, or the Senate and the House together, would determine if and when it will adjourn for a recess of 10 days or longer and thus allow for the possibility of recess appointments. In some cases, Congress has expressly provided for the temporary filling of vacancies in a particular PAS position, and such authorities might be used during a presidential transition. Generally, such provisions employ one or more of several methods: (1) a specified official is automatically designated as acting; (2) a specified official is automatically designated as acting, unless the President provides otherwise; (3) the President designates an official to serve in an acting capacity; or (4) the head of the agency in which the vacancy exists designates an acting official. An individual serving in an acting or temporary capacity in an advice and consent position might not be paid for his or her services if he or she has been nominated to the position twice and the second nomination has been withdrawn or returned. A provision of the FY2009 Financial Services and General Government Appropriations Act states the following: Effective January 20, 2009, and for each fiscal year thereafter, no part of any appropriation contained in this or any other Act may be used for the payment of services to any individual carrying out the responsibilities of any position requiring Senate advice and consent in an acting or temporary capacity after the second submission of a nomination for that individual to that position has been withdrawn or returned to the President. At times, a nominee is hired as a consultant while awaiting confirmation, but he or she may serve only in an advisory capacity and may not take on the functions and duties of the office to which he or she has been nominated. A nominee to a Senate-confirmed position has no legal authority to assume the responsibilities of this position; the authority comes with one of the limited-term appointments discussed above, or with Senate confirmation and subsequent presidential appointment. As noted at the outset of this report, the length of the appointment process during presidential transitions has been of concern to observers for more than 30 years. The 9/11 Commission drew fresh attention to this issue in 2004, recommending changes that might accelerate the selection, clearance, and Senate consideration processes, particularly for "national security positions." Congress responded by enacting new statutory provisions related to the selection and vetting process, as well as a provision expressing a "sense of the Senate" regarding a timetable for submission and consideration of high-level national security nominations during transitions. It also amended the Presidential Transition Act in 2010 and 2016. This statute now directs the President and incumbent Administration to establish a specified transition-related organizational infrastructure as well as to provide certain pre-and post-election support to eligible candidates and then to the President-elect as he selects his appointees. (See "Selection and Vetting During Presidential Transitions" and "The Senate Confirmation Process and Presidential Transitions," above.) To assist Congress in determining whether the 2004 statutory changes discussed above have had an impact on the length of the transition period appointment process, this section compares the length of the appointment process during the 2008-2009 Bush-Obama transition with the length of this process during the four previous transitions: Carter-Reagan (1980-1981), Reagan-Bush (1988-1989), Bush-Clinton (1992-1993), and Clinton-Bush (2000-2001). The section also compares the length of the transition-period appointment process among Cabinet positions and, for subcabinet positions, among agencies. Two groups of appointed positions were selected for comparison based on the criteria discussed above. These groups and collected data are shown in appendices to this report. Appendix A provides nominee-level data on the length of the process for making appointments to Cabinet-level positions during the five transitions identified above. Appendix C provides nominee-level data on the length of the process for making appointments to selected higher-level national security-related and economic and financial subcabinet positions during these transitions. Appendix B provides information on the method CRS used for selecting the positions included in Appendix C . Appendix A and Appendix C each provide information about the intervals, in elapsed days, between different points in the appointment process. These points include election day, which is the point after which the successful candidate and his or her supporters fully turn their attention from campaigning to selecting a governing team, announcement of a proposed nominee, submission of a nomination, Senate committee hearing on the nomination, Senate committee report or discharge, and final disposition by the Senate. The comparisons found that, in general, transition-period Cabinet-level nominees were selected, vetted, considered, and confirmed expeditiously; they generally took office shortly after the new President's inauguration. In some cases, however, Cabinet-level offices were not filled until more than six weeks after inauguration. For example, President George H.W. Bush's Secretary of Defense was not confirmed until March 17, President Clinton's Attorney General was not confirmed until March 11, and President Obama's nominations to be Secretary of Commerce and Secretary of Health and Human Services were not confirmed until March 24 and April 28, respectively. Filling the position of Director of ONDCP, which was accorded Cabinet rank by President Clinton and President George W. Bush, took far longer—more than six months in each case—than other Cabinet-level positions. Comparisons among the five transitions suggest that some Presidents announced their Cabinet-position selections sooner than did others, but that this did not appear to accelerate the pace of the overall appointment process. The comparisons also found that, in general, initial nominees to the subcabinet positions studied took about twice as long (more than six months from Election Day) as Cabinet-level nominees (less than three months) to be selected, vetted, considered, and confirmed. Comparisons among the median intervals for the five transitions suggest that (1) the time required for selection and vetting of nominees for these positions has grown longer; (2) the period of Senate consideration has also grown longer; (3) Senate consideration of a nomination was generally faster than the selection and vetting process that preceded it; and (4) the median durations of the appointment process for the George H.W. Bush, Clinton, George W. Bush, and Obama transitions were notably longer than for the Reagan transition. A comparison among nominations to subcabinet positions in the federal organizations discussed in this report (six departments and the intelligence community) revealed notable differences in the average duration of the process. In general, intelligence community positions were filled most quickly (median = 92 days). Among the nominations to departmental positions, State Department nominations, on average, were submitted and confirmed most quickly (median = 148 days). A more detailed discussion of the comparisons conducted for this report follows. This subsection first provides a comparison, among the five transitions, of the pace of Cabinet appointments. It then provides a comparison, among the 21 positions, of the pace of these appointments. These comparisons are drawn from the data presented in Appendix A . Cabinet-level PAS positions considered in this analysis include all heads of departments, as well as the following positions that have often been accorded Cabinet rank: the Administrator of the Environmental Protection Agency (EPA), the Director of the Office of Management and Budget (OMB), the U.S. Trade Representative, the Director of the Office of National Drug Control Policy (ONDCP), the Chair of the Council of Economic Advisers, and the U.S. Permanent Representative to the United Nations. On the whole, the analysis of Cabinet appointments indicates that the transition-period appointment process has been effective, in recent decades, at installing the Cabinet of a new Administration soon after the new President takes office. The graph on the left side of Figure 1 indicates that, on average, President-elect Obama announced his selections sooner than did three of the four preceding Presidents. His pace was similar to that of President George H.W. Bush. The graph compares the median number of days from election day to the announcement of the President-elect's nominees or, in a limited number of instances, his decision to retain the incumbent appointee. This suggests that, for this group of appointments, a President-elect could move as rapidly in 2008 as during any other transition in the preceding 30 years. President-elect George W. Bush announced his selections later, on average, than did the other four Presidents-elect. This finding is not surprising, perhaps, given the unique circumstances of the 2000 presidential election and the truncated transition period that followed. The graph on the right side of Figure 1 shows that the median Cabinet appointment was finalized—in most cases confirmed—within days of inauguration day during four of the five transitions. It shows that, for each of these four transitions—Reagan, Clinton, George W. Bush, and Obama—the median Cabinet appointment was finalized within 77-79 days of election day. This finding, when paired with the graph on the left, indicates that, on average, the Senate confirmed these four Presidents' Cabinet members within days of inauguration regardless of the average pace of a President-elect's announcements. The median Cabinet appointment was finalized less quickly—about a week later—during the transition from President Reagan to President George H.W. Bush. Notably, this transition was the sole instance among the five in which an incoming President was of the same party as the outgoing President. In addition, it is the only instance among the five in which the incoming President had been part of the previous Administration. These dynamics might have influenced the pace of this transition. Other factors, including opposition among some Senators to specific nominations—including the first nominee to be Secretary of Defense, who was rejected—might also have contributed to this higher median. In addition, three department heads serving at the end of the Reagan Administration—the Attorney General, the Secretary of Education, and the Secretary of the Treasury—continued to serve through the beginning of the incoming Bush Administration, a fact not reflected in the median shown in Figure 1 . The statistics presented in Table 2 can be used to draw comparisons of the pace of appointment of the various Cabinet positions without regard to Administration. These statistics bear out the key finding seen in Figure 1 : looking at the entire pool of Cabinet appointments across the five transitions, the median Cabinet nomination was confirmed within 79 days of the election—that is, within a few days of inauguration. The statistics in Table 2 also show, however, that all Cabinet-level nominees do not move through the process at the same pace. On average, department head nominees go through the process more quickly (median election to final disposition = 79 days) than do Cabinet-rank nominees (median = 84 days). In general, department head nominees and Cabinet-rank nominees were announced equally quickly. However, on average, department head nominees were brought before the committee of jurisdiction more quickly and confirmed at an earlier date than Cabinet-rank nominees. Perhaps more striking was a difference between the two groups in the variation in the median interval between election day and final disposition. Among department nominees, the median duration of the appointment process ranged from 77 days, for the Secretaries of State, Education, and Homeland Security, to 103 days, for the Secretary of Health and Human Services. Among Cabinet-rank nominees, the median interval for filling the position of OMB Director was the shortest, at 79 days. Most notably, nominations to the position of Director of the Office of National Drug Control Policy took far longer to go through every stage of the process than any other Cabinet nomination. The median interval for filling this position when it was designated as Cabinet rank was 309 days, or approximately ten months. All four transition period nominations to the position of ONDCP Director were anomalous when compared with all other Cabinet-level nominations. As the data in Appendix A show, each of these nominations—including the two instances in which the President had designated the position to be of Cabinet-rank—took much longer than other Cabinet nominations. The elapsed time between election day and final disposition for President Clinton's nomination of Lee Brown was 225 days, and that for President George W. Bush's nomination of John P. Walters was 393 days. Because of these extreme values for this position, the mean length of the process for all Cabinet-rank nominees is 23 days longer than the median length. This subsection first provides a comparison, among the five transitions, of the pace of the selected subcabinet appointments. It then provides a comparison, among the seven organizational units (six departments and the intelligence community), of the pace of these appointments. These comparisons are drawn from the data presented in Appendix C . This appendix includes data on 126 nominations to 38 positions across the five transitions identified above. Positions considered in this analysis include selected higher-level subcabinet posts in the federal government organizations that are most involved with policymaking related to national security and to the federal response to the economic and financial downturn at the time of the Bush-Obama transition. A complete list of these selected positions and a detailed explanation of the method by which they were chosen are provided in Appendix B . Figure 2 includes three bar graphs that provide a comparison, among the five transitions, of three key intervals for these subcabinet appointments: election to nomination submission, submission to final disposition, and election to final disposition. The graphs suggest, with regard to nominees to these subcabinet positions, the following: (1) the selection and vetting of these nominees grew longer over the course of the five transitions; (2) the selection and vetting process does not seem to have been shortened by the changes enacted in response to the recommendations of the 9/11 Commission; (3) the Senate consideration process grew longer over the course of the five transitions; (4) on average, the Senate consideration process makes up a shorter portion of the appointment process for these positions than does the selection and vetting process; and (5) the median length of the process from election to final disposition during the four later transitions was notably longer than it was during the Reagan transition. The graph on the left side of Figure 2 indicates that, on average, the selection and vetting period grew longer, from 91 days under President Reagan to 167 days under President Obama, over these 5 transitions. The length of the period under President George W. Bush could be attributed, in part, to potential delays in the selection process that might have resulted from the truncated transition period following the 2000 election. The graph in the center of Figure 2 shows that the median number of days between the submission of a nomination and its final disposition (usually confirmation) more than doubled, from 21 days under President Reagan to 48 days under President Obama. The graph on the right side of Figure 2 compares, among the five transitions, the length of the appointment process from election day to final disposition. The graph indicates that the median length of the process under President Reagan, at 114 days (about 4 months), was notably shorter than under any of the other four Presidents, at 187-198 days (6-6½ months). Table 3 provides statistics regarding intervals in the transition-period appointment process for selected subcabinet positions, without regard to Administration. The median length of the total process, from election day to final disposition, for all specified subcabinet nominees was 189 days. This means that half of the nominees to positions in this group were confirmed within approximately six months of election day, or, in other words, within approximately 3½ months of inauguration day. The remaining half were confirmed after that point. The statistics in Table 3 can be used to draw comparisons of the pace of appointment to positions in the various departments, and the intelligence community, without regard to Administration. Positions in the intelligence community were filled, on average, much more swiftly than were positions in the other agencies. This finding may be an artifact of the small number of nominations in the dataset (five), as well as the fact that the majority of these were nominations to be Director of the Central Intelligence Agency, a high-profile subcabinet post. The median nomination to a position in the intelligence community reached the point of final disposition within 92 days, or about 3 months, of election day. For all but one of the intervals measured (submission to hearing), the median for a nomination to an intelligence community position was as short as, or shorter than, those of any of the departments. Among the departments, State Department nominees, on average, completed the appointment process most quickly. Half the nominations reached the end of the process within 148 days (about five months) of election day. The median interval between election day and nomination submission, at 121 days, or roughly four months, was shorter for State Department nominees than it is for any of the other departments. However, the median period of Senate consideration for Department of Defense (20 days) nominees was shorter than that of State Department nominees (23 days) as well as that of nominations to positions in other departments. Nominees to Department of Justice positions took the longest to be confirmed, on average. The median interval between election and confirmation for these nominees was 206 days, or nearly seven months. During the five transitions studied, the incoming Administration has typically taken much longer to submit a nomination to one of the subcabinet positions in this group than the Senate has taken to dispose of it, once it was submitted. As Table 3 shows, for all selected subcabinet nominations, the median interval between election and submission is roughly five times longer than the median interval between submission and final disposition. Appendix A. Transition Period Nominations to Cabinet Positions, 1981-2009 Appendix B. Subcabinet Position Selection Method This report includes analysis of nominations to a group of higher-level subcabinet positions in the departments most involved with policymaking related to national security and to economic and financial matters. A two-stage process was used to select this group. First, relevant criteria were used to identify an appropriate pool of positions. Second, those positions to which a nomination had been made during at least one of the five presidential transitions included in this study were selected from this pool. The inclusion of the national security related positions was based on a 9/11 Commission recommendation that the "president-elect ... submit the nominations of the entire new national security team, through the level of under secretary of cabinet departments, not later than January 20," and that the "Senate ... adopt special rules requiring hearings and votes to confirm or reject national security nominees within 30 days of their submission." The commission did not further specify which departments or under secretaries should be treated in this manner. In an effort to select positions for analysis that might match those intended by the commission, criteria similar to those in the passages above were adopted. Positions were to be part of the Department of State, the Department of Defense, the Department of Justice, the Department of Energy, the Department of Homeland Security, or the intelligence community and either (1) at Level I of the Executive Schedule and not included in the Cabinet position data provided elsewhere in the report; (2) at Level II of the Executive Schedule; (3) titled as under secretaries; or (4) for those organizations without under secretaries, equivalent in title and at Level III of the Executive Schedule. With regard to the agencies listed above, one exception to these criteria was made. The Director of the Federal Bureau of Investigation (FBI) was excluded, although as a Level II position, it met the criteria. The position was excluded because it has a 10-year term and therefore has not been routinely filled at the beginning of a new Administration. During the 2008-2009 presidential transition, it was argued that the pace at which top leadership positions at the Department of the Treasury were filled would also be of concern due to federal government efforts to address the nation's economic and financial downturn. For this reason, Treasury positions similar to those in the other organizations were included. Although they did not meet the criteria above, two other positions, the Assistant Secretary for Financial Stability and the Special Inspector General for the Troubled Asset Relief Program, were also included because they were specifically associated with the federal government's efforts. Table B-1 identifies the positions that were selected based on the process specified above. The positions are listed by organization, and the organizations are listed in the order established. The subcabinet positions that were actually subject to analysis in this report were drawn from this pool. Given the nature and purpose of the study, the group selected for analysis excluded those positions to which no nomination was made during the first year of at least one of the five Administrations included in this study. The positions excluded on this basis are shown in italics. Appendix C. Transition Period Nominations to Selected Subcabinet Positions, 1981-2009 | The length of the appointment processes during presidential transitions has been of concern to observers for more than 30 years. The process is likely to develop a bottleneck during this time due to the large number of candidates who must be selected, vetted, and, in the case of positions filled through appointment by the President with the advice and consent of the Senate (PAS positions), considered by that body. The appointment process has three stages: selection and vetting, nomination and Senate consideration, and presidential appointment. Congress has taken steps to accelerate appointments during presidential transitions. In recent decades, Senate committees have provided for pre-nomination consideration of Cabinet-level nominations; examples of such actions are provided in this report. In addition, recently adopted statutory provisions appear designed to facilitate faster processing of appointments during presidential transitions. Among the new statutory provisions were those enacted by Congress in response to certain 9/11 Commission recommendations, mainly in the Intelligence Reform and Terrorism Prevention Act of 2004. Also part of this act was a sense of the Senate resolution stating that nominations to national security positions should be submitted by the President-elect to the Senate by Inauguration Day, and that Senate consideration of all such nominations should be completed within 30 days of submission. The President has certain powers—constitutional recess appointment authority and statutory authority under the Federal Vacancies Reform Act of 1998—that he or she could, under certain circumstances, use unilaterally to fill PAS positions on a temporary basis. Analyses of data related to Cabinet and selected subcabinet appointments during the last five transitions from 1981 through 2009 suggest the following: In general, transition-period Cabinet-level nominees were selected, vetted, considered, and confirmed expeditiously; they generally took office shortly after the new President's inauguration. Comparisons among the five transitions suggest that some Presidents announced their Cabinet-position selections sooner than did others, but that this did not appear to affect the pace of the overall appointment process. On average, the interval between election day and final disposition of nominations to selected subcabinet positions was more than twice as long as that of nominations to Cabinet-level positions, though nominees to subcabinet positions in some departments were faster than others. Comparisons among the median intervals for the five transitions suggest that (1) the time required for selection and vetting of nominees for these positions has grown longer; (2) the period of Senate consideration has also grown longer; (3) Senate consideration of nominations is generally faster than the selection and vetting process that precedes it; and (4) the median durations of the appointment process for the George H.W. Bush, Clinton, George W. Bush, and Obama transitions were notably longer than for the Reagan transition. |
The current budget situation has prompted Congress to examine a variety of revenue raising options. Repealing or modifying some or all of the long list of so-called tax expenditures is often included as part of those options. The exclusion from income of the interest paid on state and local government debt is one such tax expenditure. There are three primary types of proposals that include changes to state and local government bonds—capping the preference, eliminating the preference, and changing the preference to a direct issuer subsidy. These three types can be seen in the following proposals. The President's FY2013 budget proposal would include partial elimination of the tax preference by capping the preference at the 28% marginal tax rate. The Simpson-Bowles (SB) deficit reduction plan proposes complete elimination of the tax preference. The Congressional Budget Office (CBO) "Revenue Options" report proposes changing the tax exclusion for investors to a direct tax subsidy to issuers . One of the cited reasons for the elimination (or at least modification) of the tax exclusion for interest on state and local government bonds (tax-exempt bonds) is that the preference is a financially and economically inefficient tool for inducing public capital investment. In short, the federal revenue loss is greater than the subsidy to state and local governments. Thus, modifying, eliminating, or reducing the tax preference could generate federal revenue and make the federal tax code more economically efficient. Policymakers must weigh a variety of competing concerns when evaluating these proposals to modify tax-exempt bonds. Issuers, such as governments and certain private entities, benefit from lower cost of borrowing and relatively high-income investors benefit from the resulting tax-free income. With the proposals presented here, issuers would likely encounter higher borrowing costs and relative wealthy investors would lose a significant tax preference. In particular, the top 10% of all earners realize more than 77% of the total reported tax-exempt interest income. The reduced benefits accruing to issuers and these investors, however, should be weighed against the benefit of a potentially more efficient (and to some, equitable) federal income tax. The impact of changes to the tax treatment of the interest on state and local government debt can be assessed from three perspectives to analyze: the size of the tax expenditure, the distribution of the tax-exempt interest income, and the value of the tax-exemption to issuers. The size of the tax subsidy is significant. The Administration's 2013 budget includes a tax expenditure estimate of $227.5 billion for the 2013 to 2017 budget window for public purpose state and local government bonds ( Table 1 ). The 2013 budget also estimates that non-governmental tax-exempt bonds (so-called qualified private activity bonds) will generate an additional $78.7 billion in revenue losses over the same time frame. The single largest non-governmental tax expenditure for tax-exempt bonds is for non-profit hospital bonds ($26.9 billion). The column identified "Rank" in Table 1 is the position of the provision in the list of all 173 federal tax expenditures contained in the 2013 budget. How this tax subsidy is distributed across taxpayers underlies the analysis of the potential impact of tax reform proposals. The President's 2013 budget would cap the exclusion of interest income from tax-exempt bonds at 28%. The Simpson-Bowles (SB) plan would eliminate the income exclusion entirely and lower marginal tax rates. The CBO deficit reduction options report proposes to replace the interest exclusion for tax-exempt bonds with a direct payment to issuers. The distribution of tax-exempt interest is skewed to higher income taxpayers because the marginal income tax rates provide a higher after-tax rate of return for these taxpayers. Consequently, proposals that change the tax rules for tax-exempt bonds will have a greater impact on higher-income taxpayers. The Internal Revenue Service, Statistics of Income Division (SOI), publishes annual summaries of the composition of income for all tax returns. Relatively few returns report earning tax-exempt interest income. In 2009, approximately 4.5% of all returns (6.3 million) reported tax-exempt interest income. As income increases, however, the percentage of returns reporting tax-exempt interest income rises significantly. Almost two-thirds (64.1%) of returns with adjusted gross income (AGI) over $1 million included tax-exempt interest income. Table 2 presents the distribution of interest income by AGI with a break at the $200,000 income threshold. The $200,000 income level roughly approximates the income threshold at which policymakers have discussed reducing preferences in the tax code—as in the FY2013 budget proposal. In 2009, 80.6% of returns reported AGI under $200,000. These returns with AGI of less than $200,000 accounted for just 50.5% ($37.2 billion) of tax-exempt interest income. The remaining 19.4% of returns with AGI above $200,000 reported 49.5% ($36.4 billion) of tax-exempt interest income. The data by broad AGI groups presented in IRS published reports provides a reasonable assessment of the distribution of tax-exempt interest income. The IRS also releases data for public use that can be organized to address different policy questions. For example, Figure 1 reports the portion of tax-exempt interest reported by tax return decile for the 2007 tax year. The deciles for the figure are created by sorting all returns by AGI from lowest to highest. The first decile is the first 10% of returns and includes many returns with "negative" income. Each successive decile represents the next 10%. The deciles provide a smoother climb up through the range of AGI. The tenth or highest decile, returns with AGI above $113,400, reported over 77% of all tax-exempt interest income and exceeded total AGI for the cohort. Interestingly, the bottom decile, with negative aggregate AGI, actually claimed 2.0% of the interest income and was the only other cohort with tax-exempt interest income that exceeded aggregate AGI. This income cohort likely includes filers that in previous years had been in higher income cohorts and are temporarily in this lowest cohort. This cohort also includes retired taxpayers that do not earn wage and salary income. Within the top decile, tax-exempt interest income is even further concentrated in the top one percent of AGI. In 2007, the top one percent of returns all reported AGI over $407,500 and earned 49.0% of all tax-exempt interest income. Clearly, the benefit of the tax exclusion is concentrated in the upper income groups. Thus, modification of the tax preference will impact this income cohort the most. Generally, the interest rate on tax-exempt bonds is considered the "cost of capital" for the issuing entity. If the interest rate on state and local government bonds is lower than the comparable taxable interest rate for private borrowers, then the issuing government is receiving a federal subsidy, reducing the cost of capital. Thus, the relative difference between taxable bonds and tax-exempt bonds (or spread) is a straightforward way to evaluate or quantify the value of the interest exclusion to issuers. The next section reviews selected proposals that would modify the tax preferences for tax-exempt bonds. The 2013 budget proposal, the Simpson-Bowles deficit reduction proposal, and the Congressional Budget Revenue Option, would all impact tax-exempt bonds directly if enacted. As discussed above, three types of proposals are examined here. The first, capping the benefit of the tax-exemption to the 28% marginal tax rate, was included in the President's 2013 budget. The second, eliminating the tax-exemption while broadening the income tax base and lowering rates, was included in the Simpson-Bowles Deficit Commission Report. The third, replacing the tax-exemption for investors with a direct payment to the issuer, was proposed in the Congressional Budget Office publication, "Revenue Options." Variants of this last proposal include so-called tax credit bonds where the issuer or investor receives a tax credit rather than a tax exclusion. For example, the President's FY2013 budget includes reinstating one type of tax credit bond, the Build America Bond (BAB), which expired December 31, 2010. One proposal is to cap the benefit of tax-exempt interest at the 28% marginal tax rate. The plan would allow taxpayers over $200,000 ($250,000 for joint filers) an exclusion only up to the equivalent of a 28% marginal income tax rate. The impact on investors will be greater the higher the marginal tax rate. Generally, the taxpayers in tax brackets at or above the 33% rate will encounter the largest effect as more of their tax-exempt earnings would be subject to some tax under this proposal. Investors evaluate the attractiveness of a tax-exempt bond investment through comparison to a taxable alternative. More generally, the market interest rate where the after-tax rate of return on a taxable bond matches the tax-exempt rate is commonly called the "market clearing rate." If some of the interest on a tax-exempt bond becomes taxable, then the market clearing rate will increase. The change in the market clearing rate is a rough gauge of the relative impact of the proposed modification to the tax treatment of interest paid on tax-exempt bonds. In Table 3 , the column labeled "Hypothetical Taxable Bond Rate" is a taxable investment that serves as an investment alternative to tax-exempt bonds. Under current law (the third column), higher income investors would be willing to accept ever lower tax-exempt bond returns because the after-tax return to taxable bonds, the alternative, declines with the marginal tax rate. For example, a taxpayer in the 35.0% marginal tax bracket would earn a 3.90% after-tax rate of return on a taxable bond with a hypothetical 6% pre-tax rate of return. Thus, any tax-exempt bond that pays interest that is greater than 3.90% would provide a higher after-tax rate of return. Under the proposed cap the tax benefit is capped at the 28% marginal tax bracket. As a result, previously tax-exempt interest would be taxed for those in tax brackets above 28%. The higher required yield for the tax-exempt bond under this policy reflects the higher marginal tax rate which exceeds the proposed cap. The after-tax rate of return for partially tax-exempt bonds under the proposal for taxpayers in the 35.0% marginal tax bracket would rise to 4.19%, a 0.29% "premium" when compared to current law for a taxable investment with a 6% pre-tax return. The size of the premium would move with prevailing market interest rates. The higher the market interest rate, the larger the value of the premium. The market clearing rate for a tax-exempt security is the following if the taxpayer's marginal tax rate exceeds the cap: where the t i is the individuals tax rate and the policy tax rate cap is t cap . If the tax rate were less than the cap, then the clearing rate is simply: The link between a taxpayers marginal tax rate and the value of investing in tax-exempt bonds complicates the investment decision for taxpayers. Generally, the tax cap would reduce the attractiveness of tax-exempt bonds for taxpayers in tax brackets above the 28% threshold. The decrease in demand would likely increase the borrowing costs for state and local governments. The concentration of tax-exempt interest income in the higher income ranges implies that a significant share of taxpayers receiving tax-exempt interest will be affected by such a policy shift. The response to the changing tax status of tax-exempt bonds by investors as proposed by the cap, however, may be muted. Most tax-exempt bonds would still provide a greater after-tax return than comparable taxable investments. The array of marginal tax rates in the first column of Table 3 are a mix of current law rates and rates as proposed in the President's FY2013 budget. Specifically, the top two rates, 36.0% and 39.6%, would apply to taxpayers filing joint returns with taxable income over $250,000 and single taxpayers with taxable income over $200,000 in 2013 if current law is not extended. For example, a taxpayer in the 33% tax bracket who holds a $100,000 taxable bond with a 6% coupon payment would receive $6,000 each year. Investors then determine tax implications to arrive at the after-tax return of investments. Under current law, the taxes would amount to 33% of that amount or $1,980. After paying this tax, the investor would have $4,020. Thus, a tax-exempt bond investment would need to offer at least 4.02% to lure this investor under current law. In contrast, under the proposal, the investor would need a 4.23% return on a tax-exempt bond because some of the interest would be taxed. The last column of Table 3 provides a relative measure for "tax premium" on tax-exempt bonds for the selected tax rates given a 6% market interest rate on taxable bonds. Note that for the highest rate investors, the premium approaches 50 basis points or almost one-half a percent. The number of taxpayers in the top two brackets comprise just 1.9% of all returns in 2007, but 35.2% of all tax-exempt interest or $25.6 billion (see Table 4 ). If the 28% proposal were in effect, these taxpayers would pay some tax on these earnings. Assuming the hypothetical 6% market rate and no change in taxpayer behavior, then the additional revenue would be $70.3 million for this cohort. As discussed earlier, for the 33.0% marginal tax rate investors, taxes would be owed at the 5% rate difference between the cap amount and marginal tax rate (7% for the 35% marginal tax bracket). Even with the premium imposed by this proposal, there is still a significant subsidy for these taxpayers. The reduced after tax rate of return would still likely be greater than the taxable investment alternative for most taxpayers, particularly for those in the 35% bracket. The impact on issuers is difficult to predict because the response of investors is uncertain and is a critical element in evaluating issuer impact. And, as noted above, the magnitude of investor response is unclear. Some have suggested that the retroactive application of the proposed tax cap could introduce a tax-risk premium to all tax-exempt bonds. The tax-risk premium would be passed on to issuers through higher interest costs. The impact on issuers will depend on the extent to which a premium exists and how much is passed on to the issuer. The Simpson-Bowles (SB) deficit reduction committee plan recommended eliminating the exclusion of interest on state and local government debt paired with a reduction in marginal tax rates. Specifically, the SB plan would repeal the tax-exemption for all newly issued state and local government bonds. The tax rate on these bonds would be the proposed individual income tax brackets contained in the proposal ( Table 5 ). Thus, under the SB plan, interest payments from new bonds issued by state and local governments would be treated like all other income. Investment in tax-exempt bonds would no longer receive a tax preference if SB were to become law. Current high-income investors would no longer prefer tax-exempt bonds to taxable alternatives and would likely adjust their portfolios accordingly. The reduction in demand from this segment of the bond market, however, may be partly mitigated by an increase in demand from entities that previously did not invest in tax-exempt bonds. This group would include international investors and U.S. pension funds. These new investors, who do not pay U.S. taxes, place no value on the tax exclusion. The increased demand of these two types of investors combined would have positive impact on the tax-exempt bond market and a generally negative impact on the taxable bond (or similar taxable asset) market. This effect, however, will likely be minimal. As with the income tax cap, the impact of the SB proposal would be concentrated in the top two current marginal tax rates. For the top two rate brackets, tax-exempt interest would shift from generating a tax savings of 33% or 35% to a tax liability of 28%. Table 4 shows that almost 40% of tax-exempt interest ($29.8 billion) was earned by taxpayers in these two marginal rate brackets in 2007. An additional impact would be on the secondary market for outstanding tax-exempt debt. Assuming the tax treatment of outstanding tax-exempt bonds would not change, the supply of these bonds would shrink, increasing the price offered to current holders. The windfall gain to current tax-exempt bond holders may be significant. The cost of tax-exempt bond-financed investment would likely increase under the SB plan absent the federal tax preference. Proponents of preserving tax-exempt bonds claim that If eliminated, the interest rates on what would now amount to taxable bonds would rise dramatically, almost certainly resulting in a period of stagnation within state and local governments. Important infrastructure, education, health care, and community amenity projects would be delayed, scaled back, or altogether eliminated. This claim, though likely overstated, is the primary reason cited for preserving the tax exemption. Eliminating the tax-exempt bond market for new issues as under SB would also eliminate the tilt of the federal preference to riskier projects. Under current law, the tax preference applies to all projects regardless of relative risk. Thus, the absolute value of the tax preference (and federal revenue loss) is greater for projects with a greater risk profile. This arises because the interest rate premium on those projects is greater (i.e., the interest rate is higher). Returning to Table 3 , the hypothetical comparative taxable bond was assumed to be 6.0% and an investor in the 35% bracket needed a tax-exempt return of at least 3.9% to invest in the tax-exempt bond. If the project were deemed riskier, then the rate on a taxable bond of like risk could be as high as 8.0% (the higher rate is the so-called "risk premium"). This implies the tax-exempt interest rate would need to be at least 5.2% to justify investment in the riskier project. Under SB, issuers of riskier bonds would not receive more federal assistance as the risk premium increases. The elimination of the exclusion of interest on state and local government debt would also have a differential impact across states. States that rely more on debt will realize a greater increase in the cost of debt than states less reliant on debt. And, within states, relatively debt reliant local governments would also be relatively worse off. In FY2009, state and local governments in Massachusetts, New York, and Kentucky all had debt outstanding exceeding 25% of state gross domestic product (GDP). In contrast, governments in Iowa, Idaho, and Wyoming had debt to GDP ratios of less than 12%. From this, one could conclude that elimination of the tax-exemption would have roughly twice the impact in the most debt reliant states compared to the least debt reliant states. The Congressional Budget Office (CBO) provided several options to reduce the deficit and one was to replace the "tax exclusion for interest income on state and local government bonds with a direct subsidy to the issuer." This option is estimated to increase revenues $142.7 billion over the 2012 to 2021 budget window. In addition to raising revenue, the proposal would also increase the economic efficiency of the tax preference for non-federal government borrowing. Under current law, the tax exclusion provides a disproportionately greater benefit to high-income taxpayers. This proposal would replace the tax bracket dependent preference (see the column labeled "Current Law" in Table 3 ) with a subsidy payment to the issuer. The proposed payment amount, 15% of the issuer coupon payment, is lower than the estimated rate that would equate a direct pay bond to traditional tax-exempt bonds. This option is similar to the now expired Build America Bond (BAB), though the subsidy payment was significantly higher, 35%. Similar to the CBO proposal, the President's 2013 budget proposes making permanent an expanded version of the BAB financing tool for state and local governments issuers as well as non-profit issuers (hospitals and universities). The new BAB program would carry a subsidy rate of 30% for 2013, dropping to 28% thereafter. The subsidy rates in the President's budget are intended to be revenue neutral though are still estimated to reduce revenues $1.1 billion over the 2013 to 2022 budget window. There are three types of investors to consider when assessing the impact of the CBO proposal: (1) high marginal tax bracket investors, (2) current holders of bonds, and (3) potential new investors in taxable state and local government debt. If the CBO proposal were to become law, high marginal tax rate tax-exempt bond investors would lose a tax preference. In 2009, $73.6 billion in tax-exempt interest income was reported (see Table 2 ). Current holders of tax-exempt bonds would likely see a windfall gain with the now limited stock of tax favored bonds (if the tax status of existing bonds were grandfathered). There would likely be a negative impact on the market for existing taxable bonds. If potential investors rebalanced portfolios by reducing their holdings of other taxable bonds, then prices for those securities would decline. New investors that are not subject to federal income taxes, such as pension funds and international investors, would likely buy state and local government bonds. The additional investment option for these investors would likely be a welcome change from current law and could be viewed as a positive impact for investors. The issuers would have a higher interest cost because the 15% subsidy rate would not match the savings with tax-exempt bonds. Nevertheless, the subsidy would flow directly to the issuer and still provide a federal tax benefit. The subsidy would also be more economically efficient than the current subsidy delivered with the tax exclusion as investors in higher marginal tax brackets would not receive the previously explained windfall gain. Under current law, there is a significant transfer of federal tax revenue to tax-exempt bond issuers and investors. Investors benefit from the exclusion of interest on the bonds from taxable income and the above market rate of return offered by most tax-exempt bonds. State and local governments, non-profit hospitals, educational institutions, and a variety of other entities all benefit from lower interest rates than otherwise would be the case. Importantly, the federal revenue loss to the federal government exceeds the benefit received by the issuer. The three proposals reviewed here would all reduce the benefit received by issuers and investors while increasing revenues for the federal government. As a result, under these proposals, issuers will face higher borrowing costs and investors will lose one option for earning tax-free income. The proposals do differ in the relative impact on investors and issuers. The FY2013 budget proposal to cap the benefit to the 28% tax bracket would be felt relatively equally between issuers and investors and would not address the inefficiency of using tax-exempt bonds to encourage investment in public capital. The SB tax reform plan would eliminate the tax preference thereby eliminating the economic inefficiency generated by the current tax preference, but would also eliminate the relative benefit of tax-exempt bonds for both issuers and investors. The CBO proposal also eliminates the tax preference for investors, but would preserve the issuer preference albeit at a lower level. The economic inefficiency arising from the current tax preference would also be eliminated by the CBO proposal. The CBO proposal can be modified to yield a roughly equivalent subsidy to the current tax-exempt bond preference for issuers. Balancing the loss of tax preferences for issuers and investors against the benefit of a more economically efficient tax code and a smaller deficit is the critical challenge for Congress. | Under current law, interest income from bonds issued by state and local governments is exempt from federal income taxes. In addition, interest on bonds issued by certain nonprofit entities and authorities is also exempt from federal income taxes. Together, these tax preferences are estimated to generate a federal revenue loss of $309.9 billion over the 2012 to 2016 budget window. Along with this direct "cost," economic theory holds that tax-exempt bonds distort investment decisions (leading to over-investment in this sector). As with many other tax preferences, the income exclusion is being examined as part of fundamental tax reform. Generally, the tax preference directly benefits two groups: issuers and investors. Issuers, principally state and local governments (but also certain nonprofits and qualified private entities) benefit from a current lower cost of borrowing. Investors, particularly those in the top tax brackets, benefit from mostly tax-free income. In particular, the top 10% of all earners realize more than 77% of the total reported tax-exempt interest income. This report first explains the tax preference and the distribution of the receipt of tax-exempt interest. An analysis of the impact of several different proposals then follows. Included in this analysis are proposals to (1) cap the benefit at a specific income tax rate (as offered in the FY2013 budget), (2) eliminate the tax preference and lower overall rates (as proposed in the Simpson-Bowles (SB) deficit reduction plan), and (3) change the current tax exclusion for investors to a tax credit (or subsidy) for issuers (as proposed in the Congressional Budget Office (CBO) Revenue Options report). The proposals differ in the relative impact on investors and issuers. The proposal in the President's FY2013 budget would be felt relatively equally by issuers and investors and would not address the economic inefficiency of using tax-exempt bonds to encourage investment in public capital. The SB tax reform plan would eliminate the tax preference thereby eliminating the economic inefficiency generated by the current tax preference, but would also eliminate the relative benefit of tax-exempt bonds for both issuers and investors. The CBO proposal also eliminates the tax preference for investors, but would preserve the issuer preference albeit at a lower level. The economic inefficiency arising from the current tax preference would also be eliminated by the CBO proposal. The CBO proposal can be modified to yield a roughly equivalent subsidy to the current tax-exempt bond preference for issuers. This report will be updated as significant new proposals or legislative events warrant. |
Federal executive branch agencies hold an extensive real property portfolio that includes approximately 295,000 buildings. These assets have been acquired over a period of decades to help agencies fulfill their diverse missions. Agencies hold buildings with a range of uses, including offices, health clinics, warehouses, and laboratories. As agencies' missions change over time, so, too, do their real property needs, thereby rendering some assets less useful or unneeded altogether. Health care provided by the Department of Veterans Affairs (VA) has shifted in recent decades from predominately hospital-based inpatient care to a greater reliance on clinics and outpatient care, with a resulting change in space needs. Similarly, the Department of Defense (DOD) reduced its force by 36% after the Cold War ended, and has engaged in several rounds of base realignments and installation closures. Agencies are required to dispose of real property that they no longer need, but many continue to hold onto unneeded building space. In FY2010—the last year in which cost data were reported—the government spent $1.67 billion operating and maintaining unutilized and underutilized buildings. Federal agencies have indicated that their disposal efforts are often hampered by legal and budgetary disincentives, and competing stakeholder interests. This report begins with an explanation of the real property disposal process and then discusses some of the factors that have made disposition relatively inefficient and costly. It then examines key provisions of five real property reform bills introduced in the 114 th Congress: the Civilian Property Realignment Act (CPRA, S. 1750 ); the Federal Asset Sale and Transfer Act (FAST Act, S. 2375 ); the Federal Assets Sale and Transfer Act ( H.R. 4465 ); the Federal Property Management Reform Act (Reform Act, S. 2509 ); and the Public Buildings Reform and Savings Act ( H.R. 4487 , Savings Act). As noted, the government maintains a large inventory of unneeded or underutilized properties. These properties not only incur costs to the government to operate and maintain, but could, in some instances, be utilized by nonfederal entities—state and local governments, nonprofits, private sector businesses—to accomplish a range of public purposes, such as providing services to the homeless, or facilitating economic development. Government Accountability Office (GAO) reports have consistently noted that efforts to dispose of unneeded and underutilized properties are hindered by statutory disposal requirements, the cost of preparing properties for disposal, conflicts with stakeholders, and a lack of accurate data. Each of these issues is discussed here. Agencies are required to continuously survey property under their control to identify any property that they no longer need to carry out their missions—excess property—and to "promptly" report that property as excess to the General Services Administration (GSA). Agencies are then required to follow the regulations prescribed by GSA when disposing of unneeded property or to follow independent or delegated statutory authority. GSA's regulations, in turn, implement statutory disposal requirements, discussed below. The steps in the real property disposal process are set by statute. Agencies must first offer to transfer properties they do not need (excess properties) to other federal agencies, who generally pay market value for excess properties they wish to acquire. Unneeded properties that are not acquired by federal agencies (surplus properties) must then be offered to state and local governments, and qualified nonprofits, for use in accomplishing public purposes specified in statute, such as use as public parks or for providing services to the homeless. Agencies may convey surplus properties to state and local governments, and qualified nonprofits, for public benefit at less than fair market value—even at no cost. Surplus properties not conveyed for public benefit are then available for sale at fair market value or are demolished if the property could not be sold due to the condition or location of the property. Agencies have consistently argued that these statutory requirements slow down the disposition process, compelling agencies to incur operating costs for months—sometimes years—while the properties are being screened. Real property officials have said the McKinney-Vento Act ( P.L. 100-77 )—which mandates that all surplus property be screened for homeless use—can extend the time it takes to dispose of certain properties by months or years. Because public benefit conveyance requirements are set in law, agencies do not have the authority to skip screening, even for surplus properties that could not be conveyed anyway. Real property experts with the Army, for example, told auditors that they had properties that they felt could be disposed of only by demolition, due to their condition or location, but that still had to go through the screening process, thereby adding as much as 6 months to the disposal process and forcing the Army to pay maintenance costs that could have been avoided. Statutes pertaining to environmental remediation or historic preservation also add time to the process. It may take agencies years of study to assess the potential environmental consequences of a proposed disposal and to develop and implement an abatement plan, as required by law. Similarly, the National Historic Preservation Act requires agencies to plan their disposal actions so as to minimize the harm they cause to historic properties, which may include additional procedures, such as consulting with historic preservation groups at the state, local, and federal level. Unneeded buildings are often among the older properties in an agency's portfolio. As a consequence, agencies sometimes find expensive repairs and renovations may be needed before the properties are fully functioning, meet health and safety standards, and comply with historic preservation requirements. It has been estimated, for example, that VA would need to spend about $3 billion to repair the buildings in its portfolio that it rated in "poor" or "critical" condition—56% of which were vacant or underutilized, and therefore might be candidates for disposal. The poor condition of these properties, however, may deter potential buyers or lessees, particularly if they must cover the cost of required improvements as a condition of acquiring the properties. Similarly, agencies that wish to demolish vacant buildings face deconstruction and cleanup costs that, at times, exceed the cost of maintaining the property—at least in the short run—which may encourage real property managers to retain a property rather than dispose of it. Federal agencies frequently cite the cost of complying with environmental regulations as a major disincentive to disposal. Some agencies have found their disposal efforts complicated by the involvement of stakeholders with competing agendas. The Department of the Interior (DOI) has said that it can be stymied by the competing concerns of local and state governments, historic preservation offices, and political factors, when attempting to dispose of some of its unneeded real property. Similarly, VA has found that communities sometimes oppose disposals that would result in new development, and veterans groups have opposed disposing of building space if that space would be used for purposes unrelated to the needs of veterans. The Department of State (DOS) has had difficulty in disposing of surplus real property overseas due to disputes with host governments that restrict property sales. These conflicts can result in delay, or even cancellation of proposed disposals, which, in turn, prevent agencies from reducing their inventories of unneeded properties. In addition to the obstacles mentioned above, data about agency real property portfolios—which might be useful for congressional oversight—appear to be inaccurate, and government-wide data are accessible only to the agency that manages the database, the GSA. Moreover, agencies regularly enter into leases rather than seek funding for new construction when acquiring space, even when the leased space is more expensive over time. The Federal Real Property Profile (FRPP) is the government's most comprehensive source of information about real property under the control of executive branch agencies. GSA manages the FRPP and collects real property data from 24 of the largest landholding agencies each year. Other agencies are encouraged, but not required, to report data to GSA. The data elements that participating agencies collect and report are determined by the Federal Real Property Council (FRPC), an interagency taskforce that is funded and chaired by the Office of Management and Budget (OMB). The other members of the FRPC are agency senior real property officers (SRPOs) and GSA. The FRPP contains data that could enhance congressional oversight of federal real property activities, such as the number of excess and surplus properties held by major landholding agencies, the annual costs of maintaining those properties, and agency disposition actions. GSA, however, does not permit direct access to the FRPP by Congress on the grounds that the data are proprietary. GSA does respond to requests for real property data from congressional offices, but GSA staff query the database and provide the results to the requestor. Some FRPP data are made public through an annual summary report posted on GSA's website, but the summary reports are of limited use for congressional oversight for several reasons. Most of the data are highly aggregated (e.g., the number of assets disposed of, government-wide, through public benefit conveyance), and very limited information is provided on an agency-by-agency basis. It is not possible, therefore, for Congress to monitor the performance of individual agencies through the summary reports. Basic questions, such as how many excess and surplus properties each agency holds or has disposed of in a given fiscal year, cannot be answered. Nor is it possible to compare the performance of agencies, which limits the ability of Congress to study the policies and practices at the most successful agencies and hold poorly performing agencies accountable. The quality of the FRPP data has also been questioned. GAO audits have found, for example, that real property data were unreliable in key areas, such as annual operating costs, and often were not reported correctly by agencies. Another GAO report re-examined weaknesses in FRPP data collection practices, noting that key data elements—such as buildings' maintenance needs and utilization rates—are not consistently and accurately captured in the database. The GAO report found that problems with FRPP data collection result in agencies "making real property decisions using unreliable data." There may be problems associated with changing definitions, as well. The FRPC stopped reporting data on underutilized and not utilized buildings in its FY2011 real property report. It began reporting the data again in FY2013, but with different definitions than those used in FY2010. The old definitions were based on the amount of space occupied in a building, while the new definitions are based on the frequency with which space was in use. Under the new definitions, the FRPC reported 5,532 underutilized and not utilized buildings in FY2013, down from 77,700 in FY2010—a 93% decrease in three years. By FY2014, the number of underutilized and not utilized buildings reported decreased to 4,971, a 94% decline from FY2010. Inconsistencies like this have led GAO to conclude that the FRPC's data on underutilized and not utilized federal real property are not reliable. The annual summary reports also omit data that might enhance congressional oversight. The FRPP contains, for example, the number of excess and surplus properties held by each agency and the annual operating costs of those properties—issues about which Congress has expressed ongoing interest—but the summary report only provides the number and annual operating costs of disposed assets, thereby providing the "good news" of future costs avoided through disposition while omitting the "bad news" of the ongoing operating costs associated with excess and surplus properties the government maintained. In addition, agencies estimate a dollar amount for the repair needs of their buildings and structures as part of their FRPP reporting, but the estimate is then folded into a formula for calculating the condition of each building. Given that repair needs are an obstacle to disposing of some properties, Congress may find it useful to have the repair estimates reported separately to help inform funding decisions. In a 2015 report, GAO wrote that it considers the government's "overreliance on costly leased space" to be one of the primary reasons federal real property continues to be designated as a "high risk" issue. The percentage of square feet leased by GSA—which leases property for itself and on behalf of many agencies—now exceeds the percentage of square feet it owns. According to GAO, leasing space is typically more expensive than owning space over the same time period. GAO cited, for example, a long-term operating lease that cost an estimated $40.3 million more than if the agency had purchased the same building. Similarly, in FY2014, the annual operating cost for a square foot of space in a building owned by the government was $5.77, but for leased space it was $24.04. GAO wrote that while the decision to lease rather than purchase space may be driven by operational requirements—such as the United States Postal Service (USPS) leasing space in areas that it believes will optimize the efficiency of mail delivery—agencies often choose to lease rather than purchase space because of budget scoring rules, even if the decision to lease is not the most cost-effective option. Under the Budget Enforcement Act of 1990, an agency must have budget authority up-front for the government's total legal commitment before acquiring space. Thus, if an agency were to construct or purchase a building, it would need up-front funding for the entire cost of the construction or acquisition, while leased space only requires the annual lease payment plus the cost of terminating the lease agreement. In addition to the budget scoring issue, some agencies have been granted independent leasing authority, which means they do not have to work with GSA to acquire leased space. Some agencies with independent leasing authority, such as the USPS and VA, have established in-house real property expertise, while other agencies with independent authority have not. The Securities and Exchange Commission (SEC), for example, entered into a $557 million, 10-year lease for 900,000 square feet, which the SEC's inspector general (IG) called "another in a long history of missteps and misguided leasing decisions made by the SEC since it was granted independent leasing authority." The IG found that "inexperienced senior management" at the SEC made poor decisions that led to acquiring three times the space needed—the original estimate provided to Congress was for 300,000 square feet—and bypassing other locations that were closer and less expensive. CPRA was introduced on July 13, 2015, and referred to the Committee on Environment and Public Works. As of February 12, 2015, no further action has been taken. In terms of overarching structure, CPRA would draw on the military base realignment and closure (BRAC) model of real property disposal by establishing an independent commission to assess agency portfolios and to recommend actions for reducing the government's inventory of unneeded and underutilized buildings. These recommendations would need approval by the President and Congress in order to be implemented. CPRA has a broad scope, applying to space owned and leased by all executive branch agencies and government corporations—not just properties that are excess or surplus. The bill would exclude some properties, such as those under the jurisdiction of the DOD, properties owned by the USPS, certain Indian and Native Alaskan properties, certain designated wilderness areas, property owned by the Tennessee Valley Authority, and any property the Director of OMB excludes for reasons of national security. The legislation would encompass most major real property asset management functions, collectively referred to as "realigning" actions—including the consolidation, reconfiguration, colocation, exchange, sale, redevelopment, and transfer of unneeded or underutilized properties. The first step in the process proposed by CPRA would be for federal landholding agencies to develop their own recommendations for realigning their real property portfolios and for reducing operating and maintenance costs. Agencies would submit these recommendations to GSA and OMB not later than 120 days after the start of each fiscal year, along with specific data on each of the properties they own, lease, or otherwise control. The data would include the age and condition of the property, its operating costs, size in square feet (broken out by gross, rentable, and usable footage), number of federal employees and functions housed in the property, and the history of capital expenditures. The recommendations would include categorization of properties into those that can be sold, transferred, exchanged, consolidated, relocated, redeveloped, reconfigured, or otherwise disposed of so as to reduce the costs of operating and maintaining the federal real property portfolio. Agencies may also recommend enhanced use leasing and terminating expensive leases as methods of disposing of unneeded space and reducing costs. The GSA Administrator and the OMB Director would also work together to develop criteria that they would use to determine which properties should be realigned and what type of realignment should be recommended (e.g., sale, consolidation, conveyance for public benefit) for each property. The bill specifies that nine "principles" must be taken into account when establishing the criteria; some of the supporting data needed to develop the criteria may already be collected by agencies as they develop their asset management plans or meet existing reporting requirements, such as those for the FRPP. The extent to which federal buildings or facilities could be sold or redeveloped in a manner that would produce the best value. The extent to which the operating and maintenance costs would be reduced through the consolidation, colocation, and reconfiguring of space. The extent to which the utilization rate is being maximized and is consistent with nongovernment standards. The potential costs and savings over time. The extent to which leasing long-term space would be reduced. The extent to which a property aligns with the current mission of the agency. The extent to which there are opportunities to consolidate similar operations across or within agencies. The economic impact on existing communities in the vicinity of the property. The extent to which energy consumption specifically would be reduced. The standards would also include new, standard definitions for utilization of space for each category of building. The OMB Director would then conduct an independent analysis of agency recommendations and revise them, as deemed appropriate. The OMB Director would then submit the revised recommendations, along with the criteria, to a newly established Civilian Property Realignment Commission. The commission would be composed of seven members, each serving a 10 year term. The chair would be appointed by the President, with the advice and consent of the Senate. The President would appoint two other members of the commission, and the Speaker of the House, the minority leader of the House, the Senate majority leader, and the Senate minority leader would each appoint one member. CPRA would also require that the commission include members with expertise in commercial real estate and redevelopment, government management or operations, community development, or historic preservation. The commission would terminate after 10 years. The commission would review the OMB Director's recommendations, but it would not be bound by them. The commission could reject, accept or modify the OMB Director's recommendations, and add recommendations of its own. As part of the review process, the commission would be required to develop an accounting system to help evaluate the costs and returns of various recommendations. While the commission "shall seek to develop consensus" in its recommendations, the report may include recommendations supported by only a majority of commission members. The commission would be required to submit its final recommendations to the President, and to establish a website and post its findings, conclusions, and recommendations on it. CPRA would require GAO to publish a report on the recommendations, including a review of the methodology used to select properties for realignment. The bill would also require the commission to separately recommend at least five "high-value" federal properties to sell. These properties may not listed as excess or surplus, and must have an estimated fair market value of at least $500 million, in total. The high-value list would be subject to the same process of review and approval as the much longer list of recommendations the commission is required to develop. CPRA would direct the President to review the commission's recommendations and submit, within 30 days of receiving them, a report to Congress that identifies which recommendations are approved, and which, if any, are not. If the President approves all of the commission's recommendations, then he must submit a copy of the recommendations to Congress along with a certification of his approval. If the President disapproves of some or all of the commission's recommendations, he would be required to submit a report to Congress and to the commission identifying the reasons for disapproval, and the commission would have 30 days to submit a revised list of recommendations to the President. If the President approves of all of the revised recommendations, he must submit a copy of the revised recommendations along with a certification of his approval to Congress. If the President does not submit a report within 30 days of the receipt of the commission's original or revised recommendations, then the process terminates for the year and agencies are not required to dispose of any properties under CPRA. In effect, the President would be able only to approve or reject a complete list of recommendations. He would not be able to amend the commission's recommendations himself before approving them. Congress, after receiving the recommendations approved by the President, would have 45 days to review them and debate their merits. As with the President, Congress would have the authority only to act on the entire list, not to approve or disapprove of individual recommendations. If no joint resolution of disapproval is passed within the 45-day time limit, then agencies would be required to implement the recommendations. Under CPRA , if a joint resolution of disapproval were not enacted, agencies would be required to complete implementation no later than three years from the date the President submitted his list of approved recommendations to Congress. The GSA Administrator would be given authority to "take such necessary and proper actions, including the sale, conveyance, or exchange of civilian real property, as required to implement the Commission recommendations" as enacted. Other federal agencies must either use their existing authorities to implement the recommendations or work with GSA to do so. Properties disposed of pursuant to a recommendation would be exempt from several statutory requirements that would otherwise apply, primarily related to screening for public benefit conveyance. This would appear to permit agencies to bypass steps in the existing disposal process. A property recommended for public sale, for example, may not have to go through the public benefit screening process. The bill would establish new guidelines for screening and disposing of properties recommended for use serving the homeless. CPRA would also expand the reporting requirements for all construction or acquisition proposals that exceed the prospectus threshold—the dollar amount established in 40 U.S.C. Section 3307 above which agencies must obtain approval from the House Transportation and Infrastructure Committee and the Senate Environment and Public Works Committee. The bill would require each prospectus to include a statement of whether the proposal was consistent with CPRA and how life-cycle cost analysis was used to determine long-term costs, the life-cycle cost of a building, and "any increased design, construction, or acquisition costs identified" that are offset by lower long-term costs. CPRA would also require each lease prospectus to include a comparative cost analysis of leasing and buying space for the proposed project. CPRA would establish two accounts: a salaries and expense account to fund the commission's administrative and personnel costs, and an asset proceeds and space management fund (APSMF), which would be used to implement recommended actions. Both accounts would receive funds from appropriations—the bill authorizes a one-time appropriation of $20 million for the salaries and expenses account and a $62 million appropriation for the APSMF—but the APSMF would also receive the proceeds generated by implementing the commission's recommendations. In addition, some of the savings generated by implementing the recommendations would be transferred to the APSMF. All of the funds deposited in the APSMF account could only be used to cover the costs associated with implementing the commission's recommendations. Under CPRA, the first $50 million in net disposal proceeds generated each fiscal year would be deposited in the general fund of the Treasury. Net proceeds in excess of $50 million would be distributed as follows: 80% must be deposited in the general fund of the Treasury, and 20% would be allocated between the general fund of the Treasury and the APSMF at the discretion of the GSA Administrator. CPRA would require most executive agencies seeking to acquire leased space to do so only by working through GSA. This restriction would not apply to the U.S. Postal Service, VA properties, or properties excluded for reasons of national security by the President. CPRA would require the Administrator to take a building's life-cycle cost into account when constructing or leasing a building. This requirement would apply only to buildings that meet three criteria: (1) the estimated construction costs exceed $1 million; (2) the federal portion of the estimated construction or lease costs exceed 50% of the total costs; and (3) in the case of a lease, the property has more than 25,000 square feet. The bills would both define "life-cycle cost" as the total sum of investment costs, capital costs, installation costs, energy costs, operating costs, maintenance costs, and replacement costs. CPRA would define "lifetime of a building"—the length of time over which the life-cycle costs would be calculated—to be 50 years or the period of time during which the building is projected to be utilized. The GSA Administrator, when submitting a prospectus to acquire space, would be required to include in the prospectus a statement of how the life-cycle cost analysis was used and whether the analysis identified potential costs that could be offset by lower long-term costs. As discussed earlier in this report, GSA currently does not permit Congress or legislative agencies to directly access the government's only comprehensive source of real property data, the FRPP database. CPRA would require GSA to provide access to the FRPP to six congressional committees: the House Committee on Transportation and Infrastructure, the House Committee on Oversight and Government Reform, the Senate Committee on the Environment and Public Works, the Senate Committee on Homeland Security and Governmental Affairs, and the House and Senate appropriations committees. CPRA would also require GSA to provide access to the Congressional Research Service, the Congressional Budget Office, and GAO. The commission would also have access to the FRPP. CPRA would also require GSA to ensure that the FRPP includes the following information for each property: the age and condition of the property; the size of the property in square feet and acreage; the geographic location of each property, including a physical address and description; the extent to which the property is being utilized; the actual annual operating costs associated with the property; the total cost of capital expenditures associated with the property; sustainability metrics associated with each property; the number of federal employees and functions housed at the property; the extent to which the mission of the federal agency is dependent on the property; and the estimated amount of capital expenditures projected to maintain and operate the property for each of the five calendar years after the date of enactment of CPRA. The FAST Act is structured like CPRA, in that it would establish a board to develop disposal recommendations. There are differences between the bills, however. Notably the FAST Act lacks a mechanism for congressional review and approval of the board's recommendations similar to the one provided under CPRA. The provisions discussed in the following sections are the same for both S. 2375 and H.R. 4465 companion versions of the FAST Act, unless otherwise noted. S. 2375 was introduced December 8, 2015, and referred to the Committee on Homeland Security and Governmental Affairs. On December 9, 2015, the bill was ordered to be reported with an amendment in the nature of a substitute. As of February 12, 2016, no further action had been taken. H.R. 4465 was introduced February 4, 2016, and referred that same day to the Committee on Transportation and Infrastructure, and the Committee on Oversight and Government Reform. As of February 12, 2016, no further action had been taken by either committee. The FAST Act would apply to all federal executive branch agencies and wholly owned government corporations, but properties subject to BRAC would be excluded, as would most Coast Guard properties. The OMB Director could also exclude Properties for reasons of national security, and properties controlled by Indian and Native Alaskan tribes, the postal service, and the Tennessee Valley Authority would also be excluded. In addition, certain public lands would not be covered. H.R. 4465 would also exclude properties located outside the United States that are operated or maintained by the Department of State or the Agency for International Development. As with CPRA, the first step in the process proposed by the FAST Act would be for federal landholding agencies to develop their own recommendations for realigning their real property portfolios and for reducing operating and maintenance costs. Agencies would submit these recommendations to GSA and OMB not later than 120 days after the start of each fiscal year, along with specific data on each of the properties they own, lease, or otherwise control. The data would include: age and condition, operating costs, history of capital expenditures, sustainability metrics, square footage, and, the number of federal employees a property houses. The recommendations would include categorization of properties into those that can be sold, transferred, exchanged, consolidated, relocated, redeveloped, reconfigured, outleased, or otherwise disposed of so as to reduce the costs of operating and maintaining the federal real property portfolio. Agencies may also recommend properties be declared excess or surplus if they have not already been so designated. The FAST Act would require the GSA Administrator and the OMB Director to work together to develop criteria that they would use to determine which properties should be realigned and what type of realignment should be recommended. The FAST Act specifies that nine "principles" must be taken into account when establishing the criteria: The extent to which a property could be sold, redeveloped, or outleased in a manner that would produce the best value. The extent to which the operating and maintenance costs would be reduced through the consolidation, colocation, and reconfiguring of space; The extent to which a property aligns with the current mission of the agency. The extent to which the utilization rate is being maximized and is consistent with nongovernment standards. The potential costs and savings over time. The extent to which leasing long-term space would be reduced. The extent to which there are opportunities to consolidate similar operations across or within agencies. The economic impact on existing communities in the vicinity of the property. The extent to which energy consumption specifically would be reduced. The OMB Director would then conduct an independent analysis of agency recommendations and revise them, as deemed appropriate. The OMB Director would then submit the revised recommendations, along with the criteria, to a newly established Federal Real Property Reform Board ( S. 2375 ), or Public Buildings Reform Board ( H.R. 4465 ). Both boards would be composed of a chairperson appointed by the President with the advice and consent of the Senate, and six other members, also appointed by the President. In making appointments to the board, the President would be required to consult with the Speaker of the House of Representatives regarding two members, the majority leader of the Senate regarding two members, the House minority leader regarding one member, and the Senate minority leader regarding one member. Each version of the FAST Act would direct the President to ensure that the board includes members with expertise in commercial real estate, space optimization and utilization, and community development. Board members under each bill would serve six-year terms, and the board itself would terminate after six years. Under the FAST Act the board would review the OMB Director's recommendations, but it would not be bound by them. The board could reject, accept or modify the OMB Director's recommendations, and add recommendations of its own. As part of the review process, the board would be required to develop an accounting system to help evaluate the costs and returns of various recommendations. Once the board finalized its recommendations, it would be required to submit a report on them to the OMB Director. The report may only include recommendations supported by at least a majority of commission members. The board would be required to establish a website on which to post relevant information about its recommendations. As with CPRA , the FAST Act would require GAO to publish a report on the recommendations, including a review of the methodology used to select properties for realignment. As with CPRA, The bill would also require the commission to separately recommend at least five "high-value" federal properties to sell. These properties may not listed as excess or surplus, and must have an estimated fair market value of at least $500 million, in total. The high-value list would be subject to the same process of review and approval as the much longer list of recommendations the commission is required to develop. The OMB Director would have 30 days to review the board's recommendations and submit a report to Congress that discusses the decision to approve or disapprove of them. If the Director approves all of the board's recommendations, then he must submit a copy of the recommendations to Congress along with a certification of his approval. If the Director disapproves of some or all of the board's recommendations, he would be required to submit a report to Congress and to the board identifying the reasons for disapproval, and the board would have 30 days to submit a revised list of recommendations to the Director. If the Director approves of all of the revised recommendations, he must submit a copy of the revised recommendations along with a certification of approval to Congress. If the Director does not submit a report within 30 days of the receipt of the commission's original or revised recommendations, then the process terminates and agencies are not required to dispose of any properties under the FAST Act. Federal agencies would be required to begin implementation of all recommendations within two years from the date Congress received them, and complete implementation within six years. The GSA Administrator would have the discretion to convey real property for less than fair market value or for no consideration at all. In addition, several sections of the U.S. Code that pertain to real and personal property conveyances, particularly those for public benefit, would not apply to recommended disposals. The McKinney-Vento Homeless Assistance Act would still apply to properties which the HUD Secretary determines are suitable for use providing services to the homeless, but the bills would amend McKinney-Vento by shortening the screening and application process. As with CPRA , the FAST Act would establish both a salaries and expense account to fund the commission's administrative and personnel costs, and an asset proceeds and space management fund (APSMF), which would be used to implement recommended actions. Both accounts would receive funds from appropriations—the bills authorize a one-time appropriation of $2 million for the salaries and expenses account and a $40 million appropriation for the APSMF—but the APSMF would also receive the proceeds generated by the sale of real property pursuant to the board's recommendations. Unlike CPRA, the APSMF would not receive savings realized by agencies that implement board recommendations. All of the funds deposited in the APSMF account could only be used to cover the costs associated with implementing the board's recommendations. H.R. 4465 would require the GSA Administrator to establish and maintain a "single, comprehensive, and descriptive" database of all real property under the control of federal agencies. The database would include, for each property: size in square feet and acreage; geographic location of each property, including a physical address and description; relevance of each property to the agency's mission; level of use of each property, including whether it is excess, surplus, underutilized, or unutilized, and the number of days it has been so designated; annual operating costs; and replacement value. The database must permit users to search and sort properties, and download data. Once the database was operational, it would be made available, at no cost, to federal agencies and the public. The Federal Real Property Management Reform Act (Property Reform Act) would not establish a new process for identifying and disposing of unneeded real property in the manner of CPRA or the FAST Act. Rather, the Property Reform Act would expand existing real property management requirements and guidance, particularly with regard to collocating federal agencies in underutilized space held by the U.S. Postal Service. It would also incentivize the disposal of unneeded property by providing agencies with the authority to retain the proceeds from the transfer, sale, or lease of surplus property. The Property Reform Act was introduced February 4, 2016, and was referred to the Senate Committee on Homeland Security and Governmental Affairs that same day. On February 10, 2016, the committee ordered the bill reported with an amendment in the nature of a substitute. The Property Reform Act would codify the establishment of a Federal Real Property Council (FRPC), which was originally created under the provisions of Executive Order 13327 , "Federal Real Property Asset Management," signed by President George W. Bush on February 4, 2004. The FRPC would be structured almost identically under the Reform Act as it was under E.O. 13327. The FRPC is currently comprised of a senior real property expert at each of the 24 agencies covered by the Chief Financial Officers Act (CFO Act) of 1990, the Controller and Deputy Director for OMB, and the GSA Administrator. The Reform Act would add a representative of the U.S. Postal Service to the council. Under the Reform Act, the FRPC would develop real property guidance that, when implemented, would lead to more efficient and effective property management at federal agencies, resulting in reduced real property costs. This is very similar to the broad purpose for the FRPC stated in E.O. 13327. The Property Reform Act differs from E.O. 13327 by requiring performance measures and goals that are not required by the executive order. The Reform Act would require the FRPC to develop a property management plan that includes performance measures and government-wide goals for reducing surplus property and increasing the utilization of federal buildings, as well as criteria for evaluating the effectiveness of agency real property management practices. The FRPC would also be required to develop utilization rates for each type of federal building; develop a strategy to reduce the government's reliance on long-term leases; provide guidance on eliminating inefficient practices in agency leasing processes; compile a list of field offices that are suitable for collocation; issue "best practices" guidance regarding the use of public-private partnerships to manage properties; issue recommendations on how the State Agencies for Surplus Property program could be improved to ensure accountability and increase efficiencies in the personal property disposal process; and issue a report that contains a list of the underutilized, excess, and surplus property at each agency; progress made by each agency towards the goals set in the annual plan; and any recommendations for legislation that would advance the goals of the council. While completing these requirements, the FRPC would be required to consult with state, local, and tribal governments, as well as with private-sector and nonprofit organizations with expertise in commercial real estate, government management, community development, historic preservation, homeless housing, and personal property management. The FRPC's work would not cover surplus property that is on military installations, held by the Tennessee Valley Authority, part of certain public lands administered by the Secretary of the Interior or the Secretary of Agriculture, or operated and maintained by the Postal Service. The Property Reform Act would amend 40 U.S.C. 524(a) by adding several new paragraphs. These new paragraphs would require federal agencies to take additional planning and reporting steps. Specifically, the bill would require each covered agency to develop a means of assessing the capacity of its workforce to effectively manage its real property; establish goals and policies that will help reduce its inventory of excess and underutilized property; submit an annual report to the FRPC that discusses how to increase utilization rates and whether some underutilized properties could be declared excess; identify underutilized leased space; and adopt workplace practices, configurations, and management techniques that can increase productivity, thereby decreasing the need for real property assets. The Property Reform Act would also require agencies to submit a range of data on their real property holdings to the FRPC, including, for each property, its address, size (in square feet and acreage), utilization rate, annual operating costs, and sustainability metrics. In addition, agencies would be required to provide the total capital expenditures associated with each property, the estimated amount of expenditures projected to operate and maintain the property over a five-year period, and the number of federal and contract employees housed at the property and what functions they perform. Agencies with independent leasing authority would be required to submit to the FRPC a list of all leases, including operating leases, that includes the date on which the lease was executed; the date on which the lease will expire; the size of the space; the location of the property; the tenant agency; the total amount of annual rent; and the amount of the net present value of the total estimated legal obligations of the government over the life of the contract. This requirement would not apply to the Postal Service or properties excluded by the President for reasons of national security. The Property Reform Act would require GSA to establish a "single, comprehensive, and descriptive" database of all real property controlled by federal agencies. The database must include specific information for each property, including all of the data agencies would be required to submit to the FRPC, detailed in the previous section. In addition, the database would include a list of property disposals completed, and specific information about each disposed-of property, as follows: the date and disposal method; the proceeds obtained from the disposal; the number of days required to dispose of the property; the dates on which the property was declared excess, surplus, and the date on which the disposition was completed; and the costs associated with the disposal. For purposes of the database, the term surplus would not include properties subject to BRAC, certain public lands, Indian and native Eskimo property held in trust by the federal government, properties controlled by the TVA, and postal properties. The database must be made available initially to the Senate Committee on Homeland Security and Governmental Affairs, the Senate Committee on Environment and Public Works, the House Committee on Oversight and Government Reform, and the House Committee on Transportation and Infrastructure. No longer than three years after enactment of the Reform Act, the database must be made available to the public at no cost. The Property Reform Act would permit all landholding agencies to retain the net proceeds generated by the disposal of their properties. The net proceeds could only be expended after being authorized in annual appropriations acts, for three purposes: to dispose of other properties, to implement the Federal Buildings Personnel Training Act of 2010, or to pay down the deficit. The Reform Act would require that the net proceeds from the transfer or sale of personal property be deposited in the Treasury as miscellaneous receipts. The Property Reform Act would permit GSA to transfer surplus federal personal property to states for donation to museums that are open to the public each week during normal business hours. The Property Reform Act would require the Postal Service to create, on an annual basis, a list of postal properties with space available for use by federal agencies. The list would be required to be submitted to each federal agency and to the Senate Committee on Homeland Security and Governmental Affairs, and the House Committee on Oversight and Government Reform. Each federal agency would be required to review the list of postal properties, review its own list of properties, and identify opportunities for collocation. The Postal Service would also be required to ensure it has adequate inventory controls and accountability systems for the properties it owns and leases, and to develop workforce projections that reflect the needs of the Postal Service for managing its real property portfolio. In addition, the Postal Service would be required to conduct a regular inventory of its real property, and make an assessment of each property that includes its age and condition; its size, in square feet and acreage; its geographic location, including its address; its utilization rate; its actual annual operating costs; the history of capital expenditures associated with it; the number of federal and contract employees housed in it; the extent to which the mission of the Postal Service depends on it; and the estimated amount of capital expenditures projected to maintain and operate the property for each of the five years following the enactment of the bill. The Postal Service Inspector General would be required to submit to Congress a report that includes a survey of excess property held by the Postal Service, and recommendations for collocating or otherwise reducing excess space. The Property Reform Act would also require the Government Accountability office to submit a report to Congress, within one year from the enactment of the Reform Act, a report on the feasibility of the Postal Service designing mail delivery vehicles for rural areas and areas with extreme weather conditions. The report would also include a discussion of the feasibility and cost of integrating the use of collision-averting technology into its vehicle fleet. Similarly, the Postal Service would be required to submit to Congress a report that includes a review of the Postal Service's efforts to replace and modernize its fleet, and a strategy for carrying out the fleet replacement. The Public Buildings Reform and Savings Act of 2016 (Public Buildings Act) was introduced February 8, 2016, and reported to the House Committees on Financial Services and Transportation and Infrastructure the same day. Both committees reported the bill favorably on May 23, 2016, and it passed the House the same day. The bill was received in the Senate on May 24, 2016. No further action has been taken. The Public Buildings Act would establish a streamlined leasing pilot program, which would require GSA to issue simplified procedures for acquiring leases of $500,000 or less. The pilot program would also permit GSA to consolidate more than one project into a single prospectus if the consolidated lease prospectus will result in a reduction of space and improved utilization rates. In addition, the bill would reduce the amount of information GSA is required to include in lease prospectuses, provided the proposed lease would have a term of at least 10 years, meet specified cost and utilization standards, and facilitate space consolidation. During each year of the pilot program (which would run from the date of enactment until December 31, 2021), GSA would be required to submit to the House Committee on Transportation and Infrastructure and the Senate Committee on Environment and Public Works, a report that identifies the number and square footage of leases expiring by the program's termination. GSA would also be required to submit to the committees a final report after the program terminates, which includes a review and evaluation of the pilot program and recommendations for permanent changes to GSA's leasing authorities. The Public Buildings Act would require GSA to include new information in its prospectuses: first, the prospectus must include a cost comparison between leasing and constructing space; second, the prospectus must include an explanation of why such space could not be consolidated or collocated into other owned or leased space. In addition, if work on an approved project has not been initiated within five years of the prospectus's approval, then the resolution which authorized the prospectus shall be deemed expired. The bill would also require GSA to notify the House Committee on Transportation and Infrastructure and the Senate Committee on Environment and Public Works of any increase of 5% or more in the estimated cost of the project. GSA would also be required to submit an amended prospectus for approval if the scope or size of the project increases by more than 10%. The bill would direct GSA to sell or exchange a portion of the Forrestal Complex—which houses the headquarters of the Department of Energy (DOE)—in order to obtain the funds necessary to construct a new DOE headquarters. The bill specifies that GSA would have two years from the date a portion of the Forrestal Complex was disposed of, to complete construction of the new DOE headquarters in a government-owned building on government-owned land (GSA would not be permitted to lease or leaseback the property). Proceeds from the sale or exchange of portions of the Forrestal Complex would be deposited into the Federal Buildings Fund and used as specified in future appropriations. The Public Buildings Act would limit discounted purchase options—whereby the government has an option to purchase a building at the end of a lease for less than fair-market value—so that they may only be exercised to the extent specifically provided for in legislation. The bill would also require GSA to consider the direct purchase of utilities, including energy, in bulk for leased facilities. The Public Buildings Act would require the Government Accountability Office (GAO) to conduct biennial audits of GSA's National Broker Contract to determine whether brokers selected under the program obtain lower lease rental rates than the rates negotiated by GSA staff and the impact of the program on length of leases procured. GAO would also be required to determine whether the leases resulted in rental cost savings. GAO would be required to submit a report to Congress that summarized the audit findings, assessed whether the National Broker Contract provided greater savings than GSA staff, and included recommendations for improving GSA lease procurements. The bill would require GSA to submit a report to the House Committee on Transportation and Infrastructure and the Senate Committee on Environment and Public Works that evaluated rental caps in the National Capitol Region, particularly whether current caps provide for maximum competition for build-to-suit leased space. Finally, the Public Buildings Act would require federal buildings that are open to the public and which have restrooms, to have at least one lactation room. The head of a federal agency may exclude a building under his or her purview if the building does not already contain a lactation room for employees who work in the building, or a room that could be converted into a lactation room at a "reasonable cost." Agency heads may also exclude a building from the lactation room requirement if the cost of constructing such a room would be "unfeasible." Table 1 compares key provisions from CPRA and the FAST Act and is followed by an analytical discussion. Agencies have long argued that public benefit conveyance requirements, particularly those that require screening for homeless use, create an administrative burden that delays disposition and drives up maintenance costs. Savings, therefore, may be generated by permitting agencies to bypass screening requirements and move through the disposal process more quickly. Under both CPRA and the FAST Act , the identification of individual properties for specific disposal or realigning actions may permit those properties to bypass certain statutory requirements that may otherwise have applied. For example, it appears that properties recommended for sale or transfer may not be automatically subject to certain statutory public benefit screening requirements, including screening requirements established under the McKinney-Vento Homeless Assistance Act. CPRA and the FAST Act both propose establishing new entities—the former a commission, the latter a board—that would be responsible for the final list of disposal recommendations. In addition, the bills would require the President to seek Senate confirmation of the chairperson, which could slow down the development of recommendations if there were delays in the nomination or confirmation process. Similarly, the other members of the commission would either be appointed by the President in consultation with Congress (under the FAST Act) or appointed by House and Senate leaders directly (under CPRA), which could enable Congress to influence the composition of the commission. CPRA would require a 45-day timeframe for congressional action. Congress would have less than seven weeks to review all of the recommendations—of which there may be hundreds—before deciding whether to pass a joint resolution of disapproval. This could reduce oversight of major real property actions. Consolidation projects, for example, are often complex, multi-year efforts, with long-term consequences for the agencies and communities involved, and for which Congress is asked to provide hundreds of millions, or even billions, of dollars. For this reason, Congress regularly holds hearings on major consolidation proposals. For example, the effort to consolidate the Department of Homeland Security at St. Elizabeth's in the District of Columbia (DC) is estimated to cost $3.26 billion and has been the subject of several congressional hearings. The consequences of the consolidation are wide ranging, and include changing traffic patterns in Washington, DC, relocating thousands of employees, and ensuring historic preservation requirements are met. Similar issues have been raised regarding the consolidation of Food and Drug Administration headquarters, a project that has received hundreds of millions of dollars since FY2000. Some might argue that Congress would not have sufficient time, under the proposed time constraints, to either approve or disapprove of the recommendations. Requiring Congress to approve or disapprove of the entire list of recommended actions could reduce conflict among various stakeholders interested in the properties in question. Some civilian agencies have found their disposal efforts complicated by the involvement of state and local governments, nonprofits, businesses, and community leaders with competing agendas. In 2002, for example, the USPS identified a number of "redundant, low-value" facilities that it sought to close in order to reduce its operating costs. As part of the facility closure process, USPS was required to formally announce its intention to close each facility and solicit comments from the community. USPS ultimately abandoned its plans to close many facilities it identified—including post offices that were underutilized, in poor condition, or not critical to serving their geographic areas—in part due to political pressure from stakeholders. By moving the locus of decision making away from executive branch agencies, the amount of pressure that stakeholders exert on the process might be reduced. The FAST Act might limit the influence of Congress over the recommendation process, at least compared to CPRA, because there would be no opportunity for Congress to stop the process if it has objections. Under the FAST Act, the Director would approve or disapprove the list of recommendations, and Congress would only be notified of his decision. This model of decision-making would put relatively more authority in the hands of the executive branch. As discussed earlier in this report, basic data on the federal real property portfolio—including information on how many excess and surplus properties each agency holds—are currently limited. Each bill would enable the bodies that develop recommendations—the commission under CPRA and the board under the FAST Act—to access all information pertaining to the recommendations, including detailed data on each property's age, condition, operating costs, size, history of capital expenditures, sustainability metrics, and the number of employees housed at the property. Similarly, both the commission and the board would be required to post a report on its findings, conclusions, and recommendations on a website, which may result in agency-level data being made public. CPRA would also provide certain congressional committees and legislative agencies access to the FRPP. This could enhance oversight of the federal real property portfolio, since analysts and policymakers would have, for the first time, direct access to comprehensive, government-wide data on agency portfolios, which in turn can be used to track agency disposal actions on an on-going basis and conduct ad hoc analyses. Similarly, H.R. 4465 would establish a publicly accessible database with key information about the costs and level of utilization of federal buildings across the government, which will facilitate increased monitoring of agency portfolios and disposal actions. Neither CPRA nor H.R. 4465 included provisions designed to improve the quality of real property data collected from agencies. As a consequence, the value of expanded data content and access could be limited by ongoing problems with data quality. The Senate bill, S. 2375 , would not address either access to, or the quality of data in the FRPP. The Property Reform Act would not establish a new process for the disposition of surplus federal buildings, but it would establish a publicly accessible database of federal properties. The Property Reform Act database would encompass a broader range of information than the other proposed databases, including data on the length of time federal properties were in the disposal process, the costs associated with the disposal of each property, and the proceeds received from the disposition. These data may be helpful in identifying the cause of delays in the disposal process, which is one the primary reasons federal property management is considered a "high risk" area by GAO. The data on costs and proceeds may also enhance estimates of the potential revenue that could be generated through increased disposal activity. The Property Reform Act would take steps to ensure that federal agencies are aware of their options for leasing space in underutilized Postal Service buildings. Very little information is available on postal properties, and by requiring the Postal Service to submit a list of properties with available space to federal agencies, there may be an increase in collocation (federal agencies leasing space from the Postal Service). This would simultaneously provide housing for federal agencies that are relocating or consolidating operations, while reducing the inventory of unneeded space at the Postal Service. The Public Buildings Act would establish a pilot program to address concerns about the overreliance on costly leasing—another factor in GAO's designation of federal real property management as a "high risk" area. The pilot program would essentially reduce the administrative burden associated with entering into leases, provided the leases meet certain criteria. These criteria, such as a lease length of at least 10 years and a cost per square foot cap, may result in fewer short-term leases with relatively high costs. In addition, the bill would provide Congress with enhanced oversight of space acquisition projects. By requiring GSA to notify Congress of any increase of 5% or more in the cost of a project, lawmakers may be better positioned to hold GSA accountable for staying within its approved budget. In addition, by establishing a 5% threshold for notification, Congress may be able to sooner identify projects with the potential for significantly higher cost overruns. | Real property disposal is the process by which federal agencies identify and then transfer, donate, or sell real property they no longer need. Disposition is an important asset management function because the costs of maintaining unneeded properties can be substantial, consuming financial resources that might be applied to long-standing real property needs, such as repairing existing facilities, or other pressing policy issues, such as reducing the national debt. Despite the expense, federal agencies hold thousands of unneeded and underutilized properties. Agencies have argued that they are unable to dispose of these properties for several reasons. First, there are statutorily prescribed steps in the disposal process that can take months to complete. Second, properties may not be appealing to potential buyers or lessees if they require major repairs or environmental remediation—steps for which agencies lack funding to complete before bringing a property to market. Third, key stakeholders in the disposal process—including local governments, non-profit organizations, and businesses—are often at odds over how to dispose of properties. In addition, Congress may be limited in its capacity to conduct oversight of the disposal process because it currently lacks access to reliable, comprehensive real property data. The General Services Administration (GSA) maintains a database with information on most federal buildings, but those data are provided to Congress on a limited basis. Moreover, the quality of the information in the database has been questioned, in part because of inconsistent reporting of key data elements, such as how much space within a given building is unneeded. Five bills have been introduced in the 114th Congress that would enact broad reforms in the real property disposal process—the Civilian Property Realignment Act (CPRA, S. 1750); the Federal Asset Sale and Transfer Act (FAST Act, S. 2375); the Federal Assets Sale and Transfer Act (H.R. 4465); the Federal Property Management Reform Act of 2016 (Property Reform Act, S. 2509); and the Public Buildings Reform and Savings Act of 2016 (Public Buildings Act, H.R. 4487). Under CPRA, agencies would develop a list of disposal recommendations, which could include the sale, transfer, conveyance, consolidation, or outlease of any unneeded space, among other options. These recommendations would be vetted by a newly established Civilian Property Realignment Commission, and then submitted to the President. If the President approved the recommendations, then they would be sent to Congress for review. If Congress passed a joint resolution of disapproval, then the recommendations would not be implemented; if a joint resolution of disapproval was not passed, then implementation would proceed. In many cases, disposal would be expedited by exempting properties on the recommendation list from certain statutory requirements, such as screening for public benefit. Under the FAST Act, agency recommendations would be sent to a newly established real property board for vetting, and then submitted to the Director of the Office of Management and Budget for approval or disapproval. The FAST Act does not provide Congress with an opportunity to vote for or against the list of recommendations. The Property Reform Act seeks to improve the management of federal real property by establishing additional disposal guidance, allowing agencies to retain the proceeds from the disposal of their properties, and requiring the U.S. Postal Service to increase the amount of underutilized space it leases to other federal agencies. The Public Buildings Act would establish a streamlined leasing pilot program, mandate lactation rooms in many public buildings, require GSA to notify Congress of cost overruns, and require real property prospectuses to include a comparison of costs between leasing and renting space. |
The United States is the largest foreign direct investor in the world and also the largest recipient of foreign direct investment. By year-end 2011, foreign direct investment in the United States had reached $2.6 trillion and U.S. direct investment abroad had reached $4.1 trillion. This dual role means that globalization, or the spread of economic activity by firms across national borders, has become a prominent feature of the U.S. economy and that through direct investment the U.S. economy has become highly enmeshed with the broader global economy. The globalization of the economy also means that the United States has important economic, political, and social interests at stake in the development of international policies regarding direct investment. With some exceptions for national security, the United States has established domestic policies that treat foreign investors no less favorably than U.S. firms. In addition, the United States has led efforts over the past 50 years to negotiate internationally for reduced restrictions on foreign direct investment, for greater controls over incentives offered to foreign investors, and for equal treatment under law of foreign and domestic investors. In light of the terrorist attacks on the United States on September 11, 2001, however, some Members have questioned this open-door policy and have argued for greater consideration of the long-term impact of foreign direct investment on the structure and the industrial capacity of the economy, and on the ability of the economy to meet the needs of U.S. defense and security interests. Arguably the most important, and most controversial, activities related to foreign direct investment are the reviews and investigation of foreign investments in the United States by the Committee on Foreign Investment in the United States (CFIUS). The Committee is an interagency organization that serves the President in overseeing the national security implications of foreign investment in the economy. Originally established by an Executive Order of President Ford in 1975, the committee has operated until recently in relative obscurity. CFIUS has "the primary continuing responsibility within the Executive Branch for monitoring the impact of foreign investment in the United States, both direct and portfolio, and for coordinating the implementation of United States policy on such investment." Following its creation by Executive Order, the Committee met infrequently and played a low-profile role in monitoring foreign investment in the economy until 1988, when Congress approved the Exon-Florio provision. The Exon-Florio provision grants the President broad discretionary authority to take what action he considers to be "appropriate" to suspend or prohibit proposed or pending foreign acquisitions, mergers, or takeovers which "threaten to impair the national security." Congress directed that before this authority can be invoked the President must conclude that (1) other U.S. laws are inadequate or inappropriate to protect the national security; and (2) that he must have "credible evidence" that the foreign investment will impair the national security. As a result, if CFIUS determines that it does not have credible evidence that an investment will impair the national security it is not required to undertake a full 45-day investigation, even if the foreign entity is owned or controlled by a foreign government. After considering the two conditions listed above (other laws are inadequate or inappropriate, and he has credible evidence that a foreign transaction will impair national security), the President is granted almost unlimited authority to take " such action for such time as the President considers appropriate to suspend or prohibit any covered transaction that threatens to impair the national security of the United States ." In addition, such determinations by the President are not subject to judicial review. In the Exon-Florio provision (and the subsequent P.L. 110-49 ), national security was not defined, but was meant to be interpreted broadly. Nevertheless, regulations developed by the Treasury Department to implement the law direct the members of CFIUS to focus their reviews of foreign investments exclusively on those transactions that involve "products or key technologies essential to the U.S. defense industrial base," and not to consider economic concerns more broadly. CFIUS also indicated that in order to assure an unimpeded inflow of foreign investment it would implement the statute "only insofar as necessary to protect the national security," and "in a manner fully consistent with the international obligations of the United States." When Congress adopted the Exon-Florio provision, many Members were concerned that the United States could not prevent foreign takeovers of U.S. firms unless the President declared a national emergency or regulators invoked federal antitrust, environmental, or securities laws. Through the Exon-Florio provision, Congress attempted to strengthen the President's hand in conducting foreign investment policy, while limiting its own role as a means of emphasizing that, as much as possible, the commercial nature of investment transactions should be free from political considerations. Congress also attempted to balance public concerns about the economic impact of certain types of foreign investment with the nation's long-standing international commitment to maintaining an open and receptive environment for foreign investment. While CFIUS's activities often seem to be quite opaque, the Committee is not free to establish an independent approach to reviewing foreign investment transactions, but operates under the authority of the President and reflects his attitudes and policies. As a result, any discretion CFIUS uses to review and to investigate foreign investment cases reflects policy guidance from the President. Foreign investors are also constrained by legislation that bars foreign direct investment in such industries as maritime, aircraft, banking, resources and power. Generally, these sectors were closed to foreign investors prior to passage of the Exon-Florio provision in order to prevent public services and public interest activities from falling under foreign control, primarily for national defense purposes. The Exon-Florio process is comprised of three different steps for reviewing proposed or pending foreign "mergers, acquisitions, or takeovers" of "persons engaged in interstate commerce in the United States" to determine if the transaction "threatens to impair the national security." CFIUS has 30 days to conduct a review, 45 days to conduct an investigation, and then the President has 15 days to make his determination. The President is the only officer with the authority to suspend or prohibit mergers, acquisitions, and takeovers. Neither Congress nor the Administration has attempted to define the term national security as it appears in the Exon-Florio statute. Treasury Department officials have indicated, however, that during a review or investigation each member of CFIUS is expected to apply that definition of national security that is consistent with the representative agency's specific legislative mandate. For instance, over time and through a series of Executive Orders, the Department of Defense has developed the National Industrial Security Program (NISP) through which it has adopted various provisions under the term, "Foreign Ownership, Control, or Influence (FOCI)." These provisions attempt to prevent foreign firms from gaining unauthorized access to "critical technology, classified information, and special classes of classified information" through an acquisition of U.S. firms that it could not gain access to through an export control license. This type of review is run independently of and parallel to a CFIUS review. In 2007, Congress changed the way foreign direct investments are reviewed through P.L. 110-49 , the Foreign Investment and National security Act of 2007. Through P.L. 110-49 , Congress strengthened its role in two fundamental ways. First, Congress enhanced its oversight capabilities by requiring greater reporting to Congress by CFIUS on the Committee's actions either during or after it completes reviews and investigations and by increasing reporting requirements on CFIUS. Second, Congress fundamentally altered the meaning of national security in the Exon-Florio provision by including critical infrastructure and homeland security as areas of concern comparable to national security. The law also requires the Director of National Intelligence to conduct reviews of any investment that poses a threat to the national security. The law provides for additional factors the President and CFIUS are required to use in assessing foreign investments, including the implications for the nation's critical infrastructure. In another change, P.L. 110-49 requires CFIUS to investigate all foreign investment transactions in which the foreign entity is owned or controlled by a foreign government, regardless of the nature of the business. Some foreign investors have regarded this approach as a change in policy by the United States toward foreign investment. Prior to this change, foreign investment transactions were reviewed in a way that presumed that the transactions contributed positively to the economy. Consequently, the burden of proof was on the members of CFIUS to prove during a review that a particular transaction threatened to impair national security. P.L. 110-49 , however, shifted the burden onto firms that are owned or controlled by a foreign government to prove that they are not a threat to national security. In any given year, the number of investment transactions in which the foreign investor is associated with a foreign government likely is small compared with the total number of foreign investment transactions. The number of such transactions, however, has grown as some foreign governments experienced a surge in their foreign exchange reserves and they established sovereign wealth funds and invested their reserve funds abroad in an array of activities, including in U.S. businesses. In 2012, the growing number of investments by Chinese firms sparked concerns by a number of groups over the economic and security impact of the investments, similar to concerns about Japanese investment in the United States in the 1980s. In particular, on October 8, 2012, the House Permanent Select Committee on Intelligence published a report on the "the counterintelligence and security threat posed by Chinese telecommunications companies doing business in the United States." The report offered a number of policy recommendations affecting CFIUS, including The Committee on Foreign Investment in the United States (CFIUS) must block acquisitions, takeovers, or mergers involving Huawei and ZTE given the threat to U.S. national security interests. Legislative proposals seeking to expand CFIUS to include purchasing agreements should receive thorough consideration by relevant Congressional committees. Committees of jurisdiction in the U.S. Congress should consider potential legislation to better address the risk posed by telecommunications companies with nation-state ties or otherwise not clearly trusted to build critical infrastructure. Such legislation could include increasing information sharing among private sector entities, and an expanded role for the CFIUS process to include purchasing agreements. In addition, in November 2012, the U.S.-China Economic and Security Review Commission issued a report that detailed concerns over Chinese investments by U.S. industries, lawmakers, and government officials about the ''potential economic distortions and national security concerns arising from China's system of state-supported and state-led economic growth." In particular, some observers argued that economic concerns focused on the possibility that state-backed Chinese companies choose to invest ''based on strategic rather than market-based considerations,'' and are free from the constraints of market forces because of generous state subsidies. The report proffered a number of recommendations for amending the CFIUS statute: Congress examine foreign direct investment from China to the United States and assess whether there is a need to amend the underlying statute (50 U.S.C. app 2170) for the Committee on Foreign Investment in the United States (CFIUS) to (1) require a mandatory review of all controlling transactions by Chinese state-owned and state-controlled companies investing in the United States; (2) add a net economic benefit test to the existing national security test that CFIUS administers; and (3) prohibit investment in a U.S. industry by a foreign company whose government prohibits foreign investment in that same industry. Legislation creating the Committee on Foreign Investment in the United States (CFIUS) could be amended to add a test of ''economic benefit'' of a Chinese investment in the United States. CFIUS's jurisdiction be extended to include ''greenfield'' investments, or investments in new industrial plants and facilities. In 2012, two investments by Chinese firms attracted public and congressional attention: an investment by the Chinese firm Sany Group in a wind farm project, known as the Butter Creek Projects, in Oregon by Ralls Corp.; and Wanxiang's acquisition of battery-maker A123 Systems Inc. In March 2012, Ralls acquired the wind farm assets from Terna Energy SA, an Athens, Greece-based company, without reporting the transaction to CFIUS. In June, 2012, CFIUs contacted Ralls and requested the firm file a voluntary notification to have its investment retroactively reviewed. After reviewing the acquisition, CFIUS recommended that Ralls stop operations until a complete investigation could be completed as a result of objections by the U.S. Navy over the placement of wind turbines by Ralls near or within restricted Naval Weapons Systems Training Facility airspace where drones (unmanned aerial vehicles) are tested. After a full investigation, CFIUS recommended that President Obama block the investment by ordering a divestment of the transaction and imposed other requirements on Ralls to remove equipment it had installed. On September 28, 2012, President Obama issued an executive order that argued that there was credible evidence that the Ralls acquisition threatened to impair U.S. national security and ordered Ralls to divest itself of the Oregon wind farm project. In response, the Ralls Corporation filed a suit on October 1, 2012 challenging the Obama Administration's authority to block the investment. On February 22, 2013, the United States District Court for the District of Columbia dismissed the suit by ruling that the court lacked jurisdiction, since the CFIUS statute states that the President's decisions are not subject to judicial review, known as a finality provision. Ralls argued that the President was authorized only to "suspend of prohibit" a transaction, not to order a removal of equipment or a divesture. The court ruled, however that the statute grants the President broad authority by authorizing him to take "such action for such time" as he considers appropriate. The suit also argued that Ralls was treated unfairly under the Due Process Clause of the Fifth Amendment, but the court ruled that it lacked jurisdiction on this motion by the CFIUS statute, nevertheless, the court indicated that its ruling allowed Ralls' due process claim to proceed. The Ralls' due process claim apparently focused on whether the President and/or CFIUS should be required to provide companies that proceed through the CFIUS review and investigation process with an opportunity to review, respond to, and rebut any evidence used to make a Presidential Determination. One issue involved in requiring access to such information is the fact that CFIUS' analysis for any particular transaction is based on classified information generally not available to the public. Ralls has appealed the case. In addition, China's Wanxiang Group received approval in January 2013 from CFIUS to acquire electric car battery maker A123 Systems. Wanxiang outbid other potential buyers by offering to pay $257 million for the U.S. company. Some Members of Congress and the Strategic Materials Advisory Council argued against the acquisitions on the grounds that it could jeopardize the nation's energy security. Others opposed the acquisition because A123 Systems had received nearly $250 million in a federal grant to support clean energy, although half of the grant was never released. A123 Systems manufactures lithium-ion batteries for Fisker Automotive, BMW hybrid 3- and 5-Series cars, and the all-electric Chevrolet Spark. Arguably, the terrorist attacks of September 11, 2001, and a dissatisfaction among some Members over a perceived lack of responsiveness by the administration reshaped Congressional attitudes toward the Exon-Florio provision. This changed perception became apparent in 2006 as a result of the public disclosure that Dubai Ports World was attempting to purchase the British-owned P&O Ports, with operations in various U.S. ports. After the September 11 terrorist attacks Congress passed and President Bush signed the USA PATRIOT Act of 2001 (Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism). In this act, Congress provided for special support for "critical infrastructure," which it defined as systems and assets, whether physical or virtual, so vital to the United States that the incapacity or destruction of such systems and assets would have a debilitating impact on security, national economic security, national public health or safety, or any combination of those matters. This broad definition is enhanced to some degree by other provisions of the act, which specifically identify sectors of the economy that Congress considered as elements in the critical infrastructure of the nation. These sectors include telecommunications, energy, financial services, water, transportation sectors, and the "cyber and physical infrastructure services critical to maintaining the national defense, continuity of government, economic prosperity, and quality of life in the United States." The following year, Congress transferred the responsibility for identifying critical infrastructure to the Department of Homeland Security (DHS) through the Homeland Security Act of 2002. In addition, the Homeland Security Act added key resources to the list of critical infrastructure (CI/KR) and defined those resources as: "publicly or privately controlled resources essential to the minimal operations of the economy and government." Through a series of Directives, the Department of Homeland Security identified 17 sectors of the economy as falling within the definition of critical infrastructure/key resources and assigned primary responsibility for those sectors to various Federal departments and agencies, which are designated as Sector-Specific Agencies (SSAs). On March 3, 2008, Homeland Security Secretary Chertoff signed an internal DHS memo designating Critical Manufacturing as the 18 th sector on the CI/KR list. The broad sweep of industrial sectors in the economy that fall within the terms "critical infrastructure," "homeland security," and "key resources" reflects a fundamental change in the way some in Congress view national economic security. From this viewpoint, economic activities are a separately identifiable component of national security and, therefore, should be protected from foreign investment that transfers control to foreigners or shifts technological leadership abroad. This viewpoint, however, has not been shared by some policymakers, who argue that including critical infrastructure and homeland security in P.L. 110-49 did not alter the overriding focus of the Exon-Florio provision on investments that directly affect U.S. national defense security. As a result, Congress and the Bush Administration sparred at times over transactions that CFIUS had approved over the objections of various Members of Congress. This clash of views essentially revolved around three long-standing issues: a) what constitutes foreign control of a U.S. firm?; b) how should national security be defined?; and c) which types of economic activities should be targeted for a CFIUS review? Some Members also perceive greater risks to the economy arising from foreign investments by firms that are owned or controlled by foreign governments as a result of the terrorist attacks. The Dubai Ports World case, in particular, demonstrated that there was a difference between the post-September 11, 2001, expectations held by many in Congress about the role of foreign investment in the economy and of economic infrastructure issues as a component of national security. For some Members of Congress, CFIUS seemed to be out of touch with the post-September 11, 2001, view of national security, because it remained founded in the late 1980s orientation of the Exon-Florio provision, which viewed national security primarily in terms of national defense and downplayed or even excluded a broader notion of economic national security. These and other concerns about foreign investment underscore the significant differences that remained between Congress and the Bush Administration over the operations of CFIUS and over the economic and security objectives the Committee should be pursuing. In early 2011, some Members of Congress had requested that the Obama Administration support a recommendation by CFIUS that the President block a proposed acquisition of 3Leaf Systems by Huawei Technologies over national security concerns. Instead, Huawei discontinued its efforts to acquire the U.S. firm. On June 20, 2011, the Obama Administration issued a formal statement on foreign investment declaring the countries' commitment to an open investment policy. The proposed acquisition of P&O by Dubai Ports World sparked a broader set of concerns and a wide-ranging discussion between Congress and the Administration over a working set of parameters that establishes a functional definition of the national economic security implications of foreign direct investment. In part, this issue reflects differing assessments of the economic impact of foreign investment on the U.S. economy and differing political and philosophical convictions among Members and between the Congress and various administrations. | The President is generally seen as exercising broad discretionary authority over developing and implementing U.S. direct investment policy, including the authority to suspend or block investments that "threaten to impair the national security." Congress is also directly involved in formulating the scope and direction of U.S. foreign investment policy. At times, some Members have urged the President to be more aggressive in blocking certain types of foreign investments. Such confrontations reflect vastly different philosophical and political views between Members of Congress and between Congress and the Administration over the role foreign investment plays in the economy and the role that economic activities should play in the context of U.S. national security policy. In July 2007, Congress asserted its own role in making and conducting foreign investment policy when it adopted and the President signed P.L. 110-49, the Foreign Investment and National Security Act of 2007. This law broadens Congress's oversight role, and it explicitly includes the areas of homeland security and critical infrastructure as separately identifiable components of national security that the President must consider when evaluating the national security implications of a foreign investment transaction. At times, the act has drawn Congress into a greater dialogue over the role of foreign investment in the economy, and conflicts with the Administration over efforts to define the limits of the broad rubric of national economic security. |
Democratic Conference: The conference is the caucus of all Democratic Senators and serves as the central coordinating body. It operates through the Democratic leader's office and is responsible for communicating the party's message. The Democratic leader serves as chair of the conference, which is also led by a vice-chair and a secretary. Democratic Policy Committee: The policy committee is responsible for the formulation of overall legislative policy. It provides background and analysis of pending legislation, and organizes briefings and strategy meetings for Democratic Members and staff. The policy committee is led by a chair, appointed by the Democratic leader and includes regional chairs and members. Democratic Steering and Outreach Committee: Often referred to as the steering committee, this group maintains liaison between the Democratic leadership and Democratic elected officials around the country. It also is responsible for making committee assignment recommendations. It is led by a chair, appointed by the Democratic leader, who is assisted by an executive committee. Democratic Committee on Committee Outreach: This group provides a voice in the Democratic leadership for committee chairs. An appointed chair and vice-chair coordinate the committee work. Democratic Committee on Rural Outreach: This group guides rural outreach and tries to find new ways to reach rural, suburban, and ex-urban communities. It is led by an appointed chair. Democratic Senatorial Campaign Committee: This panel is the fund-raising arm of the Senate Democrats that provides financial and research assistance to Democratic Senators seeking reelection and to non-incumbent Democratic Senate nominees. It is led by a chair appointed by the Democratic leader, vice-chair, treasurer, and a board of trustees. Republican Conference: The Republican Conference is the organizational vehicle for Republican Members and their staff. It hosts periodic meetings of Senate Republicans and is the primary vehicle for communicating the party's message. The conference is led by an elected chair and vice-chair. Republican Policy Committee: The policy committee assists Senate leaders and committee chairs in designing, developing, and executing policy ideas. The policy committee hosts a weekly lunch meeting of Republican Senators and provides summaries of major bills and amendments, prepares analyses of rollcall votes, and distributes issue papers. It is led by an elected chair, and comprises members of the party leadership, the chairs of selected committees, and members designated by the Republican leader to serve on an executive committee. Republican Steering Committee: The steering committee is responsible for making committee assignment recommendations. It is led by a chair appointed by the Republican leader and an executive committee. Republican Senatorial Committee: The campaign committee oversees the political and fund-raising efforts of Senate Republicans. It is led by a chair appointed by the Republican leader and an executive committee. | Each Congress, Senators meet to organize the chamber and select their party leaders. In addition to the majority and minority leaders and party whips are numerous entities created by the party to assist with the work of the party. |
The differences between the Sunni and Shiite Islamic sects are rooted in disagreements over the succession to the Prophet Muhammad, who died in 632 AD, and over the nature of leadership in the Muslim community. The historic debate centered on whether to award leadership to a qualified, pious individual who would follow the customs of the Prophet or to transmit leadership exclusively through the Prophet's bloodline. The question was settled initially when community leaders elected a companion of the Prophet's named Abu Bakr to become the first c aliph (Arabic for "successor"). Although most Muslims accepted this decision, some supported the candidacy of Ali ibn Abi Talib, the Prophet's cousin and son-in-law, husband of the Prophet's daughter Fatima. Ali had played a prominent role during the Prophet's lifetime, but he lacked seniority within the Arabian tribal system and was bypassed. This situation was unacceptable to some of Ali's followers, who considered Abu Bakr and the two succeeding caliphs (Umar and Uthman) to be illegitimate. Ali's followers believed that the Prophet Muhammad himself had named Ali as successor and that the status quo was a violation of divine order. A few of Ali's partisans orchestrated the murder of the third caliph Uthman in 656 AD, and Ali was named caliph. Ali, in turn, was assassinated in 661 AD, and his son Hussein (680 AD) died in battle against forces of the Sunni caliph. Ali's eldest son Hassan (d. 670 AD) is also revered by Shiite Muslims, some of who claim he was poisoned by the Sunni caliph Muawiyah. Those who supported Ali's ascendancy became later known as "Shi'a," a word stemming from the term " shi ' at Ali," meaning "supporters" or "helpers of Ali." Others respected and accepted the legitimacy of his caliphate but opposed political succession based on bloodline to the Prophet. This group, who constituted the majority of Muslims, came to be known in time as "Sunni," meaning "followers of [the Prophet's] customs [ sunna ]." The caliphate declined as a religious and political institution after the 13 th century, although the term "caliph" continued to be used by some Muslim leaders until it was abolished in 1924 by Turkey's first President Mustafa Kemal Ataturk. The decline and abolition of the caliphate became a powerful religious and political symbol to some Sunni Islamist activists during the 19 th and 20 th centuries. These activists argued that leaders in the Islamic world had undermined the caliphate by abandoning the "true path" of Islam. Inspired by these figures, some contemporary Sunni Islamist extremists, such as Osama bin Laden and others, advocate the restoration of a new caliphate based on "pure" Islamic principles. The religious, ethnic, linguistic, and socioeconomic diversity that exists within the global Muslim community presents significant challenges to the reemergence of centralized, pan-sectarian, and widely recognized Islamic religious leadership. Islamic theology and sectarian considerations are rarely sufficient explanations for instances of terrorism and political violence involving Muslims or taking place in the contemporary Muslim world. Political, social, and economic factors often determine whether a given dispute reflects sectarian identities or transcends them. The use of violence by members of a given religious sect may be motivated by secular political goals or individual factors. Sunni and Shiite organizations and governments often collaborate when they perceive that their interests overlap. In other instances, theological differences can directly fuel sectarian hatred and violence and undermine calls for cross-sectarian cooperation. Members and supporters of terrorist organizations like Al Qaeda and its affiliates exhibit regional and theological diversity that makes it difficult to identify universally shared motives that can be linked to specific religious doctrines. However, many Sunni and Shiite Muslims refer to members and supporters of Al Qaeda and similar groups simply as takfiris (Arabic for "those who accuse others of apostasy") because of Al Qaeda supporters' habit of denouncing Muslim and non-Muslim individuals who don't accept their narrow interpretation of Sunni Islam as non-believers and legitimate targets. Although there are considerable differences between Sunni and Shiite Islam, the two Islamic sects share common traditions, beliefs, and doctrines. All Muslims believe that the Prophet Muhammad was the messenger of Allah (the Arabic word for God). All believe that they must abide by the revelations given to the Prophet by Allah (as recorded in the Quran) and by the hadith (sayings of the Prophet and his companions). The concepts of piety, striving for goodness, and social justice are fundamental to Islamic belief and practice. Additionally, all Muslims are expected to live in accordance with the five pillars of Islam: (1) shahada —recital of the creed "There is no God but Allah, and Muhammad is His Prophet"; (2) salat —five obligatory prayers in a day; (3) zakat —giving alms to the poor; (4) sawm —fasting from sunrise to sunset during the month of Ramadan; and (5) hajj —making a pilgrimage to Mecca once during a lifetime if one is physically and financially able. The basic sources for Islamic jurisprudence, be it Sunni or Shiite, are the Quran, the sunna (customs of the Prophet Muhammad) as relayed in the hadith (collected accounts of the Prophets sayings), qiyas (interpretive analogy), ijma ' (scholarly consensus), and ijtihad (individual reasoning). The primary function of learned religious leaders in the Islamic faith is the interpretation of Islamic law ( shari ' a ). There are no codified laws in either Sunni or Shiite Islam. Rather, there are sources for the interpretation of law outlined above, and these sources are similar among Shiites and Sunnis. Shiite hadith differ from Sunni hadith , mainly in that they include the sayings of the Shiite imams who are considered to have been divinely inspired. Shiite legal interpretation also allows more space for human reasoning than Sunni interpretation does. The majority of Muslims today are Sunnis. They accept the first four caliphs (including Ali) as the "rightly guided" rulers who followed the Prophet. In theory, Sunnis believe that the leader ( imam ) of the Muslim community should be selected on the basis of communal consensus, on the existing political order, and on a leader's individual merits. This premise has been inconsistently practiced within the Sunni Muslim community throughout history. Sunni Muslims do not bestow upon human beings the exalted status given only to prophets in the Quran, in contrast to the Shiite veneration of imams. Sunnis have a less elaborate and arguably less powerful religious hierarchy than Shiites. In contrast to Shiites, Sunni religious teachers historically have been under state control. At the same time, Sunni Islam tends to be more flexible in allowing lay persons to serve as prayer leaders and preachers. In their day-to-day practices, Sunnis and Shiites exhibit subtle differences in the performance of their obligatory prayers. Both groups share a similar understanding of basic Islamic beliefs. Within Sunni Islam, there are four schools of jurisprudence that offer alternative interpretations of legal decisions affecting the lives of Muslims. The four schools of jurisprudence rely mostly on analogy as a way to formulate legal rulings, and they also give different weight to the sayings of the Prophet and his companions ( hadith ) within their decisions. In some secular countries, such as Turkey, the opinions issued by religious scholars represent moral and social guidelines for how Muslims should practice their religion and are not considered legally binding. The four legal schools, which vary on certain issues from strict to broad legal interpretations, are the (1) Hanafi: this is the oldest school of law. It was founded in Iraq by Abu Hanifa (d. 767 AD). It is prevalent in Turkey, Central Asia, the Balkans, Iraq, Syria, Lebanon, Jordan, Afghanistan, Pakistan, India, and Bangladesh; (2) Maliki: this was founded in the Arabian Peninsula by Malik ibn Anas (d. 795 AD). It is prevalent in North Africa, Mauritania, Kuwait, and Bahrain; (3) Shaf ' i: this school was founded by Muhammad ibn Idris al Shafi'i (d. 819 AD). It is prevalent in Egypt, Sudan, Ethiopia, Somalia, parts of Yemen, Indonesia, and Malaysia; and (4) Hanbali: this was founded by Ahmad Hanbal (d. 855). It is prevalent in Saudi Arabia, Qatar, parts of Oman, and the United Arab Emirates. Sunni Islam has had less prominent sectarian divisions than Shiite Islam. The Ibadi sect, which is centered mostly in Oman, East Africa, and in parts of Algeria, Libya, and Tunisia, has been sometimes misrepresented as a Sunni sect. Ibadi religious and political dogma generally resembles basic Sunni doctrine, although the Ibadis are neither Sunni nor Shiite. Ibadis believe strongly in the existence of a just Muslim society and argue that religious leaders should be chosen by community leaders for their knowledge and piety, without regard to race or lineage. The Sunni puritanical movements referred to as " Salafism " and " Wahhabism " have become well known in the West in recent years and are highly active in many countries around the world. "Salafism" refers to a broad subset of Sunni revivalist movements that seek to purify contemporary Islamic religious practices and societies by encouraging the application of practices and views associated with the earliest days of the Islamic faith. The world's Salafist movements hold a range of positions on political, social, and theological questions and include both politically quietist and violent extremist groups. The terms "Wahhabism" and "Wahhabi" are often applied to groups and individuals who espouse a particular brand of Salafist thought commonly associated with the religious establishment of the kingdom of Saudi Arabia. In its original context, "Wahhabism" refers to a movement founded in Arabia by the scholar Muhammad ibn Abd al Wahhab (1703-1791 AD) as an offshoot of the Hanbali school of Islamic legal interpretation. Abd al Wahhab encouraged a return to the orthodox practice of the "fundamentals" of Islam, as embodied in the Quran and in the life of the Prophet Muhammad. In the 18 th century, Muhammad ibn Saud, founder of the modern-day Saudi dynasty, formed an alliance with Abd al Wahhab and unified the disparate tribes in the Arabian Peninsula. From that point forward, there has been a close relationship between the Saudi ruling family and the local Wahhabi religious establishment. The most conservative interpretations of Wahhabist Sunni Islam view Shiites and other non-Wahhabi Muslims as dissident heretics. Following the 1979 Soviet invasion of Afghanistan and Shiite Islamic revolution in Iran, Saudi Arabia's ruling Sunni royal family began allowing their clerics and citizens to more actively promote Saudi religious doctrine abroad, and Saudi individuals and organizations since have financed the construction of mosques, religious schools, and Islamic centers in dozens of countries. The content of Saudi-funded religious programs ranges from apolitical to activist depending on its sources and sponsors within the kingdom. However, in host societies many observers refer to Saudi funded or supported religious centers and clerics as "Wahhabi." Similarly, although significant differences may exist between the religious views and actions of Saudi Arabia's domestic religious establishment and those of specific Salafists active outside of the kingdom, non-Saudi Salafis frequently are identified as "Wahhabi" by other Muslims and non-Muslims who perceive them to be ideologically similar to their Saudi counterparts or believe that they receive financial support from Saudi Arabia or other Sunni Gulf states. Initially, the Shiite movement gained a wide following in areas that now include Iraq, Iran, Yemen, and parts of Central and South Asia. In most of the world, Shiites would continue as a minority. Today, according to some estimates, Shiite Islam is practiced among approximately 10% to 15% of the world's Muslim population. For Shiites, the first true leader of the Muslim community is Ali, who is considered an imam , a term used among Shiites not only to indicate leadership abilities but also to signify blood relations to the Prophet Muhammad. As Ali's descendants took over leadership of the Shiite community, the functions of an imam became more clearly defined. Each imam chose a successor and, according to Shiite beliefs, he passed down a type of spiritual knowledge to the next leader. Imams served as both spiritual and political leaders. But as Shiites increasingly lost their political battles with Sunni Muslim rulers, imams focused on developing a spirituality that would serve as the core of Shiite religious practices and beliefs. Shiites believe that when the line of imams descended from Ali ended, religious leaders, known as mujtahid s, gained the right to interpret religious, mystical, and legal knowledge to the broader community. The most learned among these teachers are known as ayatollah s (lit. the "sign of God"). Shiite religious practice centers around the remembrance of Ali's younger son, Hussein, who was martyred near the town of Karbala in Iraq by Sunni forces in 680. His death is commemorated each year on the 10 th day of the Islamic month of Muharram in a somber and sometimes violent ritualistic remembrance known as "Ashura," marked among some Shiites by the ritual of self-flagellation. As a minority that was often persecuted by Sunnis, Shiites found solace in the Ashura ritual, the telling of the martyrdom of Hussein and the moral lessons to be learned from it, which reinforced Shiite religious traditions and practices. Twelver Shiism—the most common form of Shiism today—is pervasive in Iran, Iraq, Lebanon, and Bahrain. Twelvers accept a line of 12 infallible imams descendent from Ali and believe them to have been divinely appointed from birth. The 12 imams are viewed as harbors of the faith and as the designated interpreters of law and theology. Twelvers believe that the 12 th and last of these imams "disappeared" in the late ninth century. This "hidden imam" is expected to return to lead the community. Following the 12 th imam's disappearance, as one scholar notes, a "pacifist" trend emerged among Twelvers who "chose to withdraw from politics and quietly await his coming." In the 20 th century, changes in the political landscape of the Middle East led to a new competing "activist" trend among Twelver groups in Iran and Lebanon, typified by the late Iranian religious leader Ayatollah Khomeini. Although most Shiites agree on the basic premise that Ali was the first rightful imam, they disagree on his successors. The Ismailis, who are the second-largest Shiite sect, broke off in the eighth century, recognizing only the first seven imams (the seventh was named Ismail, hence the names "Ismaili" and "Sevener"). Historically and at least until the 16 th century, the Ismailis were far more disposed than the Twelvers to pursuing military and territorial power. In the past, they established powerful ruling states, which played significant roles in the development of Islamic history. Today, Ismailis are scattered throughout the world but are prominent in Afghanistan (under the Naderi clan), in India, and in Pakistan. There are also Ismaili communities in East and South Africa. The Zaydis , who acknowledge the first five imams and differ over the identity of the fifth, are a minority sect of Shiite Islam, mostly found in Yemen. The Zaydis reject the concepts of the imams' infallibility and of a "hidden imam." Other sects, such as the Alawites and Druzes, are generally considered to be derived from Shiite Islam, although their religious practices are secretive, and some do not regard their adherents as Muslims. Alawites exist mostly in Syria and Lebanon. The Asad family that effectively has ruled Syria since 1971 are Alawite. Many Alawites interpret the pillars (duties) of Islam as symbolic rather than applied, and celebrate an eclectic group of Christian and Islamic holidays. In Turkey, the Alevi s are an offshoot group of Shiite Islam that has been often confused with Syrian Alawites or other Shiites. Most Alevis are well-integrated into Turkish society and speak both Turkish and Kurdish. The Druze community was an 11 th -century offshoot of Ismaili Shiite Islam and is concentrated in Lebanon, Jordan, Syria, and Israel. Today, the Druze faith differs considerably from mainstream Shiite Islam. | The majority of the world's Muslim population follows the Sunni branch of Islam, and approximately 10%-15% of all Muslims follow the Shiite (Shi'ite, Shi'a, Shia) branch. Shiite populations constitute a majority in Iran, Iraq, Bahrain, and Azerbaijan. There are also significant Shiite populations in Afghanistan, Kuwait, Lebanon, Pakistan, Saudi Arabia, Syria, and Yemen. Sunnis and Shiites share most basic religious tenets. However, their differences sometimes have been the basis for religious intolerance, political infighting, and sectarian violence. This report includes a historical background of the Sunni-Shiite split and discusses the differences in religious beliefs and practices between and within each Islamic sect as well as their similarities. The report also relates Sunni and Shiite religious beliefs to discussions of terrorism and sectarian violence that may be of interest to Congress. Also see CRS Report RS21695, The Islamic Traditions of Wahhabism and Salafiyya, by [author name scrubbed]. |
The Food, Conservation, and Energy Act of 2008 ( P.L. 110-246 ), the 2008 farm bill, reauthorizes almost all existing conservation programs, modifies several programs, and creates various new conservation programs. These changes address eligibility requirements, program definitions, enrollment and payment limits, contract terms, evaluation and application ranking criteria, among other administrative issues. In general, the conservation title includes specific changes that expand eligibility and delivery of technical assistance under most programs to cover more broadly, for example, forested and managed lands, pollinator habitat and protection, and identified natural resource areas, among other expansions. Producer coverage across most programs is also expanded to include beginning, limited resource, and socially disadvantaged producers; speciality crop producers; and producers transitioning to organic production. The enacted bill also creates new conservation programs to address emerging issues and priority resource areas, and also new subprograms under existing programs. Estimated new spending on the 2008 farm bill's conservation title—not including estimated conservation-related revenue and cost-offset provisions in the bill—is projected to increase by $2.7 billion over 5 years and $4.0 billion over 10 years. Total mandatory spending for the title is projected at $24.3 billion over 5 years (FY2008-FY2012) and $55.2 billion over 10 years (FY2008-FY2017). Agricultural conservation became a significant and visible policy focus in the Food Security Act of 1985. Since then, questions and concerns about conservation program funding, policy objectives, individual program effectiveness, comparative geographic emphasis, and the structure of federal assistance have been recurring issues in the debate shaping each successive omnibus farm bill. The 2008 farm bill is no exception. These long-standing issues arguably became even more apparent in this farm bill as they found their way into many individual program changes. This result may be a continuation of the more active profile taken by many conservation groups and their supporters in the 2002 farm bill. Unlike commodity programs, conservation program participation tends to be well represented by small and mid-size farming operations, according to the United States Department of Agriculture's (USDA) Economic Research Service. The programs also enjoy wider public support. In an environment of pronounced domestic budget constraint, however, conservation groups and producers found themselves competing with other farming interests for the necessary resources to expand and continue many conservation programs. Budget concerns aside, several other issues emerged in the debate leading to enactment of the 2008 farm bill: funding priorities and payment structure, geographic targeting, program complexity, the importance of large-scale conservation efforts, and measurement of costs and effectiveness. These general policy issues—in various forms—raised questions central to the deliberations and outcomes in the enacted conservation title of the farm bill. Among the questions raised were: Should payment limits be program-specific, or for some combination of conservation programs? Would the imposition of payment limits change patterns of participation and effectiveness of conservation programs? What are the potential differences in saving under different payment limit options? Where should savings be allocated? Should each conservation program have the same payment limit? How will funding levels affect the existing backlog of interest in program participation that cannot be met? Because agricultural production is concentrated in specific regions of the United States, agricultural conservation and environmental issues are not randomly distributed. Some areas and some natural resources reveal greater environmental impact from agricultural activities—actual and potential—than others. For example, pressures on farmland development from urban sprawl are more pronounced on the East and West Coasts. Although many areas of the United States have water quality/quantity concerns or air quality issues, the deterioration of certain watersheds and certain air sheds is more advanced in some places than in others. How is it determined where federal conservation spending would be most effective? Should certain locations (states, regions, or watersheds) be targeted? Does targeting particular producer groups provide an effective strategy in resource management? Should some types of agricultural production or resource concerns receive higher priority in evaluating applications? Members of Congress, conservation groups, the Administration, and individual producers raised questions about the desirability of proliferating conservation programs and the complexity of adhering to various regulations that govern the programs. Some producers might have some acreage under one program and other acreage under another program. On-farm wetland management may be regulated by one program, while the environmental management plan of retired acreage is under another program. The question arises whether there is avoidable duplication or other inefficiencies that significantly limit conservation and resource management effectiveness. Could existing programs be combined in certain ways? Would a consolidated effort targeting a few specific resource issues reduce the complexity? Along with the perceived complexity of agricultural conservation programs is the related issue of the effectiveness of program delivery. Does the conservation delivery capacity of USDA agencies need to be further supplemented through partnerships, relationships with other organizations, or expansion of the technical assistance provider system? What opportunities and problems would result if a large portion of staff in the responsible agencies retired in a short time period? Does USDA currently have the staff needed to administer conservation programs if they were all fully funded? How might more market-based solutions to resource conservation improve delivery efficiency and program effectiveness? Local planning and implementation of conservation programs through locally constituted councils is an important aspect of conservation management and a long-standing characteristic of U.S. local-federal relations. A significant question raised by conservation groups, however, is the extent to which conservation efforts would be more effective and more efficient if they took place at larger scales, for example, through regional or multistate resource planning and multistate conservation planning. Because the conservation programs are voluntary, concern was voiced that participation could decline if producers felt that conservation programs were more remote from local planning input. Using watersheds or river basin drainage areas as policy targets, for example, could reduce the planning control of any single area jurisdiction. The trade-off is seen in the efficiencies that potentially stem from pooling financial and planning resources and targeting particular resource issues affecting most if not all producers. The Chesapeake Bay region, the Great Lakes, and specific river basins with significant agricultural impacts are examples where larger scale planning may hold particular advantages. How effective are federal conservation programs in improving environmental management of natural resources? Evaluation is an essential part of effective conservation management. Yet, developing practical and reliable indicators that can be used across programs and with different producers and different resources has been a challenge. Policymakers and stakeholders generally agree that conservation measures have been effective in reducing the environmental impact of agricultural activities, but at what cost, in what locations, and under what specific circumstances are much more difficult questions to answer. The recognized importance of establishing valid indicators has been an ongoing issue in environmental management. Research has advanced considerably in the area, to the point that integrating those findings within the structure of current programs is viewed by many to be more feasible than it was in the past. The 2008 farm bill reauthorizes almost all current conservation programs, modifies several current programs, and creates various new conservation programs. The various conservation programs administered by USDA can be broadly grouped into land retirement and easement programs and so-called "working lands" programs. In general, land retirement and easement programs take land out of crop production and provide for program rental payments and cost-sharing to establish longer term conservation coverage, in order to convert the land back into forests, grasslands, or wetlands. Working lands programs provide technical and financial assistance to assist agricultural producers in improving natural resource conservation and management practices on their productive lands. The enacted 2008 farm bill also creates several new conservation programs under the bill's conservation and other titles. The following sections provide brief overviews of the Title II changes to agricultural conservation programs. Major land retirement and easement programs include the Conservation Reserve Program (CRP), the Wetlands Reserve Program (WRP), the Grasslands Reserve Program (GRP), the Farmland Protection Program (FPP), among other programs. The Conservation Reserve Program (CRP) is a voluntary program that allows producers to enter into 10-15 year contracts that provide annual rental payments and financial assistance to install certain conservation practices and maintain vegetative or tree covers. Its purpose is to conserve and improve soil, water, and wildlife resources by converting highly erodible and other environmentally sensitive acreage to a long-term vegetative cover. CRP is the largest conservation program in terms of total annual funding. It is administered by USDA's Farm Service Agency (FSA) and is funded through the Department of Agriculture's (USDA) Commodity Credit Corporation (CCC). CRP also has several subprograms, one of which is the Conservation Reserve Enhancement Program (CREP), that are designated to support state and federal partnerships through incentive payments for installing specific conservation practices that help protect environmentally sensitive land, decrease erosion, restore wildlife habitat, and safeguard ground and surface water. The enacted 2008 farm bill (Secs. 2101-2111) caps CRP enrollment at 32 million acres, down from its current cap of 39.2 million acres. The managers report on the conference agreement states this reduction is "not ... an indicator of declining or reduced support for CRP"; however, in other sections of the report USDA is encouraged to assist producers who are transitioning from land retirement to working lands conservation. The farm bill makes certain program changes, including allowing USDA to address state, regional, and national conservation initiatives; providing incentives for beginning and socially disadvantaged farmers/ranchers to purchase CRP land from retiring farmers; allowing certain types of managed haying and grazing and installation of wind turbines on enrolled lands (but at reduced rental rates); requiring that program participants manage lands according to a conservation plan; requiring USDA to survey annually the per-acre estimates of county cash rents paid to CRP contract holders; clarifying the status of alfalfa grown as part of a rotation practice; and establishing cost-sharing rates for certain types of conservation structures. The bill also amends the pilot program for wetland and buffer acres in CRP. Each state can enroll up to 100,000 acres up to a national maximum of one million acres. This maximum may be raised to 200,000 in each state following a review of the program. Eligible lands for the program include (1) wetlands that have been cropped three of the immediately preceding 10 crop years; (2) land on which a constructed wetland is to be developed to manage fertilizer runoff; and (3) land that has been devoted to commercial pond-raised aquaculture. Conditions under which managed haying and grazing on CRP acreage may occur have been modified. The farm bill allows managed harvesting and grazing in response to drought and routine grazing to control invasive species. Where routine harvesting is permitted, state technical committees are required to coordinate to ensure appropriate environmental management. In addition to managed harvesting, the installation of wind turbines on enrolled land is now permitted activity. Any of these permitted uses on CRP acreage will result in a rental payment reduction commensurate with the economic value of the authorized activity. The enacted farm bill permits 50% cost share payments on land used for hardwood trees, windbreaks, shelterbelts, and wildlife corridors for contracts entered into after November 1990. Contracts extend from a minimum of two years up to four years. Funding of $100 million also is authorized to cover cost sharing for the thinning of trees to improve the management of natural resources on the land. The 2008 farm bill modifies the criteria for evaluating CRP contract applications. Evaluation criteria include the extent to which a CRP contract application would improve soil resources, water quality, or wildlife habitat. The bill also allows the Secretary to establish different criteria in various states or regions that lead to improvements in soil quality or wildlife habitat. Preference in new CRP contracts will be given to land owners and operators who are residents of the county or a contiguous county in which the land is located. The farm bill also establishes incentives to increase the participation of beginning and socially disadvantaged farmers and ranchers. It authorizes CRP contract modifications to assist these producers in leasing or purchasing land under a CRP contract from a retired or retiring farm owner or operator. The provision authorizes $25 million for assistance in making these land transfers. Other enacted modifications to CRP include redefining the Chesapeake Bay region as a priority area without limiting the region to the states of Pennsylvania, Maryland, and Virginia. While the new program apples to all watersheds draining into the Chesapeake Bay, the Susquehanna, Shenandoah, Potomac, and Patuxent Rivers will get funding priority. A provision in the Trade and Tax Provisions Title (Section 15301) will permit retired or disabled farmers and ranchers to exclude CRP payments from self-employment taxes beginning January 2008. The Wetlands Reserve Program (WRP) provides long-term technical and financial assistance to landowners with the opportunity to protect, restore, and enhance wetlands on their property, and to establish wildlife practices and protection. It is a voluntary program administered by USDA's Natural Resources Conservation Service (NRCS). The enacted 2008 farm bill (Secs. 2201-2210) increases the WRP maximum enrollment cap to over 3.014 million acres (up from an existing cap of 2.275 million acres), and expands eligible lands to include certain types of private and tribal wetlands, croplands, and grasslands, as well as lands that meet the habitat needs of specific wildlife species. The farm bill authorizes a new Wetlands Reserve Enhancement Program, to establish agreements with states similar to that for CREP, which includes a Reserved Rights Pilot program to explore whether reserving grazing rights is compatible within WRP. The bill makes certain program changes, including changing the payment schedule for easements; limiting wetland restoration payments; specifying criteria for ranking program applications; requiring that USDA conduct an annual survey of the Prairie Pothole Region starting with FY2008; and requiring USDA to submit a report to Congress on long-term conservation easements under the program. GRP is a voluntary program administered by USDA's Farm Services Agency (FSA) that helps landowners restore and protect grassland, rangeland, pastureland, and shrubland and provides assistance for rehabilitating grasslands. The enacted 2008 farm bill (Sec. 2403) adopts a new acreage enrollment goal of an additional 1.22 million acres by 2012, with 40% of funds for rental contracts (10-, 15-, and 20-year duration) and 60% for permanent easements. Requirements for cooperative agreements similar to those under the Farmland Protection Program are also authorized for GRP easements. The farm bill modifies the terms and conditions of GRP contracts and easements to permit fire presuppression and the addition of grazing-related activities, such as fencing and livestock watering. Priority for enrollment is also given to certain expiring CRP lands, and tribal lands are made eligible. The bill does not include a Grassland Reserve Enhancement provision, as proposed in the House. FFP is a voluntary program administered by USDA's NRCS that provides matching funds to help purchase development rights for eligible farmlands to keep productive farm and ranchland in agricultural uses. USDA partners with state, tribal, or local governments and nongovernmental organizations to acquire conservation easements or other interests in land from landowners, and provides up to 50% of the fair market easement value of the conservation easement. The enacted 2008 farm bill changes the program's purpose from protecting topsoil to protecting the land's agricultural use by limiting nonagricultural uses and including lands that promote state and local farmland protection (Sec. 2401). The federal share of easement costs are capped at 50%, with the land owner contributing 25% of the costs. The program is also restructured to emphasize longer term and renewable cooperative agreements. The bill also makes other technical changes to the program covering the program's administrative requirements, appraisal methodology, and terms and conditions, among other issues. It does not rename the program the Farm and Ranchland Protection Program, as the program is often referred to by USDA. The bill provides additional budget authority for FPP of $743 million. Major working lands programs include the Environmental Quality Incentives Program (EQIP), the (renamed) Conservation Stewardship Program (CSP), the Agricultural Management Assistance (AMA) program, and the Wildlife Habitat Incentives Program (WHIP), among others. EQIP and CSP are the two largest working lands programs, and received additional budget authority over five years under the 2008 farm bill of $3.4 billion for EQIP and $1.1. billion for CSP. The enacted farm bill did not include a Senate proposal that would have closely coordinated CSP and EQIP under the so-called Comprehensive Stewardship Incentives Program. EQIP is administered by USDA's NRCS and provides technical and cost-share assistance to farmers and ranchers for promoting agricultural production and environmental quality by supporting the installation or implementation of structural and management practices on eligible agricultural land. EQIP includes a number of subprograms, including the Colorado River Basin Salinity Control, Conservation Innovation Grants, the Ground and Surface Water Conservation Program, and the Klamath River Basin. The enacted 2008 farm bill (Secs. 2501-2510) expands the program to cover practices that enhance soil, surface and ground water, air quality, and conserve energy; it also covers grazing land, forestland, wetlands, and other types of land and natural resources that support wildlife. In evaluating applications, cost-effectiveness and comprehensive treatment of resource issues are given priority. The bill sets aside 5% of the EQIP spending for beginning farmers and ranchers and 5% for socially disadvantaged farmers and ranchers, providing up to 90% of the costs of implementing an EQIP plan for these farmers. It also provides payments to assist tribal or native corporation members, and producers transitioning to organic production. The 2008 farm bill lowers the EQIP payment limit to $300,000 (down from $450,000) in any 6-year period per entity, except in cases of special environmental significance including projects involving methane digesters, as determined by USDA. Projects with organic production benefits are capped at $20,000 annually or $80,000 in any six-year period. The enacted bill retains the requirement that 60% of funds be made available for cost-sharing to livestock producers, including an incentive payments for producers who develop a comprehensive nutrient management plan. The bill reserves $37.5 million of annual EQIP funds for the Conservation Innovation Grants program and modifies the grants to cover air quality concerns associated with agriculture (including greenhouse gas emissions). It also replaces the Ground and Surface Water Conservation Program within EQIP with a new Agricultural Water Enhancement Program (AWEP) to address water quality and quantity concerns on agricultural land, highlighting certain priority areas and providing additional mandatory funds for the program. The manager's report accompanying the farm bill suggests priority areas under the programs to include the Eastern Snake Plain Aquifer region, Puget Sound, the Ogallala Aquifer, the Sacramento River watershed, the Upper Mississippi River Basin, the Red River of the North Basin, and the Everglades. AWEP prioritizes assistance to areas experiencing significant drought. The bill provides a total of $280 million through FY2012 for AWEP activities. Funding for EQIP is authorized at $1.2 billion (FY2008), $1.337 billion (FY2009), $1.45 billion (FY2010), $1.588 billion (FY2011), and $1.75 billion (FY2012). The pre-existing Conservation Security Program is a voluntary program administered by NRCS that provides financial and technical assistance to promote the conservation and improvement of soil, water, air, energy, plant and animal life, and other conservation purposes on tribal and private working lands. However, the 2008 farm bill (Sec. 2301) phases this program out (except for existing contracts) and replaces it with a new and renamed Conservation Stewardship Program (CSP). The new CSP, beginning in 2009, will continue to encourage conservation practices on working lands, but will be different from the former program. It eliminates the three-tier approach, establishes 5-year rather than 10-year contracts, and requires direct attribution of payments, among other changes, thus requiring that USDA promulgate new rules for the program. More than $2 billion in funding is made available for existing contracts under the former CSP program. Rather than the three-tier payment system, payments for new CSP contracts will be based on meeting or exceeding a stewardship threshold—the level of resource conservation and environmental management required to improve and conserve the quality and condition of at least one resource concern. The stewardship threshold also must be met for at least one priority resource concern identified at the state level as a priority for a particular watershed or area of the state. Payments are based on the actual costs of installing conservation measures, any foregone income, and the value of the expected environmental outcomes. The CSP reserves 5% of the funds each for beginning farmers and ranchers and disadvantaged farmers and ranchers (Sec. 2704). Monitoring and evaluation of the stewardship plan to assess the environmental effectiveness is also an element of the new CSP. The bill sets a target of enrolling 12.8 million acres annually under the new CSP. Individual producer payments are limited to $200,000 in any 5-year period per entity. Rather than annual sign-ups for the program, CSP enrollment will be contracted on a continuous basis. The type of eligible lands is expanded to include priority resource concerns, as identified by states; certain private agricultural and forested lands; and also some nonindustrial private forest lands (limited to not more than 10% of total annual acres under the program). Technical assistance will also be provided to specialty crop and organic producers, along with a pilot testing of producers who engage in innovative new technologies or participate in on-site conservation research. Producers may also receive supplemental payments for resource-conserving crop rotations that provide specific environmental benefits such as improving soil fertility, thus reducing the need for irrigation. Program payments may not be used for the design, construction, or maintenance of animal waste storage or treatment facilities or associated waste transport or transfer devices. WHIP is a voluntary program designed for the development and improvement of habitat primarily on private land. Through WHIP, USDA's Natural Resources Conservation Service provides both technical assistance and up to 75% cost-share assistance to establish and improve fish and wildlife habitat. The terms of WHIP agreements between NRCS and the participant generally are from 5 to 10 years from the date the agreement is signed. The 2008 farm bill (Sec. 2602) reauthorizes WHIP at current funding levels, but limits program eligibility to focus on "the development of wildlife habitat on private agricultural land, nonindustrial private forest land, and tribal lands," thus potentially excluding some previously covered areas (i.e., non-agricultural lands). It also allows USDA to provide priority to projects that address issues raised by state, regional, and national conservation initiatives. The manager's report emphasizes that the program address various specific wildlife initiatives at state and local levels. The 2008 farm bill provides $425 million (FY2008-FY2012) and also increases the limit on cost-share payments to 25% for long-term projects. Payments to an individual entity are limited to $50,000 per year. The 2008 farm bill also authorizes a $15 million increase in funding to $20 million annually for FY2008-FY2012 for the Grassroots Source Water Protection Program (Sec. 2603). Funding is also increased to $100 million (FY2009) for the Small Watershed Rehabilitation Program, to remain available until expended (Sec. 2803). The Grassroots Source Water Protection Program, a partnership between the Farm Service Agency (FSA) and the National Rural Water Association, is designed to help keep surface and groundwater water pollution from affecting drinking water. The Small Watershed Rehabilitation Program is administered by NRCS and works to rehabilitate older community dams. The farm bill (Sec. 2801) also provides additional mandatory funding ($15 million annually, FY2008-FY2012) for the Agricultural Management Assistance Program (AMA) and includes Hawaii as an eligible state under that program. AMA provides cost share assistance to agricultural producers to voluntarily address issues such as water management, water quality, and erosion control by incorporating conservation into their farming operations. The enacted bill amends the Resource Conservation and Development Program (RC&D) to emphasize locally led planning processes and to provide assistance for implementing area plans (Sec. 2805). The RC&D program designates RC&D areas and assists the capability of elected and civic leaders to plan and carry out projects for resource conservation and community development. Also reauthorized through FY2012 is the Farm Viability Program (Sec. 2402). The Farm Viability Program, as authorized in the 2002 farm bill, provides authority for USDA to provide grants to eligible entities for the purpose of carrying out farm viability programs. To date, Congress has not appropriated funds to implement the program. The Great Lakes Basin Program for Soil Erosion and Sediment Control is a federal-state partnership providing demonstration and technical assistance projects throughout the Great Lakes region. The program is coordinated by the Great Lakes Commission in partnership with the NRCS, the Environmental Protection Agency and the U.S. Army Corps of Engineers. The enacted bill modifies the program to implement the recommendations of the Great Lakes Regional Collaboration Strategy (Sec. 2604). Site-specific technical assistance (TA) is provided for producers and landowners in constructing and installing conservation and natural resource management technologies. Producers often need TA in designing and implementing appropriate conservation strategies. The enacted 2008 farm bill makes changes in the TA component of various conservation programs to respond to these producer needs and clarifies the purposes of TA. The bill also requires a review of conservation practice standards and includes specific provisions to ensure that speciality crops, organic producers, and precision agricultural producers receive adequate conservation TA. Although NRCS provides TA directly, the enacted bill also authorizes a national certification process for third-party providers, including non-federal providers (Sec. 2706). In addition, the bill creates an Agriculture Conservation Experienced Services (ACES) Program to make use of the talents and skills of older, non-USDA employees (Sec. 2710). The bill further establishes state TA committees composed of various state conservation officials and agricultural producers for each state to assist in the implementation and technical aspects of conservation programs (Sec. 2711). The bill authorizes a new Cooperative Conservation Partnership Initiative (CCPI) (Section 2707) as a component of the Conservation Technical Assistance program. It is authorized to target technical and financial resources on conservation priorities on agricultural and nonindustrial private forest land on a state, local, multistate, and regional basis. The manager's report especially encourages locally developed projects. Eligible CCPI programs include EQIP, CSP, WHIP, Great Lakes Basin Sediment Control, Conservation of Private Grazing Land, Chesapeake Bay Region, and Grassroots Water Conservation. The provision reserves 6% of the funding for these programs for initiatives under the CCPI and establishes criteria for prioritization of projects, including projects that provide innovative conservation methods. The enacted 2008 farm bill directs USDA to prepare a number of statistical and evaluation reports regarding various conservation programs: (1) an annual report on conservation program enrollments and payments—those greater than $250,000—under the Wetlands Reserve Program, Farmland Protection Program, Grassland Reserve Program, and the Environmental Quality Incentives Program (for land having special environmental significance). The bill also requires a report on the new Agricultural Water Enhancement Program (Sec. 2705). Other required reports include one on the long term implications of conservation easements (Sec. 2210), an annual report on average county cash rental rates (Sec. 2110), and an appraisal of soil and water conservation programs (Sec. 2804). In addition to the changes made to existing agricultural conservation programs, the enacted 2008 farm bill also expands the range of USDA conservation activities by creating several new programs, including a program expanding conservation activities in the Chesapeake Bay region, a new state grants program, a provision to limit production on native sod, and a provision promoting market-based approaches to conservation. This program (Sec. 2605) is targeted at conserving and protecting the Chesapeake Bay and the water sources that make up the watershed. It applies to all tributaries, backwaters, and side channels, including watersheds, draining into the Chesapeake Bay, but gives priority to the Susquehanna, Shenandoah, Potomac, and Patuxent Rivers. The bill authorizes $188 million in mandatory funding (FY2009-FY2012) and $438 million over 10 years (FY2009-FY2018). Also referred to as the "Open Fields" program, this program authorizes state grants to encourage land-owners to provide public access for wildlife-dependent recreation, subject to a 25% reduction for the total grant amount if the opening dates for migratory bird hunting in the state are not consistent for residents and non-residents. The bill provides $50 million in mandatory funds (FY2009-FY2012) for the program. This 2008 farm bill provision (Sec. 12020) makes producers that plant an insurable crop (over 5 acres) on native sod ineligible for crop insurance and the noninsured crop disaster assistance (NAP) program for the first five years of planting. The conference agreement states that this provision may apply to virgin prairie converted to cropland in the Prairie Pothole National Priority Area, if elected by the state. This new conservation provision (Sec. 2709) is intended to facilitate the participation of farmers and landowners in emerging environmental services markets, such as water and air quality, habitat protection, and carbon storage. The farm bill directs USDA to establish a framework for developing consistent standards and processes for quantifying environmental services from the agriculture and forestry sectors, but does not authorize funding for this effort. The enacted farm bill also includes changes to several additional programs. The Colorado River Basin Salinity Control Act makes funding available to support resource management activities targeting sources of salinity in the Colorado River (e.g., leaking wells, irrigation, industrial sources). The enacted farm bill establishes a Basin States Program for salinity control activities upstream of the Imperial Dam (sec. 2806). The 2002 farm bill authorized that mandatory spending of $200 million be transferred to the Bureau of Reclamation to provide water to at-risk natural desert terminal lakes. Section 2807 of the enacted bill provides $175 million for desert terminal lakes, but also designates that part of this funding be used for land and water purchases in the Walker River Basin. The basin lies on California's eastern border with Nevada. A provision in the Credit title of the enacted 2008 bill (Sec. 5002) establishes a new loan and loan guarantee program to assist producers in financing the cost to the producer for applying for needed conservation installations. The manager's report states that the loan program is only a complement to the assistance provided through the various conservation programs. The bill gives priority for these loans to beginning and socially disadvantaged farmers and ranchers, those converting to organic systems, and producers who need conservation assistance to address various compliance requirements. The majority of agriculture and farmland conservation groups have responded favorably to the expanded provisions and increased funding for programs in the Conservation Title of the 2008 farm bill. Since enactment, a few national wildlife groups have expressed concern about changes to some provisions during the conference negotiations, which are perceived as providing fewer benefits to the protection of wildlife and wildlife habitat. Among the concerns expressed by these groups are the reduction in the CRP acreage enrollment cap reduction, easing of the requirements under the "sodsaver" provision, limitations on the types of lands eligible under Wildlife Habitat Incentives Program, and the new permanent disaster fund, which could encourage marginal land plantings, among other concerns. | The 2008 enacted farm bill (Food, Conservation, and Energy Act of 2008, P.L. 110-246) reauthorizes almost all existing conservation programs, modifies several programs, and creates various new conservation programs. A new Conservation Stewardship program replaces the existing Conservation Security Program and a new Agricultural Water Enhancement Program under the Environmental Quality Incentives Program is also authorized with mandatory funding. Other new programs include the Chesapeake Bay Watershed Program and a "Sodsaver" provision to help preserve native sod, including virgin prairie in the Prairie Pothole National Priority Area. Significant modifications to existing programs include a reduction of the maximum enrolled acreage under the Conservation Reserve Program to 32 million acres and an increase in the cap for the Wetlands Reserve Program to over 3 million acres. Other changes in the enacted bill include modifications to address eligibility requirements, program definitions, enrollment and payment limits, contract terms, evaluation and application ranking criteria, among other administrative issues. Eligibility is expanded for many programs and technical assistance under most programs is broadened to cover forested and managed lands, pollinator habitat and protection, and identified natural resource areas. Beginning, limited resource, and socially disadvantaged producers, specialty crop producers, and producers transitioning to organic production are also targeted for special consideration in many existing programs. Estimated new spending on the conservation title—not including estimated conservation-related revenue and cost-offset provisions in the bill—is projected to increase by $2.7 billion over 5 years and $4.0 billion over 10 years. Total mandatory spending for the conservation title is projected at $24.3 billion over 5 years (FY2008-FY2012) and $55.2 billion over 10 years (FY2008-FY2017). A comparison of conservation provisions in the enacted 2008 farm bill with existing law and the House and Senate farm bills is provided in the Appendix. This report will not be updated. |
The State Children's Health Insurance Program (CHIP) is a federal-state program that provides health coverage to certain uninsured low-income children and pregnant women in families that have annual income above Medicaid eligibility levels, but have no health insurance. CHIP is jointly financed by the federal government and states, and the states are responsible for administering CHIP. Participation in CHIP is voluntary and all states, the District of Columbia, and the territories participate. The federal government sets basic requirements for CHIP, but states have the flexibility to design their own version of CHIP within the federal government's basic framework. As a result, there is significant variation across CHIP programs. CHIP was established as part of the Balanced Budget Act of 1997 (BBA 97; P.L. 105-33 ) under a new Title XXI of the Social Security Act (SSA). Since that time, other federal laws have provided additional funding, and made significant changes to CHIP. Most notably, the Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA; P.L. 111-3 ) increased appropriation levels for CHIP, and changed the formula for allotments (i.e., federal funds allocated to each state for the federal share of their CHIP expenditures), eligibility, and benefit requirements. The Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended) largely maintains the current CHIP structure through FY2019. The law also extends federal appropriations through FY2015 and requires states to maintain their Medicaid and CHIP child eligibility levels through FY2019 as a condition for receiving Medicaid federal matching funds. On April 16, 2015, President Obama signed into law the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L. 114-10 ). MACRA repeals the sustainable growth rate (SGR) mechanism (which overrides the reduction in the Medicare physician fee schedule that was set to begin in April 2015) and extends funding for CHIP, among other provisions. Specifically, MACRA extends CHIP funding for two additional years (i.e., through FY2017) and maintains the current allotment formula with the 23 percentage point increase to the enhanced federal medical assistance percentage (E-FMAP). MACRA also extends the "qualifying state" option, the Child Enrollment Contingency Fund, "Express Lane" eligibility, Outreach and Enrollment Grants, the Pediatric Quality Measures Program, and the Childhood Obesity Demonstration Project. Congress will face a decision with regard to the future of CHIP when federal CHIP funding expires after FY2017. The health insurance market is far different today than when CHIP was established. CHIP was designed to work in coordination with Medicaid to provide health coverage to low-income children. In general, CHIP allows states to cover CHIP children with no health insurance in families with annual income above state Medicaid eligibility levels. Before CHIP was established, no federal program provided health coverage to children with family with annual incomes above Medicaid eligibility levels. The ACA further expanded the options for children in certain low-income families with incomes above CHIP eligibility levels by offering subsidized coverage for insurance purchased through health insurance exchanges. Congress's action or inaction on the CHIP program will affect the health insurance options available to targeted low-income children and their resulting health coverage. This report describes the basic elements of CHIP, focusing on how the program is designed, who is eligible, what services are covered, how enrollees share in the cost of care, and how the program is financed. The report ends with a brief discussion of the future of CHIP. States may design their CHIP programs in three ways. They may cover eligible children under their Medicaid programs (i.e., CHIP Medicaid expansion), create a separate CHIP program, or adopt a combination approach where the state operates a CHIP Medicaid expansion and one or more separate CHIP programs concurrently. In all cases, federal CHIP funding is available to pay for the costs for services provided to CHIP children. State choices for program design impact the coverage that enrollees receive. When states provide Medicaid coverage to CHIP children (i.e., CHIP Medicaid expansion), Medicaid rules (Title XIX of SSA) typically apply. When states provide coverage to CHIP children through separate CHIP programs, Title XXI of SSA rules typically apply. States that want to make changes to their programs beyond what both laws allow may seek approval from the Centers for Medicare and Medicaid Services (CMS) through the use of the Section 1115 waiver authority. Where relevant, differences between Title XIX and Title XXI of the SSA program rules regarding eligibility, benefit coverage, cost sharing, and financing are summarized in Table 1 , and highlighted throughout the report. As of July 1, 2014, 8 states, the District of Columbia, and the territories had CHIP Medicaid expansions, 13 states had separate CHIP programs, and 29 states used a combination approach. (See Appendix A , Table A-1 for 50-state information on CHIP program design.) FY2013 state-reported CHIP enrollment data (the most recent data available) show that the bulk of CHIP enrollees received coverage through separate CHIP programs (approximately 70%). The remainder received coverage through a CHIP Medicaid expansion. This enrollment distribution has largely held true over the course of the program's history (see Figure 1 below). However, this landscape likely will change due to modifications to CHIP eligibility rules enacted under the ACA. (For more information on these and other eligibility related requirements, see the " Eligibility " subsection.) Preliminary FY2014 CHIP enrollment data show about half of CHIP enrollees are in CHIP Medicaid expansion programs and about half are in separate CHIP programs. This section describes CHIP eligibility rules. In general, CHIP extends coverage to certain low-income children and pregnant women without health insurance in families with annual family income too high to qualify them for Medicaid. Specifically, Title XXI of the SSA defines a targeted low-income child as one who is under age 19 with no health insurance, and who would not have been eligible for Medicaid under the federal and state rules in effect when CHIP was first initiated in 1997. (Hereinafter, targeted low-income children are referred to as CHIP children, CHIP-eligible or CHIP-enrolled, as applicable.) States have broad discretion in setting their income eligibility standards, and eligibility varies across states. Children under age 19 represent the vast majority of CHIP program enrollment. States with a CHIP Medicaid expansion program must follow the eligibility rules of the Medicaid program (see Table 1 ). Because CHIP eligibility builds on top of Medicaid eligibility, the Medicaid child eligibility rules that were in effect when CHIP was established in 1997 represent the Medicaid eligibility ceiling for children. States with CHIP Medicaid expansion programs may cover CHIP children by expanding their Medicaid programs in the following ways: (1) by establishing a new optional eligibility group for such children as authorized in Title XXI of SSA, and/or (2) by liberalizing the financial rules for any of several existing Medicaid eligibility categories. Many states with CHIP Medicaid expansion programs chose the latter, opting to cover CHIP children under existing Medicaid eligibility pathways, especially Medicaid's poverty-related child groups, rather than by establishing the Title XXI of SSA optional coverage group. Such a strategy reduces the administrative burden of creating and implementing a new coverage group. Regardless of the state's approach, CHIP children are an optional eligibility group in Medicaid and enrollees must be covered statewide. States are permitted to determine the eligibility criteria for the group of CHIP children who may enroll in separate CHIP programs (see Table 1 ). Title XXI of the SSA allows states to use the following factors in determining eligibility: geography (e.g., sub-state areas or statewide), age (e.g., subgroups under 19), income, residency, disability status (so long as any standard relating to disability status does not restrict eligibility), access to or coverage under other health insurance (to establish whether such access/coverage precludes CHIP eligibility), and duration of CHIP eligibility (states must re-determine eligibility at least annually). States can set the upper income level for CHIP children up to 200% of the federal poverty level (FPL), or 50 percentage points above the applicable pre-CHIP Medicaid income level. However, prior to January 1, 2014, states were able to use income disregards, which effectively permitted states to expand eligibility to children under age 19 at whatever level they chose. Two states, New Jersey, and New York, plus one California county used this income-counting methodology to expand their CHIP programs to 355% FPL, 405% FPL, and 416% FPL, respectively. The income-disregard option was eliminated under the ACA. Beginning January 1, 2014, the ACA required the federal government and states to rely on modified adjusted gross income (MAGI) income counting rules when determining eligibility for CHIP as well as most of Medicaid's nonelderly populations and subsidized exchange coverage. Under the MAGI rules, a state looks at each individual's MAGI, deducts 5% (which the law provides as a standard disregard), and compares that income to the new income standards set by each state. The transition to MAGI effectively limits CHIP upper income eligibility levels for states by eliminating a state's ability to use income disregards to extend coverage to children in families at higher income levels. Also under the ACA, states are permitted to use CHIP federal matching funds to cover children who lose Medicaid eligibility as a result of the elimination of income disregards. As a part of a separate provision, the ACA required states to transition CHIP "stairstep" children aged 6 through 18 in families with annual income less than 133% FPL (based on MAGI) to Medicaid, beginning January 1, 2014. According to a recent Medicaid budget survey, 21 states transitioned children from CHIP to Medicaid in 2014 as a result of this requirement. Of the states impacted by this policy, another study estimates that on average 28% (or approximately 562,000 stairstep children) made this transition in January 2014. The purpose of this transition was to ensure uniform child coverage under Medicaid up to 133% FPL (effectively 138% after adjustment for the 5% disregard) across all states. The ACA also required states to maintain income eligibility levels for CHIP through September 30, 2019, as a condition for receiving payments under Medicaid (notwithstanding the lack of corresponding federal appropriations for FY2018 and FY2019). This provision is often referred to as the ACA Maintenance of Effort (MOE) requirement. (Implications of the MOE requirement for the future of CHIP are discussed in more detail in the financing section below.) Statewide upper income eligibility thresholds for CHIP-funded child coverage vary substantially across states, ranging from a low of 175% FPL to a high of 405% FPL. Appendix A , Table A-1 shows state-reported child upper income eligibility levels based on MAGI (adjusted for the 5% disregard), as of January 1, 2014. To summarize, Table A-1 shows: 18 states and the District of Columbia provide coverage above 301% FPL; of these, two states extend coverage above 400% FPL, including New York (405% FPL) and California (416% FPL in one county); 9 states provide coverage between 251% FPL and 300% FPL; 20 states provide coverage between 201% FPL and 250% FPL; and 3 states extend coverage at levels less than 200% FPL, including Idaho (190% FPL), North Dakota (175% FPL), and Arizona (100%). Despite the fact that 27 states extend CHIP coverage to children in families with annual income greater than or equal to 251% FPL, CMS administrative data show that CHIP enrollment is concentrated among families with annual income at lower levels. FY2013 state-reported administrative data show that approximately 89% of CHIP child enrollees were in families with annual income at or below 200% FPL, and approximately 97% of child enrollees were in families with annual income at or below 250% FPL. (See Table 2 .) Families with higher income levels are more likely to have access to employer-sponsored insurance coverage. With the enactment of the ACA, families may also have access to subsidized coverage through the exchange. However, such coverage is not always affordable for low-income families. (For more information on the definition of affordability of employer-sponsored insurance coverage as it relates to a family's ability to qualify for subsidized exchange coverage, see the discussion of the "family glitch issue" in the subsection entitled " The Future of CHIP .") Figure B-1 through Figure B-4 of Appendix B show the 50-state upper income eligibility levels for children and pregnant women in Medicaid, CHIP, and subsidized exchange coverage, as of January 1, 2014. Variability exists across states in the income eligibility ranges (i.e., income eligibility floors and ceilings) associated with each of the programs. The federal Medicaid statute establishes mandatory coverage floors (defined as a percentage of the federal poverty level) for its poverty-related pregnant women and children eligibility pathways. However, states are permitted to extend Medicaid coverage above these federal minimum levels; this is why there is variability across states in terms of the income eligibility levels at which CHIP begins. For example, the state of Alabama extends Medicaid eligibility to infants in families with annual income less than or equal to 141% FPL, while the state of Iowa extends Medicaid eligibility to infants in families with annual income less than or equal to 240% FPL. In another example, CHIP coverage for children extends to a higher income eligibility threshold than subsidized health insurance exchange coverage in one county in California and in the state of New York (i.e., 416% FPL and 405% FPL, respectively). It is important to note, however, that not all children with family income at the specified levels are eligible for each of the programs due to program rules that differ for each of these programs. For instance, CHIP is only available to uninsured children, subsidized exchange coverage is not available to individuals with access to minimum essential coverage, and insurance status is not considered when determining Medicaid eligibility. These figures show both the range of CHIP income eligibility relative to the other programs, and how the programs are envisioned to work together in extending coverage to low-income children and families. CHIP in some states covers a relatively small segment of the income eligibility continuum while CHIP in other states covers a larger segment of the continuum. This is particularly true for infants and pregnant woman. States have used the optional Medicaid eligibility pathways to set higher Medicaid income eligibility levels for infants and pregnant women relative to older children (see Figure B-1 through Figure B-4 of Appendix B ). As a result, CHIP has been used to provide health coverage to older uninsured children to a greater extent. In general, the Medicaid program is a much larger program than CHIP. Child enrollment in Medicaid, for example, was 38.7 million as compared to 8.1 million in CHIP in FY2013. The figures in Appendix B , however, are not weighted to reflect program enrollment by state. For example, it is possible that a state with a large uninsured child population but a CHIP program with a relatively narrow income eligibility range may result in a much larger number of CHIP program enrollees than a state with a relatively small uninsured child population and a CHIP program with a much broader income eligibility range. Nineteen states provide coverage to pregnant women under CHIP. The three main ways that states may extend CHIP coverage to pregnant women (regardless of their age) are through (1) the state plan option for pregnant women; (2) the Section 1115 waiver authority; and/or (3) the unborn child pathway. The latter is the predominant pathway used by states for this purpose. As of January 2014, four states (Colorado, New Jersey, Oregon, and Rhode Island) extended coverage to pregnant women under Section 1115 waiver authority or the CHIP pregnant women state plan option. Under CHIPRA, states are permitted to cover pregnant women through a state plan amendment when certain conditions are met (e.g., the Medicaid income standard for pregnant women must be at least 185% FPL but in no case lower than the percentage level in effect on July 1, 2008; no preexisting conditions or waiting periods may be imposed; and CHIP cost-sharing protections apply). The period of coverage associated with the state plan option includes pregnancy through the postpartum period (roughly through 60 days postpartum), and benefits include all services available to CHIP children in the state as well as prenatal, delivery, and postpartum care. Infants born to such pregnant women are deemed eligible for Medicaid or CHIP, as appropriate, and are covered up to age one year. As of January 2014, 15 states provide CHIP coverage to pregnant women ages 19 and older by extending coverage to unborn children as permitted through federal regulation. Coverage available to such women may be limited to prenatal and delivery services, but is still used in 15 states because it permits the extension of CHIP coverage to a pregnant woman regardless of her immigration status. See Figure B-4 for state-specific CHIP eligibility levels for unborn children, pregnant women and deemed newborns, as of January 1, 2014. As is the case with eligibility, CHIP benefit coverage depends on program design (see Table 1 ). States that use CHIP Medicaid expansion programs must provide CHIP-eligible children with the full range of mandatory Medicaid benefits, as well as all optional services that the state chooses to cover as specified in their state Medicaid plans. As an alternative to providing all of the mandatory and selected optional benefits under traditional Medicaid, states may enroll state-specified groups, including children in CHIP Medicaid expansions, in Alternative Benefit Plans (ABPs). When certain conditions are met, states may also provide premium assistance for health insurance offered through private insurance arrangements for Medicaid children (including CHIP children) and their parents. For CHIP children, benefits available through Medicaid's Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) Program must be provided, whether through traditional state plan coverage or otherwise. The EPSDT program covers health screenings and services, including assessments of each child's physical and mental health development; laboratory tests (including lead blood level assessment); appropriate immunizations; health education; and vision, dental, and hearing services. States are required to provide all federally allowed treatment to correct problems identified through screenings. EPSDT sets Medicaid benefit coverage for children (including CHIP children) apart from other sources of health insurance in that it permits coverage of all services listed in Medicaid statute (regardless of whether a given benefit is covered in the state plan) and it effectively eliminates any state-defined limits on the amount, duration, and scope of this benefit. States that offer separate CHIP programs have more latitude in designing their programs. Such states are allowed to determine which services to cover, and may place limits on the services that they offer. Separate CHIP program rules permit states to elect any of three benefit options: 1. Benchmark benefit package: includes one of the following three base benchmark plans: the standard Blue Cross/Blue Shield preferred provider option offered under the Federal Employees Health Benefits Program (FEHBP), the health coverage that is offered and generally available to state employees in the state involved, and/or health coverage that is offered by a health maintenance organization (HMO) with the largest commercial (non-Medicaid) enrollment in the state involved. 2. Benchmark-equivalent coverage : defined as a package of benefits that has the same actuarial value as one of the base benchmark benefit packages listed above. A state choosing to provide benchmark-equivalent coverage must cover each of the benefits in the "basic benefits category," including inpatient and outpatient hospital and physicians' surgical and medical services, lab, x-ray, and well-baby and well-child care, including age-appropriate immunizations. Benchmark-equivalent coverage must also include at least 75% of the actuarial value of coverage under the benchmark plan for each of the benefits in the "additional service category." These additional services include prescription drugs, vision services, and hearing services. States are encouraged to cover other categories of service not listed above; and/or 3. Secretary-approved coverage : defined as any other health benefits plan that the Secretary of Health and Human Services (HHS) determines will provide appropriate coverage to the targeted population of uninsured children. Regardless of the choice of program design, all states must cover emergency services, well baby and well child care including age-appropriate immunizations, and dental services. If offered, mental health services must meet federal mental health parity requirements. As with Medicaid, abortions cannot be covered, except in the case of a pregnancy resulting from rape or incest, or when an abortion is necessary to save the mother's life. Finally, when certain conditions are met (e.g., CHIP minimum benefits and CHIP cost-sharing protections), states can also offer premium assistance to pay a beneficiary's share of costs for group (employer-based) health insurance for CHIP children and their parents. According to a recent study of CHIP benefit coverage, 11 states offered premium assistance programs with CHIP federal matching funds in 2013. Data from this study that looked at benefit coverage in 42 separate CHIP programs (in 38 states) indicate that in 2013: 25 states chose Secretary-approved coverage; 9 states offered benchmark-equivalent coverage; 3 states offered coverage available in the largest HMO in the state; 3 states offered existing state-based coverage; 1 state offered FEHBP-equivalent coverage; and 1 state offered state employee coverage. According to this study, benefits offered under separate CHIP programs ranged from benefit coverage modeled after the state's Medicaid plan to more limited benefit coverage available through the commercial market. The study also found that coverage for basic medical services (e.g., physician, hospital, laboratory, and radiological services) were largely covered without "significant" limitations. States did impose limitations on other types of services (e.g., physical, occupational and speech therapy; orthodontia; hearing aids; and corrective lenses). Finally, only a few services were not covered at all (e.g., care coordination for children with special needs, non-emergency medical transportation). In FY2013, managed care was the predominant delivery system under CHIP. Administrative data show that approximately 84% of separate CHIP enrollees received coverage under some form of managed care, while the remaining 16% received coverage under a fee-for-service arrangement. As with eligibility and benefits, cost-sharing rules depend on a state's CHIP program design (see Table 1 ). Cost sharing refers to the out-of-pocket payments made by beneficiaries of a health insurance plan, and may include premiums (usually on a monthly basis), enrollment fees, deductibles, copayments, coinsurance, and other similar charges. CHIP Medicaid expansion children must follow the cost-sharing rules of the Medicaid program. Under these rules, the majority of such children are exempt from cost sharing. However, CHIP Medicaid expansion children may still be subject to service-related cost sharing for non-emergency care provided in an emergency room and for non-preferred prescription drugs. In addition, CHIP Medicaid expansion children enrolled in certain Medicaid waiver programs may be subject to cost sharing. If a state implements a separate CHIP program, premiums or enrollment fees may be imposed for program participation, but the maximum allowable amount is dependent on annual family income. Preventive services and pregnancy-related assistance are exempt from cost sharing for all CHIP families regardless of income, and special rules also apply to Indian children. Families with annual income under 150% FPL : Premiums may not exceed the amounts set forth in federal Medicaid regulations. Additionally, these families may be charged service-related cost sharing, but such cost sharing is limited to (1) nominal amounts defined in federal Medicaid regulations for the subgroup with annual income below 100% FPL, and (2) slightly higher amounts defined in CHIP regulations for families with annual income between 100%-150% FPL. Families with annual income above 150% FPL : Cost sharing (program participation fees and service-related cost sharing) may be imposed in any amount, provided that cost sharing for higher-income children is not less than cost sharing for lower-income children, subject to the out-of-pocket aggregate limit of 5% of annual family income on all types of cost sharing combined. In addition, states are required to inform families of these limits and provide a mechanism for families to stop paying once the cost-sharing limits have been reached. The above-referenced study on 42 separate CHIP programs (in 38 states) indicates that only 2 states (Oregon and South Dakota) did not impose any form of cost sharing in 2013. Thirty separate CHIP programs imposed premiums or program participation fees. According to the study, the median monthly premium per child ranged from $10 for families with annual income less than 150% FPL (in 9 programs) to $33 for families with annual income greater than 301% FPL (in 14 programs). Twenty-eight separate CHIP programs imposed service-related cost sharing in amounts that ranged from a low of $0.50 for an office visit or prescription drug in Georgia, to $200.00 for an inpatient hospital visit in Alabama. While Title XXI sets the annual aggregate limit for all cost sharing charges at 5% of a family's annual income, the study found that 20 programs had cost-sharing limits lower than the 5% cap. The federal government and the states jointly finance CHIP. The federal government reimburses states for a portion of every dollar they spend on CHIP (for both CHIP Medicaid expansions and separate CHIP programs) up to state-specific limits called allotments. In FY2013, CHIP expenditures totaled $13.2 billion. The federal share totaled $9.2 billion and the state share was $4.0 billion. The federal government pays about 70% of CHIP expenditures, and the federal government's share of CHIP expenditures (including both services and administration) is determined by the enhanced federal medical assistance percentage (E-FMAP) rate. The E-FMAP rate is derived each year by the HHS Secretary using a set formula, and it varies by state. By statute, the E-FMAP (or federal matching rate) can range from 65% to 85%, and in FY2015, the E-FMAP ranges from 65% (13 states) to 82% (Mississippi). See Table A-2 for states' E-FMAP rates for FY2015. The ACA included a provision to increase the E-FMAP rate by 23 percentage points (not to exceed 100%) for most CHIP expenditures from FY2016 through FY2019. This would increase the statutory range of the E-FMAP rate to 88% through 100%. With this 23 percentage point increase, the federal share of CHIP will be significantly higher, which means states are expected to spend through their limited federal CHIP funding (i.e., state CHIP allotments) faster when the enhanced rate takes effect. There are three aspects of CHIP federal funding: the national total appropriation amounts, state allotments, and expenditures. The federal appropriation is the total amount of federal funds appropriated for CHIP in a fiscal year. The state allotments are the federal funds allocated to each state for the federal share of their CHIP expenditures. Federal CHIP expenditures are the actual amount of federal funds spent on CHIP. As Figure 2 shows, in FY2013, the federal appropriation for CHIP was $17.4 billion, the CHIP allotments to states totaled $8.9 billion, and CHIP federal expenditures totaled $9.2 billion. In FY2013, the federal appropriation was significantly higher than the state CHIP allotments because the formula establishing the state CHIP allotment amounts does not factor in the federal appropriation (explained in more detail below). Also, the FY2013 CHIP federal expenditures were slightly higher than the state CHIP allotments. States have two years to spend their allotment funds, and the FY2013 federal CHIP expenditures consist of federal funding from each of the FY2012 and FY2013 state CHIP allotments. The federal appropriation for CHIP is provided in Section 2104(a) of the Social Security Act. This amount is the overall annual ceiling on federal CHIP spending to the states, the District of Columbia, and the territories. CHIPRA increased the annual appropriation amounts substantially beginning in FY2009 and provided appropriations through FY2013. Then, the ACA provided annual appropriation amounts for an additional two years (i.e., through FY2015). MACRA extended the federal appropriations through FY2017, and FY2017 is the last year for which a CHIP appropriation amount is provided. For FY2016 and FY2017, the annual appropriation amounts are $19.3 billion and $20.4 billion, respectively. If the federal appropriation is not large enough to cover state allotments in any given year, the state allotments would be reduced proportionally. Since FY2009, the federal appropriation amount has been more than sufficient to cover the state allotments. State allotments are the federal funds allocated to each state for the federal share of their CHIP expenditures. CHIPRA established a new allocation of federal CHIP funds among the states based largely on states' actual use of and projected need for CHIP funds. There are two formulas for determining state allotments: an even-year formula and an odd-year formula. In even years, such as FY2014, state CHIP allotments are each state's previous year allotment plus any Child Enrollment Contingency Fund (described below) payments from the previous year adjusted for health care inflation and child population growth in the state. For even years, the formula for CHIP allotments can be adjusted to reflect CHIP eligibility or benefit expansions and increase the allotment amount. In odd years, state CHIP allotments are each state's previous year spending (including federal CHIP payments from the state CHIP allotment, Child Enrollment Contingency Fund payments, and redistribution funds) adjusted using the same growth factor as the even year formula (i.e., health care inflation and child population growth in the state). Since the odd-year formula is based on states' actual use of CHIP funds, it is called the "re-basing year" because a state's CHIP allotment can either increase or decrease depending on each state's CHIP expenditures in the previous year. State CHIP allotment funds are available to states for two years. As noted above, this explains why federal expenditures are higher than the state allotments in Figure 2 because the FY2013 federal CHIP expenditures include federal funding from states' FY2012 and FY2013 allotments. In addition, the aggregate state CHIP allotment amounts have been lower than the annual federal appropriation amount because the allotment formulas do not factor in the annual federal appropriation amount, which means the aggregate state allotment amounts could add up to an amount greater than or less than the federal appropriation amount. Since FY2009, the aggregate state CHIP allotment amounts have been significantly lower than the federal appropriation amount. The allotment is available to states to cover the federal share of both CHIP benefit and administrative expenditures. However, no more than 10% of the federal CHIP funds that a state draws down from its CHIP allotment can be spent on non-benefit expenditures including expenditures for administration, translation services, and outreach efforts. If a state's CHIP allotment for the current year, in addition to any allotment funds carried over from the prior year, is insufficient to cover the projected CHIP expenditures for the current year, a few different shortfall funding sources are available. These include Child Enrollment Contingency Fund payments, redistribution funds, and Medicaid funds. Since FY2009, only one state and one territory have received shortfall funding. Child Enrollment Contingency Fund payments are available to states with both a funding shortfall and CHIP enrollment (for children) that exceeds a target level. As a result, not all states with funding shortfalls are eligible for Child Enrollment Contingency Fund payments. The contingency fund formula is based on a state's growth in CHIP enrollment and per capita spending. This means that a state may receive a payment from the fund that does not equal its actual shortfall. Iowa is the only state that has received Child Enrollment Contingency Fund payments since FY2009 when the funds were first available. After two years, any unused state CHIP allotment funds are redistributed to shortfall states. For redistribution funds, a shortfall state is defined as a state that will not have enough money to meet projected costs in the current year after counting (1) the current year's state allotment, (2) unspent funds from the prior year's state allotment, and (3) available Child Enrollment Contingency Fund payments. If redistributed funds are insufficient to meet the needs of all shortfall states, each shortfall state receives a proportionate share of the available funds based on the shortfall in each state. Since FY2009, only Puerto Rico has received redistribution funds. For states that designed their CHIP program as a CHIP Medicaid expansion or a combination program, if the state is still facing a shortfall after receiving Child Enrollment Contingency Fund payments and redistribution funds, they may receive federal Medicaid matching funds to fund the shortfall in the Medicaid expansion portion of its CHIP program. When Medicaid funds are used to fund CHIP, the state receives the lower regular FMAP rate (i.e., federal Medicaid matching rate) rather than the higher E-FMAP rate provided for other CHIP expenditures. However, while federal CHIP funding is capped, federal Medicaid funding is open-ended, which means there is no upper limit or cap on the amount of federal Medicaid funds a state may receive. In a few situations, federal CHIP funding is used to finance Medicaid expenditures. For instance, certain states significantly expanded Medicaid eligibility for children prior to the enactment of CHIP in 1997. These states are allowed to use their CHIP allotment funds to fund the difference between the Medicaid and CHIP matching rates (i.e., FMAP and E-FMAP rates respectively) to finance the cost for children in Medicaid above 133% FPL. In addition, states may use CHIP allotment funds and receive the more generous E-FMAP rates for (1) expenditures for children aged 6 to 18 in families with annual income up to 133% FPL that had been enrolled in separate CHIP programs who were transitioned to Medicaid on January 1, 2014, as part of the ACA and (2) children that moved from CHIP to Medicaid due to the application of the 5% income disregard. Figure 3 shows actual CHIP expenditures (including both the federal and state share) for FY1998 through FY2013 and projected CHIP expenditures for FY2014 and FY2015. See Table A-2 for CHIP expenditures by state for FY2013. With federal funding for CHIP set to end after FY2017, Congress will need to decide whether to continue the CHIP program. In considering the future of CHIP, it is helpful to recall why the program was created in 1997: to provide affordable health coverage at a time when there were few other insurance coverage options for low-income children outside of Medicaid. The health insurance market is far different today, with the enactment of the ACA. Now, if CHIP funding is exhausted, current CHIP-eligible children potentially could be eligible for Medicaid, for subsidized coverage in the health insurance exchanges, or for their parent's employer-sponsored insurance coverage, but not all CHIP-eligible children would be eligible for these programs and some could end up being uninsured without the availability of CHIP. Some argue that it is important to continue providing child-specific safety net coverage because each of the low-income subsidy programs (e.g., CHIP, Medicaid, and subsidized exchange coverage) plays a unique role in the health care delivery system. For instance, greater cost-sharing protections exist for the programs that target families at the lower ends of the income-eligibility spectrum. In addition, some are wary of providing coverage for children in the health insurance exchanges because the exchanges are new and there is little evidence about how coverage in the exchanges compares to CHIP coverage. With FY2017 being the final year for which federal CHIP funding is provided in statute, Congress's action or inaction will determine the future of CHIP and of health coverage for CHIP children. In considering the future of CHIP, Congress has a number of policy options, including extending federal CHIP funding and continuing the program or letting CHIP funding expire. If Congress decides to extend federal CHIP funding, there are a number of policy options to consider, including the length of the funding extension and whether to make programmatic changes. Funding could be extended for just a few years (e.g., two or four years) or indefinitely, and the extension could maintain, phase down, or eliminate the 23 percentage point increase to the E-FMAP rate. In addition, the extension could make programmatic changes to eligibility, benefit coverage, or other aspects of the program. Although FY2017 is the last year for which federal CHIP funding is provided under current law, states are expected to have federal CHIP spending in FY2018 because states will have access to unspent funds from their FY2017 allotments and to unspent FY2016 allotments redistributed to shortfall states (if any). If Congress takes no action and CHIP funding runs out, states need to adhere to the MOE requirements that are in effect through FY2019. The MOE requires states to maintain income eligibility levels for CHIP children through September 30, 2019, as a condition for receiving Medicaid payments (notwithstanding the lack of corresponding federal CHIP appropriations for FY2016 through FY2019). The MOE requirements impact CHIP Medicaid expansion programs and separate CHIP programs differently. For CHIP Medicaid expansion programs , when federal CHIP funding is exhausted, the CHIP-eligible children in these programs continue to be enrolled in Medicaid but financing switches from CHIP to Medicaid. This switch would cause the federal share of expenditures to decrease from the E-FMAP rate to the regular FMAP rate, which means the cost of covering these children would increase for states. For separate CHIP programs , states are provided a couple of exceptions to the MOE: (1) after September 1, 2015, states may enroll CHIP-eligible children into qualified health plans in the health insurance exchanges or (2) states may impose waiting lists or enrollment caps in order to limit CHIP expenditures. In addition, in the event that a state's CHIP allotment is insufficient to fund CHIP coverage for all eligible children, a state must establish procedures to screen children for Medicaid eligibility, and enroll those who are Medicaid-eligible. For children not eligible for Medicaid, the state must establish procedures to enroll CHIP children in qualified health plans in the health insurance exchanges that have been certified by the HHS Secretary. If no additional federal CHIP appropriations are provided, CHIP children in CHIP Medicaid expansion programs (roughly half of CHIP enrollees) would continue to receive coverage through the Medicaid program through FY2019, but coverage of CHIP children in separate CHIP programs (roughly half of CHIP enrollees) who are not eligible for Medicaid is reliant on whether the children have access to qualified health plans that are certified by the HHS Secretary. Under the MOE, if states do not receive a CHIP allotment, after establishing procedures to enroll all Medicaid eligible children in Medicaid, states are only required to establish procedures to enroll children in qualified health plans certified by the HHS Secretary. If there are no certified plans, the MOE does not obligate states to provide coverage to these children. If there are certified plans, not all CHIP children will be eligible for subsidized exchange coverage due to the "family glitch," among other reasons. Under each of the policy options outlined above under " If Federal CHIP Funding Expires ," at least some CHIP enrollees would continue to have coverage through CHIP, Medicaid, the health insurance exchanges, or the employer-sponsored insurance market. However, not all CHIP children would continue to have coverage under each of the policy options. If the federal CHIP program funding is permitted to expire before (or after) the MOE requirements that are in effect through FY2019, the coverage landscape is expected to change for some portion of the current CHIP enrollees. Although the specific results of coverage projections may look different in future years, it is possible to learn from the information they offer. In anticipation of the FY2015 congressional debate regarding the future of CHIP, the Urban Institute conducted an analysis for MACPAC to generate estimates of the sources of coverage for children in separate CHIP programs who were projected to lose CHIP coverage if federal CHIP funding was exhausted in FY2016. The analysis found that if federal CHIP funding was not renewed and states exhausted their FY2015 federal allotments, approximately two-thirds of current separate CHIP-enrolled children would move to their parent's employer-sponsored insurance coverage (i.e., approximately 1.2 million, or 32.6%) or to subsidized exchange coverage (i.e., approximately 1.4 million, or 36.5%). The remaining one-third of such children (approximately 1.1 million, or 30.9%) would become uninsured in FY2016. For the children who would receive coverage under alternative coverage options, there would be variation among the coverage in terms of benefits, cost sharing, and financing. With respect to benefit coverage, a recent MACPAC analysis of benefits available under separate CHIP programs, Medicaid, exchange plans, and employer-sponsored insurance found the following: Covered benefits vary within each source—between states for Medicaid and CHIP and among plans for exchange plans and employer-sponsored insurance. Most CHIP, Medicaid, exchange plans, and employer-sponsored insurance plans cover major medical benefits, such as inpatient and outpatient care, physician services, and prescription drugs. Although Medicaid and CHIP cover pediatric dental services, dental benefits are offered as a separate, stand-alone insurance product in most exchanges. CHIP and Medicaid cover many services that are not always available in exchange plans. For example, all CHIP and Medicaid programs cover audiology exams, and 95% of CHIP programs cover hearing aids. However, only 37% of exchange plan essential health benefit benchmarks cover audiology exams, and only 54% cover hearing aids. For other benefits, such as applied behavioral analysis therapy and autism services, coverage varies. MACPAC's analysis of affordability of exchange coverage for children currently covered by CHIP found that the out-of-pocket costs for CHIP generally are higher than under Medicaid but significantly lower than in the exchanges or under employer-sponsored insurance. When comparing out-of-pocket costs across coverage types, MACPAC found that for families with employer-sponsored insurance, "projected premiums could average $3,751 per year or 9.1% of family income. Families with subsidized coverage on the exchange might see smaller or no premium costs, but they would face much higher cost-sharing amounts (in the form of deductibles and service-level cost-sharing) than under CHIP." With respect to financing, under CHIP and Medicaid the coverage for CHIP enrollees would continue to be jointly financed by the federal government and states, but moving CHIP children into Medicaid would increase the state share of expenditures for these children. Under the option to move CHIP children into the health insurance exchanges, the federal government alone would fund the subsidized coverage, without any contribution from states. For employer-sponsored insurance coverage, premiums are largely shared by the employer and its employees. Appendix A. CHIP Data by State Table A-1 provides FY2013 data by state regarding CHIP program type, income eligibility levels, and enrollment. Table A-2 shows FY2015 CHIP E-FMAP rates and FY2013 CHIP expenditures (including both federal and state expenditures). Appendix B. Upper Income Eligibility Levels in Medicaid, CHIP, and Subsidized Exchange Coverage State-by-state income eligibility level for Medicaid, CHIP, and subsidized exchange coverage for infants, children aged 1 to 5, children aged 6 to 18, and pregnant women and unborn children are provided in Figure B-1 , Figure B-2 , Figure B-3 , and Figure B-4 (respectively). Most children and pregnant women in families with income under 400% of the federal poverty level (FPL) are eligible for Medicaid, CHIP, or subsidized exchange coverage. The income eligibility levels for Medicaid and CHIP vary by state and population (i.e., age of child or pregnant women), and subsidized exchange coverage is available for most children and pregnant women with incomes between 100% FPL and 400% FPL that do not have access to other minimum essential coverage, such as Medicaid or CHIP. | The State Children's Health Insurance Program (CHIP) is a means-tested program that provides health coverage to targeted low-income children and pregnant women in families that have annual income above Medicaid eligibility levels but have no health insurance. CHIP is jointly financed by the federal government and states, and the states are responsible for administering CHIP. In FY2013, CHIP enrollment totaled 8.4 million individuals and CHIP expenditures totaled $13.2 billion. Under the CHIP program, the federal government sets basic requirements for CHIP, but states have the flexibility to design their own version of CHIP within the federal government's basic framework. As a result, there is significant variation across CHIP programs. Currently, state upper-income eligibility limits for children range from a low of 175% of the federal poverty level (FPL) to a high of 405% of FPL. States may also extend CHIP coverage to pregnant women when certain conditions are met. States may design their CHIP programs in three ways: a CHIP Medicaid expansion, a separate CHIP program, or a combination approach where the state operates a CHIP Medicaid expansion and one or more separate CHIP programs concurrently. CHIP benefit coverage and cost-sharing rules depend on program design. CHIP Medicaid expansions must follow the federal Medicaid rules for benefits and cost sharing, which entitles CHIP enrollees to Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) coverage (effectively eliminating any state-defined limits on the amount, duration, and scope of any benefit listed in Medicaid statute) and exempts the majority of children from any cost sharing. For separate CHIP programs, the benefits are permitted to look more like private health insurance, and states may impose cost sharing, such as premiums or enrollment fees, with a maximum allowable amount that is tied to annual family income. The federal government reimburses states for a portion of every dollar they spend on CHIP (including both CHIP Medicaid expansions and separate CHIP programs) up to state-specific annual limits called allotments. The federal share of FY2013 total expenditures was $9.2 billion and the state share was $4.0 billion. CHIP was enacted in 1997. Since that time, Congress has extended federal CHIP funding. The Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) extended CHIP funding through FY2015. On April 16, 2015, President Obama signed into law the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L. 114-10). MACRA repeals the sustainable growth rate (SGR) mechanism (which overrides the reduction in the Medicare physician fee schedule that was set to begin in April 2015) and extends funding for CHIP, among other provisions. Specifically, MACRA extends CHIP funding for two additional years (i.e., through FY2017) and maintains the current allotment formula, including a 23 percentage point increase to the enhanced federal medical assistance percentage (E-FMAP). MACRA also extends the "qualifying state" option, the Child Enrollment Contingency Fund, "Express Lane" eligibility, Outreach and Enrollment Grants, the Pediatric Quality Measures Program, and the Childhood Obesity Demonstration Project. Although MACRA adds two additional years to federal funding for CHIP (through FY2017), states still need to adhere to the ACA's maintenance of effort (MOE) requirements that are in effect through FY2019. The MOE requires states to maintain income eligibility levels for CHIP children through September 30, 2019, as a condition for receiving federal Medicaid payments (notwithstanding the lack of corresponding federal CHIP appropriations for FY2018 and FY2019). The MOE requirements impact CHIP Medicaid expansion programs and separate CHIP programs differently. For CHIP Medicaid expansion programs, when federal CHIP funding is exhausted, the CHIP-eligible children in these programs continue to be enrolled in Medicaid but financing switches from CHIP to Medicaid. For separate CHIP programs, states are provided a couple of exceptions to the MOE: (1) after September 1, 2015, states may enroll CHIP-eligible children into qualified health plans in the health insurance exchanges or (2) states may impose waiting lists or enrollment caps in order to limit CHIP expenditures. In addition, in the event that a state's CHIP allotment is insufficient to fund CHIP coverage for all eligible children, a state must establish procedures to screen children for Medicaid eligibility, and enroll those who are Medicaid-eligible. For children not eligible for Medicaid, the state must establish procedures to enroll CHIP children in qualified health plans in the health insurance exchanges that have been certified by the Secretary of Health and Human Services (HHS) to be "at least comparable" to CHIP in terms of benefits and cost sharing. Congress will face a decision with regard to the future of CHIP when federal CHIP funding expires after FY2017. If Congress does not act and federal CHIP funding ends, some CHIP enrollees likely would continue to have coverage through Medicaid as a result of the MOE requirements, but others would need to find another source of health insurance coverage (e.g., employer-sponsored health insurance or through the health insurance exchanges), and some likely would be uninsured. Congress's action or inaction on the CHIP program may affect health insurance options and resulting coverage for targeted low-income children that are eligible for the current CHIP program. This report describes the basic elements of CHIP, focusing on how the program is designed, who is eligible, what services are covered, how enrollees share in the cost of care, and how the program is financed. The report ends with a brief discussion of the future of CHIP. |
The ADEA prohibits an employer from discriminating against an employee or applicant for employment because the individual has opposed any practice made unlawful by section 4 of the ADEA or because the individual has made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or litigation under the ADEA. The ADEA also prohibits such actions when committed by an employment agency against any individual, and by a labor organization against a member or applicant for membership. An individual who believes that he or she has been discriminated against in violation of the ADEA's anti-retaliation provisions may file a charge with the Equal Employment Opportunity Commission (EEOC) within 180 days after the alleged unlawful practice occurred. Upon receiving the charge, the EEOC will seek to eliminate any alleged unlawful practices by informal methods of conciliation, conference, and persuasion. Yes. If the EEOC does not commence an action to enforce the rights of the aggrieved person, such individual may bring a civil action in any court of competent jurisdiction for such legal or equitable relief as will effectuate the purposes of the ADEA. A court may award such legal or equitable relief as may be appropriate to effectuate the purposes of the ADEA, including without limitation judgments compelling employment, reinstatement, or promotion, or enforcing the liability for amounts deemed to be unpaid minimum wages or unpaid overtime compensation. Adopted 1967. ARRA prohibits a non-federal employer that receives covered funds from discharging or otherwise discriminating against an employee who discloses to the Recovery Accountability and Transparency Board (Board), an inspector general, a Member of Congress, or specified others, information that the employee reasonably believes is evidence of (1) gross mismanagement of an agency contract or grant related to covered funds; (2) a gross waste of covered funds; (3) a substantial and specific danger to public health or safety related to the implementation or use of covered funds; (4) an abuse of authority related to the implementation or use of covered funds; or (5) a violation of law, rule, or regulation involving an agency contract or grant related to covered funds. A person who believes that he or she has been subject to a reprisal prohibited by ARRA's whistleblower provisions may submit a complaint to the appropriate inspector general (IG). Although the IG retains discretion to not investigate complaints, it appears that an inspection will be conducted unless the IG determines that the complaint is frivolous, does not relate to covered funds, or another federal or state judicial or administrative proceeding has been invoked to resolve the complaint. Upon completion of the investigation, the IG will submit findings to the complainant, the employer, the head of the appropriate agency, and the Board. Within 30 days of receiving the findings, the head of the agency concerned will determine whether there is sufficient basis to conclude that the non-federal employer has subjected the complainant to a prohibited reprisal. The agency head will either issue an order denying relief, or take one or more of the following actions: (1) order the employer to take affirmative action to abate the reprisal; (2) order reinstatement with back pay; (3) order the employer to pay an amount equal to the aggregate amount of all costs and expenses that were reasonably incurred by the complainant. Any person adversely affected or aggrieved by an order may obtain review in the U.S. court of appeals for the circuit in which the reprisal is alleged to have occurred. Yes. If the head of an agency issues an order denying relief, has not issued an order within 210 days after the submission of a complaint, or the IG decides not to investigate or discontinues an investigation, and there is no showing that the delay or decision is because of the bad faith of the complainant, the complainant may bring a de novo action at law or equity against the employer in the appropriate federal district court. In a de novo action, a prevailing employee may be awarded compensatory damages, as well as reinstatement with back pay and an amount equal to the aggregate amount of all costs and expenses that were reasonably incurred. Adopted 2009. See P.L. 111-5 , §1553, 123 Stat. 297 (2009). Sponsor: Representative David R. Obey Cosponsors: 9 House: Conference report agreed to in House. Agreed to by the Yeas and Nays: 246 - 183, 1 Present (Roll no. 70). Senate: Conference report agreed to in Senate. Senate agreed to conference report by Yea-Nay Vote. 60 - 38. Record Vote Number: 64 . The ADA prohibits discrimination against any individual because he or she has opposed any act or practice made unlawful by the ADA or because such individual made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing under the ADA. A person alleging discrimination under the ADA's anti-retaliation provisions may file a charge with the Equal Employment Opportunity Commission (EEOC) within 180 days after the alleged unlawful employment practice occurred. Upon receipt of the charge, the EEOC will conduct an investigation. If the EEOC determines after the investigation that there is not reasonable cause to believe that the charge is true, it will dismiss the charge and notify the claimant and respondent of its action. If reasonable cause is found, the EEOC will attempt to eliminate the alleged unlawful employment practice by informal methods of conference, conciliation, and persuasion. The EEOC will make its determination as promptly as possible and, so far as practicable, no later than 120 days from the filing of the charge or, in specified circumstances, the date upon which the EEOC is authorized to take action with respect to the charge. If the EEOC is unable to secure from the respondent an acceptable conciliation agreement, it may bring a civil action against the respondent, so long as the respondent is not a government, governmental agency, or political subdivision. In cases involving such entities, the EEOC will refer the case to the Attorney General, who may bring a civil action in the appropriate federal district court. Yes. If the EEOC dismisses a charge, a civil action is not filed by the EEOC or the Attorney General, or if the EEOC has not entered into a conciliation agreement involving the aggrieved party, such person may file a civil action in any judicial district in the state in which the unlawful employment practice is alleged to have been committed, in the judicial district in which the relevant employment records are maintained or administered, or in the judicial district in which the person would have worked but for the alleged practice. If the respondent is not found in any of these districts, the action may be brought in the judicial district in which the respondent has its principal office. If a court finds that the respondent has intentionally engaged in or is intentionally engaging in an unlawful employment practice, it may enjoin the respondent from engaging in such practice and order such affirmative action as may be appropriate, including reinstatement or any other equitable relief. A reasonable attorney's fee, including litigation expenses and costs, may be awarded. Adopted 1990. The AHERA prohibits an employer, including a state or local education agency, from discharging or otherwise discriminating against an employee for providing information related to a potential violation of its provisions to any other person, including a state or the federal government. An employee or representative of employees who believes that he or she has been discharged or otherwise discriminated against in violation of the AHERA's whistleblower provisions may apply to the Secretary of Labor for a review of the termination or alleged discrimination within 90 days after the alleged violation occurs. The review will be conducted in accordance with section 660(c) of Title 29, U.S. Code. Under section 660(c), the Secretary will institute an investigation as he deems appropriate. If the Secretary determines that a violation has occurred, he will bring an action in any appropriate federal district court. No. A federal district court that finds a violation of the AHERA may order all appropriate relief including reinstatement with back pay. Adopted 1986. The CAA prohibits an employer from discharging or otherwise discriminating against any employee because the employee (1) commenced or is about to commence a proceeding under the CAA or a proceeding for the administration or enforcement of any requirement imposed by the CAA; (2) testified or is about to testify in any such proceeding; or (3) assisted or participated, or is about to assist or participate, in any manner in such a proceeding. Any employee who believes that he or she has been discharged or otherwise discriminated against in violation of the CAA may, within 30 days after such violation occurs, file a complaint with the Secretary of Labor. Upon receipt of the complaint, the Secretary will conduct an investigation and within 30 days of the receiving the complaint, shall notify the complainant and the alleged violator with the results of the investigation. Within 90 days of receipt of the complaint, the Secretary will issue an order either providing relief or denying the complaint. Any person adversely affected or aggrieved by an order issued under the CAA's whistleblower provisions may obtain review of the order in the U.S. court of appeals for the circuit in which the violation allegedly occurred. The petition for review must be filed within 60 days from the issuance of the Secretary's order, and the commencement of proceedings shall not, unless ordered by the court, operate as a stay of the Secretary's order. No. If the Secretary determines that a violation has occurred, the Secretary will order the person who committed such violation to (1) take affirmative action to abate the violation, and (2) reinstate the complainant to his or her former position with compensation, including back pay, terms, conditions, and privileges of employment. The Secretary may order the payment of compensatory damages to the complainant. If an order is issued, at the request of the complainant, the Secretary will assess against the person against whom the order is issued a sum equal to the aggregate amount of all costs and expenses, including attorneys' and expert witness fees, reasonably incurred by the complainant in bringing the complaint. Adopted 1977. The CMVSA prohibits an employer from discharging, disciplining, or discriminating against an employee regarding pay, terms, or privileges of employment because the employee (1) filed a complaint or instituted a proceeding related to a violation of a commercial motor vehicle safety or security regulation, standard, or order, or testified or will testify in such a proceeding; (2) is perceived to have filed or instituted a proceeding related to a violation of a commercial motor vehicle safety or security regulation, standard, or order; (3) refuses to operate a vehicle because the operation violates a regulation, standard, or order related to commercial motor vehicle safety, health, or security, or has a reasonable apprehension of serious injury because of the vehicle's hazardous safety or security condition; (4) has accurately reported hours on duty; (5) has cooperated or is perceived as being about to cooperate with a safety or security investigation by the Secretary of Transportation, the Secretary of Homeland Security, or the National Transportation Security Board; or (6) has furnished or is perceived to have furnished specified information to the Secretary of Transportation, the Secretary of Homeland Security, the National Transportation Security Board, or any federal, state, or local regulatory or law enforcement agency. An employee alleging discharge, discipline, or discrimination in violation of the CMVSA's anti-retaliation provisions may file a complaint with the Secretary of Labor within 180 days after the alleged violation occurred. Within 60 days of receiving the complaint, the Secretary will conduct an investigation, decide whether it is reasonable to believe the complaint has merit, and notify the complainant and the person alleged to have committed the violation of the findings. If the Secretary determines that it is reasonable to believe that the violation occurred, he will include with the decision findings and a preliminary order that provides for affirmative action to abate the violation, reinstatement, and compensatory damages, including back pay. The parties may object to the findings or order, and request a hearing within 30 days of the date of notification of the findings. If a hearing is not requested, the preliminary order is final and not subject to judicial review. A hearing will be conducted expeditiously, and not later than 120 days after the end of the hearing, the Secretary will issue a final order. A person adversely affected by the order may file a petition for review in the U.S. court of appeals for the circuit in which the violation occurred or the person resided on the date of the violation. The petition for review must be filed no later than 60 days after the order is issued. Yes. If the Secretary has not issued a final decision within 210 days after the filing of a complaint and the delay is not because of the employee's bad faith, the employee may bring an original action at law or equity for de novo review in the appropriate federal district court. A prevailing employee is entitled to affirmative action to abate the violation, reinstatement, and compensatory damages, including back pay. Relief may also include punitive damages in an amount not to exceed $250,000. Adopted 1994. Amended 2007. See P.L. 110-53 , § 1536, 121 Stat. 464 (2007). Sponsor: Representative Bennie G. Thompson Cosponsors: 205 House: Conference report agreed to in House. Agreed to by the Yeas and Nays: 371 - 40 (Roll no. 757). Senate: Conference report agreed to in Senate. Senate agreed to conference report by Yea-Nay Vote. 85 - 8. Record Vote Number: 284 . CERCLA, also known as the "Superfund" Act, prohibits an employer from firing or in any other way discriminating against, or causing to be fired or discriminated against, any employee because he or she (1) provided information to a state or to the federal government; (2) filed, instituted, or caused to be filed or instituted any proceeding under CERCLA; or (3) has testified or will testify in a proceeding resulting from the administration or enforcement of CERCLA. Any employee who believes that he or she has been terminated or otherwise discriminated against by any person in violation of CERCLA's whistleblower provisions may, within 30 days, apply to the Secretary of Labor for a review of the termination or alleged discrimination. Upon receipt of such application, the Secretary will institute an investigation and upon receiving the investigation report, make findings of fact. If the Secretary finds that a violation occurred, he will issue a decision, incorporating an order that requires the party committing the violation to take such affirmative action to abate the violation as the Secretary deems appropriate, including reinstatement with compensation. If the Secretary finds no violation, he will issue an order denying the application. An order issued by the Secretary is subject to judicial review. No. A prevailing employee is entitled to such affirmative action to abate the violation as the Secretary deems appropriate, including reinstatement with compensation. Adopted 1980. The CFPA prohibits employers engaged in providing consumer financial products or services, and employers that provide a material service in connection with the provision of such products or services, from terminating or in any other way discriminating against a covered employee because the employee has (1) provided, caused to be provided, or is about to provide or cause to be provided, information relating to a violation of the CFPA or any other provision of law that is subject to the jurisdiction of the Bureau of Consumer Financial Protection (Bureau) to the employer, the Bureau, or a state, local, or federal government authority or law enforcement agency; (2) testified or will testify in any proceeding resulting from the administration or enforcement of the CFPA or any other provision of law that is subject to the jurisdiction of the Bureau; (3) filed, instituted, or caused to be filed or instituted any proceeding under any federal consumer financial law; or (4) objected to or refused to participate in any activity that the employee reasonably believed to be in violation of any law subject to the jurisdiction of, or enforceable by, the Bureau. An employee who believes that he or she has been discharged or otherwise discriminated against in violation of the CFPA's whistleblower provisions may file a complaint with the Secretary of Labor within 180 days of the alleged violation. Within 60 days after receiving the complaint, the Secretary will initiate an investigation and determine whether there is reasonable cause to believe that the complaint has merit. The Secretary will notify the complainant and the person alleged to have committed the violation of his determination in writing. If the Secretary concludes that there is reasonable cause to believe that a violation has occurred, he will also issue a preliminary order that provides for affirmative action to abate the violation, reinstatement with back pay, and compensatory damages. Either party may file objections to the Secretary's findings or order and request a hearing within 30 days after receiving his notification. If a hearing is not requested in the 30-day period, the preliminary order shall be deemed a final order that is not subject to judicial review. If a hearing is conducted, the Secretary is required to issue a final order providing relief or denying the complaint within 120 days after the date of the hearing's conclusion. Any person adversely affected or aggrieved by a final order may seek review of the order in the U.S. court of appeals for the circuit in which the violation allegedly occurred or the circuit in which the complainant resided on the date of such violation. The petition for review must be filed no later than 60 days after the date of the issuance of the final order. Yes. If the Secretary does not issue a final order within 210 days after the date of filing the complaint, or within 90 days after the date of receipt of a written determination, the complainant may bring an action at law or equity for de novo review in the appropriate federal district court having jurisdiction. An employee who prevails in a private action may be awarded all relief necessary to make the employee whole, including injunctive relief and compensatory damages. Adopted 2010. See P.L. 111-203 , § 1057, 124 Stat. 2031 (2010). Sponsor: Representative Barney Frank House: Conference report agreed to in House. On agreeing to the conference report Agreed to by the Yeas and Nays: 237 - 192 (Roll no. 413). Senate: Conference report agreed to in Senate. Senate agreed to conference report by Yea-Nay Vote. 60 - 39. Record Vote Number: 208 . The CPSA prohibits a manufacturer, private labeler, distributor, or retailer from discharging or otherwise discriminating against an employee because he or she (1) provided, caused to be provided, or is about to provide or cause to be provided information related to a violation of the CPSA, any law enforced by the Consumer Product Safety Commission (CPSC), or any related order, rule, regulation, standard, or ban, to the individual's employer, the federal government, or state attorney general; (2) testified or is about to testify in a proceeding concerning a violation of the CPSA; (3) assisted or participated, or is about to assist or participate, in a proceeding concerning a violation of the CPSA; or (4) refused to participate in any activity, policy, or practice that the individual reasonably believed to be in violation of the CPSA, any law enforced by the CPSC, or any related order, rule, regulation, standard, or ban. A person who believes that he or she was discharged or otherwise discriminated against in violation of the CPSA's whistleblower provisions may file a complaint with the Secretary of Labor no later than 180 days after the date on which the violation occurs. Within 60 days of receiving the complaint, the Secretary will initiate an investigation and determine whether there is reasonable cause to believe that the complaint has merit. If reasonable cause is found, the Secretary will issue findings and a preliminary order that provides for affirmative action to abate the violation, reinstatement with back pay, and the payment of compensatory damages to the complainant. The parties may object to the findings or order, and request a hearing within 30 days of the date of notification of the findings. If a hearing is not requested within the 30-day period, the preliminary order will be deemed a final order that is not subject to judicial review. If a hearing is requested, the Secretary will issue a final order no later than 120 days after the date of the hearing. Yes. A person may bring an action at law or equity for de novo review in the appropriate federal district court with jurisdiction within 90 days after receiving a written determination, or if the Secretary has not issued a final decision within 210 days after the filing of the complaint. An employee who prevails in a private action may be awarded all relief necessary to make the employee whole, including injunctive relief and compensatory damages. Adopted 2008. See P.L. 110-314 , § 219(a), 122 Stat. 3062 (2008). Sponsor: Representative Bobby L. Rush Cosponsors: 106 House: Conference report agreed to in House. On motion to suspend the rules and agree to the conference report Agreed to by the Yeas and Nays: (2/3 required): 424 - 1 (Roll no. 543). Senate: Conference report agreed to in Senate. Senate agreed to conference report by Yea-Nay Vote. 89 - 3. Record Vote Number: 193 . The Department of Defense Authorization Act of 1987 prohibits defense contractors and subcontractors from discharging, demoting, or otherwise discriminating against an employee as a reprisal for disclosing to a Member of Congress, an Inspector General (IG), and other specified entities evidence of gross mismanagement or a substantial and specific danger to public health or safety. Any person who believes that he or she has been subject to a prohibited reprisal may submit a complaint to the IG, who is required to investigate the complaint unless the IG determines that the complaint is frivolous, fails to allege a violation, or has previously been addressed in another federal or state judicial or administrative proceeding. A complaint may not be brought more than three years after the date on which the alleged reprisal occurred. Upon completion of the investigation, the IG will submit a report of the findings of the investigation to the individual, relevant contractor, and the head of the agency. If the agency head determines that a contractor has subjected a person to a prohibited reprisal, the agency head may take one or more of the following actions: (1) order the contractor to abate the reprisal; (2) order the contractor to reinstate the person to the position that the person held before the reprisal, together with compensatory damages, employment benefits, and other applicable terms and conditions of employment; (3) order the contractor to pay the complainant an amount equal to the aggregate amount of all costs and expenses, including attorneys' and expert witnesses' fees, that were reasonably incurred by the complainant. Any person adversely affected or aggrieved by an order may obtain review in the U.S. court of appeals for the circuit in which the reprisal occurred. Yes. If the head of an executive agency issues an order denying relief, or does not issue an order within 210 days after the submission of a complaint and the delay is not the result of the complainant's bad faith, the complainant may bring a de novo action at law or equity against the contractor in the appropriate federal district court. An action may not be brought more than two years after the date on which remedies are deemed to be exhausted. An employee who prevails in a private action may be awarded compensatory damages and other relief available under the whistleblower provisions of the Department of Defense Authorization Act of 1987. Adopted 1986. Amended 2013. See P.L. 112-239 , § 827(a)-(f), 126 Stat. 1833 (2013). Sponsor: Representative Howard P. McKeon Cosponsors: 1 House: Conference report agreed to in House. On agreeing to the conference report Agreed to by the Yeas and Nays: 315 - 107 (Roll no. 645). Senate: Conference report agreed to in Senate. Senate agreed to conference report by Yea-Nay Vote. 81 - 14. Record Vote Number: 229 . The Dodd-Frank Act established several new whistleblower protections for individuals employed in the financial services industry. Section 748 of the Dodd-Frank Act, for example, amended the Commodity Exchange Act (CEA) to add a new section 23 that prohibits employers from discharging or otherwise discriminating against an individual for providing information related to a violation of the CEA to the Commodity Futures Trading Commission (CFTC) or for assisting in any investigation or judicial or administrative action of the CFTC based upon or related to such information. Section 922 of the Dodd-Frank Act amended the Securities Exchange Act of 1934 (SEA) to add a new section 21F that prohibits employers from discharging or otherwise discriminating against an individual for (1) providing information related to a violation of the securities laws to the Securities and Exchange Commission (SEC); (2) initiating, testifying in, or assisting in any investigation or judicial or administrative action of the SEC based upon or related to such information; or (3) making disclosures that are required by SOX, the SEA, or any other law subject to the SEC's jurisdiction. Section 1057 of the Dodd-Frank Act prohibits employers engaged in providing consumer financial products or services, and employers that provide a material service in connection with the provision of such products or services, from terminating or in any other way discriminating against a covered employee because the employee has (1) provided, caused to be provided, or is about to provide or cause to be provided, information relating to a violation of Title X of the Dodd-Frank Act or any other provision of law that is subject to the jurisdiction of the Bureau of Consumer Financial Protection (Bureau) to the employer, the Bureau, or a state, local, or federal government authority or law enforcement agency; (2) testified or will testify in any proceeding resulting from the administration or enforcement of Title X of the Dodd-Frank Act or any other provision of law that is subject to the jurisdiction of the Bureau; (3) filed, instituted, or caused to be filed or instituted any proceeding under any federal consumer financial law; or (4) objected to or refused to participate in any activity that the employee reasonably believed to be in violation of any law subject to the jurisdiction of, or enforceable by, the Bureau. An individual who alleges a termination or other discrimination in violation of section 23 of the CEA may bring an action in the appropriate district court of the United States. If the individual is a federal employee, he or she must bring the action in accordance with section 1221 of title 5, U.S. Code. An action may not be brought more than two years after the date on which the violation is committed. An individual who alleges a termination or other discrimination in violation of section 21F of the SEA may bring an action in the appropriate district court of the United States. An action may not be brought more than six years after the date on which the violation occurred or more than three years after the date when facts material to the right of action are known or reasonably should have been known by the complainant. An employee who believes that he or she has been discharged or otherwise discriminated against in violation of the section 1057 whistleblower provisions may file a complaint with the Secretary of Labor within 180 days of the alleged violation. Within 60 days after receiving the complaint, the Secretary will initiate an investigation and determine whether there is reasonable cause to believe that the complaint has merit. The Secretary will notify the complainant and the person alleged to have committed the violation of her determination in writing. If the Secretary concludes that there is reasonable cause to believe that a violation has occurred, she will also issue a preliminary order that provides affirmative action to abate the violation, reinstatement with back pay, and compensatory damages. Either party may file objections to the Secretary's findings or order and request a hearing within 30 days after receiving her notification. If a hearing is not requested in the 30-day period, the preliminary order shall be deemed a final order that is not subject to judicial review. Any person adversely affected or aggrieved by a final order may seek review of the order in the U.S. court of appeals for the circuit in which the violation allegedly occurred or the circuit in which the complainant resided on the date of such violation. A petition for review must be filed no later than 60 days after the date of the issuance of the final order. Yes. Under section 23 of the CEA and section 21F of the SEA, an individual may bring an action in the appropriate district court of the United States. Under section 1057 of the Dodd-Frank Act, the complainant may bring an action at law or equity for de novo review in the appropriate federal district court having jurisdiction if the Secretary has not issued a final order within 210 days after the date the complaint was filed, or within 90 days after the date of receipt of a written determination. An individual who prevails in an action under section 23 of the CEA is entitled to reinstatement, back pay with interest, and compensation for any special damages sustained as result of the discharge or discrimination, including litigation costs and reasonable attorney's fees. An individual who prevails in an action under section 21F of the SEA is entitled to reinstatement, two times the amount of back pay otherwise owed to the individual, including interest, and compensation for litigation costs, expert witness fees, and reasonable attorneys' fees. An individual who prevails in a private action under section 1057 of the Dodd-Frank Act may be awarded all relief necessary to make the person whole, including injunctive relief and compensatory damages. Adopted 2010. See P.L. 111-203 , §§ 748, 922, 1057, 124 Stat. 1376 (2010). Sponsor: Representative Barney Frank House: Conference report agreed to in House. On agreeing to the conference report Agreed to by the Yeas and Nays: 237 - 192 (Roll no. 413). Senate: Conference report agreed to in Senate. Senate agreed to conference report by Yea-Nay Vote. 60 – 39. Record Vote Number: 208 . The EPPA prohibits an employer from discharging or otherwise discriminating against an employee or prospective employee because such individual (1) has filed a complaint, or instituted or caused to be instituted any proceeding under or related to the EPPA; (2) has testified or is about to testify in any such proceeding; or (3) has exercised any right afforded by the EPPA. The Secretary of Labor may bring an action to restrain violations of the EPPA. Yes. An aggrieved employee or prospective employee may bring an action in any federal or state court of competent jurisdiction no later than three years after the date of the alleged violation. An employer that violates the EPPA's anti-retaliation provisions will be liable for such legal or equitable relief as may be appropriate, including reinstatement and the payment of lost wages and benefits. Adopted 1988. ERISA prohibits any person from discharging, fining, suspending, expelling, disciplining, or discriminating against a participant or beneficiary for (1) exercising any right to which he or she is entitled under the provisions of an employee benefit plan, section 1201 of title 29, U.S. Code, or the Welfare and Pension Plans Disclosure Act; or (2) giving information, testifying, or being about to testify in any inquiry or proceeding related to ERISA or the Welfare and Pension Plans Disclosure Act. In the case of a multiemployer plan, it is unlawful for the plan sponsor or any other person to discriminate against any contributing employer for exercising rights under ERISA or for giving information or testifying in any inquiry or proceeding before Congress related to ERISA. A civil action may be brought by the Secretary of Labor to enjoin any act or practice which violates ERISA's anti-retaliation provisions, or to obtain other appropriate equitable relief to redress the violation or enforce ERISA's anti-retaliation provisions. The federal district courts have exclusive jurisdiction for these actions. Yes. A civil action may be brought by a participant or beneficiary to enjoin any act or practice which violates ERISA's anti-retaliation provisions, or to obtain other appropriate equitable relief to redress the violation or enforce ERISA's anti-retaliation provisions. The federal district courts have exclusive jurisdiction for these actions. If a court concludes that a violation of ERISA's anti-retaliation provisions has occurred, it may enjoin the offending act or practice, or order other appropriate equitable relief to redress the violation or enforce ERISA's anti-retaliation provisions. A court, in its discretion, may allow a reasonable attorney's fee and costs of action. Adopted 1974. Amended 2006. See P.L. 109-280 , § 205, 120 Stat. 889 (2006). Sponsor: Representative John Boehner Cosponsors: 4 House: Passed by recorded vote: 279 - 131, 1 Present (Roll no. 422). Senate: Passed without amendment by Yea-Nay Vote. 93 - 5. Record Vote Number: 230 . The ERA prohibits an employer from discharging or otherwise discriminating against any employee who (1) notified his or her employer of an alleged violation of the ERA or the Atomic Energy Act of 1954 (AEA); (2) refused to engage in any unlawful practice under the ERA or AEA, if the employee identified the alleged illegality to the employer; (3) testified before Congress or at any federal or state proceeding regarding any provision of the ERA or AEA; (4) commenced a proceeding under the ERA or AEA; (5) testified or is about to testify in any such proceeding; or (6) assisted or participated or is about to assist or participate in a proceeding to carry out the purposes of the ERA or AEA. Any employee who believes that he or she has been discharged or otherwise discriminated against in violation of the ERA's whistleblower provisions may, within 180 days after such violation occurs, file a complaint with the Secretary of Labor alleging such discharge or discrimination. Upon receipt of a complaint, the Secretary will complete an investigation within 30 days. Within 90 days of receiving the complaint, the Secretary will, unless the proceeding is terminated due to a settlement, issue an order either denying the complaint or providing for affirmative action to abate the violation and reinstatement with back pay. If the Secretary determines that a violation has occurred, he will issue a final order. Any person adversely affected or aggrieved by an order may obtain review in the U.S. Court of appeals for the circuit in which the violation allegedly occurred. A petition for review must be filed within 60 days from the issuance of the order. Yes. If the Secretary has not issued a final decision within one year after the filing of a complaint and there is no showing that the delay is because of the complainant's bad faith, the complainant may bring an action at law or equity for de novo review in the appropriate federal district court. A prevailing employee is entitled to affirmative action to abate the violation and reinstatement with back pay. Compensatory damages may also be awarded. Adopted 1974. Amended 2005. See P.L. 109-58 , § 629, 119 Stat. 785 (2005). Sponsor: Representative Joe Barton Cosponsors: 2 House: Conference report agreed to in House. On agreeing to the conference report Agreed to by the Yeas and Nays: 275 - 156 (Roll no. 445). Senate: Conference report agreed to in Senate. Senate agreed to conference report by Yea-Nay Vote. 74 - 26. Record Vote Number: 213 . The FLSA prohibits an employer from discharging or otherwise discriminating against an employee because such employee filed a complaint or instituted any proceeding under the statute, testified or is about to testify in any such proceeding, or served or is about to serve on an industry committee. Enforcement An action may be maintained against any employer, including a public agency, in any federal or state court of competent jurisdiction by any one or more employees. An employee loses his or her right to file a complaint under the FLSA's anti-retaliation provisions once the Secretary of Labor files a complaint against the employer. Yes. Employers who willfully violate the FLSA's anti-retaliation provisions may be fined up to $10,000 and imprisoned up to six months. Employers who retaliate against employees in violation of this provision shall be liable for legal and equitable relief, including, without limitation, reinstatement, the payment of lost wages, and an additional equal amount as liquidated damages. The court will, in addition to any judgment awarded, allow reasonable attorneys' fees to be paid to the plaintiff, as well as the costs of the action. Adopted 1938. The FMLA prohibits an employer from discharging or otherwise discriminating against any individual because he or she (1) has opposed any practice made unlawful by the FMLA; (2) has filed a charge, or instituted or caused to be instituted any proceeding under or related to the FMLA; (3) has given or is about to give any information in connection with any inquiry or proceeding related to any right provided under the FMLA; or (4) has testified or is about to testify in any inquiry or proceeding related to any right provided under the FMLA. The Secretary of Labor will receive, investigate, and attempt to resolve complaints that allege violations of the FMLA's anti-retaliation provisions, and may bring an action in any court of competent jurisdiction. Yes. An aggrieved employee may bring an action to recover damages or obtain equitable relief in any federal or state court of competent jurisdiction. In cases other than those involving a willful violation, an action must be brought within two years of the date of the last event constituting the alleged violation. In cases involving a willful violation, an action must be brought within three years of the date of the last event constituting the alleged violation. An employer that violates the FMLA's anti-retaliation provisions will be liable for damages equal to the following: (1) the amount of any wages, salary, benefits, or other compensation lost because of the violation, or, if there has been no such loss, the amount of any actual monetary losses sustained as a direct result of the violation, such as the cost of providing care, up to a sum equal to 12 weeks of wages or salary; (2) the interest on the aforementioned amount; and (3) an additional amount as liquidated damages. The employer will also be liable for such equitable relief as may be appropriate, including reinstatement. Adopted 1993. Applicants and employees of the Federal Bureau of Investigation (FBI) are protected from retaliatory personnel actions taken because the employee disclosed information to the Attorney General that the employee reasonably believes evidences a violation of any law, rule, or regulation, or mismanagement, a gross waste of funds, an abuse of authority, or a substantial and specific danger to public health or safety. According to regulations promulgated under the statute, an FBI employee who believes that a retaliatory personnel action has been taken may report the alleged reprisal to the FBI's Investigative Offices. Within 15 calendar days of receipt, the office conducting the investigation (Conducting Office) shall provide written notice of receipt of the allegation to the person who made it (the complainant) and shall conduct an investigation to determine whether there are reasonable grounds to believe that a reprisal has been or will be taken. Within 90 days of providing such notice to the complainant, and at least every 60 calendar days thereafter, the Conducting Office shall notify the complainant of the status of the investigation. Within 240 days of receiving the allegation, the office will determine whether there are reasonable grounds to believe that a retaliatory personnel action has been or will be taken, unless the complainant agrees to an extension. No. If the Conducting Office determines there are reasonable grounds to believe that a reprisal has been taken, it will report this to the Director of the Office of Attorney Recruitment and Management, Department of Justice (Director) along with recommendations for corrective action. The Conducting Office may request the Director to order a stay of any personnel action for 45 calendar days, which may be extended. Within 60 days of being notified that an investigation has ended—or at any time after 120 days from the date that the complainant first reported the alleged reprisal, if the complainant has not been notified by the Conducting Office that it will seek corrective action—the complainant may request corrective action directly to the Director. In such cases, the complainant may request the Director to order a stay of any personnel action allegedly taken or to be taken in reprisal for a protected disclosure. Based upon all the evidence, the Director will determine whether a protected disclosure was a contributing factor in a personnel action. If the Director makes such a determination, the Director will order corrective action unless the FBI demonstrates by clear and convincing evidence that it would have taken the same personnel action in the absence of the disclosure. Corrective action may include placing the complainant, as nearly as possible, in the position he would have been in had the reprisal not taken place; reimbursement for attorney's fees, reasonable costs, medical costs incurred, and travel expenses; back pay and related benefits; and any other reasonable and foreseeable consequential damages. Adopted 1978. The FDA Modernization Act amended the Federal Food, Drug, and Cosmetic Act to prohibit an entity engaged in the manufacture, processing, packing, transporting, distribution, reception, holding, or importation of food from discharging or otherwise discriminating against an employee with respect to the individual's compensation, terms, conditions, or privileges of employment because the employee (1) provided, caused to be provided, or is about to provide or cause to be provided information relating to a violation of the Federal Food, Drug, and Cosmetic Act to the employer, the federal government, or the attorney general of a state; (2) testified or is about to testify in a proceeding concerning the violation; (3) assisted or participated or is about to assist or participate in a proceeding concerning the violation; or (4) objected to, or refused to participate in any activity that the employee believed to be in violation of the Federal Food, Drug, and Cosmetic Act. An individual who believes that he or she has been discharged or otherwise discriminated against in violation of the relevant whistleblower provisions may file a complaint with the Secretary of Labor within 180 days after the date on which the violation occurs. Within 60 days of receiving the complaint, the Secretary will initiate an investigation and determine whether there is reasonable cause to believe that the complaint has merit. If the Secretary determines that reasonable cause exists, he will accompany his findings with a preliminary order that requires the person who committed the violation to take affirmative action to abate the violation, to reinstate the complainant with back pay, and to provide compensatory damages. The person alleged to have committed the violation or the complainant may file objections to the findings or the order and request a hearing. A final order must be issued by the Secretary within 120 days after the date of the hearing's conclusion. Any person adversely affected or aggrieved by a final order may obtain review in the U.S. court of appeals for the circuit in which the violation occurred or the circuit in which the complainant resided on the date of the violation. A petition for review must be filed no later than 60 days after the date of the issuance of the final order. Yes. If the Secretary has not issued a final decision within 210 days after the filing of the complaint, or within 90 days after receiving a written determination, the complainant may bring an action at law or equity for de novo review in the appropriate federal district court having jurisdiction. An employee who prevails in a private action may be awarded all relief necessary to make the individual whole, including injunctive relief and compensatory damages. Adopted 2011. See P.L. 111-353 , § 402, 124 Stat. 3968 (2011). Sponsor: Representative Betty Sutton Cosponsors: 59 House: Resolving differences - On motion that the House agree to the Senate amendments Agreed to by the Yeas and Nays: 215 - 144 (Roll no. 661). Senate: Passed Senate with an amendment and an amendment to the Title by Voice Vote. The FMSHA prohibits an employer from discharging an employee or applicant for employment because the individual (1) filed or made a complaint under or related to the FMSHA; (2) is the subject of medical evaluations and potential transfer; (3) instituted or testified in any proceeding under or related to the FMSHA; or (4) exercised any statutory right afforded by the FMSHA. Employees and applicants who believe that they have been discharged, interfered with, or otherwise discriminated against in violation of this prohibition may file a complaint with the Secretary of Labor within 60 days after the alleged violation. Upon receipt of the complaint, the Secretary will forward a copy to the respondent and within 15 days of receiving the complaint, the Secretary will institute an investigation as he deems appropriate. If the Secretary determines that the complaint was not brought frivolously, the Federal Mine Safety and Health Review Commission (Commission) will order the immediate reinstatement of the miner pending a final order. If the Secretary determines that the FMSHA's whistleblower provisions have been violated, he will immediately file a complaint with the Commission, with service upon the alleged violator and miner, proposing an order granting appropriate relief. The Commission shall afford an opportunity for a hearing and shall issue an order affirming, modifying, or vacating the Secretary's proposed order, or directing other appropriate relief. Yes. Within 90 days of receiving a complaint, the Secretary will notify the miner about whether a violation occurred. If the Secretary determines that the FMSHA's whistleblower provisions were not violated, the complainant will have the right, within 30 days of notice of the Secretary's determination, to file an action in his or her own behalf before the Commission. The Commission shall afford an opportunity for a hearing and shall issue an order, granting such relief as it deems appropriate. Whenever an order is issued sustaining a complainant's charges, a sum equal to the aggregate amount of all costs and expenses, including attorneys' fees, will be assessed against the person who committed the violation. Any person adversely affected by such an order may obtain review in any U.S. court of appeals for the circuit in which the violation is alleged to have occurred or in the U.S. Court of Appeals for the D.C. Circuit. The Commission may require a person committing a violation to abate the violation as the Commission deems appropriate, including reinstatement with back pay and interest. When the Commission issues an order that sustains a complainant's charges, a sum equal to the aggregate amount of all costs and expenses, including attorneys' fees, will be assessed against the person who committed the violation. Adopted 1969. Amended 1977, 1984. The FRSA prohibits a railroad carrier engaged in interstate or foreign commerce, a contractor or subcontractor of such a carrier, or an officer or employee of such a carrier, from discharging or otherwise discriminating against an employee because he or she (1) provides or is about to provide information, or otherwise directly assists in an investigation regarding conduct that the individual believes is a violation of a federal law, rule, or regulation relating to railroad safety or security, or constitutes gross fraud, waste, or abuse of a federal grant or other public funds intended to be used for railroad safety or security, if the information or assistance is provided to specified government entities or a person with supervisory authority over the employee; (2) refuses to violate or assist in the violation a federal law, rule, or regulation related to railroad safety or security; (3) files a complaint, causes a proceeding to enforce the FRSA or railroad safety or security, or testifies in that proceeding; (4) notifies or attempts to notify the railroad carrier or the Secretary of Transportation of a work-related personal injury or work-related illness of an employee; (5) cooperates with a safety or security investigation by the Secretary of Transportation, the Secretary of Homeland Security, or the National Transportation Safety Board; (6) furnishes information to specified entities related to an railroad accident or incident resulting in injury or death to an individual or damage to property; or (7) accurately reports hours on duty pursuant to the Hours of Service Act. In addition, a railroad carrier engaged in interstate or foreign commerce, or an officer or employee of such a carrier, may not discharge or otherwise discriminate against an employee for (1) reporting, in good faith, a hazardous safety or security condition; (2) refusing to work when confronted by a hazardous safety or security issue, if certain conditions exist; or (3) refusing to authorize the use of safety-related equipment, track, or structures, if the employee is responsible for the inspection or repair of such items and believes that they are in a hazardous safety or security state. A person who believes that he or she has been discharged or otherwise discriminated against in violation of the FRSA's whistleblower provisions may file a complaint with the Secretary of Labor no later than 180 days after the date on which the violation occurs. Within 60 days of receiving the complaint, the Secretary of Labor will conduct an investigation and determine whether there is reasonable cause to believe that the case has merit. If reasonable cause is found, the Secretary will issue findings and a preliminary order that provides for affirmative action to abate the violation, reinstatement with back pay, and the payment of compensatory damages to the complainant. The parties may object to the findings or order, and request a hearing within 30 days of the date of notification of the findings. If a hearing is not requested within the 30-day period, the preliminary order will be deemed a final order that is not subject to judicial review. If a hearing is requested, the Secretary will issue a final order no later than 120 days after the date of the hearing. Any person adversely affected or aggrieved by the Secretary's final order may obtain review of the order in the U.S. Court of Appeals for the circuit in which the violation allegedly occurred or the circuit in which the complainant resided on the date of the violation. Yes. If the Secretary of Labor has not issued a final decision within 210 days after the filing of the complaint and if the delay is not because of the employee's bad faith, the employee may bring an original action at law or equity for de novo review in the appropriate federal district court. A prevailing employee is entitled to all relief necessary to make the employee whole, including reinstatement with back pay and compensatory damages. Punitive damages in an amount not to exceed $250,000 may also be awarded. Adopted 1994. Amended 2007. See P.L. 110-53 , § 1521, 121 Stat. 444 (2007). Sponsor: Representative Bennie G. Thompson Cosponsors: 205 House: Conference report agreed to in House. On agreeing to the conference report Agreed to by the Yeas and Nays: 371 - 40 (Roll no. 757). Senate: Conference report agreed to in Senate. Senate agreed to conference report by Yea-Nay Vote. 85 - 8. Record Vote Number: 284 . The Clean Water Act prohibits an employer from firing or otherwise discriminating against an employee, or causing such firing or discrimination, because the employee has filed, instituted, or caused to be filed or instituted any proceeding under the Clean Water Act, or has testified or is about to testify in any proceeding resulting from the administration or enforcement of the Clean Water Act. Any employee who believes that he or she has been fired or discriminated against in violation of the Clean Water Act's anti-retaliation provisions may, within 30 days after such alleged violation occurs, apply to the Secretary of Labor for a review. Upon receipt of such application, the Secretary will institute an investigation as he or she deems appropriate. Upon receiving the report of such investigation, the Secretary will make findings of fact; if he finds that such violation did occur, the Secretary will issue a decision, incorporating an order and findings, requiring the party committing such violation to take such affirmative action to abate the violation, including the rehiring or reinstatement of the employee with compensation. If the Secretary finds that there was no such violation, she will issue an order denying the application; such order shall be subject to judicial review in the same manner as orders and decisions are subject to judicial review under the Clean Water Act. Whenever an order is issued, at the request of the applicant, a sum equal to the aggregate amount of all costs and expenses, including attorneys' fees, determined to have been reasonably incurred by the applicant, will be assessed against the person committing the violation. No. A prevailing employee is entitled to such affirmative action to abate the violation as the Secretary deems appropriate, including rehiring or reinstatement with compensation. When an order is issued, at the request of the applicant, a sum equal to the aggregate amount of all costs and expenses, including attorneys' fees, determined to have been reasonably incurred, will be assessed against the person committing the violation. Adopted 1972. The ISCA prohibits a person from discharging or discriminating against an employee because the employee has reported the existence of an unsafe container, a violation of the ISCA, or a regulation prescribed under the ISCA. An employee who believes that he or she has been discharged or discriminated against in violation of the ISCA's whistleblower provisions may file a complaint with the Secretary of Labor within 60 days of the violation. The Secretary may investigate the complaint and bring a civil action in an appropriate federal district court if he finds that there has been a violation. No. A court may restrain violations and order appropriate relief, including reinstatement of the employee with back pay. Adopted 2006. See P.L. 109-304 , § 11, 120 Stat. 1697 (2006). Sponsor: Representative F. James Sensenbrenner, Jr. Cosponsors: 1 House: On motion to suspend the rules and pass the bill, as amended Agreed to by voice vote. Senate: Passed Senate without amendment by Unanimous Consent. The LHWCA prohibits an employer from discharging or otherwise discriminating against an employee who claims or attempts to claim compensation from the employer, or testifies or is about to testify against the employer in a proceeding under the statute. An employee who believes that he or she has been discharged or otherwise discriminated against in violation of the LHWCA's anti-retaliation provisions may file a complaint with a district director of the Office of Workers' Compensation Programs. Within five days of receiving such a complaint, the district director will initiate specific inquiry to determine all the facts and circumstances pertaining to the complaint. If the district director determines that the employee has been discharged or suffered discrimination and is able to resume his or her duties, the district director will recommend reinstatement and/or restitution as is indicated by the circumstances of the case. If the employer and the employee accept the district director's recommendation, it will be incorporated in an order and sent to each party. If the parties do not agree to the recommendation, the district director will prepare a memorandum summarizing the disagreement and refer the case to the Office of the Chief Administrative Law Judge, Department of Labor, for hearing. The Office of Administrative Law Judges is responsible for final determinations of all disputed issues connected with the discrimination complaint. No. Any employee that is discriminated against will be restored to his or her employment and shall be compensated for any loss of wages arising from the discrimination, provided that if the employee ceases to be qualified to perform the duties of employment, he or she will not be entitled to such restoration and compensation. The employer and not his insurance carrier will be liable for such penalties and payments, and any provision in an insurance policy undertaking to relieve the employer from the liability for such penalties and payments shall be void. Adopted 1972. Amended 1984. The MSAWPA prohibits an employer from intimidating, threatening, restraining, coercing, blacklisting, discharging, or in any manner discriminating against any migrant or seasonal agricultural worker because such worker has, with just cause, filed a complaint or instituted, or caused to be instituted, any proceeding under the statute's anti-retaliation provisions. Any employee who has testified or is about to testify in any such proceeding or justifiably exercises any right or protection afforded by MSAWPA is also protected from retaliatory action. An employee who believes, with just cause, that he or she has been discriminated against in violation of the MSAWPA's anti-retaliation provisions may file a complaint with the Secretary of Labor within 180 days of the violation. As he deems appropriate, the Secretary will institute an investigation and, upon determining that a violation has occurred, will bring an action in any appropriate federal district court. No. In an action brought by the Secretary, the federal district court has jurisdiction, for cause shown, to restrain the violation and order all appropriate relief, including reinstatement with back pay or damages. Adopted 1983. MAP-21 prohibits a motor vehicle manufacturer, part supplier, or dealership from discharging or otherwise discriminating against an employee because he or she (1) provided, caused to be provided, or is about to provide or cause to be provided to his or her employer or the Secretary of Transportation information related to a motor vehicle defect, noncompliance, or any violation or alleged violation of any notification or reporting requirement of chapter 301, title 49, U.S. Code; (2) filed, caused to be filed, or is about to file or cause to be filed a proceeding related to any violation or alleged violation of any notification or reporting requirement of chapter 301, title 49, U.S. Code; (3) testified or is about to testify in such a proceeding; (4) assisted, participated in, or is about to assist or participate in such a proceeding; or (5) objected or refused to participate in an activity that he or she reasonably believed to be in violation of any provision of chapter 301, title 49, U.S. Code, or any order, rule, regulation, standard, or ban under such provision. A person who believes that he or she has been discharged or otherwise discriminated against in violation of MAP-21's anti-retaliation provisions may file a complaint with the Secretary of Labor no later than 180 days after the date on which the violation occurs. Within 60 days of receiving the complaint, the Secretary will conduct an investigation and determine whether there is reasonable cause to believe that the complaint has merit. If the Secretary concludes that there is reasonable cause to believe that a violation has occurred, he will accompany his findings with a preliminary order that provides for affirmative action to abate the violation, reinstatement with back pay, and compensatory damages. The parties may object to the findings or order, and request a hearing within 30 days of the date of notification of the findings. If a hearing is not requested within the 30-day period, the preliminary order will be deemed a final order that is not subject to judicial review. If a hearing is requested, the Secretary will issue a final order no later than 120 days after the date of the hearing. Any person adversely affected or aggrieved by the Secretary's final order may obtain review of the order in the U.S. Court of Appeals for the circuit in which the violation allegedly occurred or the circuit in which the complainant resided on the date of the violation. The petition for review must be filed no later than 60 days after the date of issuance of the final order. Yes. If the Secretary of Labor has not issued a final decision within 210 days after the filing of the complaint and if the delay is not because of the employee's bad faith, the employee may bring an original action at law or equity for de novo review in the appropriate federal district court. If the Secretary determines that a violation has occurred, he will order affirmative action to abate the violation, reinstatement with back pay, and compensatory damages. Adopted 2012. See P.L. 112-141 , § 31307(a), 126 Stat. 765 (2012). Sponsor: Representative John L. Mica Cosponsors: 2 House: Conference report agreed to in House. On agreeing to the conference report Agreed to by the Yeas and Nays: 373 - 52 (Roll no. 451). Senate: Conference report agreed to in Senate. Senate agreed to conference report by Yea-Nay Vote. 74 - 19. Record Vote Number: 172 . Under section 8(a)(4) of the NLRA, it is an unfair labor practice for an employer to discharge or otherwise discriminate against an employee because he or she has filed charges or given testimony under the NLRA. An employee alleging an employer's unfair labor practice may file a charge with the National Labor Relations Board's regional director for the region in which the alleged unfair labor practice has occurred or is occurring. If it appears that formal proceedings should be instituted, the regional director will issue a formal complaint that includes a notice of hearing before an administrative law judge (ALJ). Following the hearing, the ALJ will issue a decision, with findings of fact, conclusions, and recommendations about the disposition of the case. Exceptions to the ALJ's decision or to any other part of the record or proceedings may be filed with the National Labor Relations Board (NLRB). If such exceptions are not filed in a timely or proper manner, the ALJ's decision will become the decision of the NLRB. If further review is conducted by the NLRB and it is determined that the employer has committed an unfair labor practice, it will issue an order requiring the employer to cease and desist from the unfair labor practice and to take such affirmative action as will effectuate the policies of the NLRA, including reinstatement with or without back pay. Any person aggrieved by a final order of the NLRB may obtain review of the order in any U.S. court of appeals in the circuit where the unfair labor practice was alleged to have been committed or where the person resides or transacts business, or in the U.S. Court of Appeals for the District of Columbia Circuit. No. An employer found to have committed an unfair labor practice will be ordered to cease and desist from such practice and to take such affirmative action as will effectuate the policies of the NLRA, including reinstatement with or without back pay. Adopted 1935. The NTSSA prohibits a public transportation agency, a contractor or subcontractor of such an agency, or an officer or employee of such an agency from discharging or otherwise discriminating against an employee if such action is because of the employee's lawful, good faith act done, or perceived by the employer to have been done or about to be done to (1) provide or cause to provide information, or assist in an investigation regarding conduct that the employee believes to be a violation of any federal law, rule, or regulation related to public transportation safety or security, or fraud, waste, or abuse of public funds intended for public transportation, if the information or assistance is provided to specified individuals or government entities; (2) refuse to violate or assist in the violation of any federal law, rule, or regulation related to public transportation safety or security; (3) file a complaint or cause a proceeding related to the enforcement of the NTSSA's whistleblower provisions, or testify in such proceeding; (4) cooperate with a safety or security investigation by the Secretary of Transportation, the Secretary of Homeland Security, or the National Transportation Safety Board (NTSB); or (5) furnish information to the Secretary of Transportation, the Secretary of Homeland Security, the NTSB, or any federal, state, or local regulatory or law enforcement agency about the facts related to an accident or incident resulting in the injury or death of an individual or damage to property that occurs in connection with public transportation. A public transportation agency, a contractor or subcontractor of such an agency, or an officer or employee of such an agency is also prohibited from discharging or otherwise discriminating against an employee for reporting a hazardous safety or security condition, refusing to work when confronted by a hazardous safety or security condition, or refusing to authorize the use of any safety- or security-related equipment, track, or structures, if the employee is responsible for the inspection or repair of such items and believes that the items are in a hazardous condition. Refusals to work or authorize the use of safety- or security-related equipment, track, or structures, are protected only if made in good faith, no reasonable alternative to a refusal is available, and other specified requirements are satisfied. A person who believes that he or she has been discharged or otherwise discriminated against in violation of the NTSSA's whistleblower provisions may file a complaint with the Secretary of Labor no later than 180 days after the date on which the violation occurs. Within 60 days of receiving the complaint, the Secretary will conduct an investigation and determine whether there is reasonable cause to believe that the complaint has merit. If the Secretary concludes that there is reasonable cause to believe that a violation has occurred, he will accompany his findings with a preliminary order that provides for affirmative action to abate the violation, reinstatement with back pay, and compensatory damages. The parties may object to the findings or order, and request a hearing within 30 days of the date of notification of the findings. If a hearing is not requested within the 30-day period, the preliminary order will be deemed a final order that is not subject to judicial review. If a hearing is requested, the Secretary will issue a final order no later than 120 days after the date of the hearing. Any person adversely affected or aggrieved by the Secretary's final order may obtain review of the order in the U.S. Court of Appeals for the circuit in which the violation allegedly occurred or the circuit in which the complainant resided on the date of the violation. The petition for review must be filed no later than 60 days after the date of issuance of the final order. Yes. If the Secretary of Labor has not issued a final decision within 210 days after the filing of the complaint and if the delay is not because of the employee's bad faith, the employee may bring an original action at law or equity for de novo review in the appropriate federal district court. A prevailing employee is entitled to all relief necessary to make the employee whole, including reinstatement with back pay and compensatory damages. Relief may also include punitive damages in an amount not to exceed $250,000. Adopted 2007. See P.L. 110-53 , § 1413, 121 Stat. 414 (2007). Sponsor: Representative Bennie G. Thompson Cosponsors: 205 House: Conference report agreed to in House. On agreeing to the conference report Agreed to by the Yeas and Nays: 371 - 40 (Roll no. 757). Senate: Conference report agreed to in Senate. Senate agreed to conference report by Yea-Nay Vote. 85 - 8. Record Vote Number: 284 . The OSH Act prohibits an employer from discharging or in any manner discriminating against an employee because such employee filed a complaint or instituted or caused to be instituted a proceeding under the OSH Act, or is about to testify in any such proceeding. Any employee who has testified or is about to testify in any such proceeding or exercises any right or protection afforded by the OSH Act is also protected from retaliatory action. An employee who believes that he or she has been discharged or otherwise discriminated against in violation of the OSH Act may file a complaint with the Secretary of Labor alleging such discrimination within 30 days after the violation occurs. Upon receipt of the complaint, the Secretary will institute an investigation as he deems appropriate. If the Secretary determines that a violation has occurred, he will bring an action in any appropriate U.S. district court. The Secretary must notify the complainant of his determination within 90 days of receiving the complaint. No. In an action brought by the Secretary, the federal district court has jurisdiction, for cause shown, to restrain the violation and order all appropriate relief, including reinstatement with back pay. Adopted 1970. The ACA amended the Fair Labor Standards Act (FLSA) to provide additional protections for employees. Under the new section 18c of the FLSA, an employer is prohibited from discharging or otherwise discriminating against any employee because he or she has (1) received a premium tax credit or cost-sharing subsidy under the ACA; (2) provided, caused to be provided, or is about to provide or cause to be provided to the employer, the federal government, or a state attorney general information related to any violation of, or any act or omission the employee reasonably believes to be a violation of, any provision of title 29, U.S. Code; (3) testified or is about to testify in a proceeding concerning such a violation; (4) assisted or participated in, or is about to assist or participate in, such a proceeding; or (5) objected to, or refused to participate in any activity, policy, practice, or assigned task that employee reasonably believed to be in violation or any provision of title 29, U.S. Code, or any order, rule, regulation, standard, or ban under such title. An employee who believes that he or she has been discharged or otherwise discriminated against in violation of section 18c of the FLSA may seek relief in accordance with the enforcement procedures established by the Consumer Protection Safety Act (CPSA). See discussion above. Yes. In accordance with the enforcement procedures established by the CPSA, a person may bring an action at law or equity for de novo review in the appropriate federal district court with jurisdiction within 90 days after receiving a written determination, or if the Secretary of Labor has not issued a final decision within 210 days after the filing of the complaint. In accordance with the enforcement procedures established by the CPSA, a court may grant all relief necessary to make employee whole, including injunctive relief and compensatory damages. Adopted 2010. See P.L. 111-148 , § 1558, 124 Stat. 261 (2010). Sponsor: Representative Charles B. Rangel Cosponsors: 40 House: Resolving differences - On motion that the House agree to the Senate amendments Agreed to by recorded vote: 219 - 212 (Roll no. 165). Senate: Passed Senate with an amendment and an amendment to the Title by Yea-Nay Vote. 60 - 39. Record Vote Number: 396 . The PSIA prohibits an owner or operator of a pipeline facility, or a contractor or subcontractor of such an owner or operator, from discharging or otherwise discriminating against an employee because he or she (1) provided, caused to be provided, or is about to provide or cause to be provided to the employer or the federal government information related to any violation or alleged violation of an order, regulation, or standard under chapter 601, title 49, U.S. Code or any federal law related to pipeline safety; (2) refused to engage in any practice made unlawful by chapter 601, title 49, U.S. Code or any federal law related to pipeline safety, if the employee has identified the alleged illegality to the employer; (3) provided, caused to be provided, or is about provide or cause to be provided, testimony before Congress or at any federal or state proceeding involving chapter 601, title 49, U.S. Code or any federal law related to pipeline safety; (4) commenced, caused to be commenced, or is about to commence or cause to be commenced a proceeding under chapter 601, title 49, U.S. Code or any federal law related to pipeline safety; (5) provided, caused to be provided, or is about to provide or cause to be provided, testimony in such a proceeding; or (6) assisted or participated in, or is about to assist or participate in, a proceeding or action related to chapter 601, title 49, U.S. Code or any federal law related to pipeline safety. A person who believes that he or she was discharged or otherwise discriminated against in violation of the PSIA's whistleblower provisions may file a complaint with the Secretary of Labor no later than 180 days after the date on which the violation occurs. Within 60 days of receiving the complaint, the Secretary will conduct an investigation and determine whether there is reasonable cause to believe that the complaint has merit. If the Secretary concludes that there is reasonable cause to believe that a violation has occurred, he will accompany his findings with a preliminary order that provides for affirmative action to abate the violation, reinstatement with back pay, and compensatory damages. The parties may object to the findings or order, and request a hearing within 60 days of the date of notification of the findings. If a hearing is not requested within the 60-day period, the preliminary order will be deemed a final order that is not subject to judicial review. If a hearing is requested, the Secretary will issue a final order no later than 90 days after the date of the hearing. Any person adversely affected or aggrieved by the Secretary's final order may obtain review of the order in the U.S. Court of Appeals for the circuit in which the violation allegedly occurred or the circuit in which the complainant resided on the date of the violation. The petition for review must be filed no later than 60 days after the date of issuance of the final order. Yes. Under section 60121(a) of title 49, U.S. Code, a person may bring a civil action in an appropriate federal district court for an injunction against another person for a violation of chapter 601, title 49, U.S. Code. The PSIA's whistleblower provisions are codified in chapter 601. Under the PSIA's whistleblower provisions, a prevailing employee is entitled to affirmative action to abate the violation, reinstatement with back pay, and compensatory damages. Injunctive relief is available for actions brought under section 60121(a) of title 49, U.S. Code. Adopted 2002. See P.L. 107-355 , § 6(a), 116 Stat. 2989 (2002). Sponsor: Representative Don Young Cosponsors: 43 House: Resolving differences—On motion that the House agree to the Senate amendment Agreed to without objection. Senate: Passed Senate with an amendment by Unanimous Consent. The SDWA prohibits an employer from firing, or in any other way discriminating against, or causing to be fired or discriminated against, any employee because such employee filed, instituted, or caused to be filed or instituted any proceeding under the SDWA or has testified or is about to testify in any proceeding resulting from the administration or enforcement of the SDWA. Any employee who believes that he or she has been fired or otherwise discriminated against in violation of the SDWA's anti-retaliation provisions may, within 30 days after such alleged violation occurs, file a complaint with the Secretary of Labor. Upon receiving the complaint, the Secretary will conduct an investigation and notify the complainant and the person alleged to have committed the violation of the investigation results. Within 90 days of receiving the complaint, the Secretary will issue an order that either denies the complaint or provides affirmative action to abate the violation, reinstatement with back pay, compensatory damages, and, where appropriate, exemplary damages. An order will be made on the record after notice and an opportunity for agency hearing. Any person adversely affected or aggrieved by an order may obtain review in the U.S. court of appeals for the circuit in which the violation allegedly occurred. A petition for review must be filed within 60 days from the issuance of the order. No. A prevailing employee is entitled to affirmative action to abate the violation, reinstatement with back pay, compensatory damages, and, where appropriate, exemplary damages. At the request of the complainant, the Secretary will assess against the person who committed the violation a sum equal to the aggregate amount of all costs and expenses, including attorneys' fees, reasonably incurred by the complainant in connection with the complaint. Adopted 1974. SOX prohibits publicly traded companies, including any subsidiaries or affiliates whose financial information is included in the consolidated financial statements of such companies, and nationally recognized statistical rating organizations from discharging, demoting, suspending, threatening, harassing, or in any other manner discriminating against an employee because such employee provided information, caused information to be provided, otherwise assisted in an investigation, or filed, testified, or participated in a proceeding regarding any conduct that the employee reasonably believes is a violation of SOX, any SEC rule or regulation, or any federal statute relating to fraud against shareholders, when the information or assistance is provided to a federal regulatory or law enforcement agency, any Member or committee of Congress, or a person with supervisory authority over the employee or investigative authority for the employer, regarding any violation of 18 U.S.C. §§ 1341 (mail fraud), 1343 (wire fraud), 1344 ( bank fraud), 1348 (securities fraud against shareholders), or any SEC rule or regulation, or of any federal law regarding fraud against shareholders. Any employee who alleges discharge or other discrimination in violation of SOX's whistleblower provisions may file a complaint with the Secretary of Labor, using procedures set forth in section 42121(b) of title 49, U.S. Code. (These procedures are discussed below in the Enforcement section for the Wendell H. Ford Aviation Investment and Reform Act of the 21 st Century.) SOX indicates, however, that a complaint must be filed within 180 days after the date on which the violation occurs, or 180 days after the date on which the employee became aware of the violation. Yes. If the Secretary has not issued a final decision within 180 days of the filing of a complaint and there is no showing that the delay is because of the claimant's bad faith, the claimant may bring an action at law or equity for de novo review in the appropriate federal district court. A prevailing employee may be awarded all relief necessary to make the individual whole, including reinstatement with back pay and interest, and compensation for any special damages sustained as a result of the discrimination. Adopted 2002. See P.L. 107-204 , Title VIII, Sec. 806(a), 116 Stat. 802 (2002). Sponsor: Representative Michael G. Oxley Cosponsors: 30 House: Conference report agreed to in House. On agreeing to the conference report Agreed to by the Yeas and Nays: 423 - 3 (Roll no. 348). Senate: Conference report agreed to in Senate. Senate agreed to conference report by Yea-Nay Vote. 99 - 0. Record Vote Number: 192 . Amended 2010. See also Dodd-Frank Wall Street Reform and Consumer Protection Act, supra . The SPA prohibits a person from discharging or otherwise discriminating against a seaman because the individual (1) in good faith, reported or is about to report to the Coast Guard or another appropriate federal agency or department the belief that a violation of a maritime safety law or regulation has occurred; (2) refused to perform duties because of a reasonable apprehension or expectation that performing such duties would result in serious injury; (3) testified in a proceeding to enforce a maritime safety law or regulation; (4) notified or attempted to notify the vessel owner or the Secretary of the department in which the Coast Guard is operating (Secretary) of a work-related personal injury or work-related illness; (5) cooperated with a safety investigation by the Secretary or the National Transportation Safety Board (NTSB); (6) furnished information to the Secretary, the NTSB, or any other public official about the facts related to any marine casualty resulting in injury or death, or damage to property occurring in connection with vessel transportation; or (7) accurately reported hours of duty. A seaman may file a complaint in the same manner as a complaint may be filed under section 31105(b) of title 49, U.S. Code. The procedures, requirements, and rights described in section 31105, including those providing for the judicial review of final orders, also apply to whistleblower claims under the SPA. (Section 31105 is discussed in the Enforcement section for the Commercial Motor Vehicle Safety Act.) Yes. Pursuant to section 31105(c) of title 49, U.S. Code, a seaman may bring an original action at law or equity for de novo review in an appropriate federal district court if the Secretary of Labor has not issued a final decision within 210 days after the filing of the complaint and if the delay is not the result of the seaman's bad faith. Pursuant to section 31105(b) of title 49, U.S. Code, a prevailing seaman is entitled to affirmative action to abate the violation, reinstatement with back pay, and compensatory damages. Relief may also include punitive damages in an amount not to exceed $250,000. Adopted 1984. Amended 2002. See P.L. 107-295 , § 428, 116 Stat. 2127 (2002). Sponsor: Senator Ernest F. Hollings Cosponsors: 14 House: Conference report agreed to in House. On agreeing to the conference report Agreed to by voice vote. Senate: Conference report agreed to in Senate. Senate agreed to conference report by Yea-Nay Vote. 95 - 0. Record Vote Number: 243 . Amended 2010. See P.L. 111-281 , § 611(a), 124 Stat. 2969 (2010). Sponsor: Representative James L. Oberstar Cosponsor: 1 House: Resolving differences - On motion that the House agree to the Senate amendments to the House amendment to the Senate amendment Agreed to without objection. Senate: Resolving differences - Senate agreed to the House Amendment to the title by Unanimous Consent. The SWDA prohibits an employer from firing, or in any other way discriminating against, or causing to be fired or discriminated against, any employee because such employee filed, instituted, or caused to be filed or instituted any proceeding under the SWDA, or has testified or is about to testify in any proceeding resulting from the administration or enforcement of the SWDA. Any employee who believes that he or she has been fired or otherwise discriminated against in violation of the SWDA's anti-retaliation provisions may, within 30 days after such alleged violation occurs, apply to the Secretary of Labor for a review of the firing or alleged discrimination. Upon receipt of such application, the Secretary will institute an investigation as he deems appropriate. Following the receipt of the investigation report, the Secretary will make findings of fact. If he finds that a violation did occur, the Secretary will issue a decision, incorporating an order and findings, and require the party committing the violation to take such affirmative action to abate the violation as the Secretary deems appropriate, including the rehiring or reinstatement of the employee with compensation. If the Secretary finds no violation, he will issue an order denying the application; such order shall be subject to judicial review in the same manner as orders and decisions are subject to judicial review under the SWDA. No. A prevailing employee is entitled to such affirmative action to abate the violation as the Secretary deems appropriate, including rehiring or reinstatement with compensation. Whenever an order is issued, at the request of the applicant, a sum equal to the aggregate amount of all costs and expenses, including attorneys' fees, to have been reasonably incurred by the applicant, will be assessed against the person who committed the violation. Adopted 1976. The SMCRA prohibits an employer from discharging or in any other way discriminating against or causing to be fired or discriminated against any employee because such employee has filed, instituted, or caused to be filed or instituted any proceeding under the SMCRA. Any employee who has testified or is about to testify in any such proceedings is also protected from such retaliatory action. An employee who believes that he or she has been fired or otherwise discriminated against in violation of the SMCRA's anti-retaliation provisions may, within 30 days, apply to the Secretary of Labor for a review of such firing or alleged discrimination. Upon receipt of the complaint, the Secretary will initiate an investigation as he deems appropriate. The Secretary will make findings of act after receiving a report of the investigation. If the Secretary determines that a violation occurred, he will issue a decision incorporating the findings and an order that requires the party committing the violation to take such affirmative action to abate the violation as the Secretary deems appropriate, including the rehiring or reinstatement of the employee with compensation. If the Secretary finds that no violation occurred, he will issue a finding. Orders issued by the Secretary are subject to judicial review in the same manner as other orders and decisions of the Secretary are subject to judicial review under the SMCRA. No. A prevailing employee is entitled to such affirmative action to abate the violation as the Secretary deems appropriate, including the rehiring or reinstatement of the employee with compensation. Whenever an order is issued to abate a violation, at the request of the applicant, a sum equal to the aggregate amount of all costs and expenses, including attorney's fees, determined to have been reasonably incurred by the applicant in connection with the institution and prosecution of such proceedings, will be assessed against the person who committed the violation. Adopted 1977. Title VII prohibits an employer from discriminating against any employee or applicant for employment because he or she has (1) opposed any practice made an unlawful employment practice by Title VII; or (2) made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing under Title VII. Title VII also prohibits such actions when committed by an employment agency or joint labor-management committee against an individual, or labor organization against a member or applicant for membership. A person alleging discrimination under Title VII's anti-retaliation provisions may file a charge with the Equal Employment Opportunity Commission (EEOC) within 180 days after the alleged unlawful employment practice occurred. Upon receipt of the charge, the EEOC will conduct an investigation. If the EEOC determines after the investigation that there is not reasonable cause to believe that the charge is true, it will dismiss the charge and notify the claimant and respondent of its action. If reasonable cause is found, the EEOC will attempt to eliminate the alleged unlawful employment practice by informal methods of conference, conciliation, and persuasion. The EEOC will make its determination as promptly as possible and, so far as practicable, no later than 120 days from the filing of the charge or, in specified circumstances, the date upon which the EEOC is authorized to take action with respect to the charge. If the EEOC is unable to secure from the respondent an acceptable conciliation agreement, it may bring a civil action against the respondent, so long as the respondent is not a government, governmental agency, or political subdivision. In cases involving such entities, the EEOC will refer the case to the Attorney General, who may bring a civil action in the appropriate federal district court. Yes. If the EEOC dismisses a charge, a civil action is not filed by the EEOC or the Attorney General, or if the EEOC has not entered into a conciliation agreement involving the aggrieved party, such person may file a civil action in any judicial district in the state in which the unlawful employment practice is alleged to have been committed, in the judicial district in which the relevant employment records are maintained or administered, or in the judicial district in which the person would have worked but for the alleged practice. If the respondent is not found in any of these districts, the action may be brought in the judicial district in which the respondent has its principal office. If a court finds that the respondent has intentionally engaged in or is intentionally engaging in an unlawful employment practice, it may enjoin the respondent from engaging in such practice and order such affirmative action as may be appropriate, including reinstatement or any other equitable relief. A reasonable attorney's fee, including litigation expenses and costs, may be awarded. Adopted 1964. Amended 1972. The TSCA prohibits an employer from discharging or otherwise discriminating against any employee with respect to compensation, terms, conditions, or privileges of employment because the employee has (1) commenced, caused to be commenced, or is about to commence or cause to be commenced a proceeding under the TSCA; (2) testified or is about to testify in any such proceeding; or (3) assisted or participated or is about to assist or participate in such a proceeding or in any other action to carry out the purposes of the TSCA. Any employee who believes that he or she has been discharged or otherwise discriminated against by any person in violation of the TSCA's anti-retaliation provisions may, within 30 days after such alleged violation occurs, file a complaint with the Secretary of Labor. Within 30 days of receiving the complaint, the Secretary will complete an investigation. Within 90 days of receiving the complaint, the Secretary will, unless the proceeding is terminated due to a settlement, issue an order either denying the complaint or providing for affirmative action to abate the violation, reinstatement with compensation, compensatory damages, and, where appropriate, exemplary damages. The order will be made on the record after notice and an opportunity for agency hearing. Any person adversely affected or aggrieved by the order may obtain review in the U.S. court of appeals for the circuit in which the violation allegedly occurred. A petition for review must be filed within 60 days from the issuance of the order. No. A prevailing employee is entitled to affirmative action to abate the violation, reinstatement with compensation, compensatory damages, and, where appropriate, exemplary damages. Whenever an order is issued, at the request of the applicant, a sum equal to the aggregate amount of all costs and expenses, including attorneys' fees, will be assessed against the person who committed the violation. Adopted 1976. USERRA prohibits an employer from discriminating or taking any adverse employment action against any person because such person has (1) taken an action to enforce a protection afforded by the statute; (2) testified or otherwise made a statement in or in connection with any proceeding under USERRA; (3) has assisted or otherwise participated in an investigation under USERRA; or (4) has exercised a right provided by USERRA. A person who claims to be entitled to employment or reemployment rights under USERRA may file a complaint with the Secretary of Labor, who will investigate the complaint. If the Secretary determines that the action alleged in the complaint occurred, he will attempt to resolve the complaint by making reasonable efforts to ensure compliance. If the Secretary's efforts do not resolve the complaint, he will notify the complainant of the results of the Secretary's investigation and the ability to have the request referred to the Attorney General, if the employer is a state or private employer, or the Office of Special Counsel, if the employer is a federal executive agency or the Office of Personnel Management (OPM). If the Attorney General is reasonably satisfied that the person on whose behalf the complaint is referred is entitled to relief, the Attorney General may appear on behalf of the person and commence an action. In an action against a state employer, the action will be brought in the name of the United States. If the Special Counsel is reasonably satisfied that the person on whose behalf the complaint is referred is entitled to relief, the Special Counsel, upon the request of the complainant, may appear on behalf of the person and initiate an action before the Merit Systems Protection Board. A person may submit directly a complaint against a federal executive agency or OPM to the Merit Systems Protection Board (MSPB) if that person has chosen not to apply to the Secretary for assistance, has received notification from the Secretary, has chosen not be represented by the Special Counsel, or has received notification of a decision from the Special Counsel declining to initiate an action and represent the person before the MSPB. If the MSPB determines that a federal executive agency or OPM has not complied with USERRA's employment or reemployment provisions, it will enter an order requiring the agency of OPM to comply with such provisions and to compensate the complainant for lost wages or benefits. A person adversely affected or aggrieved by a final MSPB order or decision may petition the U.S. Court of Appeals for the Federal Circuit for review. Yes. A person may commence an action with respect to a complaint against a state or private employer if the person has chosen not to apply to the Secretary for assistance, has chosen not to request referral of the complaint to the Attorney General, or has been refused representation by the Attorney General. In the case of an action against a state employer, the action may be brought in a state court of competent jurisdiction. In the case of an action against a private employer, the action may be brought in the federal district court for any district in which the employer maintains a place of business. A person who prevails in a claim against a state or private employer may be awarded lost wages or benefits. If a court determines that the employer's failure to comply with USERRA's employment and reemployment provisions was willful, it may require the employer to pay an equal amount as liquidated damages. In addition, the court will use, where it finds appropriate, its full equity powers, including temporary or permanent injunctions, temporary restraining orders, and contempt orders. Adopted 1994. Amended 1998. See P.L. 105-368 , § 211, 112 Stat. 3329 (1998). Sponsor: Representative Bob Stump Cosponsors: 18 House: Resolving differences - House agreed to Senate amendment with amendments pursuant to H.Res. 592 . Senate: Resolving differences - Senate agreed to the House amendments to Senate amendment by Unanimous Consent. Amended 2008. See P.L. 110-389 , § 311, 122 Stat. 4162 (2008). Sponsor: Senator Daniel K. Akaka Cosponsors: 1 House: On motion to suspend the rules and pass the bill, as amended Agreed to by voice vote. Senate: Resolving differences - Senate agreed to the House amendment to the bill by Unanimous Consent. AIR21 prohibits an air carrier, or a contractor or subcontractor of an air carrier, from discharging or otherwise discriminating again an employee because he or she (1) provided, caused to be provided, or is about to provide or cause to be provided to the employer or the federal government information related to a violation or alleged violation of an order, regulation, or standard of the Federal Aviation Administration (FAA) or any other provision of federal law involving air carrier safety; (2) filed, caused to be filed, or is about to file or cause to be filed a proceeding related to a violation or alleged violation of any order, regulation, or standard of the FAA or any other provision of federal law involving air carrier safety; (3) testified or is about to testify in such a proceeding; or (4) assisted or participated in, or is about to assist or participate in such a proceeding. A person who believes that he or she has been discharged or otherwise discriminated against in violation of AIR21's anti-retaliation provisions may file a complaint with the Secretary of Labor no later than 90 days after the date on which the violation occurs. Within 60 days of receiving the complaint, the Secretary will conduct an investigation and determine whether there is reasonable cause to believe that the complaint has merit. If the Secretary concludes that there is reasonable cause to believe that a violation has occurred, he will accompany the findings with a preliminary order that provides for affirmative action to abate the violation, reinstatement with back pay, and compensatory damages. The parties may object to the findings or order, and request a hearing within 30 days of the date of notification of the findings. If a hearing is not requested within the 30-day period, the preliminary order will be deemed a final order that is not subject to judicial review. If a hearing is requested, the Secretary will issue a final order no later than 120 days after the date of the hearing. Any person adversely affected or aggrieved by the Secretary's final order may obtain review of the order in the U.S. Court of Appeals for the circuit in which the violation allegedly occurred or the circuit in which the complainant resided on the date of the violation. The petition for review must be filed no later than 60 days after the date of issuance of the final order. No. A prevailing employee is entitled to affirmative action to abate the violation, reinstatement with back pay, and compensatory damages. Adopted 2000. Generally, the WPA provides protections for many federal employees who make disclosures evidencing illegal or improper government activities. In order to trigger the protections of the WPA, a case must contain the following elements: a "personnel action" that was taken because of a "protected disclosure" made by a "covered employee." Within 240 days of receipt of a complaint, the Office of Special Counsel (OSC) must make a determination as to whether there are reasonable grounds to believe that a prohibited personnel practice has occurred, exists, or is to be taken. If a positive determination is made and the information was sent to the Special Counsel by an employee, former employee, applicant for employment, or an employee who obtained the information acting within the scope of employment, the Special Counsel must transmit the information to the appropriate agency head and require that the agency head conduct an investigation and submit a written report. The identity of the complaining employee may not be disclosed without such individual's consent, unless the Special Counsel determines that disclosure is necessary to avoid imminent danger to health and safety or an imminent criminal violation. The Special Counsel then reviews the reports as to their completeness and the reasonableness of the findings and submits the reports to Congress, the President, the Comptroller General, and the complainant. If the Special Counsel does not make a positive determination, however, he or she may only transmit the information to the agency head with the consent of the individual. Further, if the Special Counsel receives the information from some source other than the ones described above, he or she may transmit the information to the appropriate agency head, who shall inform the Special Counsel of any action taken. In any case where the subject of the whistleblowing disclosure evidences a criminal violation, however, all information is referred to the Attorney General and no report is transmitted to the complainant. At least every 60 days throughout its investigation, the OSC must give notice of the status of the investigation to the individual who brought the allegation. In addition, no later than 10 days before the termination of an investigation, a written status report including the proposed findings and legal conclusions must be made to the individual who made the allegation of wrongdoing. Yes. The WPA provides that an employee, former employee, or applicant for employment has the independent right to seek review of whistleblower reprisal cases by the MSPB no more than 60 days after notification is provided to such employee that the investigation was closed or 120 days after filing a complaint with the OSC. If in any investigation the Special Counsel determines that there are "reasonable grounds to believe" a prohibited personnel practice exists or has occurred, the Special Counsel must report findings and recommendations, and may include recommendations for corrective action, to the Merit Systems Protection Board (MSPB), the agency involved, the Office of Personnel Management (OPM) and, optionally, to the President. If the agency does not act to correct the prohibited personnel practice, the Special Counsel may petition the MSPB for corrective action. The MSPB, before rendering its decision, is required to provide an opportunity for oral or written comments by the Special Counsel, the agency involved, and the OPM, and for written comments by any individual who alleges to be the victim of the prohibited personnel practices. Proceedings for disciplinary action against an officer or employee who commits a prohibited personnel practice may be instituted by the Special Counsel by filing a written complaint with the MSPB. After proceedings before the MSPB or an administrative law judge, if violations are found, the MSPB may impose (i) disciplinary action consisting of removal, reduction in grade, debarment from Federal employment for a period not to exceed five years, suspension, or reprimand; (ii) an assessment of a civil penalty not to exceed $ 1,000; or (iii) any combination of disciplinary actions described under clause (i) and an assessment described under clause (ii). In addition, the agency where the prevailing party was employed or had applied for employment may be held responsible for reasonable attorney's fees. In the case of presidentially appointed and Senate confirmed employees in "confidential, policy-making, policy-determining, or policy-advocating" positions, the complaint and the statement of facts, along with any response from the employee, are to be presented to the President for disposition in lieu of the presentation to the Board. Adopted 1989. Amended 1994, 2012. See P.L. 112-199 , §§ 101(a), (b)(1)(B), (2)(B), (C), 102-104(b)(1), 105, 112, 126 Stat. 1465 (2012). Sponsor: Senator Daniel K. Akaka Cosponsors: 14 House: On passage Passed without objection Senate: Resolving differences - Senate agreed to House amendment to the bill ( S. 743 ) by Unanimous Consent. | This report provides an overview of federal whistleblower and anti-retaliation laws. In general, these laws protect employees who report misconduct by their employers or who engage in various protected activities, such as participating in an investigation or filing a complaint. In recent years, Congress has expanded employee protections for a variety of private-sector workers. Eleven of the forty laws reviewed in this report were enacted after 1999. Among these laws are the Sarbanes-Oxley Act, the FDA Food Safety Modernization Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act. The report focuses on key aspects of the federal whistleblower and anti-retaliation laws. For each law, the report summarizes the activities that are protected, how the law's protections are enforced, whether the law provides a private right of action, the remedies prescribed by the law, and the year the law's whistleblower or anti-retaliation provisions were adopted and amended. With regard to amendment dates, the report identifies only dates associated with substantive amendments. For enactments after 2001, the report provides information on congressional sponsorship and votes. |
In the 1970s, a series of lawsuits began challenging the funding disparities among school districts within the states. Schools in the U.S., which typically receive some federal and state financial assistance, generally derive a substantial percentage of their funding from local property taxes, which, at least in the early days of education finance litigation, generated significantly different levels of funding depending on how much the property in a given district was worth. Spurred by concerns that such disparities discriminated against students in poor school districts or resulted in an inadequate education, school finance plaintiffs began filing lawsuits in federal and state courts based on theories involving educational equity or adequacy. In the most prominent federal case on school financing, San Antonio Independent School District v. Rodriguez , the Supreme Court rejected a legal challenge to Texas's system of public financing for its elementary and secondary schools, holding that the state finance system did not violate equal protection or interfere with a fundamental right. Ultimately, the Rodriguez case, which clarified that school funding disparities were not a federal issue, foreclosed school finance claims based on the U.S. Constitution and prompted plaintiffs to file lawsuits based on state constitutional claims, thereby transforming education finance litigation into an issue of state law. This report discusses the Rodriguez case and the resulting flurry of state education finance litigation, including the dominant legal theories of equity and adequacy and the leading cases in each of these areas. In Rodriguez , the original plaintiffs in the case challenged the Texas state system of public financing for elementary and secondary schools, which they claimed to be a violation of the Equal Protection Clause of the Fourteenth Amendment because funding under the system, which was based on local property taxes, discriminated against students in less affluent school districts and interfered with the students' fundamental right to education. The Supreme Court rejected both of these arguments, holding that the state finance system did not violate equal protection or interfere with a fundamental right. Under the Supreme Court's equal protection jurisprudence, "the general rule is that legislation is presumed to be valid and will be sustained if the classification drawn by the statute is rationally related to a legitimate state interest," although laws that are based on suspect classifications such as race or gender or that interfere with a fundamental right typically receive heightened scrutiny and require a stronger, if not compelling, state interest to justify the classification or infringement. The Rodriguez Court, however, concluded that the Texas financing system did not discriminate against any definable category of poor people or result in the absolute deprivation of education and therefore held that there was no impermissible classification based on wealth and no discrimination against a suspect class. Likewise, the Court found that the Constitution did not explicitly or implicitly guarantee a right to education and that there was no evidence that the Texas financing system resulted in an education so inadequate that it interfered with the ability to exercise other fundamental constitutional rights. The Court's holding that there was no discrimination against a suspect class and no interference with a fundamental right was important because it determined the degree of judicial scrutiny that the Texas financing system received. Had the Court found a violation of equal protection or infringement of a fundamental right, then the Texas school funding system would have been subject to strict scrutiny and the state would have been required to offer a compelling state interest as justification for the system. In the absence of such a finding, however, the Texas financing system was subject to rational basis review. Under that standard, the Court upheld the state funding system as rationally related to the legitimate state interest of maintaining local control over matters involving education and taxation. As noted above, the Rodriguez case foreclosed school finance claims based on the federal constitution and prompted plaintiffs to file lawsuits based on state constitutional claims instead, thereby transforming education finance litigation into an issue of state law. This section discusses the two major legal theories involved in state education finance litigation—equity and adequacy—as well as leading cases in these areas. Initially, litigants in school finance cases focused on the issue of equity. Arguing that the funding disparities among school districts were inequitable, the plaintiffs in these cases contended that such inequities were unconstitutional and should be remedied by equalizing funding among all school districts. Although the U.S. Supreme Court had rejected arguments based on the Equal Protection Clause of the U.S. Constitution, advocates for school financing reform typically based their new legal claims on equal protection provisions found within the constitutions of individual states. For example, in Serrano v. Priest , which is the most prominent example of an equity-based education finance claim, the Supreme Court of California held that the state finance system for public schools violated the equal protection provisions in the California constitution because "discrimination in educational opportunity on the basis of district wealth involves a suspect classification, and ... education is a fundamental interest." Although an equity-based litigation strategy was effective in some of the early cases: [The] difficulties of actually achieving equal educational opportunity through the fiscal neutrality principle, as well as political resistance to judicial attempts to enforce court orders in the initial fiscal equity cases, seem to have dissuaded other state courts from venturing down this path. Despite an initial flurry of pro-plaintiff decisions in the mid-1970s, by the mid-1980's, the pendulum had decisively swung the other way: plaintiffs won only two decisions in the early '80s, and, as of 1988 ... 15 of the State Supreme Courts had denied any relief to the plaintiffs ... compared to the seven states in which plaintiffs had prevailed. In part, this shift may have occurred because state courts and legislatures experienced implementation difficulties when attempting to equalize funding among school districts and because court decisions that required equal resources did not necessarily ensure equal or adequate educational opportunities. As a result of this diminished success with equity-based claims, plaintiffs in school financing cases began bringing school finance claims based on adequacy theories instead. Although state courts continued to analyze education finance cases in terms of equal protection, the courts gradually began to examine other considerations, notably arguments regarding educational adequacy. Specifically, rather than rely on the argument that school funding disparities were a violation of equal protection, some plaintiffs began arguing that inadequate funding levels resulted in a violation of state constitutional provisions that guaranteed an adequate education. Most of these claims were based on provisions found in virtually all state constitutions that require states to establish a system of free public schools and provide students with a "thorough," "efficient," or "adequate" education. For example, in the early case Robinson v. Cahill , the Supreme Court of New Jersey interpreted a state constitutional provision that required the legislature to provide for "a thorough and efficient system of free public schools," and the court concluded that "we do not doubt than an equal educational opportunity for children was precisely in mind" and "the obligation is the State's to rectify." As a result, the court ruled that the New Jersey school finance system was unconstitutional but left it to the legislature to devise a solution that would compel localities to provide equal educational opportunities to their students. In another significant adequacy case, Rose v. Council for Better Education , the Supreme Court of Kentucky evaluated the claim that the state education financing scheme was inadequate and therefore a violation of a state constitutional provision that requires the legislature to "provide for an efficient system of common schools." The court not only found such a violation, but held that "Kentucky's entire system of common schools is unconstitutional" because the entire system is "underfunded and inadequate" and "fraught with inequalities and inequities." The court then held that every child "must be provided with an equal opportunity to have an adequate education" and set forth educational standards to define what constitutes an adequate education. Currently, state education finance litigation typically involves adequacy-based claims. As one commentator notes, "Adequacy has become the predominant theme of the recent wave of state court decisions because the adequacy approach resolves many of the legal problems that had arisen in the early fiscal equity cases and because it provides the courts judicially manageable standards for implementing effective remedies." Regardless of whether such lawsuits involve equity or adequacy theories, education finance litigation has thus far been brought in 45 out of 50 states. | Over the past several decades, a series of lawsuits have challenged funding disparities that exist among school districts within the states. Spurred by concerns that such disparities discriminated against students in poor school districts or resulted in an inadequate education, school finance plaintiffs began filing lawsuits in federal and state courts based on theories involving educational equity or adequacy. This report provides an analysis of litigation regarding school financing, including an overview of the legal issues involved in such litigation and a description of the leading school finance cases at both the federal and state level. |
As part of the conflict with the Taliban and Al Qaeda, the United States has captured and detained numerous persons believed to have been part of or associated with enemy forces. Over the years, federal courts have considered a multitude of petitions by or on behalf of suspected belligerents challenging aspects of U.S. detention policy. The Supreme Court has issued definitive rulings concerning several legal issues raised in the conflict with Al Qaeda and the Taliban, including executive authority under the 2001 Authorization for Use of Military Force ("AUMF," P.L. 107-40 ) to detain properly designated enemy belligerents captured on the Afghan battlefield; the application of at least some provisions of the 1949 Geneva Conventions to the conflict with Al Qaeda; and the ability of detainees held in the United States or at the U.S. Naval Station in Guantanamo Bay, Cuba, to challenge the legality of their detention in habeas corpus proceedings. In December 2011, Congress passed the National Defense Authorization Act for FY2012 ("2012 NDAA," P.L. 112-81 ), which contains a provision largely intended to codify the present understanding of the detention authority conferred by the AUMF, as interpreted and applied by the Executive and the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit). The full implications of the 2012 NDAA upon judicial activity concerning wartime detention remains to be seen. In any event, the act does not address many of the legal issues involving wartime detention which, while occasioning significant political debate, have not been squarely resolved by the Supreme Court. These issues include the full scope of the Executive's detention authority, including the circumstances in which U.S. citizens may be detained as enemy belligerents; the degree to which noncitizens held at Guantanamo and other locations outside the United States are entitled to protections under the Constitution; the authority of federal habeas courts to compel the release into the United States of detainees determined to be unlawfully held if the Executive cannot effectuate their release to another country; and the ability of detainees to receive advance notice and challenge their proposed transfer to a foreign country. Additionally, the Supreme Court may be called upon to determine the nature of procedural rules to be applied in habeas cases and the proper standard of evidence to be applied. To the extent that these rules are found to differ from the Federal Rules of Civil Procedure and other court rules, it may be necessary to determine whether the same procedural rules apply to both U.S. citizens and foreign nationals who may be detained under the AUMF authority. This report briefly summarizes major judicial opinions concerning suspected enemy belligerents detained in the conflict with Al Qaeda and the Taliban. It discusses all Supreme Court decisions concerning enemy combatants. It also addresses notable appeals court opinions addressing issues of ongoing relevance to U.S. detention policy. The report also discusses a few notable decisions by federal district courts, including criminal cases involving persons who were either involved in the 9/11 attacks or were captured abroad by U.S. forces or allies during operations against Al Qaeda and the Taliban. It also addresses some federal appellate reviews of matters involving military commissions. Many of the rulings discussed in this report are discussed in greater detail in other CRS products, including CRS Report RL33180, Enemy Combatant Detainees: Habeas Corpus Challenges in Federal Court , by [author name scrubbed] and [author name scrubbed]; CRS Report RL34536, Boumediene v. Bush: Guantanamo Detainees' Right to Habeas Corpus , by [author name scrubbed]; CRS Report RS21884, The Supreme Court 2003 Term: Summary and Analysis of Opinions Related to Detainees in the War on Terrorism , by [author name scrubbed]; and CRS Report R42337, Detention of U.S. Persons as Enemy Belligerents , by [author name scrubbed]. Since 2004, the Supreme Court has made several rulings concerning enemy combatants. These have addressed, inter alia , the Executive's authority to detain enemy belligerents under the 2001 AUMF; the legality of military commissions established by presidential order to try suspected belligerents for violations of the law of war; and detainees' access to federal courts. The Hamdi case addressed the President's authority to detain "enemy combatants" as part of the conflict authorized by the AUMF, and whether a detained individual could seek independent review of the legality of his detention. Four separate opinions were written, with none receiving support of a majority of the Justices. However, a majority of the Court recognized that, as a necessary incident to the 2001 AUMF, the President is authorized to detain persons captured while fighting U.S. forces in Afghanistan (including U.S. citizens), and potentially hold such persons for the duration of the conflict to prevent their return to hostilities. A divided Court found that persons deemed "enemy combatants" have the right to challenge the legality of their detention before a judge or other "neutral decision-maker," with a majority of the Justices clearly recognizing the existence of such a right in the case of a detained U.S. citizen. In a plurality opinion joined by three other Justices, Justice O'Connor wrote that a citizen detained as an enemy combatant must receive notice of the factual basis for his classification and a fair opportunity to rebut the government's factual assertions before a neutral decision-maker, and has a right to counsel in connection with such a hearing. The plurality suggested, however, that the exigencies of the circumstances of a detainee's capture may allow for a tailoring of enemy combatant proceedings "to alleviate their uncommon potential to burden the Executive at a time of ongoing military conflict," possibly allowing hearsay evidence and "a presumption in favor of the Government's evidence," as long as a fair opportunity to rebut such evidence is provided. The Padilla case, decided on the same day as Hamdi , concerned a habeas challenge by Jose Padilla, a U.S. citizen who was designated as an "enemy combatant" and militarily detained in the United States for his alleged involvement in an Al Qaeda plot to detonate a "dirty bomb." Unlike the petitioner in Hamdi , who was captured in the Afghan zone of combat, Padilla was captured on U.S. soil. In a 5-4 ruling, the Court remanded the case without deciding the merits on the ground that Padilla's habeas petition had not been filed in the proper venue. In doing so, the majority did not reach the merits of Padilla's claim that any authority the President might have under the AUMF to detain "enemy combatants" did not extend to persons captured on American soil and away from the Afghan battlefield. Four Justices would have found jurisdiction based on the "exceptional circumstances" of the case and affirmed the holding below that detention is prohibited under the Non-Detention Act, 18 U.S.C. §4001(a) (prohibiting the detention of U.S. citizens unless authorized by an act of Congress). Padilla filed a new petition in the Fourth Circuit, and the appellate court considered the legality of his detention in Padilla v. Haft , discussed infra . In Rasul v. Bush , the Court held in a 6-3 ruling that the federal habeas corpus statute, 28 U.S.C. §2241, provided federal courts with jurisdiction to consider habeas corpus petitions by or on behalf of persons detained at the U.S. Naval Station in Guantanamo Bay, Cuba. Having found that Guantanamo detainees were entitled by statute to seek habeas review of their detention, the Court did not reach the issue of whether the constitutional writ of habeas also extended to noncitizens held at Guantanamo. The Court also did not address whether a less rigorous burden of proof or relaxed evidentiary procedures would be appropriate in comparison to ordinary habeas cases. Congress subsequently attempted to limit the reach of the federal habeas statute to Guantanamo detainees through the enactment of the Detainee Treatment Act of 2005 (DTA) and the Military Commissions Act of 2006 (MCA). In Hamdan v. Rumsfeld , the Supreme Court reviewed the validity of military tribunals established pursuant to presidential order to try suspected terrorists for violations of the law of war. The petitioner Hamdan was charged with conspiracy to commit a violation of the law of war. Prior to reaching the merits of the case, the Hamdan Court first had to determine whether the DTA stripped it of jurisdiction to review habeas corpus challenges by or on behalf of Guantanamo detainees whose petitions had already been filed prior to enactment of the DTA. In a 5-3 opinion, the Court held that the DTA did not apply to such petitions. Turning to the merits of the case, the majority held that the convened tribunals did not comply with the Uniform Code of Military Justice (UCMJ) or the law of war, as incorporated in the UCMJ and embodied in the 1949 Geneva Conventions, which the Court held applicable to the armed conflict with Al Qaeda. The Court concluded that, at a minimum, Common Article 3 of the Geneva Conventions applies to persons captured in the conflict with Al Qaeda, according to them a minimum baseline of protections, including protection from the "passing of sentences and the carrying out of executions without previous judgment pronounced by a regularly constituted court, affording all the judicial guarantees which are recognized as indispensable by civilized peoples." The Court held that military commissions were not "regularly constituted" because they deviated too far from the rules that apply to courts-martial, without a satisfactory explanation of the need for departing from such rules. In particular, the Court noted that the commission rules allowing the exclusion of the defendant from attending portions of his trial or hearing some of the evidence against him deviated substantially from court-martial procedures. A four-Justice plurality of the Court also recognized that for an act to be triable under the common law of war, the precedent for it being treated as an offense must be "plain and unambiguous." After examining the history of military commission practice in the United States and internationally, the plurality further concluded that conspiracy to violate the law of war was not in itself a crime under the common law of war or the UCMJ. In the aftermath of the Hamdan decision, Congress enacted the MCA, which, inter alia , expressly eliminated court jurisdiction over all pending and future causes of action other than via the limited review permitted under the DTA. In the 2008 case of Boumediene v. Bush , the Court ruled in a 5-4 opinion that the constitutional privilege of habeas extends to Guantanamo detainees. In doing so, the Court stated that the Constitution's extraterritorial application turns on "objective factors and practical concerns." The Court deemed at least three factors to be relevant in assessing the extraterritorial scope of the constitutional writ of habeas: (1) the citizenship and status of the detainee and the adequacy of the status determination process; (2) the nature of the site where the person is seized and detained; and (3) practical obstacles inherent in resolving the prisoner's entitlement to the writ. The Court also found that MCA §7, which limited judicial review of executive determinations of the Boumediene petitioners' enemy combatant status to that authorized by the DTA, did not provide an adequate habeas substitute and therefore acted as an unconstitutional suspension of the writ of habeas corpus. The majority listed a number of potential constitutional infirmities in the DTA review process, including the absence of provisions (1) empowering a reviewing court to order the release of a detainee found to be unlawfully held; (2) permitting petitioners to challenge the President's authority to detain them indefinitely; (3) enabling a presiding court to review or correct administrative findings of fact which formed the legal basis for an individual's detention; and (4) permitting the detainee to present exculpatory evidence discovered after the conclusion of administrative proceedings. Although the Boumediene Court held that the constitutional writ of habeas extends to noncitizens held at Guantanamo, it did not opine as to the scope of habeas review available to detainees, the remedy available for those persons found to be unlawfully held by the United States, or the extent to which other constitutional provisions extend to noncitizens held at Guantanamo and elsewhere. Prior to the Supreme Court's decision in Boumediene , the D.C. Circuit considered a number of challenges brought under the DTA in which detainees contested determinations by Combatant Status Review Tribunals (CSRTs) that they were properly detained as enemy combatants. In 2008, the government petitioned the Supreme Court to review two rulings by the D.C. Circuit regarding the scope of judicial review of CSRT determinations. The Supreme Court granted certiorari and vacated the appellate court's decisions, remanding for reconsideration in light of the Supreme Court's decision in Boumediene . Upon remand, the D.C. Circuit reinstated without explanation its decisions, presumably because it did not find the Boumediene ruling to conflict with its decisions in these cases. In December 2008, the Supreme Court granted certiorari to review an en banc ruling by the U.S. Court of Appeals for the Fourth Circuit (Fourth Circuit) regarding petitioner al-Marri, an alien lawfully admitted into the United States on a student visa who had been arrested by civilian law enforcement and thereafter transferred to military custody for detention as an enemy combatant. At the time, the Court's decision to review the Fourth Circuit's ruling was thought to have potentially set the stage for a definitive pronouncement regarding the President's authority to militarily detain terrorist suspects apprehended away from the Afghan battlefield. However, before the Court could consider the merits of the case, the government requested that the Court authorize al-Marri's release from military custody and transfer to civilian authorities to face criminal charges. The Court granted the government's request, vacated the appellate court's earlier judgment, and transferred the case back to the lower court with orders to dismiss it as moot. The appellate court's ruling is discussed in more detail below. In October 2009, the Supreme Court agreed to review a ruling by a three-judge panel of the D.C. Circuit in the case of Kiyemba v. Obama , discussed infra . The Kiyemba case involved several Guantanamo detainees who, despite no longer being considered enemy combatants and having been cleared for release, had not been transferred from Guantanamo on account of the government being unable to effectuate their release to a foreign country. The Kiyemba petitioners sought reversal of a D.C. Circuit ruling finding that a federal habeas court lacked the authority to compel the Executive to release the detainees into the United States. Following the Supreme Court's grant of certiorari, however, several Kiyemba petitioners were resettled in foreign countries, and the United States was able to find countries willing to settle the remaining petitioners, although five petitioners rejected these countries' offers for resettlement. On March 1, 2010, the Supreme Court vacated the appellate court's opinion and remanded the case in light of these developments. Because the Supreme Court had granted certiorari on the understanding that no remedy was available for the petitioners other than release into the United States, it returned the case to the D.C. Circuit to review the ramifications of the new circumstances. Discussion of subsequent action taken by the D.C. Circuit, as well as by the Supreme Court with respect to another petition for certiorari by the Kiyemba petitioners, is found below. Following the Supreme Court's remand of the Kiyemba case back to the D.C. Circuit, the circuit panel reinstated its opinion with slight modifications. The Kiyemba petitioners once again sought Supreme Court review of the circuit court's ruling that federal habeas courts lacked authority to compel the petitioners' release into the United States. On April 18, 2011, the Supreme Court denied their request for review. Eight Supreme Court Justices took part in the decision, with Justice Kagan recusing herself. In joining the opinion, Justice Breyer issued a statement joined by Justices Kennedy, Ginsburg, and Sotomayor, which emphasized that the issue that had initially been presented when the Kiyemba petitioners first sought review by the Supreme Court was "whether a district court may order the release of an unlawfully held prisoner into the United States where no other remedy is available ." Because the government had received offers of resettlement for the petitioners, the petitioners had not proffered or alleged evidence that they would face torture or other harm, and the government continued to seek plaintiffs' resettlement, Justice Breyer found "no Government-imposed obstacle to petitioners' timely release and appropriate resettlement." However, Justice Breyer stated that should these circumstances materially change, the petitioners "may of course raise their original issue (or related issues) again in the lower courts and in this Court." Most judicial activity concerning U.S. detention policy in the conflict with Al Qaeda has occurred within the D.C. Circuit. Following the Supreme Court's ruling in Boumediene that the constitutional writ of habeas corpus extends to detainees held at Guantanamo, over 200 habeas petitions were filed by detainees in the U.S. District Court for the District of Columbia. Courts considering habeas claims have sometimes reached differing conclusions regarding the scope of the Executive's detention authority; the admissibility of hearsay evidence and involuntary statements made by detainees; the appropriate methodology for assessing the sufficiency and reliability of evidence proffered by the government to justify the legality of a habeas petitioner's detention; and the remedy available for those persons whom a habeas court determines to have been unlawfully detained. Decisions by the D.C. Circuit have generally been favorable to the legal positions advanced by the government. Since 2009, the appellate court has issued rulings concluding, among other things, that the Executive may lawfully detain persons who are "part of" Al Qaeda, the Taliban, and affiliated groups, and possibly also persons who provide a sufficient degree of support to such entities in their hostilities against the United States and its allies ( Al-Bihani v. Obama ); a functional approach is appropriate when assessing whether a person is "part of" Al Qaeda, meaning that judges should consider the significance of a person's activities in relation to the organization, rather than requiring formal proof of membership, such as evidence the petitioner received orders from the organization's hierarchy ( Awad v. Obama , Bensayah v. Obama , Salahi v. Obama ); the government may satisfy its evidentiary burden in support of a person's detention when its factual claims are supported by a preponderance of evidence ( Al-Bihani v. Obama , Al Odah v. United States ), but a lower standard might be constitutionally permissible ( Al-Adahi v. Obama, Almerfedi v. Obama ); it is proper for a habeas court to assess the cumulative weight and effect of proffered evidence according to a "conditional probability analysis" when determining whether the government has demonstrated factual grounds for detaining a habeas petitioner ( Al-Adahi v. Obama , Salahi v. Obama ); consideration of hearsay evidence in habeas cases is not determined by the Federal Rules of Evidence ( Al Odah v. United States , Al-Madhwani v. Obama ); official government records, including government intelligence reports, are entitled to a presumption of regularity in Guantanamo habeas litigation ( Latif v. Obama ); the writ of habeas affords Guantanamo detainees with a limited right to challenge their proposed transfer to the custody of a foreign government ( Kiyemba II ) as well as matters related to their conditions of confinement ( Aamer v. Obama , Hatim v. Obama ); habeas courts lack authority, absent an authorizing statute, to compel the Executive to release non-citizen detainees into the United States, even if such persons have been determined by the court to be unlawfully detained ( Kiyemba I and III ); it is unlikely that noncitizens who have been transferred to foreign custody may seek judicial review of their designation as enemy combatants by the U.S. government ( Gul v. Obama ); and the constitutional writ of habeas does not presently extend to noncitizen detainees held at U.S.-operated facilities in Afghanistan ( Maqaleh v. Gates ). In some of these cases, affected detainees have requested Supreme Court review. Several of these requests have been denied. It remains to be seen whether the Supreme Court will ultimately agree to review any of the D.C. Circuit's decisions, or whether the appellate court's rulings will remain controlling for the foreseeable future. The following section discusses major rulings made by the D.C. Circuit regarding persons designated as enemy combatants that involve matters of continuing relevance to U.S. detention policy. It does not discuss those rulings that were subsequently overruled by the Supreme Court on the merits. The D.C. Circuit has issued several opinions relating to the scope of the Executive's authority to detain persons as part of the conflict with Al Qaeda, the Taliban, and associated forces. These opinions have also addressed the issues related to the sufficiency and reliability of evidence proffered by the government in support of its factual claims. In January 2010, a three-judge panel of the D.C. Circuit issued a ruling concerning the scope of the government's detention authority under the AUMF in the case of Al-Bihani v. Obama . In an opinion supported in full by two members of the panel, the appellate court recognized that, at a minimum, the President was authorized to detain persons who were subject to the jurisdiction of military commissions established pursuant to the Military Commissions Acts of 2006 and 2009; namely, any person who was "part of forces associated with Al Qaeda or the Taliban," along with "those who purposefully and materially support such forces in hostilities against U.S. Coalition partners." While the panel concluded that either purposeful and material support for an AUMF-targeted organization in hostilities against the United States or membership in such an organization may be independently sufficient to justify detention, the court declined "to explore the outer bounds of what constitutes sufficient support or indicia of membership to meet the detention standard." It did, however, note that this standard would permit the detention of a "civilian contractor" who "purposefully and materially supported" an AUMF-targeted organization through "traditional food operations essential to a fighting force and the carrying of arms." Notwithstanding the government's reliance on the law of war to interpret the scope of the AUMF and arguably in conflict with Supreme Court discussion of the issue in Hamdi , the panel rejected the idea that the international law of war has any relevance to the courts' interpretation of the scope of the detention power conferred by the AUMF. The panel also held that the procedural protections afforded in habeas cases involving wartime detainees do not need to mirror those provided to persons in the traditional criminal law context, where evidence must demonstrate guilt beyond reasonable doubt, or the lesser procedures courts have used in any specific habeas context. The panel stated: [C]ourts are neither bound by the procedural limits created for other detention contexts nor obliged to use them as baselines from which any departures must be justified. Detention of aliens outside the sovereign territory of the United States during wartime is a different and peculiar circumstance, and the appropriate habeas procedures cannot be conceived of as mere extensions of an existing doctrine. Rather, those procedures are a whole new branch of the tree. In the context of military detention of enemy belligerents, the court found, the government need only support its authority to detain using a "preponderance of evidence" standard. The court rejected the petitioner's argument, based on his reading of Hamdi , that any relaxation of procedural standards must be justified by the particular exigencies of the case. The court established the hearsay rule for detainee habeas cases, at least those brought by aliens abroad : [T]he question a habeas court must ask when presented with hearsay is not whether it is admissible—it is always admissible—but what probative weight to ascribe to whatever indicia of reliability it exhibits. The D.C. Circuit thereafter denied a petition for an en banc rehearing of the Al-Bihani case. However, a concurring opinion joined by a majority of the active appellate court judges characterized certain aspects of the panel's decision, concerning the application of international law of war principles in interpreting the AUMF, to be non-binding dicta. It did not address whether any portions of the Al-Bihani ruling concerning the lawfulness of detaining persons on account of membership or support for Al Qaeda, the Taliban, or associated forces also constituted non-binding dicta. However, circuit court decisions since Al-Bihani have appeared to construe the AUMF as authorizing the Executive to detain persons who are "part of" organizations targeted by the AUMF as well as those who provide support to such entities. Moreover, the 2012 NDAA expressly authorizes the detention of persons who have "substantially supported al-Qaeda, the Taliban, or associated forces that are engaged in hostilities against the United States or its coalition partners, including any person who has … directly supported such hostilities in aid of such enemy forces." In any event, in litigation following Al-Bihani involving Guantanamo detainees, the Obama Administration has not justified its detention claims solely on the grounds that a particular detainee provided support to Al Qaeda or the Taliban. Instead, its legal justification for holding persons on account of wartime activity has been that they were at least functionally "part of" Al Qaeda, the Taliban, or an associated force at the time of capture. The Supreme Court denied a petition to review the Al-Bihani decision. The case should not be confused with a similarly named case involving the petitioner's brother. The habeas petitioner in that case also sought Supreme Court review of the denial of his habeas petition, but the Court declined to hear the case. In Al-Adahi , a three-judge panel of the D.C. Circuit endorsed the use of "conditional probability analysis" by habeas courts when considering the sufficiency and reliability of evidence proffered by the government in support of its claim that a person is lawfully detained under the AUMF. The case involved review of a district court decision granting a habeas petition by a Guantanamo detainee who the government claimed was "part of" Al Qaeda, following its determination that the government had failed to demonstrate its claim by a preponderance of evidence. On appeal, the D.C. Circuit panel assumed arguendo that the government was required to show by a preponderance of evidence that the petitioner was lawfully detained under the AUMF, but suggested that reliance on this standard may not be constitutionally required. It next turned to the district court's analysis of evidence proffered by the government in support of its detention of petitioner, and concluded that the lower court "clearly erred in its treatment of the evidence" and its application of the preponderance of evidence standard. Examining the record, the circuit panel held that the lower court erred by separately considering the sufficiency of each item of evidence proffered by the government, and finding that the government failed to meet its evidentiary burden because no individual piece of evidence provided sufficient grounds to justify the petitioner's detention. The circuit panel was also critical of the lower court for failing to make any findings regarding the petitioner's "implausible" and inconsistent explanations for some of his activities, stating that it is a "well-settled principle that false exculpatory statements are evidence—often strong evidence—of guilt." According to the circuit panel, "conditional probability analysis" is appropriate for assessing whether a person's detention under the AUMF is supported by the preponderance of the evidence. Using this framework, a habeas court must consider the cumulative weight and effect of proffered evidence when assessing whether the government has satisfied its evidentiary burden. In describing "conditional probability analysis" and its implications for the assessment of the evidence in the case before it, the Al-Adahi panel wrote: "Many mundane mistakes in reasoning can be traced to a shaky grasp of the notion of conditional probability." John Allen Paulos, Innumeracy: Mathematical Illiteracy and Its Consequences 63 (1988). The key consideration is that although some events are independent (coin flips, for example), other events are dependent: "the occurrence of one of them makes the occurrence of the other more or less likely.... " John Allen Paulos, Beyond Numeracy: Ruminations of a Numbers Man 189 (1991). Dr. Paulos gives this example: "the probability that a person chosen at random from the phone book is over 250 pounds is quite small. However, if it's known that the person chosen is over six feet four inches tall, then the conditional probability that he or she also weighs more than 250 pounds is considerably higher." INNUMERACY 63. Those who do not take into account conditional probability are prone to making mistakes in judging evidence. They may think that if a particular fact does not itself prove the ultimate proposition (e.g., whether the detainee was part of al-Qaida), the fact may be tossed aside and the next fact may be evaluated as if the first did not exist. This is precisely how the district court proceeded in this case: Al-Adahi's ties to bin Laden "cannot prove" he was part of Al-Qaida and this evidence therefore "must not distract the Court." … The fact that Al-Adahi stayed in an al-Qaida guesthouse "is not in itself sufficient to justify detention." Al-Adahi's attendance at an al-Qaida training camp "is not sufficient to carry the Government's burden of showing that he was a part" of al-Qaida. And so on. The government is right: the district court wrongly "required each piece of the government's evidence to bear weight without regard to all (or indeed any) other evidence in the case. This was a fundamental mistake that infected the court's entire analysis." Employing this standard, the circuit panel examined the evidentiary record (including false exculpatory statements made by the petitioner during interrogation), and concluded that the government had satisfied its evidentiary burden of proving that the petitioner was subject to detention on account of membership in Al Qaeda. The circuit panel also concluded that some of the individual pieces of evidence proffered by the government—including evidence showing that the petitioner had voluntarily stayed at an Al Qaeda guesthouse and had received and executed orders from Al Qaeda members while at a weapons training camp—constituted sufficient grounds to justify his detention. The Supreme Court denied a petition of certiorari to review the Al-Adahi ruling. This case involved the review of a district court's denial of habeas relief to a Guantanamo detainee whom the government alleged to have been "part of" Al Qaeda at the time of capture. The petitioner, a Yemeni national, admitted to U.S. interrogators that he had travelled to Afghanistan to receive weapons training and fight U.S. forces. He was subsequently injured in an air raid, which resulted in the amputation of one of his legs. When Al Qaeda took over a portion of a hospital where petitioner was being treated, he allegedly joined Al Qaeda fighters barricaded there when coalition forces attempted to re-take the hospital, but he was surrendered by Al Qaeda fighters due to his injury. In upholding the district court's denial of habeas relief, the circuit panel rejected several legal and factual challenges raised by petitioner. As an initial matter, the Awad panel reaffirmed the propriety of using conditional probability analysis, previously relied upon by the D.C. Circuit in Al-Adahi , to assess petitioner's evidentiary challenges; accordingly, it would not "weigh each piece of evidence in isolation, but [would] consider all of the evidence taken as a whole." The circuit panel then proceeded to consider petitioner's argument that some of the evidence that had been proffered against him, including Al Qaeda documents and out-of-court statements by another detainee who was present at the hospital where petitioner was apprehended, were unreliable hearsay. The panel noted past jurisprudence recognizing that "hearsay evidence is admissible in this type of habeas proceeding if the hearsay is reliable," and concluded that the proffered evidence was sufficiently reliable to have been considered by the lower court. The court then turned to petitioner's legal challenges. The panel rejected petitioner's argument that the government was required to justify its claims that he was lawfully detainable through clear and convincing evidence, and found that the less rigorous "preponderance of evidence" standard that had been relied upon by the district court was constitutionally permissible. The circuit panel also dismissed petitioner's argument that his habeas petition could only be denied if a specific finding of fact was made that petitioner would pose a threat to the United States and its allies if released. The panel characterized the circuit court's prior decision in Al-Bihani as foreclosing this argument, and it went on to state that the United States's authority to detain an enemy combatant is not dependent on whether an individual would pose a threat … if released but rather upon the continuation of hostilities.... Whether a detainee would pose a threat to U.S. interests if released is not at issue in habeas corpus proceedings in federal courts concerning aliens detained under the authority conferred by the AUMF. Finally, the panel rejected petitioner's argument that, in order for the government to justify his detention under the AUMF, it would have to demonstrate that he was part of Al Qaeda's "command structure." The panel held that petitioner's actions in joining Al Qaeda fighters behind a barricade were sufficient grounds to conclude he was "part of" Al Qaeda. It also suggested other situations where the government would not need to prove that a detainee was subject to Al Qaeda's "command structure" in order to justify its conclusion that he was "part of" Al Qaeda, such as when a person was captured in Afghanistan as part of a group that was shooting at U.S. forces and identified himself upon capture as an Al Qaeda member. The Supreme Court denied a petition to review the Awad decision. In June 2010, a three-judge panel of the D.C. Circuit upheld a district court's denial of a habeas petition brought on behalf of a person who had been detained at Guantanamo since 2002 due to his allegedly being part of Al Qaeda and Taliban forces. The petitioner challenged the procedures used by the district court when admitting evidence, and also the sufficiency of the evidence upon which its judgment on the merits was based. The circuit panel rejected these challenges as being foreclosed by controlling legal precedent. Specifically, the panel rejected the petitioner's argument that the government was required to support its factual claims in support of the legality of the petitioner's detention through "clear and convincing evidence." The panel recognized that based on binding precedent within the circuit, it is "well-settled law that a preponderance of the evidence standard is constitutional in considering a habeas petition from an individual detained pursuant to authority granted by the AUMF." The panel further rejected petitioner's argument that the admission of hearsay was statutorily restricted by the Federal Rules of Evidence and federal habeas statute. The court found this argument unpersuasive, citing both to the Supreme Court's ruling in Hamdi and the appellate court's prior jurisprudence as recognizing that district courts may admit reliable hearsay evidence when considering a habeas petition by an individual detained under the AUMF. In this case, the court agreed with the lower court that the hearsay evidence demonstrated sufficient indicia of reliability to be accorded weight: For example, in considering interrogation reports of a third party concerning al Qaeda and Taliban travel routes into Afghanistan, the [district] court noted that this hearsay was corroborated by "multiple other examples of individuals who used this route to travel to Afghanistan for the purpose of jihad." The court indicated that it was aware of the limitations of this evidence when it concluded that "[although far from conclusive, the Government's evidence suggests that an individual using this travel route to reach Kandahar may have done so because it was a route used by some individuals seeking to enter Afghanistan for the purpose of jihad." The court approved this analysis of hearsay and declined to find an abuse of discretion on the part of the district court. The panel also rejected the petitioner's challenges to the individual pieces of evidence proffered by the government in support of his detention. On April 4, 2011, the Supreme Court denied a petition to review the Al-Odah decision. The Al-Odah ruling has been relied upon by the D.C. Circuit in other cases, including in one case in which a petition for certiorari was denied by the Supreme Court. This case involved the review of a district court denial of habeas relief to an Algerian citizen who had been arrested by Bosnian authorities in 2001 and was subsequently transferred to U.S. custody for detention at Guantanamo. The government claimed that although the petitioner had not directly taken part in combat activities against the United States, he had intended to travel to Afghanistan to fight U.S. forces and had facilitated the travel of others to do the same. The executive branch initially argued that it had legal authority to hold the detainee, pursuant to the authority vested by the AUMF and the President's "inherent authority" as Commander-in-Chief, on account of the detainee's alleged membership in and support for Al Qaeda. In 2008, a federal district court judge denied the detainee's habeas petition. The court found that the government had sufficient grounds to detain the petitioner for providing support to Al Qaeda, but declined to decide whether there were also sufficient grounds to detain the petitioner for being "part of" the organization. On appeal, the Executive eschewed reliance on certain evidence that it earlier relied upon to demonstrate that petitioner acted as a travel facilitator for Al Qaeda, and also modified its argument in support of petitioner's detention—abandoning its argument that the petitioner was subject to detention on account of providing support to Al Qaeda, and instead arguing that he was subject to detention on account of being "part of" the organization. The government also relied solely on the authority granted by the AUMF to justify its detention authority, rather than any independent authority deriving from the Commander-in-Chief Clause. The reviewing circuit panel reversed and remanded the case back to the district court, finding that evidence relied upon by the lower court to conclude that the petitioner had supported Al Qaeda was insufficient to show that he was "part of" the organization. Portions of the appellate panel's opinion discussing the sufficiency and reliability of the evidence proffered by the government were largely redacted. However, the published opinion provided further clarification regarding the D.C. Circuit's view of the detention authority conferred by the AUMF. The Bensayah panel recognized that the D.C. Circuit had previously made clear that "the AUMF authorizes the Executive to detain, at the least, any individual who is functionally part of al Qaeda." According to the panel, because Al Qaeda's organizational structure is generally unknown and thought to be amorphous, a determination as to whether an individual is "part of" the organization "must be made on a case-by-case basis by using a functional rather than a formal approach and by focusing upon the actions of the individual in relation to the organization." Although the panel concluded that evidence demonstrating that a person operated within Al Qaeda's command structure was sufficient to show that he was "part of" the organization, it suggested that there "may be other indicia that a particular individual is sufficiently involved with the organization to be deemed part of it." Nonetheless, the panel indicated that the "purely independent conduct of a freelancer" is not sufficient grounds to deem him to be functionally part of Al Qaeda. This case involved review of a district court order granting habeas relief to a Guantanamo detainee captured in 2001 in Mauritania. Although the petitioner had not fought against the United States, the government alleged that he was lawfully detained on the grounds that he was "part of" Al Qaeda. Most of the evidence proffered by the government in support of its allegations concerned activities by the petitioner which occurred years before the 9/11 attacks. In habeas proceedings before the lower court, the government presented evidence that petitioner swore an oath of loyalty to Al Qaeda in 1991 and provided support to the organization at various points thereafter, including by recruiting members, hosting organization leaders, and providing the organization with financial support. For his part, the petitioner claimed that he severed ties with Al Qaeda in the early 1990s. The district court ruled that the government failed to satisfy its evidentiary burden in proving that the petitioner was "part of" Al Qaeda at the time of capture, and ordered the detainee to be released. In doing so, it rejected the government's argument that once the petitioner swore an oath of allegiance to Al Qaeda, he bore the burden of demonstrating that he had later withdrawn from the organization. On appeal, a three-judge panel vacated the lower court's decision, finding that intervening case law—namely, the circuit court's opinions in the Al-Adahi , Awad , and Bensayah cases discussed above—cast doubt on the lower court's approach to determining whether petitioner was "part of" Al Qaeda. In particular, the Salahi panel found that the lower court had improperly required the government to prove that the petitioner had received and executed orders from Al Qaeda in order to demonstrate his membership in the organization. Subsequent circuit jurisprudence established that membership could be demonstrated not only from evidence that a person was part of Al Qaeda's "command structure," but also from activities which revealed a person to be functionally part of the organization. The panel recognized, however, that in cases like the one involving petitioner, who had not engaged in combat activities against the United States, "the government's failure to prove that an individual was acting under orders from al-Qaida may be relevant to the question of whether the individual was 'part of' the organization when captured." Although the government requested that the Salahi panel direct the district court to deny the habeas petition, it declined to do so, finding that it was appropriate to remand the case so the lower court could conduct further proceedings consistent with circuit jurisprudence that developed after its initial ruling. The panel found that because the lower court lacked guidance from subsequent circuit jurisprudence, it had primarily looked for evidence as to whether petitioner participated in Al Qaeda's command structure, but "did not make definitive findings regarding certain key facts necessary for us to determine as a matter of law whether Salahi was in fact 'part of' al-Qaida when captured." In remanding the case to the lower court for further factual findings, the Salahi panel reiterated the admonition made by the circuit court in Al-Adahi that courts considering habeas petitions by Guantanamo detainees must consider the assorted evidence relating to the government's claims collectively rather than in isolation. While the panel stated that the lower court appeared to have generally followed this approach, it suggested that its consideration of certain evidence "may have been unduly atomized." Notably, the panel suggested that when the lower court determined that the petitioner's limited relationships with Al Qaeda operatives might have been too insubstantial to independently serve as a basis for deeming the petitioner "part of" Al Qaeda, those connections made it more probable that the petitioner was a member of the organization and were thus relevant to an assessment as to whether he had been lawfully detained. The panel also suggested that examining the petitioner's oath to Al Qaeda in isolation from his subsequent "sporadic support" may have resulted in the lower court failing to consider the possibility that this support demonstrated the petitioner's continued adherence to his oath of loyalty. In reaching its ruling, the appellate court did not squarely address the government's argument that the petitioner's oath to Al Qaeda in the early 1990s established an evidentiary burden upon him to demonstrate that he had subsequently withdrawn from the organization. The appellate court also declined to consider the government's argument that the district court had accorded insufficient weight to certain inculpatory statements that were made by petitioner in interrogations subsequent to a period of time when he had been, by the government's admission, subject to mistreatment, because the panel viewed this issue to be irrelevant to the legal questions addressed by its opinion conditional probability analysis. In Uthman , a three-judge circuit panel reversed and remanded a district court decision that had granted habeas relief to a Yemeni national who had been captured in Afghanistan and detained by U.S. forces since December 2001. In prior cases, including the Bensayah and Salahi decisions discussed supra , the D.C. Circuit had recognized that the determination of whether a person was "part of" Al Qaeda was based on a functional, case-by-case assessment which focused on the individual's actions in relation to the organization. The Uthman decision provided further clarification as to the kind of circumstantial evidence that could potentially provide sufficient grounds to support the detention of a person under the AUMF. The government made several claims regarding Uthman's activities in relation to Al Qaeda—including that he attended an Al Qaeda training camp, fought against the Northern Alliance in Afghanistan, and served as a bodyguard to Osama Bin Laden—which were contested. Nonetheless, the D.C. Circuit panel found that the following facts, which were either found by the district court or which were uncontested by Uthman, were sufficient to demonstrate that Uthman was "more likely than not" part of Al Qaeda and therefore subject to detention: (1) he was captured in December of 2001 in the vicinity of Tora Bora, where Al Qaeda forces had gathered to fight United States and its allies; (2) at the time of capture, Uthman was travelling with a small group including two Al Qaeda members who were bodyguards for Osama Bin Laden and a Taliban fighter; (3) he had previously studied at a religious school in Yemen which was known as "a fruitful al Qaeda recruiting ground," and which had also been attended by the Al Qaeda and Taliban fighters with whom Uthman had been captured; (4) Uthman's travel route to Afghanistan resembled that commonly used by Al Qaeda recruits; (5) his explanation for how he raised funds to travel to Afghanistan was not viewed as credible by the district court, and constituted a "false exculpatory" statement lending credence to the government's claims of wrongdoing; (6) Uthman was seen at an Al Qaeda guesthouse; and (7) Uthman's exculpatory explanation of his activities in Pakistan and Afghanistan involved "many coincidences that are perhaps possible, but not likely." Although the panel recognized that at least some of these findings, when viewed in isolation, would not necessarily be sufficient to find that Uthman was functionally part of Al Qaeda, it ruled that when the evidence proffered by the government was considered in totality, "Uthman's actions and recurrent entanglement with al Qaeda show that he more likely than not was part of al Qaeda." The Supreme Court declined to review the decision. In Al-Madhwani , a three-judge appellate panel reviewed and affirmed a lower court dismissal of a habeas petition by a Guantanamo detainee. Madhwani argued that the government provided insufficient evidence to demonstrate that he was subject to detention under the AUMF, and also alleged that the district court had improperly considered evidence outside the record and had committed procedural errors. The petitioner also claimed that he had been tortured by U.S. authorities prior to his transfer to Guantanamo, and argued that statements he made to military authorities at Guantanamo were tainted by his earlier coercion. In upholding the district court's denial of habeas, the circuit panel found it unnecessary to reach Madhwani's challenge that certain evidence had been tainted by undue coercion, as there was sufficient evidence untainted by these claims to support the district court's decision. The panel noted that the district court had considered 260 exhibits and held a four-day merits hearing during which petitioner himself testified for over one day, and discounted "a substantial portion" of the government's evidence based on a finding that it was tainted by mistreatment suffered by petitioner prior to his transfer to Guantanamo. The panel found the evidence considered by the lower court, including incriminating testimony by Madhwani in testimony, provided sufficient grounds to support the government's determination that he was "part of" Al Qaeda. This evidence included admissions by Madhwani of his stay at an Al Qaeda-affiliated guest house and military training camp; his admission to carrying a rifle at the behest of camp superiors, his "suspicious" travel after departing the camp with recruits and "implausible" explanation for his travel; and the circumstances of his final capture in the company of at least one known Al Qaeda operative. The panel also rejected several other legal and evidentiary arguments made by Madhwani, including certain arguments that had been previously rejected by the D.C. Circuit, including his claim that hearsay evidence could only be admitted in wartime detention cases if it fell within an exception recognized under the Federal Rules of Evidence. The Supreme Court declined to review the case. In Almerfedi , a three-judge panel of the D.C. Circuit considered the government's appeal of a district court ruling granting habeas relief to a Guantanamo detainee whom the government claimed had acted as a facilitator for Al Qaeda. The government based its claim primarily upon admissions made by habeas petitioner Almerfedi himself, as well as statements made by another Guantanamo detainee. The district court concluded, however, that Almerfedi's statements did not demonstrate by a preponderance of the evidence that Almerfedi was "part of" Al Qaeda. It also declined to consider the testimony of the fellow Guantanamo detainee, concluding that it was unreliable. The circuit panel reversed and remanded with instructions to the lower court to deny Almerfedi's habeas petition. The circuit court's ruling did not clearly pronounce any new legal standards governing consideration of detainees' habeas claims (though the majority opinion reiterated the suggestion made in Al-Adahi that the government might be able to support the detention of a person using a lower standard than one based on the preponderance of evidence). However, some have viewed the decision as significant because the court implied that the government's evidence was not as compelling as evidence proffered in prior cases reviewed by the D.C. Circuit, and might signify "the minimum amount of evidence" necessary to demonstrate under a preponderance of evidence standard that an individual was lawfully detained. The government's contention that Almerfedi served as a facilitator for Al Qaeda was based on several factors. By Almerfedi's own admission, he had travelled from Yemen to Pakistan in 2001, where he stayed for more than two months at the headquarters of Jama'at Tablighi, an Islamic missionary organization designated by U.S. intelligence as a Terrorist Support Entity closely aligned with Al Qaeda. He subsequently travelled to Iran, where he admitted staying for over a month before being arrested by Iranian authorities with at least $2,000 cash in his possession. The government further claimed, based on statements Almerfedi allegedly made to another Guantanamo detainee named al-Jadani, that while Almerfedi was in Iran he stayed at an Al Qaeda guest house in Tehran. Al-Jadani also claimed that other, unnamed Guantanamo detainees had informed him that a "Hussain al-Aden" acted as an Al Qaeda facilitator at the Tehran guesthouse, and the government believed that "Hussain al-Adeni was the same person as Almerfedi because the nisha 'al-Adeni' means 'from Aden,' which is [the Yemeni city] where Almerfedi is from." For his part, Almerfedi denied that he had ever stayed at an Al Qaeda guesthouse or served as a facilitator, and noted that the dates when al-Jadani claimed he stayed at the guesthouse were obviously incorrect, because it was undisputed that Almerfedi had been arrested by Iranian authorities at least a year earlier. Almerfedi alleged that he had left Yemen in order to seek a better life in Europe. He claimed to have travelled to Pakistan because it would be easier to obtain a visa there, and that he stayed with Jama'at Tablighi in the hope that he could take advantage of the travel discounts they offered members (even though he denied ever being a member of the organization). He further alleged that his subsequent travel to and stay in Iran were part of a failed attempt to be smuggled into Europe. Examining the record, the circuit court concluded that "the government's evidence, combined with Almerfedi's incredible explanations" provided sufficient grounds to detain Almerfedi even without consideration of al-Jadani's statements. The court noted that Almerfedi's stay at the headquarters of Jama'at Tablighi was "probative, by itself it presumably would not be sufficient to carry the government's burden because there are surely some persons associated with Jama'at Tablighi who are not affiliated with al-Qaeda." However, when this fact was considered along with Almerfedi's travel route, which the court described as being "quite at odds with his professed desire to travel to Europe," in addition to the circumstances of Almerfedi's capture with at least $2,000 of unexplained cash in his possession, the government's case that Almerfedi acted as an Al Qaeda facilitator "was on firmer ground." Further, the circuit panel found that although the lower court had recognized Almerfedi's explanation of his activities as "perplexing" and unconvincing, it erred by failing to assess these "false exculpatory statements" as amounting to evidence in favor of the government's position, as the D.C. Circuit had held in Al-Adahi . While finding that the admission of al-Jadani's statements was unnecessary for the government to satisfy the evidentiary burden justifying Almerfedi's detention, two panel members nonetheless concluded that the lower court clearly erred in ruling these statements as unreliable "jail house gossip." The district court had rejected al-Jadani's statements at least in part because al-Jadani alleged that Almerfedi told him that he was at an Al Qaeda guesthouse in 2002 or 2003, though Almerfedi had already been taken into custody by that time. The majority of the circuit panel believed, however, that al-Jadani's "timing confusions were inconsequential," because the correct date of Almerfedi's capture had been given in some reports of al-Jadani's interrogations by U.S. authorities, and al-Jadani's reliability had been established via a classified government declaration which buttressed many of his statements regarding Al Qaeda guesthouses in Iran. The majority of the panel also believed that the district court erred when it failed to assess al-Jadani's recounting of conversations with unnamed detainees that implicated Almerfedi. The panel majority viewed it as "quite understandable that al-Jadani would be reluctant" to identify these detainees to U.S. authorities. Moreover, the panel majority found it significant that al-Jadani knew specific details regarding the capture of a "Hussain al-Aden" by Iranian authorities and his subsequent transfer first to Afghan and then to U.S. custody. The panel majority characterized the circumstances as matching "Almerfedi's unique experiences and therefore mak[ing] clear that Hussain Almerfedi and Hussain al-Adeni are the same man," buttressing the credibility of al-Jadani and that of the unnamed detainees who purportedly identified Almerfedi as an Al Qaeda facilitator. Writing separately, D.C. Circuit Judge Judith W. Rogers concurred with the panel majority in its ruling that the government had satisfied the evidentiary burden needed to support Almerfedi's detention. However, Judge Rogers disagreed with the majority's analysis of the recorded statements of al-Jadani. The district court's determination that al-Jadani's statements were unreliable was a factual one that could only be reversed for clear error, and an examination of the record evidenced did "not lead to a 'firm conviction' that the district court's analysis of al-Jadani's statements was mistaken, much less implausible." The Supreme Court declined to review the circuit court's decision. In this case, a circuit panel found that although the corroboration of hearsay statements has proved useful to establish their reliability, corroboration of statements made by the petitioner himself during interrogations is not necessary to find that he is lawfully detained. The district court had sustained Al Alwi's detention based on admissions he made during interrogation that established he had traveled to Afghanistan to join the fight against the Northern Alliance, had stayed in at least three guesthouses associated with enemy forces, received military training and participated in hostilities against the Northern Alliance, and was part of a unit that was bombed by U.S. forces in late 2001. Al Alwi sought to have the denial of his habeas petition reversed on the basis that his statements were insufficiently corroborated by other evidence, which he argued was required under the "corroboration rule" applicable in criminal trials. The appellate court expressed skepticism that such a rule still exists in the criminal context, but regarded it as irrelevant to habeas proceedings, where other indicia of reliability could satisfy the requirement to assess the probative value of such statements. In this case, the interrogation reports were found to be sufficiently reliable because Al Alwi's statements were consistent and he did not contend that he gave false answers during any specific session due to the coercive interrogation methods he alleged were used. Moreover, the government did submit evidence other than the petitioner's statements to demonstrate the connection between the admissions and inferences that could be drawn from them (i.e., such conduct was typical of Taliban and Al Qaeda recruits). The appellate court declined to review the petitioner's argument that his detention was no longer lawful because the "associated force" of which he was allegedly a member is no longer engaged in hostilities, stating that he had failed to raise the argument before the lower court and that there was sufficient evidence to establish he was a part of the Taliban or Al Qaeda. The court also rejected Al Alwi's argument that the government must prove not only that he was "part of" Al Qaeda or the Taliban, but also that he "substantially supported" one of those entities. Although the district court had not squarely addressed whether Al Alwi was a part of any group of combatants, the appellate court found that enough facts had been established for it to make that determination on review, without remanding the case for further finding of fact. Finally, the circuit panel rejected the petitioner's contention that the district court's denial of his unopposed request for a 30-day continuance amounted to an abuse of discretion. He had asked for extra time because he had been unable to meet with his attorneys due to his having begun a hunger strike, but the court denied the request because Al Alwi was himself responsible for the delay. While the appellate court agreed that the denial of Al Alwi's request was difficult to understand in light of the fact that the district court had granted the government a similar continuance without objection, it stated that the petitioner must be able to demonstrate actual prejudice from the denial, which he had failed to do. The district judge had permitted his attorneys to submit an amended response, and at any rate, according to the panel, it could not be demonstrated that 30 days would have made an appreciable difference given the amount of time his counsel had been working with him through the CSRT and habeas proceedings. The Supreme Court declined to accept an appeal of the case. In this case a three-judge circuit panel reviewed a district court ruling granting the habeas petition of a Guantanamo detainee whom the government claimed was subject to detention under the AUMF. The district court had found that the government failed to satisfy its evidentiary burden to demonstrate its allegation that Latif, a Yemeni national who had travelled to Afghanistan and was subsequently captured in Pakistan, had fought with the Taliban and was subject to detention. In a 2-1 decision, the panel vacated the district court's ruling and remanded the case for further proceedings. The panel's published decision was initially heavily redacted, but much of the discussion centered on classified government intelligence documents that served as the primary evidentiary basis supporting the government's allegations. The opinion was later reissued with fewer redactions. The panel majority found that the district court erred by not affording a "presumption of regularity" to the intelligence documents proffered by the government, and that Latif had not presented evidence to satisfactorily rebut the presumption that the intelligence documents accurately recorded the statements made therein. The controlling opinion in Latif , written by Judge Brown, described the presumption of regularity as applicable to "the official acts of public officers and, in the absence of clear evidence to the contrary, courts presume that they have properly discharged their official duties." Judge Brown distinguished a presumption of regularity from a presumption of truthfulness, and suggested that confusion over the distinction might explain the prior reluctance of lower courts to accord a presumption of regularity to government intelligence documents: The confusion stems from the fact that intelligence reports involve two distinct actors—the non-government source and the government official who summarizes (or transcribes) the source's statement. The presumption of regularity pertains only to the second: it presumes the government official accurately identified the source and accurately summarized his statement, but it implies nothing about the truth of the underlying non-government source's statement. There are many conceivable reasons why a government document might accurately record a statement that is itself incredible. A source may be shown to have lied, for example, or he may prove his statement was coerced. The presumption of regularity—to the extent it is not rebutted—requires a court to treat the Government's record as accurate; it does not compel a determination that the record establishes what it is offered to prove. The majority characterized the application of a presumption of regularity to intelligence documents as being supported by separation of powers principles; because "courts have no special expertise in evaluating the nature and reliability of the executive branch's wartime record ... it is appropriate to defer to executive branch expertise." The majority also noted that this presumption regularly given to government documents in other contexts, including in ordinary criminal cases. It also discussed prior D.C. Circuit rulings which it characterized as being consistent with or lending support to the panel's holding. Reviewing the evidence before the district court, the panel majority found that the intelligence report proffered by the government, if reliable, provided sufficient evidence to demonstrate the lawfulness of Latif's detention. Because the majority held that this report was entitled to a presumption of regularity, and because Latif "challenge[d] only the reliability of the Report," the majority found that it could only uphold the district court's grant of habeas if Latif was able to rebut the government's evidence "with more convincing evidence of his own." The majority found that he had not done so, and in addition, it found that the district court had failed to consider properly relevant evidence in assessing Latif's credibility, including the similarity between Latif's travel route and that commonly used by Al Qaeda and Taliban fights, as well as potentially incriminating statements that he made. The panel remanded the case back to the district court for further consideration of the evidence. Judge Henderson wrote a separate concurrence to the panel decision, agreeing with the controlling opinion's analysis but arguing that remand was unnecessary and that the panel should have simply reversed the lower court's grant of habeas. Writing in dissent, Judge Tatel argued that the district court's factual findings were subject to a deferential clear error standard of review, and that employing this standard would have resulted in affirming the lower court's grant of habeas. He also disputed the majority's holding that a presumption of regularity should apply to government intelligence documents in habeas cases. He characterized the presumption as typically being applied to those government documents which are "familiar, transparent, generally understood as reliable, or accessible." Judge Tatel argued that presumption should not apply to intelligence documents of the kind at issue here, which "was produced in the fog of war by a clandestine method that we know almost nothing about." He further expressed fear that application of this presumption would in practice come "perilously close to suggesting that whatever the government says must be treated as true.... " The Supreme Court denied certiorari to review the Latif decision. Mukhtar Al Warafi denied that he was part of the Taliban, and argued that even if he were a part of the organization, he was not lawfully subject to detention because he served "permanently and exclusively as 'medical personnel'" within the meaning of the Geneva Conventions and their U.S. Army implementing regulations, AR 190-8. Article 24 of the First Geneva Convention provides protections to full-time medical personnel, and Article 28 directs that they "shall be retained only insofar as the state of health, the spiritual needs and the number of prisoners of war require." The Army Regulation implements the Geneva Conventions provisions concerning the detention of "retained personnel," including medical personnel. Although Congress included a provision in Section 5 of the Military Commissions Act of 2006 stating that detainees may not invoke the Geneva Conventions in a habeas proceeding, the three-judge panel found the detainee may nevertheless invoke the Army Regulation implementing them. However, the district court found the detainee had failed to prove his status as a medic, inasmuch as he lacked the identification card and armlet bearing the distinctive emblem required elsewhere under the First Geneva Convention for medical personnel. The petitioner argued that it should remain open to him to prove his status by other means, but the circuit court agreed with the court below that because the Taliban failed to provide medical personnel the required means of identification, such personnel are not entitled to the special protections described in Article 24. Al Warafi's detention was affirmed. The petitioner in this case was a teenager when he was captured in Pakistan after spending time with Taliban soldiers near the front in Afghanistan as well as in a series of mosques run by an organization associated with Al Qaeda. He argues that he never took part in hostilities and was never part of the command structure of the Taliban or Al Qaeda. The district court found that he was nevertheless part of the Taliban or Al Qaeda. He appealed. The D.C. Circuit affirmed, with two of the judges invoking at one point the "walks like a duck test" to approve the lower court's reasoning. They found the undisputed facts of the case coupled with the petitioner's unpersuasive explanations for them to support a finding that the petitioner was more likely than not a member of the Taliban or Al Qaeda, making his detention lawful under the AUMF. Senior Circuit Judge Edwards wrote a concurring opinion conceding that the evidence was sufficient under circuit precedent to support detention. He objected, however, that the evidence adduced did not in his view meet the preponderance of the evidence standard the court has said it employs. He would have required the government to provide positive evidence that Hussain fit within the AUMF standard at the time of his capture. The Supreme Court declined to review the decision. Justice Breyer concurred in the denial of certiorari, but indicated his vote might have been different had the petitioner asked for review on the claim that he was not an "individual who ... was part of or supporting forces hostile to the United States or coalition partners in Afghanistan and who engaged in an armed conflict against the United States there " pursuant to the Hamdi case. Another detainee case, Ali v. Obama , has responded to the invitation to bring this question before the Supreme Court. The D.C. Circuit has also considered a number of cases involving issues related to the transfer or release of Guantanamo detainees. Some of these cases concern the remedy available to persons whom a reviewing court has determined to be unlawfully held, but who cannot be resettled or repatriated to a foreign country in the near future due to legal or practical obstacles. Other cases involve challenges by detainees to their impending transfer to a specific foreign country, where detainees claim that they would be tortured or unlawfully detained by the government of the receiving country. The D.C. Circuit has also indicated that it is highly unlikely that a detainee may challenge his designation as an enemy combatant after being released from U.S. custody and transferred to a foreign country. In October 2008, a federal district court ordered the release into the United States of several Guantanamo detainees who were no longer considered enemy combatants but who could not be returned to their home country (China) because of the likelihood they would be subjected to torture there, finding that the political branches' plenary authority in the immigration context did not contravene the petitioners' entitlement to an effective remedy to their unauthorized detention. However, the D.C. Circuit panel stayed the district court's order pending appellate review, and subsequently reversed the district court's decision in the case of Kiyemba v. Obama (" Kiyemba I "), decided in February 2009. The majority held that although the constitutional writ of habeas enables Guantanamo detainees to challenge the legality of their detention, habeas courts lack authority (absent the enactment of an authorizing statute) to compel the transfer of a non-citizen detainee into the United States, even if that detainee is found to be unlawfully held and the government has been unable to effectuate his release to a foreign county. The Kiyemba I panel's decision was primarily based on long-standing jurisprudence in the immigration context which recognizes that the political branches have plenary authority over whether arriving aliens may enter the United States. The majority of the panel also found that Guantanamo detainees were not protected by the Due Process Clause of the Constitution, as they are non-citizens held outside the U.S. and lack significant ties to the country. As discussed supra , the Supreme Court granted certiorari to review the Kiyemba ruling, and subsequently vacated the appellate court's opinion and remanded the case in light of the fact that several countries had thereafter agreed to resettle the petitioners. In May 2010, the D.C. Circuit panel reinstated its earlier opinion, as modified to take into account subsequent congressional enactments limiting the use of funds to release any Guantanamo detainee into the United States (the panel's reinstatement is commonly referred to as " Kiyemba III ," to distinguish it from the Circuit panel's initial ruling and an intervening case also entitled Kiyemba v. Obama ). The Supreme Court declined to review Kiyemba III . In another case entitled Kiyemba v. Obama (commonly referred to as " Kiyemba II "), a D.C. Circuit panel considered habeas petitions by detainees who were no longer considered enemy combatants, and who sought to prevent their transfer to any country where they would likely face further detention or torture. The Kiyemba II panel rejected the government's argument that the MCA stripped the court of jurisdiction to hear claims related to the petitioners' proposed transfer. The panel interpreted Boumediene as invalidating the MCA's court-stripping provisions with respect "to all habeas claims brought by Guantanamo detainees, not simply with respect to so-called 'core' habeas claims" relating to the legality of the petitioners' detention. However, the panel held that an executive branch determination that a detainee will not be tortured if transferred to a particular country is binding on the court, and a habeas court may not second-guess this assessment. The circuit panel also reversed a district court ruling that required the government to provide 30 days' notice to detainees' counsel before any proposed transfer. As a result of this ruling, the detainees' ability to challenge their proposed transfer from Guantanamo may be quite limited. On March 22, 2010, the Supreme Court denied a petition for writ of certiorari to review the appellate court's ruling. The Kiyemba II decision has been relied upon by the D.C. Circuit in subsequent rulings concerning detainees' right to challenge the Executive's determination that they would not face torture if transferred to a particular country and receive advance notice of their proposed transfer. This case involved two former Guantanamo detainees who sought to challenge their designation as "enemy combatants" by the U.S. government, despite the fact that they were no longer in U.S. custody. Following the detainees' transfer to foreign government custody, the lower court dismissed their habeas petitions as moot. The detainees appealed to the D.C. Circuit, arguing that dismissal was improper and that they had suffered collateral consequences even after leaving U.S. custody because of their enemy combatant designation. The three-judge panel upheld the lower court's dismissal. The court held that even assuming that courts may retain habeas jurisdiction over former detainees who suffer collateral consequences as a result of their detention, the consequences identified by the petitioners did not constitute the kind of injuries sufficient to give the court jurisdiction. Although petitioners claimed that their designation as enemy combatants caused the countries to which they were transferred to restrict their travel, the Gul panel did not find this to be an injury redressible by the court, because the restrictions were imposed by the foreign governments rather than the United States. The panel also was not persuaded by petitioners' claim that they suffered a cognizable injury because their "enemy combatants" designation barred their travel to the United States. As an initial matter, the panel noted that there was no evidence that petitioners actually wanted to enter the United States. Moreover, the court ruled that even the plaintiffs' designation as enemy combatants was rescinded, this would not remove the barriers to U.S. travel; by statute, all Guantanamo detainees were placed on the government's "no fly" list, regardless of enemy combatant status, and U.S. immigration law's restrictions on the admission of aliens posing security risks was not dependent upon an enemy combatant designation. The panel also deemed petitioners' claim that their designation meant that they remained subject to possible targeting by the United States as "the most speculative [claim] of all," as the petitioners had "no basis whatsoever for believing" the government might still pursue them after releasing them from custody. Finally, the court found that binding precedent foreclosed consideration of petitioners' argument that they suffered a cognizable injury on the basis of the stigma caused by their designation. The Supreme Court declined to review the case. Besides the rulings discussed above, the appellate court for the D.C. Circuit has also issued opinions on several other distinct issues related to U.S. detention policy. These rulings have involved issues including, inter alia , the continuing application of the judicial review procedures established under DTA following the Supreme Court's ruling in Boumediene v. Bush ; the ability of former Guantanamo detainees to bring civil suit against U.S. officials based on the detainees' allegedly wrongful treatment while in U.S. custody; the application of the constitutional writ of habeas to persons held by the United States in foreign locations other than Guantanamo; and the ability of detainees to seek redress for what they view as wrongful conditions of confinement. In June 2008, a three-judge panel of the D.C. Circuit ruled in the case of Parhat v. Gates that the petitioner had been improperly deemed an "enemy combatant" by a Combatant Status Review Tribunal (CSRT), the first ruling of its kind by a federal court. The ruling, which occurred prior to the Supreme Court's decision in Boumediene , was made under the judicial review process that had been established by the DTA. Although the D.C. Circuit has since held that the DTA review process is no longer in effect, the Parhat decision continues to be cited within the D.C. Circuit for its holding that evidence presented by the government must be in a form that permits a reviewing court to assess its reliability. The petitioner in Parhat , an ethnic Chinese Uighur captured in Pakistan in December 2001, was found by a CSRT to be subject to detention on account of his affiliation with a Uighur independence group known as the East Turkistan Islamic Movement (ETIM), which was purportedly "associated" with Al Qaeda and the Taliban and engaged in hostilities against the United States and its coalition partners (the petitioner denied membership in the ETIM). The Parhat panel found that the evidence presented by the government to support its claims regarding the ETIM was insufficient to support the CSRT's determination that Parhat was an enemy combatant. Most significantly, the court found that the principal evidence presented by the government regarding the ETIM being associated with Al Qaeda and the Taliban and engaged in hostilities against the United States and its coalition allies—four government intelligence documents describing ETIM activities and the group's relationship with Al Qaeda and the Taliban—did not "provide any of the underlying reporting upon which the documents' bottom-line assertions are founded, nor any assessment of the reliability of that reporting." As a result, the court found that neither the CSRT nor the reviewing court itself were capable of assessing the reliability of the assertions made by the documents. Accordingly "those bare assertions cannot sustain the determination that Parhat is an enemy combatant," and the CSRT's designation was therefore improper. The circuit court stressed that it was not suggesting that hearsay evidence could never reliably be used to determine whether a person was an enemy combatant, or that the government must always submit the basis for its factual assertions to enable an assessment of its claims. However, evidence "must be presented in a form, or with sufficient additional information, that permits the [CSRT] and court to assess its reliability." The Parhat panel also denied without prejudice a government motion to protect from public disclosure any nonclassified information raised in the litigation that the executive branch had labeled "law enforcement sensitive," along with names and identifying information of U.S. personnel mentioned in the record. While the panel acknowledged that information falling under both of these categories warranted protection from public disclosure, it characterized the government's argument for nondisclosure as being supported only upon "a generic explanation of the need for protection, providing no rationale specific to the information actually at issue in this case." In particular, the panel faulted the government motion for failing either to "give the court a basis for withholding" a specific category of information, or a basis upon which the court could "determine whether the information it has designated properly falls within the categories it has described." This case concerned the continuing availability of DTA review procedures in light of the Supreme Court's ruling in Boumediene v. Bush that the constitutional privilege of habeas corpus extends to non-citizen detainees held at Guantanamo. As discussed supra , following the Supreme Court's ruling in Gates v. Bismullah , the D.C. Circuit reinstated two earlier rulings concerning the scope of judicial review of CSRT determinations available under the DTA. The government subsequently petitioned for a rehearing of the case, arguing that the Supreme Court's ruling in Boumediene effectively nullified the review system established by the DTA, as Congress had not intended for detainees to have two judicial forums in which to challenge their detention. The D.C. Circuit granted the government's motion for rehearing, and in Bismullah v. Gates , a three-judge panel held that, in light of the Supreme Court's ruling in Boumediene restoring detainees' ability to seek habeas review of the legality of their detention, the appellate court no longer had jurisdiction over petitions for review filed pursuant to the DTA. Four British nationals formerly detained at Guantanamo sued the Secretary of Defense and various military officers for damages, alleging that their treatment while in U.S. military custody violated their rights under the Fifth and Eighth Amendments to the Constitution, the Geneva Conventions, and other provisions of law. The district court dismissed the Bivens claims on the basis of qualified immunity, holding that the officers could not reasonably be expected to have anticipated that the plaintiffs, as aliens held overseas, would be entitled to rights under the U.S. Constitution. The D.C. Circuit twice affirmed, interpreting Boumediene (on remand) as "disclaim[ing] any intention to disturb existing law governing the extraterritorial reach of any constitutional provisions, other than the Suspension Clause," which, in the circuit court's view, appears to mean that those detained at Guantanamo have no rights under the Constitution (other than the right to petition for habeas corpus). It rested its holding, however, on its analysis of qualified immunity under Bivens , agreeing with the lower court that even if the Constitution does provide some protections to the plaintiffs, the defendants were protected by qualified immunity. Even were this not so clear, the D.C. Circuit noted a "special factor" precludes extending a Bivens remedy to plaintiffs; namely, the "[t]he danger of obstructing U.S. national security policy." Having found that the claims for damages were barred by the Federal Tort Claims Act, the circuit court did not address whether Boumediene 's holding invalidating Section 7 of the MCA encompassed only the portion of the provision that stripped courts of jurisdiction over habeas claims, or whether the language eliminating other causes of action against the government had also been invalidated. Subsequently in Al-Zahrani v. Rodriguez , discussed infra, the D.C. Circuit held that the language in the MCA eliminating causes of action other than habeas corpus survived Boumediene. The D.C. Circuit later extended the holding to preclude lawsuits by former detainees for their treatment after they had been declared to no longer be enemy combatants. This case concerned the application of the constitutional writ of habeas corpus to non-citizens detained by the United States in Afghanistan. In 2009, a federal district court ruled that the constitutional writ of habeas may extend to non-Afghan detainees held in a U.S.-operated facility in Bagram, Afghanistan, when those detainees had been captured outside of Afghanistan but were transferred to Bagram for long-term detention as enemy combatants. The district court held that the circumstances surrounding the detention of the petitioners in Maqaleh were "virtually identical to the detainees in Boumediene —they are [non-U.S.] citizens who were ... apprehended in foreign lands far from the United States and brought to yet another country for detention." A three-judge panel of the D.C. Circuit reversed and held that the constitutional writ of habeas did not extend to non-citizens detained in the Afghan theater of war. In making this determination, the circuit court applied factors listed by the Supreme Court in Boumediene as being relevant to analysis of the writ's extraterritorial application, namely, (1) the citizenship and status of the detainee and the adequacy of the status determination process; (2) the nature of the site where the person is seized and detained; and (3) practical obstacles inherent in resolving the prisoner's entitlement to the writ. According to the circuit panel, consideration of the first factor weighed in favor of extending the writ of habeas to the petitioners, because the status determination process employed in Afghanistan to determine whether persons were subject to detention afforded fewer procedural protections than the process used at Guantanamo. However, the circuit panel found that the application of the other two enumerated factors conclusively weighed against extending the constitutional writ of habeas to non-citizens held at Bagram. In particular, the circuit panel found that the degree and likely duration of U.S. control over Bagram were more limited than U.S. control over Guantanamo. The panel also found that significant practical obstacles would be inherent in attempting to resolve the habeas claims of Bagram detainees, including the petitioners' location in an active theater of war. The court considered it pertinent that the Unites States held persons at Bagram pursuant to a cooperative agreement with the Afghan government, and suggested that extending constitutional protections to Bagram detainees could be disruptive to the U.S.-Afghan relationship. Although the Maqaleh panel held that the constitutional writ of habeas did not extend to persons in petitioners' situation, it suggested that its analysis might be different if evidence were presented that the executive branch opted to transfer detainees into a theater of war to evade judicial review. Relying on this statement, the Maqaleh petitioners sought a rehearing of their habeas claims. In February 2011, a district court permitted the petitioners to amend their habeas complaint to take into account new evidence that purportedly undercut the reasoning of the Maqaleh panel. The petitioners argued before the district court that the U.S. plan to turn the Bagram prison facility to Afghan control while retaining non-Afghan detainees in U.S. custody undermines the rationale for the appellate decision and warranted a conclusion that habeas review should be available. The district court was not persuaded, however, and granted the government's motion to dismiss. The petitioners again appealed to the D.C. Circuit, which found that circumstances in Afghanistan had not changed sufficiently to warrant a revisiting of " A l Maqaleh II " and denied the petitions. The three-judge panel unanimously rejected the invitation to create a new "manipulation of detention site" factor for determining whether the Suspension Clause applies. The court indicated that it might have been more receptive to considering such circumstances had the petitioners been transferred from a place to which the writ of habeas runs to an area beyond its reach. But the fact that the petitioners had all been arrested in Asia prior to their transfer to another Asian country, albeit one in the midst of an armed conflict, did not raise any constitutional concerns. In Al-Zahrani , a three-judge panel of the D.C. Circuit upheld the dismissal of a civil suit brought against federal officials by the fathers of two foreign nationals who had been detained as "enemy combatants" at Guantanamo and died in U.S. custody. The circuit panel held that dismissal was warranted under Section 7(a)(2) of the MCA, which stripped federal courts of jurisdiction over non-habeas claims brought against the government concerning the detention of aliens designated as "enemy combatants." While the Supreme Court in Boumediene had struck down the MCA's bar on federal court jurisdiction over habeas claims, the Al-Zahrani panel recognized that the MCA's separate jurisdictional bar over non-habeas claims remained in effect. Plaintiffs contended that Section 7(a)(2) was unconstitutional because it denied plaintiffs "a proper remedy for violations of their constitutional rights." The panel rejected this claim because the only remedy that plaintiffs sought was money damages, and "such remedies are not constitutionally required" and may be barred by statutory or common law immunities. The U.S. Court of Appeals for the Ninth Circuit (Ninth Circuit) dismissed a civil lawsuit for damages by a former detainee based on similar reasoning, as did the Fourth Circuit. Appellant al Janko had been at Guantanamo for seven years prior to prevailing in his habeas case. After his transfer, he sued the United States and a number of U.S. officials for his wrongful detention and alleged mistreatment during his incarceration. The district court held it had no jurisdiction to entertain his claims due to the MCA provision barring it from hearing non-habeas claims relating to the treatment, trial, or transfer of persons held at Guantanamo. He appealed, arguing that the MCA provision does not apply to him because he was found by the habeas court to have been improperly detained. The D.C. Circuit affirmed the dismissal, finding that he was indeed "an alien who is or was detained by the United States [who] has been determined by the United States to have been properly detained as an enemy combatant," even though a district court had ordered him released. The unanimous three-judge panel interpreted the language "determined by the United States" to refer to a determination made by the executive branch. Four executive branch review tribunals had determined that al Janko was lawfully detained pursuant to the AUMF. The contradictory determination by the district court when considering al Janko's habeas petition did not alter his status under the statute. Therefore, the jurisdiction-stripping language of the MCA applied. Habeas counsel for Guantanamo detainees who had lost—or were not actively pursuing—their habeas cases contesting detention brought this action to challenge the government's plan to condition the detainees' right of access to counsel on counsel's agreement to abide by a Memorandum of Understanding (MOU). The court agreed with the petitioners that detainees' access to counsel should continue to be governed by the Protective Order the court issued in 2008 to cover all Guantanamo detainee habeas cases. The Justice Department took the view that the Protective Order expired with respect to a detainee once his case was terminated; that is, finally adjudicated, withdrawn or dismissed. The judge, however, agreed with attorneys for the detainees, who argued that continued privileged access to their clients was necessary to pursue further petitions or otherwise vindicate their clients' rights. The government had represented to the court that the procedures in the MOU were, for all practical purposes, the same as those in the Protective Order. The court, however, discerned a few critical differences, chief among them that the MOU gave military authorities sole discretion to permit counsel to visit their clients, leaving no role for the courts. While the terms of the Protective Order were enforceable through the court, disputes regarding the MOU were to be settled under the "final and unreviewable discretion" of the Commander of Joint Task Force-Guantanamo Bay, with no written obligation to render a timely decision, and it expressly avoided creating "any right or benefit enforceable at law or in equity" for detainees or their lawyers. The court also noted that the Protective Order assumed that counsel for detainees have a "need to know" classified information relevant to their cases, and permits the discussion of such information with clients "to the extent necessary for [their] effective representation." In contrast, the MOU made no such presumption ("need to know" would be determined by the Department of Defense Office of General Counsel) and required the attorneys to justify the need to view their own work product created during the pendency of the habeas case in order to gain access to it. The judge predicted such a requirement would cause lengthy delays and force attorneys to divulge strategy to opposing counsel merely to review their own work. Moreover, the MOU required counsel to seek permission from appropriate government personnel in order to share information with one another. The court explained its view that permitting the Executive to create its own counsel-access provisions would "allow the Government to transgress on the Court's duty to safeguard individual liberty by 'calling the jailer to account.'" The court also expressed puzzlement that the government saw a need to replace the Protective Order, which had functioned smoothly for more than four years without drawing complaints from either side. For its part, the government argued that the vacuum left by the expiration of the Protective Order in inactive cases called for the new rules, which led the court to observe that "when it comes to power, the Government, as much as nature, abhors a vacuum." The court, however, felt its own power was more than sufficient to fill any perceived void, and reinstated the judicially created Protective Order. This case involves detainees who have or are engaged in voluntary hunger strikes and are thus potentially subject to involuntary enteral feeding, a procedure described as painful in which the detainee is strapped to a chair and given a nutritional supplement through a tube inserted through the nose and down the esophagus. Petitioners sought to enjoin the procedure, arguing that they have a constitutionally protected liberty interest in refusing unwanted medical treatment. Two district court judges had dismissed the petitions for lack of jurisdiction, agreeing with the government's position that detainees may not challenge the force-feeding because Congress has precluded suits challenging conditions of detention. The D.C. Circuit reversed. According to the majority of the three-judge panel, when the Supreme Court in Boumediene struck down Section 7 of the MCA insofar as it suspended habeas jurisdiction with respect to persons detained pursuant to the AUMF, the net effect was to return the habeas statute to its previous state, while continuing to deny jurisdiction over non-habeas claims involving Guantanamo detainees. In the D.C. Circuit, the majority held, the habeas corpus statute is a permissible avenue to challenge conditions of confinement, even if the petitions are brought by Guantanamo detainees. Whether Congress had intended to or could constitutionally suspend "non-core" habeas claims of the type under consideration was unnecessary to decide. According to the court, Congress could have passed a new law after Boumediene to restrict Guantanamo habeas petitions to only challenges regarding the legality of the detention itself and not to permit challenges to conditions of detention, but it had not done so. The majority found itself bound by circuit precedent, including the decision in Kiyemba II , to accord jurisdiction. Senior Circuit Judge Williams dissented from this reasoning. He would have found circuit precedent to be less clear on the jurisdictional point, and would have given effect to Congress's apparent intent to restrict legal challenges by detainees involving the conditions of their detention. Turning to the merits of the petition, the circuit court denied petitioners' motion for a preliminary injunction. The petitioners were unlikely to prevail in their case, according to the court, because the force-feeding of detainees could be said to further the government's legitimate penological interest in preserving the lives of persons in its lawful custody and in maintaining security and discipline at the detention facility. The petitioners will have the opportunity to demonstrate to the lower court facts that might establish that the government's interests are reduced or that there are alternative measures the government might adopt to achieve them. Detainees challenged a change in the Guantanamo detention facility visitation policy that they argue impedes their right to access to counsel. The detainees alleged that they have beensubjected to new, more intrusive search procedures prior to and after meetings or phone calls with their attorneys in a manner that conflicted with their religious beliefs. The changed policy also required detainees to travel to a separate part of the camp, which detainees argued imposed special hardship on them due to their weakened physical state resulting from participation in a hunger strike. The district court had ordered the government to reverse the policy change, apparently suspecting that its rationale for instituting the change was a pretext for interfering in the detainees' ability to pursue their habeas cases. The D.C. Circuit reversed, finding that Supreme Court precedent required heightened deference to the military's assessment of its valid security needs. Where the district court had applied a high bar for the government to clear in order to justify policies with a negative impact on detainees' access to counsel, the appellate court treated the challenge as no different from ordinary habeas challenges to conditions of confinement in a regular prison setting. Accordingly, the framework established by the Supreme Court in Turner v. Safley was deemed to govern the circuit court's review, under which prison regulations that "impinge on inmates' constitutional rights" are to be upheld "as long as those regulations are 'reasonably related to legitimate penological interests.'" Assuming without deciding that "the detainees' right to habeas includes the right to representation by counsel and that that right has been burdened by the policies that the detainees challenge," the circuit court looked to the four Turner factors, which are as follows: (1) whether there is a "valid, rational connection between the prison regulation and the legitimate governmental interest put forward to justify it," (2) "whether there are alternative means of exercising the right that remain open to prison inmates," (3) "the impact accommodation of the asserted constitutional right will have on guards and other inmates, and on the allocation of prison resources generally," (4) "the absence of ready alternatives" to the regulation. Explaining that the first factor is the most important and that it is to be applied with wide-ranging deference to the assessment of the prison authorities, the court readily found the new policy was a reasonable means of addressing the contraband problem and efficiently managing security personnel. The second factor could be satisfied because detainees who were unwilling to undergo the searches and travel to a meeting site could communicate with counsel by mail. Accommodating the detainees' desires would have negative impact on the guards' ability to prevent the smuggling of contraband, satisfying the third prong. Finally, in order to satisfy the fourth prong, detainees must present a policy alternative that is an "obvious regulatory alternative that fully accommodates the asserted right while not imposing more than a de minimis cost to the valid penological goal." The detainees' suggestion for returning to the previous policy failed because prison administrators had determined that the old procedures were insufficient; a determination the court declined to second-guess. Although most judicial activity concerning U.S. detention policy has occurred in the D.C. Circuit, a few notable cases have been decided in the Fourth Circuit Court of Appeals. Each case concerned the military detention of a U.S. person within the United States—one a U.S. citizen and the other an alien lawfully admitted into the country on a student visa—following the Executive's determination that the person was an unlawful enemy combatant. In each case, the individual was ultimately transferred to civilian custody, and thereafter tried and convicted for terrorism-related activity. Nonetheless, it is possible that the circuit court's analysis of the scope of Executive detention authority may inform subsequent judicial rulings on the matter. After the Supreme Court vacated an earlier ruling in his favor by the Second Circuit (see above), Jose Padilla filed a new petition in the District Court for the District of South Carolina. The district court granted Padilla's motion for summary judgment and ordered the government to release him from military detention, while suggesting Padilla could be kept in civilian custody if charged with a crime or determined to be a material witness. Padilla's attorneys had based their argument on the dissenting opinion of four Supreme Court Justices, who would have found Padilla's detention barred by the Non-Detention Act, 18 U.S.C. §4001(a), and the language in Hamdi seemingly limiting the scope of detention authority under the AUMF to combatants captured in Afghanistan. The government argued that Padilla's detention was covered under the Hamdi decision's interpretation of the AUMF as an act of Congress authorizing his detention because he is alleged to have attended an Al Qaeda training camp in Afghanistan before traveling to Pakistan and then to the United States. The judge disagreed with the government, finding that more express authority from Congress would be necessary and that the AUMF contains no such authority. Accordingly, the court found Padilla's detention barred by 18 U.S.C. §4001(a). The court also disagreed that the President has inherent authority as Commander-in-Chief of the Armed Forces to determine wartime measures. The Fourth Circuit Court of Appeals reversed, finding that Padilla, although captured in the United States, could be detained pursuant to the AUMF because he had been, prior to returning to the United States, "'armed and present in a combat zone' in Afghanistan as part of Taliban forces during the conflict there with the United States." As the Supreme Court again considered whether to grant review, the government charged Padilla with conspiracy based on evidence unrelated to the original "dirty bomb" plot allegations and petitioned for leave to transfer him from military custody to a federal prison for civilian trial. The Court granted the government permission to transfer Padilla and later denied certiorari. Padilla was found guilty and sentenced to 17 years and three months' imprisonment, the trial court having rejected his motion to dismiss charges against him due to his alleged mistreatment at the hands of the military. In al-Marri , the Fourth Circuit sitting en banc considered whether the AUMF and the law of war permit the detention of a resident alien alleged to have engaged in activities within the United States in support of Al Qaeda, but who had not been part of the conflict in Afghanistan. Four of the nine judges would have held that even if the allegations were true, al-Marri did not fit within the legal category of "enemy combatant" within the meaning of Hamdi , and that the government could continue to hold him only if it charged him with a crime, commenced deportation proceedings, or obtained a material witness warrant in connection with grand jury proceedings (as a majority of the original three-judge panel had found). A plurality of the fractured en banc court, however, found that the AUMF and the law of war give the President the power to detain persons who enter the United States as "sleeper agents" on behalf of Al Qaeda for the purpose of committing hostile and war-like acts such as those carried out on 9/11 (although the judges did not arrive at a common definition of "enemy combatant"). The case was remanded to the district court for further consideration of the evidence to determine whether the government had established that al-Marri was a sleeper agent. The en banc panel also considered the evidentiary burden that the government would be required to fulfill to detain al-Marri as an enemy combatant. In his controlling opinion, Judge Traxler wrote that the lower court had erred in applying the relaxed evidentiary standards of Hamdi to persons captured in the United States. While the Hamdi plurality suggested that hearsay evidence might be sufficient to support detention of a person apprehended in combat zone, Judge Traxler wrote that Hamdi does not establish a "cookie-cutter procedure appropriate for every alleged enemy-combatant, regardless of the circumstances of the alleged combatant's seizure or the actual burdens the government might face in defending the habeas petition in the normal way." However, he recognized that some relaxation of normal procedural safeguards may be warranted if the government demonstrates the need for this relaxation on account of national security interests and an undue burden that would result if it was compelled to produce more reliable evidence. After the Supreme Court granted review, the government brought charges against al-Marri in federal court and asked the Court to dismiss the case as moot and to vacate the decision below, which the Court agreed to do, leaving the applicability of the AUMF to persons captured in the United States uncertain. Al-Marri pled guilty to conspiring to provide material support to terrorists and was sentenced to eight and a half years in prison. This 2012 decision concerned a civil suit brought by Jose Padilla and his mother against current and former government officials based on Padilla's prior military detention as an enemy combatant (Padilla's habeas challenge to military detention is discussed supra ). The petitioners sought a declaration that Padilla's detention was unconstitutional, an order enjoining any future designation as an enemy combatant, and nominal damages. The district court dismissed the suit, and a three-judge circuit panel affirmed. The panel construed all but one of petitioners' claims to ask the judiciary to imply a cause of action for constitutional violations by federal officials (i.e., a Bivens claim). The panel stated that special factors "counsel judicial hesitation in implying causes of action for enemy combatants held in military detention." The Constitution designates the political branches with authority over military affairs, with no comparable role accorded to the judiciary. According to the panel, judicial involvement in such matters would "stray from the traditional subjects of judicial competence," and risk impingement upon the explicit constitutional responsibilities of the political branches. The panel also characterized the judiciary as ill-equipped to administer a Bivens remedy the case before it, as litigation would risk interrupting the military chain of command by requiring members of the Armed Forces and their civilian superiors to testify about each other's decisions and actions, and could also interfere with military and intelligence operations on a wide scale. Finally, the panel found that Padilla had "extensive opportunities to challenge the legal basis for his detention" in prior habeas litigation, and the existence of alternative avenues for protecting his interests counseled against recognition of a Bivens action. In addition to his Bivens claims, Padilla also brought action under the Religious Freedom Restoration Act (RFRA) for alleged burdens to his free exercise of religion that were caused by his military detention. While not going so far as to absolutely rule that RFRA did not apply to persons held in military detention, the panel found that there were "strong reasons for defendants to believe that RFRA did not apply to enemy combatants," and it was appropriate to recognize an immunity defense in the present situation because "it would run counter to basic notions of notice and fair warning to hold that personal liability in such an unsettled area of law might attach." The panel also upheld the lower court's ruling that Padilla lacked standing to seek an order enjoining the government from designating him as an enemy combatant in the future. The panel held that the lower court had properly found that Padilla suffered no real and immediate risk of harm from this designation, as he was in the process of serving a long-term prison sentence due to his criminal conviction for terrorist activities. Any additional reputational harm that Padilla suffered on account of his designation as an enemy combatant was also deemed to be inadequate to provide Padilla with standing. The Supreme Court declined to review the case. Although there are currently no persons detained in the United States under AUMF authority, the plaintiffs in Hedges v. Obama were able to persuade a federal district court judge to issue a preliminary injunction enjoining enforcement of Section 1021(b)(2) of the 2012 NDAA, which includes among "covered persons" subject to detention under the authority of the AUMF: "A person who was a part of or substantially supported al-Qaeda, the Taliban, or associated forces that are engaged in hostilities against the United States or its coalition partners, including any person who has committed a belligerent act or has directly supported such hostilities in aid of such enemy forces." The Hedges plaintiffs were a group of activists and journalists, including U.S. citizens and foreign nationals, who sued the government arguing that the provision caused them to alter their lawful conduct in order to avoid being subject to military detention without trial under the provision. The Obama Administration sought to deflect the lawsuit on the basis that Section 1021 of the 2012 NDAA does "nothing new," but merely reaffirms detention authority conferred by the AUMF as it has been practiced by the executive branch and affirmed by the D.C. Circuit. Accordingly, the government urged the court to declare the plaintiffs to be without standing and to dismiss the action. The court rejected the argument that Section 1021 is merely an affirmation of the AUMF that does not change the law regarding detention, noting that to hold otherwise "would be contrary to basic principles of legislative interpretation that require Congressional enactments to be given independent meaning." The court also noted differences in language describing the scope of application in the two statutes that make the NDAA language seem broader, including the addition of "substantial support" of Al Qaeda and the Taliban and the inclusion of "associated forces" (who might not have had direct involvement in the 2001 terrorist attacks), as well as mention of "direct support of hostilities" engaged in by any such groups against the United States or its coalition partners. Moreover, the court credited the plaintiffs' fears as reasonable and concluded that the statute must also be too vague to satisfy the Fifth Amendment's requirement that a statute provide adequate notice regarding the nature of conduct to be avoided. Given the government's representations that Section 1021 does not add anything to previous law, the court presumed that a preliminary injunction would not cause the government undue burdens. The government moved for reconsideration of the court's opinion with respect to the plaintiffs' standing, stating that "law of war detention" does not apply to persons solely on the basis of independent journalistic activities or independent public advocacy as described by the plaintiffs. The court issued an order clarifying that the injunction applied nationwide. The U.S. Court of Appeals for the Second Circuit granted the government's motion for a stay of the injunction pending appeal and then reversed the lower court's opinion, finding that both the citizen and non-citizen plaintiffs lacked standing to bring the suit in the first place. The appellate court explained that the NDAA provision has no bearing at all on whether U.S. citizens may lawfully be detained pursuant to the AUMF. While the court did find the provision has relevance with respect to non-citizens outside the United States, it held that the non-citizen plaintiffs had failed to establish a sufficient reason to fear that the U.S. government would apprehend them and subject them to military detention. The court viewed the language of Section 1021 of the 2012 NDAA as entirely unambiguous. The alleged contradiction between the provision purporting to reaffirm the AUMF yet adding new criteria not found in the original was deemed to be a clarification as to how the AUMF applies to organizations, and not just persons, deemed responsible for the 9/11 attacks. The court did not agree that its interpretation meant that Section 1021 was no legal consequence. Rather, it explained that the measure clarified what previously had been subject to much debate—whether the Administration could detain those who were part of or substantially supported Al Qaeda, the Taliban, and associated forces under the AUMF. The court further clarified why Sections 1021(d) and 1021(e) are not duplicative. Section 1021(d) states that the provision does not expand or limit the President's authority to detain under the AUMF, and in the court's view, is meant to clarify that the authority to detain those who were part of or who substantially supported the enumerated forces already existed under the AUMF. By contrast, Section 1021(e) "disclaims any statement about existing authority," whatever that authority may be. The Supreme Court declined to review the case. This case was a suit for damages involving two U.S. citizens who were detained by U.S. forces in Iraq as "security internees" after they were accused of conducting illicit arms sales. They asserted they were whistle-blowers and that the accusations were retaliation against them for reporting suspicious activity to the FBI. According to their complaint, they were held in solitary confinement and denied access to counsel, interrogated under severely abusive conditions, and denied due process before a Detainee Status Board. Neither was charged with a crime, and both were eventually released. They brought suit against the Secretary of Defense at the time, Donald Rumsfeld, and other officials they felt bore responsibility for their mistreatment. The district court denied Secretary Rumsfeld's motion to dismiss the complaint, and he appealed. The United States also appealed the district court's rejection of its motion to dismiss on the basis that the Administrative Procedure Act prohibits judicial review of "military authority exercised in the field in time of war or in occupied territory." An appellate panel reversed the decision with respect to the U.S. claim and affirmed the decision with respect to Secretary Rumsfeld. Rehearing en banc was granted and both decisions set aside. On rehearing, the full circuit court agreed with the merits panel that there was no right of action against the United States for activities in Iraq. With respect to the claim against Secretary Rumsfeld and others in the chain of command, the majority framed the question as "whether the federal judiciary should create a right of action for damages against soldiers (and others in the chain of command) who abusively interrogate or mistreat military prisoners, or fail to prevent improper detention and interrogation." Noting that the other appellate courts who have addressed the question answered it in the negative and that the Supreme Court has only rarely allowed new Bivens action, the majority declined to permit the suit to go forward. The majority interpreted Supreme Court precedent to establish a principle that civilian courts should not interfere with the military chain of command without statutory authority. Even assuming that the plaintiffs' constitutional rights were violated and that law prohibiting mistreatment of prisoners—the Detainee Treatment Act and possibly some treaties —were violated, the majority assessed that permitting the lawsuit would "come at an uncertain cost in national security," and declined to find a right of action where relevant statutes failed to provide one. Moreover, even if a right of action were to be created under the circumstances present, liability would not extend to the Secretary of Defense and others far removed from the actual conduct at the heart of the complaint. Three judges dissented from the opinion, arguing that the majority essentially created absolute immunity for members of the military from Bivens civil liability even in cases involving the torture of civilians. Although numerous cases have been brought in federal civilian court involving persons who allegedly engaged in terrorist activity, relatively few involve persons who were captured abroad by U.S. forces during operations against either Al Qaeda or the Taliban, and only one case has been tried in civilian court involving a person involved in the September 11, 2001, terrorist attacks. This section discusses notable rulings made in criminal cases involving Zacharias Moussaoui, who was tried and convicted for his role in the September 11, 2001, terrorist attacks, but was never officially designated as an "enemy combatant"; John Walker Lindh, thus far the only person captured abroad and tried and convicted in federal civilian court for belligerent activities occurring on the Afghan battlefield; and Ahmed Khalfan Ghailani, a suspect in the 1998 African Embassy bombings who was incarcerated at Guantanamo and charged at a military commission, but was later transferred to the Southern District of New York for trial on terrorism charges. Ghailani is the only Guantanamo prisoner to have been transferred for civilian trial in the United States. This section also covers appeals of military commission convictions and a collateral case in which the petitioner sought to enjoin his trial by military commission. Zacharias Moussaoui, a French citizen, was arrested by immigration authorities for overstaying his visa after he raised suspicions at a Minnesota flight school where he was enrolled. Less than a month after he was taken into custody, a group of Al Qaeda terrorists carried out the September 11, 2001, attacks, and Moussaoui was charged in connection with the conspiracy to commit those attacks. On January 7, 2002, after Moussaoui's arraignment, the Department of Justice (DOJ) imposed Special Administrative Measures (SAMs) to prevent his communication with other terrorists. Moussaoui was permitted unmonitored attorney/client and consular communications and mail, and monitored communications with others. The court also issued a protective order under the Classified Information Procedures Act (CIPA; 18 U.S.C. app. 3, §3), which permitted defense counsel to access classified information, but did not permit Moussaoui to receive such information unless the government consented or the judge determined that it was necessary to protect his right to prepare a defense. After a competency hearing in which the judge explained that the lack of personal access to classified information could impede Moussaoui's ability to defend himself without counsel appropriately cleared for access to such information, the judge permitted the defendant to proceed pro se , and appointed the public defenders who had been assigned to the case to act as standby counsel. After Moussaoui refused to cooperate with his appointed lawyers, the judge replaced some of them, but ultimately concluded that Moussaoui was unlikely to approve any court-appointed attorneys, and also held that he was not entitled to unmonitored access to "advisory counsel" of his choice. Despite Moussaoui's rejection of virtually all efforts by standby counsel to assist him, the lawyers continued to file motions on his behalf, including motions seeking relief from the SAMs or to revoke his pro se status on the grounds that he was not in a position to take advantage of exculpatory information in the government's possession. Moussaoui attempted to plead guilty in July 2002, but was unwilling to admit to the facts necessary to support the plea and withdrew it. Moussaoui then sought access to several persons held overseas by the government as enemy combatants who might provide information that would be useful to his defense by testifying that Moussaoui was not involved in the September 11 attacks. (The government had advanced theories that Moussaoui was the intended "20 th hijacker" or pilot of a fifth plane intended to target the White House, whose participation in the actual attack was thwarted due to his incarceration, and that Moussaoui's refusal to provide agents information about the plot that might have prevented the attacks from taking place contributed to the deaths of the several thousand victims, a factor relevant to death penalty eligibility. Moussaoui claimed to be part of a plan for subsequent terrorist operations and to have had no knowledge regarding the September 11 plot.) The government offered to provide redacted summaries of reports presumably based on intelligence interrogations of the enemy combatant witnesses, but the judge rejected the proffered substitutions as possibly unreliable and inadequate to protect Moussaoui's Sixth Amendment right to compulsory process. The government appealed the district court's order requiring the government to make three of the requested enemy combatant witnesses available for deposition to be conducted by remote video. The United States Court of Appeals for the Fourth Circuit affirmed the district court's holding that that the enemy combatants in question could be reached through judicial process (directed at their custodians) for the purpose of providing testimony and that their testimony would be relevant to the case, but reversed the order for depositions and the sanctions the court had imposed for the government's refusal to comply. The appellate court held that substitutions for depositions could be prepared that would provide substantially the same ability to prepare a defense, although it agreed with some of the objections the district court had articulated regarding the government's proposed substitutions. The majority viewed the intelligence reports as possessing adequate indicia of reliability because they were produced through methods designed to produce accurate analyses of foreign intelligence. Consequently, the court remanded the case to the district court with instructions to prepare substitutions for the deposition testimony by a process involving collaboration with the parties, noting that adequate jury instructions would be necessary in some cases to permit the jury to assess the reliability of the evidence. In the meantime, the district court revoked Moussaoui's pro se privilege for his continued submission of improper filings, some of which contained veiled or overt threats, political statements with no relevance to the case, attempts at communicating to persons overseas, and insulting language, despite repeated warnings that such conduct would result in sanctions. After the Supreme Court denied certiorari with respect to the appellate court's ruling on his right to depose enemy combatant witnesses in the custody of the United States, Moussaoui again decided, over his counsel's objections, to plead guilty as an apparent tactic to avoid the death penalty. After a hearing in which Moussaoui demonstrated to the court's satisfaction that he understood a guilty plea would result in forfeiting his right to appeal based on any violation of his constitutional rights that might have occurred prior to the plea, the court accepted his plea. Moussaoui admitted to the government's allegations, including some he had previously denied, and signed the statement of facts supporting the guilty plea, adding the designation of "20 th Hijacker" below his signature. During the sentencing phase, Moussaoui claimed that his mission on September 11 was to have been piloting a commercial airliner into the White House, although statements by enemy combatant witnesses introduced by the government contradicted that claim, along with some other allegations Moussaoui had admitted as true. In the bifurcated sentencing proceeding, the jury found Moussaoui to be eligible to receive the death penalty but declined to impose it, sentencing him instead to life in prison. Just days after receiving his sentence, Moussaoui filed a motion to withdraw his guilty plea, claiming that his understanding of the American legal system had been "completely flawed" and asking for a new trial "[b]ecause I now see that it is possible that I can receive a fair trial ... even with Americans as jurors and that I can have the opportunity to prove that I did not have any knowledge of and was not a member of the plot to hijack planes and crash them into buildings on September 11, 2001." He then appealed the court's denial of his motion for a new trial, arguing among other things that his plea was not voluntary as a matter of law because of district court rulings that violated his constitutional rights, and that it was not knowing because he did not have access to classified information in the government's possession that contradicted the government's theory of the case. Finding that his guilty plea was entered with full knowledge and understanding of its ramifications and that his objections to constitutional claims were waived, the circuit court affirmed. The circuit court reviewed the procedural history regarding Moussaoui's access to classified information because these claims were relevant to the adequacy of the plea and were therefore not waived for purposes of appeal, but reiterated its earlier view that adequate substitutions under CIPA would have protected Moussaoui's rights had the CIPA process not been cut short by the guilty plea. Moreover, it noted that CIPA information had been made available during the sentencing phase for establishing death-eligibility factors, and that not only did Moussaoui make no effort to withdraw his plea upon receiving the information, but he contradicted the supposedly exculpatory statements at trial. Finally, the circuit court rejected Moussaoui's contention that plain error had resulted in the jury's false belief that the only sentencing options available to them were the death penalty or life imprisonment without possibility of parole, in violation of his right to have his sentence decided by the jury, on the basis that Moussaoui had requested the jury be instructed that the sentencing options were limited as part of an apparently successful strategy to avoid the death penalty. John Walker Lindh, a U.S. citizen, was captured in Afghanistan and charged with 10 counts of supplying services to the Taliban under various statutes. He moved to have the charges dismissed, arguing, inter alia that he was entitled to combatant immunity as part of the Taliban. While the judge refused to accept the government's argument that the President's designation of Lindh as an "unlawful combatant" was not subject to second-guessing by the court, he nevertheless concluded that the Taliban is not entitled to combatant immunity under international law and rejected the defense. Lindh was also unsuccessful in his bid to avoid the government's request for a protective order covering unclassified but sensitive information as well as classified information that the government had concluded was subject to discovery by the defendant. At issue was whether the defendant could adequately prepare a defense given the government's proposal to restrict certain information from the government's redacted reports of relevant interviews with detainees held at Guantanamo. Rule 16(d) of the Federal Rules for Criminal Procedure permits the court to restrict discovery with respect to any information for good cause, including cases where the government claims the protection of such information is vital to the national security. The court found good cause to issue a protective order to prohibit the public dissemination of the detainee interview reports, which would serve to prevent Al Qaeda members from learning "the status of, the methods used in, and the information obtained from the ongoing investigation of the detainees." Lindh objected to the order on the basis that it would burden his ability to prepare for trial by requiring the pre-screening of investigators and expert witnesses before he would be permitted to disclose unclassified information to them, which he argued could reveal his defense strategy to the prosecution. The judge found the needs of both parties could be accommodated by amending the proposed order to require investigators or expert witnesses for the defense to sign a memorandum of understanding, under oath, promising not to disclose information provided under the order, rather than requiring pre-screening. Lindh also objected to the proposed protective order because he believed it would impair his ability to use the media to influence public opinion, as he contended the government had done. Noting that the "[d]efendant has no constitutional right to use the media to influence public opinion concerning his case so as to gain an advantage at trial" under either the Sixth Amendment right to a public trial or the public's First Amendment right to a free press, the judge rejected the argument, but cautioned that information that turned out to be relevant and material to the trial as the case progressed might eventually require unsealing to further those rights. Prior to the beginning of the merits phase of the trial, Lindh struck a plea deal with prosecutors, admitting to one count of carrying an explosive during the commission of a felony, and was sentenced to 20 years' imprisonment. Alleged Al Qaeda member Ahmed Khalfan Ghailani was indicted in 1998 and charged with conspiracy to kill Americans abroad in connection with the bombing the United States Embassies in Nairobi, Kenya, and Dar es Salaam, Tanzania. He was arrested in Pakistan in 2004 and turned over to U.S. custody to be held and interrogated at an undisclosed site abroad by Central Intelligence Agency (CIA) officials. In 2006, he was transferred to DOD custody and held as an enemy combatant at Guantanamo. He was charged before a military commission for his role in one of the embassy bombings, but the charges were later withdrawn so that he could be transferred to the Southern District of New York to be tried on the earlier indictment. The transfer occurred in May 2009. Ghailani has since been convicted and sentenced to life imprisonment for his part in the conspiracy. The case has resulted in a number of rulings on constitutional issues that are likely to be pertinent to the debate as to whether to try similar crimes in federal court or before military commissions, including such issues as the right to effective assistance of counsel, the right to a speedy trial, the privilege against self-incrimination and the right to counsel in custodial interrogation, and the consequences of a jury trial. How these issues might be resolved in a military commission or by reviewing courts remains to be seen. A military commission would also have had to resolve the issue of whether crimes committed prior to the 9/11 attacks can properly be charged as war crimes, a highly charged question for which arguments can be made either way, but which appears to be lacking in precedent. After his transfer to New York, Ghailani moved for an injunction or other relief against the Secretary of Defense to prevent the reassignment of the military defense attorneys who had been detailed to serve as his defense counsel before the military commission. Ghailani urged the court to order the government to permit the two officers to act as his appointed counsel in federal court, arguing that depriving him of the assistance of the counsel he had grown to trust amounted to a violation of his Sixth Amendment right to the effective assistance of counsel. The government urged the court to decline to adjudicate the motion or grant relief based on the political question doctrine, arguing that the assignment of military officers to particular duties is the prerogative of the executive branch alone. The judge did not think the political question doctrine prevented his consideration of the matter, since he was not considering the propriety of the reassignment as much as he was assessing the impact of the decision on the defendant's rights, but ultimately denied the motion, holding that an indigent defendant's right to appointed representation does not mean the right to continuous representation by counsel of his choice. Ghailani also filed a motion for dismissal of his indictment based on his claim that the government violated his Sixth Amendment right to a speedy trial. In connection with this motion, Ghailani sought discovery of documents in the government's possession that demonstrate the government delayed his prosecution from 2004 until his transfer to New York for reasons other than national security. Rule 16 of the Federal Rules for Criminal Procedure permits discovery of items "within the government's custody, possession, or control" that are material to the case, excluding documents that were prepared by government attorneys or agents that constitute work product connected to the prosecution. The judge excluded one document specifically requested by the defendant as attorney work product, but approved a more general request for information relating to the reasons behind the timing of Ghailani's transfer for trial based on a Supreme Court ruling that makes the "reason for delay" one part of the test for determining whether charges must be dismissed for failure to provide a speedy trial. The judge defined the scope of "in the government's possession, custody, or control" as reaching beyond the officials of the U.S. Attorney's Office who had worked on the case to include higher-level DOJ officials who were not intimately involved in the case but were involved in the decision about where to prosecute Ghailani. This requirement would not unduly burden the prosecution with unreasonable discovery requirements, according to the court, because the embassy bombing crime had "commanded the attention of the highest levels" of the government long before Ghailani was in American custody. Under these circumstances, high-level officials involved in the important decisions involving Ghailani's treatment can be included within the meaning of "government" in Rule 16. Accordingly, the judge issued an order requiring production of documents held by the DOJ that are material to the case and not otherwise privileged under the rule. The court ultimately denied the speedy trial motion after applying the multi-factor balancing test established by the Supreme Court in Barker v. Wingo , which takes into account the length of the delay, the reason for the delay, the defendant's assertion of the right, and the prejudice to the defendant. The court held that the time Ghailani spent in CIA detention was justified by the need to interrogate him for intelligence purposes, a process that was incompatible with prosecution in federal court. The time between Ghailani's transfer to Guantanamo in 2006 and his transfer to New York in 2009, however, was held insufficient to justify postponement of trial, because the need to prevent the defendant from returning to hostilities was not incompatible with federal prosecution. The aborted military commission prosecution did not justify delay because the government had complete discretion as to where to prosecute the defendant. However, although the Guantanamo portion of the delay was attributable to the government, it was assessed as a "neutral factor" because there was no evidence that its purpose had to do with a "quest for tactical advantage." Because Ghailani was detainable as an "enemy combatant" with or without prosecution, the need to avoid excessive incarceration was not a relevant factor under Barker analysis, either. The court was not persuaded that Ghailani was prejudiced by the delay, and it held there was no violation of his Sixth Amendment rights. Although Ghailani's overseas detention by the CIA did not preclude his prosecution, it did result in the exclusion of a government witness whose identity was uncovered during Ghailani's interrogation and whose cooperation with prosecutors was less than willing. The government having stipulated that any statements Ghailani made to CIA interrogators were coerced, the judge held that the Fifth Amendment's privilege against self-incrimination would permit the government to introduce such witness testimony only if it had proven that the connection between Ghailani's coerced statements and the witness's testimony was sufficiently remote or attenuated to purge the taint of illegality, or if it could establish another basis upon which the testimony could be admitted. The government failed to establish the inevitability of its identification of the witness independent of the defendant's coerced statement, and it did not persuade the judge that the "core application" doctrine applicable to the exclusionary rule in the Fourth Amendment search and seizure context should hold sway in the Fifth Amendment context. Consequently, the court held hearings to examine whether the witness's testimony was truly voluntary; the extent to which the coerced statements played a role in securing the witness's cooperation; and whether the lapse of time between the illegal government action and contact with the witness established a sufficient attenuation to avoid the exclusion of his testimony. The judge ultimately found each of these criteria weighed in favor of the defendant, but the facts leading to this determination remain largely classified. After a jury trial, Ghailani was found guilty of conspiracy to destroy buildings and property of the United States, but not guilty of 284 other counts—one count of murder or attempted murder for each of the Americans killed or injured in the attacks, one count each for the bombing the U.S. embassies in Dar es Salaam, Tanzania, and Nairobi, Kenya, and various other charges related to the bombings. The jury concluded that Ghailani's participation in the property destruction conspiracy was a direct or proximate cause of the death of a person other than a conspirator. After rejecting the defendant's motion for acquittal or a new trial on the property conspiracy charge, which the defense argued was necessary in light of the seemingly inconsistent verdict, the judge sentenced Ghailani to life imprisonment based on the aggravating factor the jury found. The results of Ghailani's trial have fueled the debate over whether military commissions or federal court trials are appropriate in terrorism cases. Some observers view the trial as a demonstration that federal trial courts using the ordinary tools of criminal justice are up to the task of meting out justice to terrorists, while others characterize the outcome as a "near acquittal" that demonstrates the superiority of military commissions. The judge's post-trial opinion denying the defendant's motion for acquittal sheds some light on what may seem to be a curious verdict. Ghailani's defense throughout the trial was that he had been unknowingly duped into carrying out what he thought were innocent acts, but which in hindsight turned out to be acts in furtherance of the bombing conspiracy. The charge of conspiracy to destroy property, however, did not require that the government prove beyond a reasonable doubt that Ghailani was aware of the exact objective and targets of the plot; it merely required proof that Ghailani understood that his activities would very likely result in the bombing of American facilities somewhere, for which the judge agreed there was abundant evidence. The jury was instructed that willful blindness on the part of the accused to the precise objective of the conspiracy would invalidate a defense based on the lack of requisite knowledge, and that conviction was therefore proper if the facts demonstrated that the defendant "was aware of a high probability of the fact in dispute and consciously avoided confirming that fact." In contrast, the charge for participating in the Dar es Salaam embassy bombing required proof that "Ghailani knew that the embassy was a target and that he acted to further that goal." Apparently the jury did not agree that the government's evidence adequately established these elements. Ghailani appealed, arguing that his lengthy pretrial detention by the CIA and then the military should have precluded his trial on speedy trial grounds. He also challenged the district court's jury instruction on "conscious avoidance," which permitted the jury to find that he had the requisite knowledge for a guilty verdict if he purposely avoided confirming the likely objective of the criminal conspiracy. Finally, he argued that, in any event, his life sentence was not commensurate with his conviction on only one of the 286 charges brought against him. The appellate court disagreed, validating the district court's opinions on each point raised. After Salim Hamdan won his earlier habeas case at the Supreme Court, which led the Supreme Court to invalidate the military commission system set up by President Bush, Congress enacted the Military Commission Act of 2006. Hamdan was then charged under the new system with conspiracy and material support of terrorism. In 2008, Salim Hamdan was found guilty of one count of providing material support for terrorism and sentenced to 66 months' imprisonment, but was credited with five years' time served and subsequently returned to Yemen. Despite his release, Hamdan continued his appeal through the system established by the MCA, arguing that his conviction on the material support charge was invalid because the charge was not recognized as a violation of the international law of war at the time he committed it. After determining the appeal was not moot by reason of Hamdan's release, the U.S. Court of Appeals for the D.C. Circuit overturned Hamdan's conviction as contrary to the MCA. In its unanimous opinion, the three-judge panel found that Congress did not intend for the offenses it defined in the MCA to apply retroactively. Because the court agreed that the crime of material support of terrorism did not exist as a war crime under the international law of war at the time the relevant conduct occurred (a requirement under the previously existing military commissions statute), it vacated the decision below of the Court of Military Commissions Review (CMCR), which had unanimously affirmed Hamdan's conviction. The MCA declares that it "codif[ies] offenses that have traditionally been triable by military commissions," and that "because the provisions ... codify offenses that have traditionally been triable under the law of war or otherwise triable by military commission, this subchapter does not preclude trial for offenses that occurred before the date of the enactment.... " Where the CMCR had deferred to Congress in its determination that material support for terrorism, as defined, is a pre-existing violation of the law of war, the D.C. Circuit interpreted the language quoted above as evincing an intent to preclude retroactive enforcement of any offenses in the event Congress was mistaken about their pre-existence, as the court determined was the case with respect to the material support offense. This interpretation was based not only on the plain language of the statute (an interpretation the government brief shared), but also on the canon of constitutional avoidance, which in this case called for a reading that would not require the court to decide whether the offense was retroactive in violation of the Ex Post Facto clause of the Constitution. The government had asserted that ample precedent for the charge of material support for terrorism could be found in analogous charges under the "U.S. common law of war" as practiced in Civil War military commissions and during other conflicts. The court rejected that theory, instead regarding the "U.S. common law of war" as distinct from the international law of war which Congress intended for military commissions to apply. Because the charge of material support has been the most frequently charged of the offenses before military commissions, and because all charges to date have involved conduct that occurred prior to the enactment of the MCA, the effect of the opinion is bound to have an effect on upcoming cases, charging decisions, and possibly opportunities for plea agreements. The court also hinted that other offenses proscribed by the MCA might fall into the retroactive category. To avoid that fate, the court suggested, an offense must be shown to be "based on norms firmly grounded in international law." The government opted not to appeal the decision directly, but instead challenged the ruling indirectly by appealing a different case to the D.C. Circuit en banc . (See Al Bahlul , below). The full circuit court in that case overruled the Hamdan II interpretation of the MCA 2006 as far as it held Congress intended to avoid ex post facto application of offenses defined therein, but otherwise agreed with its invalidation of the offenses of material support of terrorism and solicitation to commit war crimes. In the appeal of the military commission conviction in Al Bahlul, the government essentially asked the three-judge panel of the appellate court to overturn his conviction on the basis that Hamdan II provided binding precedent on the question presented; namely, the validity of convictions for conspiracy, solicitation, and material support of terrorism for conduct preceding passage of the Military Commissions Act (MCA) in 2006. ( Hamdan II did not address conspiracy or solicitation, but the government conceded that these offenses do not constitute universally recognized violations of the international law of war.) The government sought this ruling to facilitate en banc consideration of the D.C. Circuit's precedential ruling concerning the scope of crimes recognized as cognizable offenses of the laws of war under the MCA. The court complied with the request in a per curiam order, invalidating the second military commission conviction and thereby enabling it to work its way through the appeals process to the D.C. Circuit. Al Bahlul, formerly Osama bin Laden's public relations director and personal secretary, was convicted in 2009 by a military commission of "(1) providing material support and resources, including himself to al Qaeda ...; (2) conspiring with Osama bin Laden and other members and associates of al Qaeda to, inter alia, commit murder, attack civilians and civilian objects in violation of the law of war, commit terrorism, and provide material support for terrorism with exceptions; and (3) soliciting various persons to commit these same offenses in violation of" the MCA. The Court of Military Commission Review (CMCR) upheld the conviction, finding that the offenses for which Al Bahlul was charged were violations of the law of war when committed. Following the MCA appellate process, Al Bahlul's attorneys appealed to the D.C. Circuit. Although the government agreed with Al Bahlul's defense counsel that Hamdan II required reversal of Al Bahlul's conviction, it made clear that it did not agree that Hamdan II was correctly decided. In order to keep its options open for appeal, the government set forth in its brief why it thought the D.C. Circuit wrongly decided Hamdan II . First, the government argued, the Hamdan II panel's conclusion that Congress did not intend to authorize military commissions to penalize pre-2006 conduct unless it constituted a clearly recognized violation of international law does not comport with the plain language of the MCA or Congress's stated intent. Second, the government viewed as faulty the panel's interpretation of Article 21 of the Uniform Code of Military Justice (UCMJ), which the court held to restrict the jurisdiction of military commissions for pre-2006 conduct to well-established violations of the law of war. Rather, the government argued that Article 21 was intended to preserve jurisdiction of military commissions over the types of crimes the United States has historically considered subject to such trials as violations of the U.S. common law of war. Because the United States has charged such crimes before military commissions at least since the Civil War, the government disagreed that their retroactive inclusion in the MCA would pose any Ex Post Facto clause problems. The D.C. Circuit granted the government's petition for rehearing en banc. Assuming without deciding that the Ex Post Facto Clause applies to detainees held at Guantanamo, the full court overruled the Hamdan II panel's holding that Congress intended to avoid violating it. Rather, the court said, Congress "unambiguously authorize[d] Bahlul's prosecution for the charged offenses based on pre–2006 conduct." There being no ambiguity, the court did not have recourse to the canon of constitutional avoidance, under which a court will construe a statute in a manner that avoids requiring a ruling on a constitutional question. However, because Bahlul did not clearly raise any ex post facto challenges during his appeal before the CMCR, the majority determined that its own review would be conducted under a "plain error" standard, meaning that the conviction would be overturned only if the court were to find that "a miscarriage of justice would otherwise result." Applying this standard, the court found that the CMCR committed plain error with respect to the convictions on the charges of material support and solicitation, but that the conviction for conspiracy was not plainly erroneous. The court found the conspiracy charge was not plainly erroneous based on two independent, alternative rationales. First, the conduct underlying the charge could have been charged at the time under 18 U.S.C. §2332(b), which criminalizes any attempt or conspiracy to kill a national of the United States abroad. It does not plainly violate the Ex Post Facto Clause to try a pre-existing federal criminal offense by military commission, the court found, and any difference between the elements of the offense under 18 U.S.C. §2332(b) and the conspiracy offense under the MCA would not have seriously affected the fairness, integrity or public reputation of judicial proceedings. Second, the court cited historical high profile military commission trials for conspiracies to demonstrate that it is not obvious that conspiracy was not already triable by military commission under the UCMJ when the conduct occurred. The court remanded the appeal to the original three-judge panel to decide the remaining challenges to the conspiracy conviction: (1) whether Congress exceeded its Article I, §8 authority by defining crimes triable by military commission to include conduct that does not violate the international law of war; (2) whether Congress violated Article III by vesting the executive branch with authority to try crimes that are not violations of the international law of war; (3) whether the conviction violates the First Amendment; and (4) whether the 2006 MCA violates the equal protection element of the Due Process Clause of the Fifth Amendment by discriminating against aliens. There were four concurring opinions, three of which dissented in part. Judge Henderson, who wrote the majority opinion, explained in a separate concurrence that she would have found the Ex Post Facto Clause inapplicable to Bahlul. Judge Rogers dissented with respect to the affirmance of the conspiracy charge on the basis that inchoate conspiracy is not a violation of the international law of war. The three partial dissents objected to the use of the plain error standard because it does not produce a definitive answer to the questions raised. Judge Brown and Judge Kavanaugh agreed with the outcome but differed on the rationale for affirming the conspiracy conviction. They also would have addressed the remaining issues rather than remanding them. The U.S. Court of Appeals for the Ninth Circuit declined to put a stop to the military commission trial of Abd Al Rahim Hussein Al-Nashiri for his alleged role in three terrorist plots, including the 2000 bombing of the USS Cole in a Yemeni harbor. Agreeing with the court below, the appellate panel found that federal courts have no jurisdiction to entertain pre-trial challenges to the military commissions' jurisdiction because Congress barred such challenges when it passed Section 7 of the Military Commissions Act of 2006 (MCA). Al-Nashiri is a Saudi national who is currently detained at Guantanamo Bay and has been charged before a military commission with conspiring to commit terrorism and murder in violation of the law of war in connection with the Cole bombing, an attempt to bomb the USS The Sullivans in 2000, and the 2002 bombing of a French vessel, M/V Limburg . He brought suit in federal district court against the Convening Authority for the Office of Military Commissions claiming that the charges contravened the MCA requirement that offenses be committed "in the context of and associated with hostilities." Al-Nashiri argues that since neither the President nor Congress had certified the existence of an armed conflict in Yemen prior to 2003, the charges against him are unlawful as a matter of law. In that case, he argues, the Convening Authority exceeded his authority by bringing the charges. He asked the court for a declaratory judgment stating that "neither the President nor Congress certified the existence of an armed conflict subject to the laws of war in Yemen prior to September 2003" and that the defendant "acted beyond his authority and in violation of the constitution by issuing orders to convene a military commission with the power to recommend the sentence of death for allegations relating to" the three incidents. The government moved to dismiss for lack of jurisdiction, which the district court granted. On appeal, Al-Nashiri renewed his contention that MCA Section 7 is unconstitutional. Following an earlier decision in a different case, however, the appellate court disagreed that the Supreme Court's decision in Boumediene v. Bush , which held that the revocation of the writ of habeas corpus (in the first paragraph of Section 7) was unconstitutional, also invalidated the second paragraph enacted by Section 7. Al-Nashiri argued in the alternative that this provision does not apply to his lawsuit because he named the Convening Authority in his personal capacity rather than his capacity as an agent of the government. He also argued that the initial referral of charges is not an "aspect of trial" such that its challenge would be barred. The court of appeals disagreed, noting that the relief sought would not help the petitioner much unless it applied to the new Convening Authority and the rest of the government. Moreover, an error in the exercise of delegated authority does not bring an action outside the scope of an official's capacity. The second argument was dismissed on the basis of plain text reading, as was a third argument based on legislative history. The appellate court noted that the military commissions have jurisdiction to determine their own jurisdiction pursuant to statute. In fact, the court noted, the military judge has already held that the issue of the existence of hostilities is a question of fact and an element of proof that must be established by the government at trial. Al-Nashiri will be able to contest the military commission's jurisdiction over his alleged crimes at the military commission and, if convicted, on appeal. Although the political branches of government have been primarily responsible for shaping U.S. wartime detention policy in the conflict with Al Qaeda and the Taliban, the judiciary has also played a significant role in clarifying elements of the rights and privileges owed to detainees under the Constitution and existing federal statutes and treaties. These rulings may have long-term consequences for U.S. detention policy, both in the conflict with Al Qaeda and the Taliban and in future armed conflicts. Judicial decisions concerning the meaning and effect of existing statutes and treaties may compel the executive branch to modify its current practices to conform with judicial opinion. For example, judicial opinions concerning the scope of detention authority conferred by the AUMF may inform executive decisions as to whether grounds exist to detain an individual suspected of involvement with Al Qaeda or the Taliban. Judicial decisions concerning statutes applicable to criminal prosecutions in Article III courts or military tribunals may influence executive determinations as to the appropriate forum in which to try detainees for criminal offenses. Judicial rulings may also invite response from the legislative branch, including consideration of legislative proposals to modify existing authorities governing U.S. detention policy. The 2012 NDAA, for example, contains provisions which arguably codify aspects of existing jurisprudence regarding U.S. authority to detain persons in the conflict with Al Qaeda. Judicial activity with respect to the present armed conflict may also influence legislative activity in future hostilities. For example, Congress may look to judicial rulings interpreting the meaning and scope of the 2001 AUMF for guidance when drafting legislation authorizing the Executive to use military force in some future conflict. While the Supreme Court has issued definitive rulings concerning certain issues related to wartime detainees, many other issues related to the capture, treatment, and trial of suspected enemy belligerents are either the subject of ongoing litigation or are likely to be addressed by the judiciary. Accordingly, the courts appear likely to play a significant role in shaping U.S. policies relating to enemy belligerents in the foreseeable future. | As part of the conflict with Al Qaeda and the Taliban, the United States has captured and detained numerous persons believed to have been part of or associated with enemy forces. Over the years, federal courts have considered a multitude of petitions by or on behalf of suspected belligerents challenging aspects of U.S. detention policy. Although the Supreme Court has issued definitive rulings concerning several legal issues raised in the conflict with Al Qaeda and the Taliban, many others remain unresolved, with some the subject of ongoing litigation. This report discusses major judicial opinions concerning suspected enemy belligerents detained in the conflict with Al Qaeda and the Taliban. The report addresses all Supreme Court decisions concerning enemy combatants. It also discusses notable circuit court opinions addressing issues of ongoing relevance. In particular, it summarizes notable decisions which have (1) addressed whether the Executive may lawfully detain only persons who are "part of" Al Qaeda, the Taliban, and affiliated groups, or also those who provide support to such entities in their hostilities against the United States and its allies; (2) adopted a functional approach for assessing whether a person is "part of" Al Qaeda; (3) decided that a preponderance of evidence standard is appropriate for detainee habeas cases, but suggested that a lower standard might be constitutionally permissible, and instructed courts to assess the cumulative weight of evidence rather than each piece of evidence in isolation; (4) determined that Guantanamo detainees have a limited right to challenge their proposed transfer to foreign custody, but denied courts the authority to order detainees released into the United States; (5) held that the constitutional writ of habeas does not extend to noncitizen detainees held at U.S.-operated facilities in Afghanistan; and (6) determined that Guantanamo detainees may challenge conditions of their detention. Finally, the report discusses a few criminal cases involving persons who were either involved in the 9/11 attacks or were captured abroad by U.S. forces or allies during operations against Al Qaeda, the Taliban, and associated entities, as well as reviews of military commission cases in federal appellate courts. For over a decade, the primary legal authority governing the detention of enemy belligerents in the conflict with Al Qaeda was the 2001 Authorization for Use of Military Force ("AUMF," P.L. 107-40). In December 2011, Congress passed the National Defense Authorization Act for FY2012 ("2012 NDAA," P.L. 112-81), which contains a provision that is largely intended to codify the current understanding of the detention authority conferred by the AUMF, as has been interpreted and applied by the Executive and the D.C. Circuit. In any event, the act does not address many of the legal issues involving wartime detention that have not been squarely resolved by the Supreme Court. Among other things, these unresolved issues include the precise scope of the Executive's wartime detention authority, including the circumstances in which U.S. citizens may be detained; the degree to which noncitizens (or in one case, U.S. citizens) held abroad are entitled to protections under the Constitution; the authority of federal habeas courts to compel the release into the United States of detainees determined to be unlawfully held; and the ability of detainees to receive advance notice and to challenge their proposed transfer to foreign custody. Several rulings addressed in this report are discussed in greater detail in other CRS products, including CRS Report RL33180, Enemy Combatant Detainees: Habeas Corpus Challenges in Federal Court, by [author name scrubbed] and [author name scrubbed]; CRS Report RL34536, Boumediene v. Bush: Guantanamo Detainees' Right to Habeas Corpus, by [author name scrubbed]; CRS Report RS21884, The Supreme Court 2003 Term: Summary and Analysis of Opinions Related to Detainees in the War on Terrorism, by [author name scrubbed]; and CRS Report R42337, Detention of U.S. Persons as Enemy Belligerents, by [author name scrubbed]. |
This is an outline of the Electronic Communications Privacy Act (ECPA). ECPA consists of three parts. The first, sometimes referred to as Title III, outlaws the unauthorized interception of wire, oral, or electronic communications. It also establishes a judicial supervised procedure to permit such interceptions for law enforcement purposes. The second, the Stored Communications Act, focuses on the privacy of, and government access to, stored electronic communications. The third creates a procedure for governmental installation and use of pen registers as well as trap and trace devices. It also outlaws such installation or use except for law enforcement and foreign intelligence investigations. Prohibitions : In Title III, ECPA begins the proposition that unless provided otherwise, it is a federal crime to engage in wiretapping or electronic eavesdropping; to possess wiretapping or electronic eavesdropping equipment; to use or disclose information obtained through illegal wiretapping or electronic eavesdropping; or to disclose information secured through court-ordered wiretapping or electronic eavesdropping, in order to obstruct justice. Wiretapping : First among these is the ban on illegal wiretapping and electronic eavesdropping that covers: (1) any person who (2) intentionally (3) intercepts, or endeavors to intercept (4) wire, oral, or electronic communications (5) by using an electronic, mechanical or other device, (6) unless the conduct is specifically authorized or expressly not covered, e.g. (a) one of the parties to the conversation has consent to the interception, (b) the interception occurs in compliance with a statutorily authorized (and ordinarily judicially supervised) law enforcement or foreign intelligence gathering interception, (c) the interception occurs as part of providing or regulating communication services, (d) certain radio broadcasts, and (e) in some places, spousal wiretappers. Unlawful Disclosure : Title III has three disclosure offenses. The first is a general prohibition focused on the products of an unlawful interception: (1) any person [who] (2) intentionally (3) discloses or endeavors to disclose to another person (4) the contents of any wire, oral, or electronic communication (5) having reason to know (6) that the information was obtained through the interception of a wire, oral, or electronic communication (7) in violation of 18 U.S.C. 2511(1), (8) is subject to the same sanctions and remedies as the wiretapper or electronic eavesdropper. When the illegally secured information relates to a matter of usual public concern, the First Amendment precludes a prosecution for disclosure under §2511(c). Moreover, the legislative history indicates that Congress did not intend to punish the disclosure of intercepted information that is public knowledge. Finally, the results of electronic eavesdropping authorized under Title III may be disclosed and used for law enforcement purposes and for testimonial purposes. Title III makes it a federal crime to disclose intercepted communications under two other circumstances. It is a federal crime to disclose, with an intent to obstruct criminal justice, any information derived from lawful police wiretapping or electronic eavesdropping. A third disclosure proscription applies only to electronic communications service providers "who intentionally divulge the contents of the communication while in transmission" to anyone other than sender and intended recipient. Violators would presumably be exposed to criminal liability under the general disclosure proscription and to civil liability. Unlawful Use : The prohibition on the use of information secured from illegal wiretapping or electronic eavesdropping mirrors its disclosure counterpart: (1) any person [who] (2) intentionally (3) uses or endeavors to use to another person (4) the contents of any wire, oral, or electronic communication (5) having reason to know (6) that the information was obtained through the interception of a wire, oral, or electronic communication (7) in violation of 18 U.S.C. 2511(1), (8) is subject to the same sanctions and remedies as the wiretapper or electronic eavesdropper. The criminal and civil liability that attend unlawful use of intercepted communications in violation of paragraph 2511(1)(d) are the same as for unlawful disclosure in violation of paragraphs 2511(1)(c) or 2511(1)(e), or for unlawful interception under paragraphs 2511(1)(a) or 2511(1)(b). Possession of Intercept Devices : The proscriptions for possession and trafficking in wiretapping and eavesdropping devices are even more demanding than those that apply to the predicate offense itself. There are exemptions for service providers, government officials and those under contract with the government, but there is no exemption for equipment designed to be used by private individuals, lawfully but surreptitiously. Government Access : Title III exempts federal and state law enforcement officials from its prohibitions on the interception of wire, oral, and electronic communications under three circumstances: (1) pursuant to or in anticipation of a court order, (2) with the consent of one of the parties to the communication; and (3) with respect to the communications of an intruder within an electronic communications system. To secure a Title III interception order as part of a federal criminal investigation, a senior Justice Department official must approve the application for the court order authorizing the interception of wire or oral communications. The procedure is only available where there is probable cause to believe that the wiretap or electronic eavesdropping will produce evidence of one of a long, but not exhaustive, list of federal crimes, or of the whereabouts of a "fugitive from justice" fleeing from prosecution of one of the offenses on the predicate offense list. Any federal prosecutor may approve an application for a court order under section 2518 authorizing the interception of email or other electronic communications and the authority extends to any federal felony rather than more limited list of federal felonies upon which a wiretap or bug must be predicated. At the state level, the principal prosecuting attorney of a state or any of its political subdivisions may approve an application for an order authorizing wiretapping or electronic eavesdropping based upon probable cause to believe that it will produce evidence of a felony under the state laws covering murder, kidnaping, gambling, robbery, bribery, extortion, drug trafficking, or any other crime dangerous to life, limb or property. State applications, court orders and other procedures must at a minimum be as demanding as federal requirements. Applications for a court order authorizing wiretapping and electronic surveillance must include the identity of the applicant and the official who authorized the application; a full and complete statement of the facts including details of the crime; a particular description of the nature, location and place where the interception is to occur, a particular description of the communications to be intercepted, the identities (if known) of the person committing the offense and of the persons whose communications are to be intercepted; a full and complete statement of the alternative investigative techniques used or an explanation of why they would be futile or dangerous; a statement of the period of time for which the interception is to be maintained and if it will not terminate upon seizure of the communications sought, a probable cause demonstration that further similar communications are likely to occur; a full and complete history of previous interception applications or efforts involving the same parties or places; in the case of an extension, the results to date or explanation for the want of results; and any additional information the judge may require. Before issuing an order authorizing interception, the court must find: probable cause to believe that an individual is, has or is about to commit one or more of the predicate offenses; probable cause to believe that the particular communications concerning the crime will be seized as a result of the interception requested; that normal investigative procedures have been or are likely to be futile or too dangerous; and probable cause to believe that the facilities from which, or the place where, the wire, oral, or electronic communications are to be intercepted are being used, or are about to be used, in connection with the commission of such offense, or are leased to, listed in the name of, or commonly used by such person. Subsections 2518(4) and (5) demand that any interception order include the identity (if known) of the persons whose conversations are to be intercepted; the nature and location of facilities and place covered by the order; a particular description of the type of communication to be intercepted and an indication of the crime to which it relates; the individual approving the application and the agency executing the order; the period of time during which the interception may be conducted and an indication of whether it may continue after the communication sought has been seized; an instruction that the order shall be executed; as soon as practicable, and so as to minimize the extent of innocent communication seized; and upon request, a direction for the cooperation of communications providers and others necessary or useful for the execution of the order. The court orders remain in effect only as long as required but not more than 30 days. After 30 days, the court may grant 30 day extensions subject to the procedures required for issuance of the original order. During that time the court may require progress reports at such intervals as it considers appropriate. Intercepted communications are to be recorded and the evidence secured and placed under seal (with the possibility of copies for authorized law enforcement disclosure and use) along with the application and the court's order. Within 90 days of the expiration of the order, those whose communications have been intercepted are entitled to notice, and evidence secured through the intercept may be introduced into evidence with 10 days' advance notice to the parties. Title III also describes conditions under which information derived from a court ordered interception may be disclosed or otherwise used. It permits disclosure and use for official purposes by: other law enforcement officials including foreign officials; federal intelligence officers to the extent that it involves foreign intelligence information; other American or foreign government officials to the extent that it involves the threat of hostile acts by foreign powers, their agents, or international terrorists. It also allows witnesses testifying in federal or state proceedings to reveal the results of a Title III tap, provided the intercepted conversation or other communication is not privileged. Consequences of a Violation : Criminal Penalties : Interception, use, or disclosure in violation of Title III is generally punishable by imprisonment for not more than five years and/or a fine of not more than $250,000 for individuals and not more than $500,000 for organizations. In addition to exemptions previously mentioned, Title III provides a defense to criminal liability based on good faith. Civil Liability : Victims of a violation of Title III may be entitled to equitable relief, damages (equal to the greater of actual damages, $100 per day of violation, or $10,000), punitive damages, reasonable attorney's fees and reasonable litigation costs. A majority of federal courts hold that governmental entities other than the United States may be liable for violations of §2520 and that law enforcement officers enjoy a qualified immunity from suit under §2520. The cause of action created in §2520 is subject to a good faith defense. Efforts to claim the defense by anyone other than government officials or someone working at their direction have been largely unsuccessful. Finally, the USA PATRIOT Act authorizes a cause of action against the United States for willful violations of Title III, the Foreign Intelligence Surveillance Act, or the provisions governing stored communications in 18 U.S.C. 2701-2712. Successful plaintiffs are entitled to the greater of $10,000 or actual damages, and reasonable litigation costs. Administrative and Professional Disciplinary Action: Upon a judicial or administrative finding of a Title III violation suggesting possible intentional or willful misconduct on the part of a federal officer or employee, the federal agency or department involved may institute disciplinary action. It is required to explain to its Inspector General's office if it declines to do so. Attorneys who engage in unlawful wiretapping or electronic eavesdropping remain subject to professional discipline in every jurisdiction. Courts and bar associations have had varied reactions to lawful wiretapping or electronic eavesdropping by members of the bar. Exclusion of Evidence : When the Title III prohibits disclosure, the information is inadmissible as evidence before any federal, state, or local tribunal or authority. Individuals whose conversations have been intercepted or against whom the interception was directed have standing to claim the benefits of the §2515 exclusionary rule through a motion to suppress. Section 2518(10)(a) bars admission as long as the evidence is the product of (1) an unlawful interception, (2) an interception authorized by a facially insufficient court order, or (3) an interception executed in manner substantially contrary to the order authorizing the interception. Mere technical noncompliance is not enough; the defect must be of a nature that substantially undermines the regime of court-supervised interception for law enforcement purposes. Prohibitions : The SCA has two sets of proscriptions: a general prohibition and a second applicable to only certain communications providers. The general proscription makes it a federal crime to: (1) intentionally (2) either (a) access without authorization or (b) exceed an authorization to access (3) a facility through which an electronic communication service is provided (4) and thereby obtain, alter, or prevent authorized access to a wire or electronic communication while it is in electronic storage in such system. Section 2701's prohibitions yield to several exceptions and defenses. First, the section itself declares that: Subsection (a) of this section does not apply with respect to conduct authorized—(1) by the person or entity providing a wire or electronic communications service; (2) by a user of that service with respect to a communication of or intended for that user; or (3) in section 2703 [requirements for government access], 2704 [backup preservation] or 2518 [court ordered wiretapping or electronic eavesdropping] of this title. Second, there are the good faith defenses provided by section 2707. Third, there is the general immunity from civil liability afforded providers under subsection 2703(e). A second set of prohibitions appears in section 2702 and supplements those in section 2701. Section 2702 bans the disclosure of the content of electronic communications and records relating to them by those who provide the public with electronic communication service or remote computing service. The section forbids providers to disclose the content of certain communications to anyone or to disclose related records to governmental entities. Section 2702 comes with its own set of exceptions which permit disclosure of the contents of a communication: (1) to an addressee or intended recipient of such communication or an agent of such addressee or intended recipient; (2) as otherwise authorized in section 2517 [relating to disclosures permitted under Title III], 2511(2)(a)[relating to provider disclosures permitted under Title III for protection of provider property or incidental to service], or 2703 [relating to required provider disclosures pursuant to governmental authority] of this title; (3) with the lawful consent of the originator or an addressee or intended recipient of such communication, or the subscriber in the case of remote computing service; (4) to a person employed or authorized or whose facilities are used to forward such communication to its destination; (5) as may be necessarily incident to the rendition of the service or to the protection of the rights or property of the provider of that service; (6) to the National Center for Missing and Exploited Children, in connection with a report submitted thereto under section 227 of the Victims of Child Abuse Act of 1990; (7) to a law enforcement agency—(A) if the contents—(i) were inadvertently obtained by the service provider; and (ii) appear to pertain to the commission of a crime; or (8) to a federal, state, or local government entity, if the provider, in good faith, believes that an emergency involving danger of death or serious physical injury to any person requires disclosure without delay of communications relating to the emergency. The record disclosure exceptions are similar. Government Access : The circumstances and procedural requirements for law enforcement access to stored wire or electronic communications and transactional records are less demanding than those under Title III. They deal with two kinds of information—often in the custody of the communications service provider rather than of any of the parties to the communication—communications records and the content of electronic or wire communications. The Stored Communications Act provides two primary avenues for law enforcement access: permissible provider disclosure (section 2702) and required provided access (section 2703). As noted earlier in the general discussion of section 2702, a public electronic communication service (ECS) provider or a public remote computing service (RCS) provider may disclose the content of a customer's communication without the consent of a communicating party to a law enforcement agency in the case of inadvertent discovery of information relating to commission of a crime, or to any government entity in an emergency situation. ECS and RCS providers may also disclose communications records to any governmental entity in an emergency situation. Federal, state, and local agencies, regardless of the nature of their missions, all qualify as governmental entities for purposes of section 2702. Section 2702 authorizes voluntary disclosure. Section 2703 speaks to the circumstances under which ECS and RCS providers may be required to disclose communications content and related records. Section 2703 distinguishes between recent communications and those that have been in electronic storage for more than 180 days. The section insists that government entities resort to a search warrant to compel providers to supply the content of wire or electronic communications held in electronic storage for less than 180 days. It permits them to use a warrant, subpoena, or a court order authorized in subsection 2703(d) to force content disclosure with respect to communications held for more than 180 days. A subsection 2703(d) court order may be issued by a federal magistrate or by a judge qualified to issue an order under Title III. It need not be issued in the district in which the provider is located. The person whose communication is disclosed is entitled to notice, unless the court authorizes delayed notification because contemporaneous notice might have an adverse impact. Government supervisory officials may certify the need for delayed notification in the case of a subpoena. Subsection 2703(d) authorizes issuance of an order when the governmental entity has presented specific and articulable facts sufficient to establish reasonable grounds to believe that the contents are relevant and material to an ongoing criminal investigation. Some courts have held that this "reasonable grounds" standard is a Terry standard, a less demanding standard than "probable cause," and that under some circumstances this standard may be constitutionally insufficient to justify government access to provider held email. A Sixth Circuit panel has held that the Fourth Amendment precludes government access to the content of stored communications (email) held by service providers in the absence of a warrant, subscriber consent, or some other indication that the subscriber has waived his or her expectation of privacy. Where the government instead secures access through a subpoena or court order as section 2703 permits, the evidence may be subject to both the Fourth Amendment exclusionary rule and the exceptions to the rule. The SCA has two provisions which require providers to save customer communications at the government's request. One is found in subsection 2703(f). It requires ECS and RCS providers to preserve "records and other evidence in its possession," at the request of a governmental entity pending receipt of a warrant, court order, or subpoena. Whether providers are bound to preserve emails and other communications that come into their possession both before and after receipt of the request is unclear. The second preservation provision is more detailed. It permits a governmental entity to insist that providers preserve backup copies of the communications covered by a subpoena or subsection 2703(d) court order. It gives subscribers the right to challenge the relevancy of the information sought. It might also be read to require the preservation of the content of communications received by the provider both before and after receipt of the order, but the requirement that copies be made within two days of receipt of the order seems to preclude such an interpretation. Section 2703 provides greater protection to communication content than to provider records relating to those communications. Under subsection 2703(c), a governmental entity may require a ECS or RCS provider to disclose records or information pertaining to a customer or subscriber—other than the content of a communication—under a warrant, a court order under subsection 2703(d), or with the consent of the subject of the information. An administrative, grand jury or trial subpoena is sufficient, however, for a limited range of customer or subscriber related information. The customer or subscriber need not be notified of the record disclosure in either case. The district courts have been divided for some time over the question of what standard applies when the government seeks cell phone location information from a provider, either current or historical. The Third Circuit has held that while issuance of an order under subsection 2703(d) does not require a showing of probable cause as a general rule, the circumstances of a given case may require it. In United States v. J ones , five members of the Supreme Court seemed to suggest that a driver has a reasonable expectation that authorities must comply with the demands of the Fourth Amendment before acquiring access to information that discloses the travel patterns of his car over an extended period of time. There, the Court unanimously agreed that the agents' attachment of a tracking device to Jones' car and long-term capture of the resulting information constituted a Fourth Amendment search. For four Justices, placement of the device constituted a physical intrusion upon a constitutionally protected area. For four others, long term tracking constituted a breach of Jones' reasonable expectation of privacy. For the ninth Justice, the activity constituted a Fourth Amendment search under either rationale. It remains to be seen whether the Supreme Court's decision in Jones will contribute to resolution of the issue. Consequences : Breaches of the unauthorized access prohibitions of section 2701 expose offenders to possible criminal, civil, and administrative sanctions. Violations committed for malicious, mercenary, tortious or criminal purposes are punishable by imprisonment for not more than five years (not more than 10 years for a subsequent conviction) and/or a fine of not more than $250,000 (not more than $500,000 for organizations); lesser transgressions, by imprisonment for not more than one year (not more than five years for a subsequent conviction) and/or a fine of not more than $100,000. Victims of a violation of subsection 2701(a) have a cause of action for equitable relief, reasonable attorneys' fees and costs, and damages equal to the amount of any offender profits added to the total of the victim's losses (but not less than $1,000 in any event). Violations by the United States may give rise to a cause of action and may result in disciplinary action against offending officials or employees under the same provisions that apply to U.S. violations of Title III, Unlike violations of Title III, however, there is no statutory prohibition on disclosure or use of the information through a violation of section 2701; nor is there a statutory rule for the exclusion of evidence as a consequence of a violation. Yet, violations of SCA, which also constitute violations of the Fourth Amendment, will trigger both the Fourth Amendment exclusionary rule and the exceptions to that rule. No criminal penalties attend a violation of voluntary provider disclosure prohibitions of section 2702. Yet, ECS and RCS providers—unable to claim the benefit of one of the section's exceptions, of the good faith defense under subsection 2707(e), or of the immunity available under subsection 2703(e)—may be liable for civil damages, costs and attorneys' fees under section 2707 for any violation of section 2702. Prohibitions : A trap and trace device identifies the source of incoming calls, and a pen register indicates the numbers called from a particular instrument. Since they did not allowed the user to overhear the "contents" of the phone conversation or to otherwise capture the content of a communication, they were not considered interceptions within the reach of Title III prior to the enactment of ECPA. Although Congress elected to expand the definition of interception, it chose to regulate these devices beyond the boundaries of Title III for most purposes. Nevertheless, the Title III wiretap provisions apply when, due to the nature of advances in telecommunications technology, pen registers and trap and trace devices are able to capture wire communication "content." Subsection 3121(a) outlaws installation or use of a pen register or trap and trace device, except under one of seven circumstances: (1) pursuant to a court order issued under sections 3121-3127; (2) pursuant to a Foreign Intelligence Surveillance Act (FISA) court order; (3) with the consent of the user; (4) when incidental to service; (5) when necessary to protect users from abuse of service; (6) when necessary to protect providers from abuse of service; or (7) in an emergency situation. Government Access : Federal government attorneys and state and local police officers may apply for a court order authorizing the installation and use of a pen register and/or a trap and trace device upon certification that the information that it will provide is relevant to a pending criminal investigation. The order may be issued by a judge of "competent jurisdiction" over the offense under investigation, including a federal magistrate judge. Senior Justice Department or state prosecutors may approve the installation and use of a pen register or trap and trace device prior to the issuance of court authorization in emergency cases that involve either an organized crime conspiracy, an immediate danger of death or serious injury, a threat to national security, or a serious attack on a "protected computer." Emergency use must end within 48 hours, or sooner if an application for court approval is denied. Federal authorities have applied for court orders, under the Stored Communications Act (18 U.S.C. 2701-2712) and the trap and trace authority of 18 U.S.C. 3121-3127, seeking to direct communications providers to supply them with the information necessary to track cell phone users in conjunction with an ongoing criminal investigation. Thus far, their efforts have met with mixed success. Consequences : The use or installation of pen registers or trap and trace devices by anyone other than the telephone company, service provider, or those acting under judicial authority is a federal crime, punishable by imprisonment for not more than a year and/or a fine of not more than $100,000 ($200,000 for an organization). Subsection 3124(e) creates a good faith defense for reliance upon a court order under subsection 3123(b), an emergency request under subsection 3125(a), "a legislative authorization, or a statutory authorization." There is no accompanying exclusionary rule, and consequently a violation of section 3121 will not serve as a basis to suppress any resulting evidence. Moreover, unlike violations of Title III, there is no requirement that the target of an order be notified upon the expiration of the order; nor is there a separate federal private cause of action for victims of a pen register or trap and trace device violation. One court, in order to avoid First Amendment concerns, has held that the statute precludes imposing permanent gag orders upon providers. Nevertheless permitting providers to disclose the existence of an order to a target does not require them to do so. Some of the states have established a separate criminal offense for unlawful use of a pen register or trap and trace device, yet most of these seem to follow the federal lead and have not established a separate private cause of action for unlawful installation or use of the devices. | This report provides an overview of federal law governing wiretapping and electronic eavesdropping under the Electronic Communications Privacy Act (ECPA). It is a federal crime to wiretap or to use a machine to capture the communications of others without court approval, unless one of the parties has given his prior consent. It is likewise a federal crime to use or disclose any information acquired by illegal wiretapping or electronic eavesdropping. Violations can result in imprisonment for not more than five years; fines up to $250,000 (up to $500,000 for organizations); civil liability for damages, attorneys' fees and possibly punitive damages; disciplinary action against any attorneys involved; and suppression of any derivative evidence. Congress has created separate, but comparable, protective schemes for electronic communications (e.g., email) and against the surreptitious use of telephone call monitoring practices such as pen registers and trap and trace devices. Each of these protective schemes comes with a procedural mechanism to afford limited law enforcement access to private communications and communications records under conditions consistent with the dictates of the Fourth Amendment. The government has been given narrowly confined authority to engage in electronic surveillance, conduct physical searches, and install and use pen registers and trap and trace devices for law enforcement purposes under ECPA and for purposes of foreign intelligence gathering under the Foreign Intelligence Surveillance Act. This report is an abridged version of CRS Report R41733, Privacy: An Overview of the Electronic Communications Privacy Act, by [author name scrubbed], without the footnotes, quotations, attributions of authority, or appendixes found there. The longer report also serves as the first section of CRS Report 98-326, Privacy: An Overview of Federal Statutes Governing Wiretapping and Electronic Eavesdropping, by [author name scrubbed] and [author name scrubbed], which examines both ECPA and the Foreign Intelligence Surveillance Act (FISA). It too is available in abridged form as CRS Report 98-327, Privacy: An Abbreviated Outline of Federal Statutes Governing Wiretapping and Electronic Eavesdropping, by [author name scrubbed] and [author name scrubbed]. |
by [author name scrubbed] and [author name scrubbed] (707-2577 and 707-7610) The Air Force is proposing to replace 133 of its oldest Boeing KC-135E aerial refuelingtanker aircraft by leasing 100 new Boeing KC-767 tankers instead of initially buying themoutright. (1) The proposedlease was authorized by Section 8159 of the FY2002 DOD Appropriations Act ( P.L. 107-117 ofJanuary 10, 2002). The lease, if implemented, would represent a significant shift away fromprevious Air Force plans to modernize its tanker fleet, and a significant departure from normal DODprocedures for major DOD aircraft acquisition programs. The main issue for Congress is whether to approve or disapprove the lease. Congress'sdecision on this lease could significantly affect DOD aerial refueling capabilities, Air Force fundingrequirements, and the U.S. defense industrial base. Congress's decision could also set precedentsfor DOD acquisition practices and have significant implications for future oversight of DODacquisition programs. This report examines the lease proposal and its ramifications by providing backgroundinformation on the Air Force's tanker fleet, the Boeing 767 tanker, and the proposed lease itself. Then the report analyzes the following potential oversight issues for Congress relating to the meritsof the proposed lease: Is there an urgent need to replace the oldest KC-135s? If so, is the KC-767 the best replacement aircraft? Are there industrial base concerns? How the does cost of acquiring 100 KC-767 tankers through a lease compareto the cost of acquiring them through a purchase (i.e., a procurement)? What potential implications might implementing the lease have forcongressional oversight of DOD acquisition programs? Although the discussions of these four questions are written so that the reader can proceedfrom one discussion to the next, the discussions are designed to be fairly self-contained, so thatreaders who might be interested in only a particular question can read the section on that question. by [author name scrubbed] and [author name scrubbed] (707-2577 and 707-7610) Air Force's Draft Tanker Roadmap. The AirForce's tanker fleet currently consists of 544 aging KC-135E tankers and 59 somewhat newer KC-10tankers. The Air Force's draft Tanker Roadmap of June 18, 2003 -- its draft plan for managing andmodernizing the tanker fleet -- proposes to begin recapitalizing (i.e., replacing) the fleet by leasing100 new Boeing 767 aircraft that have been converted into tankers. The leased 767 tankers wouldbe used to replace tanker capability now provided by the 133 oldest KC-135Es in the fleet. The leaseon the first group of 767s would begin in late FY2006. The draft roadmap also calls for retiring 58 KC-135s in FY2004-FY2005 and another 68 inFY2006-FY2008, and using the resulting savings to help finance the lease. A third component ofthe draft roadmap calls for conducting a new tanker requirements study and an analysis ofalternatives (AOA) to determine future requirements for the tanker fleet and the tanker characteristicsbest suited to replace the remaining aircraft in the tanker fleet. The June 18, 2003 draft roadmap appears to depart from long-standing Air Force plans forthe tanker fleet, which called for conducting an AOA prior to acquiring any new tanker aircraft, andfor beginning recapitalization in the 2012 time frame rather than in FY2006. (2) The most recent tankerrequirements study found that by the year 2005, the Air Force would need 500 to 600 KC-135Rtankers -- or their equivalent -- to meet the tanker needs of the national military strategy. The AirForce study concluded that the current tanker fleet cannot satisfy this requirement because a portionof the fleet is always in maintenance and is therefore not operational. KC-135 Cost and Availability -- The Economic Service LifeStudy (ESLS). The Air Force's most comprehensive study of the KC-135 fleet isthe KC-135 Economic Service Life Study (February 2001), which serves as the most appropriatebaseline, and point of departure for considering the urgency of KC-135 recapitalization. TheEconomic Service Life Study (ESLS) made cost and availability forecasts for the KC-135 fleet forthe years 2001 through 2040. It was conducted by a team of experts from throughout the Air Forceand led by the Air Mobility Command (AMC). Regarding cost, the ESLS found that the KC-135fleet would incur "significant cost increases" between 2001 and 2040, but "no economic crisis is onthe horizon", "there appears to be no run-away cost-growth," and "the fleet is structurally viable to2040." (See Figure 1) Following the ESLS publication, the Air Force planned to wait until 2013 tobegin KC-135 replacement. Figure 1. KC-135 Annual Cost Forecast Regarding aircraft availability, the ESLS predicted that the number of KC-135s availablewould increase between FY2001 to FY2004, reflecting improvements made in programmed depotmaintenance, but would then decline gradually until 2040. (See Figure 2.) The ESLS projected threepotential trends: the most optimistic trend ("Upper Bound") showed between 350 and 375 KC-135sbeing available from 2005 to 2039, and ending at 349 aircraft available in 2040. The "most likely"trend showed between 300 and 350 aircraft being available between 2005 and 2035, with aircraftdipping below 300 and ending around 290 available in 2040. The "worst case" trend (assumed thatthe Air Force did nothing to try to arrest the declining trend in availability) showed aircraftavailability gradually and consistently declining from a high point of approximately 330 in 2004 toonly 190 in 2040. The ESLS predicted that the actual future trend would be somewhere between theupper bound (349) and the most likely trend (290). Figure 2. KC-135 Projected Aircraft Availability The Tanker Version Of The Boeing 767. TheBoeing 767 has been in production since the early 1980s. Of the more than 900 that have been built,most are used in commercial aviation as airliners or cargo carriers. Military applications for the 767,however, have been envisioned and pursued for at least 10 years. As early as July 1992, Boeing began publicly exploring the idea of using the 767--200ERversion of the 767 design (3) as the successor for a variety of existing combat-support Air Force aircraft that are based on the oldBoeing 707 aircraft design. (4) Among the Air Force missions mentioned as being suitable for the767-200ER were airborne early warning, aerial refueling, and electronic reconnaissance andsurveillance. In 1993, Saudi Arabia began exploring the potential purchase of new or used 767s orother commercial aircraft for use as military tankers. Since then, Australia, Italy, Japan, Singapore,and the United Kingdom have studied the use of used or new commercial aircraft, including 767s,as tankers to replace their older tanker aircraft. In March 2000, Boeing created a business unit to market the 767 tanker worldwide. In April2000, Boeing signed a contract to build four new 767 military tankers for Italy, with the first to bedelivered in 2005. This was followed by a second contract to build four new 767 military tankersfor Japan. In February 2001, Boeing offered to sell thirty six 767 tankers to the Air Force as a stop-gapmeasure for bolstering Air Force tanker capability pending the results of the Air Force's projectedtanker AOA. At a June 6, 2001, hearing before the defense subcommittee of the SenateAppropriations Committee, General Michael Ryan, then-Chief of Staff of the Air Force, mentionedthe Boeing offer in his response to a question from Senator Ted Stevens on the continued viabilityof the service's KC-135s. General Ryan stated that "we're looking out in about the next 15-year timeframe to begin that replacement." (5) A September 25, 2001, press report stated that Representative Norman Dicks, a member ofthe defense subcommittee of the House Appropriations Committee, planned to "insert an amendmentinto a defense appropriations bill to jump-start the Air Force's purchase of hundreds of Boeing 767tankers and electronic surveillance planes." (6) In an October 12, 2001 interview, Air Force Secretary James Rocheexpressed support for leasing 100 767s and explained the Air Force's rationale for the proposal: We have a unique business opportunity to get the bestpricing possible to address our critical need for a multimission aircraft that can carry gas and alsodo all kinds of other things. ... This is not a bail out, but taking advantage of a buyer's market. (7) The Proposed 767 Tanker Lease. Basic Elements of the Lease . Under the proposed 767lease, the Air Force would lease each of the 100 767s for a period of six years. The 100 aircraftwould be leased in 6 groups. The lease for the first group of four aircraft would begin in lateFY2006 and extend to late FY2012. The lease for the next group of 16 aircraft would begin at thestart of FY2007 and extend to the end of FY2012. The remaining 80 aircraft would be divided into4 groups of 20 whose leases would begin at the start of FY2008, FY2009, FY2010, and FY2011,respectively, and extend to the end of FY2014, FY2015, FY2016, and FY2017, respectively. Figure3 below illustrates the relationship between the annual lease payments, the total lease program costsand the number of aircraft under lease. Figure 3. Cost of Lease Payments and Total Lease Program, FY2003-FY2017 Notes: Y1=left axis, $ millions Y2=right axis, number of leased aircraft * Lease payments reflect the number of aircraft that have been delivered. Each setof aircraft is available for a six-year lease from the time of delivery. ** Total Lease program cost includes annual lease payments and all support costs butnot purchase of aircraft. If the at the end of the leases, the Air Force purchases all100 aircraft, the total program cost would be $29.8 billion, or about $4.4 billionmore. If the Air Force does not buy the aircraft, Wilmington Trust would sell theaircraft to pay off the bondholders. If the Air Force sells the planes for more thanneeded to pay off bondholders, the Air Force would receive a rebate, estimated at$800 million. *** Under the Air Force plan, aircraft would be delivered between 2006 and 2011on the following schedule: 4, 16, 20, 20, 20, 20. Since each aircraft is to be leasedfor a six-year period, the number of aircraft leased grows to 100 by FY2011 when allaircraft are delivered and then declines to zero once all leases are completed. Tocontinue to retain the full fleet of new aircraft, the Air Force would need to beginbuying the planes starting in 2012. Source: CRS calculations based on Air Force, Business Case Analysis Model ,"Lease/Return Option," July 1, 2003. Boeing would begin building each group of aircraft three years prior to the start of the leasefor each group. To finance the three-year construction effort for each group of aircraft, Boeingwould draw down on a bank line of credit (i.e., a bank loan). Upon completing construction of eachgroup of aircraft, Boeing would sell the aircraft to a special non-profit entity established specificallyfor the 767 lease. This entity, referred to as a Special Purpose Entity (SPE) or Variable InterestEntity (VIE) and named the Wilmington Trust, would in effect act as a middleman between Boeingand the Air Force. The SPE would purchase the 767s from Boeing using funds that the SPE wouldraise by issuing bonds on the commercial bond market (i.e., funds that private investors would agreeto loan to the SPE in exchange for a promise from the SPE to eventually repay those funds with acertain amount of interest). The SPE would then lease the 767s to the Air Force using leasepayments that are calculated to cover (but not exceed) the SPE's costs, which would include thepurchase cost of the 767s (an average of $138.4 million in FY2002 dollars per plane, including $7.4million in interest costs on Boeing's construction loans), the interest return promised to thebondholders, and the SPE's minor administrative expenses. The SPE plans to offer three tranches of bonds, each secured by different assets and eachreflecting different risks. The "G" tranche, estimated to make up about one-third of the total leasecost, will be secured by the Air Force's lease payments. Because the Air Force is contractually liablefor an additional year's worth of lease payments in case of termination, these are essentially low-riskbonds. For that reason, the Air Force is projecting that rates will be about 1/2% point above theprojected Treasury bill rates from 2006 to 2011. (8) The second tranche of bonds, the "A" bonds, covering about half of the borrowing, wouldbe secured by the value of the aircraft itself and would be the second claimant in case of termination. The Air Force is projecting that those bonds would also be relatively low risk, and hence, wouldrequire an interest rate 1% above the projected Treasury rate in each year from 2006 to 2011.Although it could well be difficult to sell the aircraft for their full value, some would argue that thelikelihood that the Air Force would renege would be low because under the contract, they would facelarge, unbudgeted termination liabilities that could be as high as $2.7 billion in current year dollarsat the highpoint of lease payments. In addition, the Air Force sees a compelling need to maintainthe size of the tanker fleet. The third tranche of bonds, the "B" bonds, to cover about 15% of the total cost of the lease,would be backed by the potential sale of the aircraft to the Air Force at the end of the lease. Thistranche of bonds is a more risky proposition because a purchase requires Congressional approval,and an additional $4.4 billion in current year dollars in funding. However, purchase is an attractiveoption because the Air Force would already have paid 90% of the cost of the aircraft in its leasepayments. Additionally, the aircraft would only have been used for one-quarter or less of theirnormal service lives. (9) Toreflect potential risks, the Air Force projects that a 10% interest rate compounded to the end of eachlease would be required to attract bondholders. (10) A principal purpose of the SPE is to relieve Boeing of the need to lease the 767s directly tothe Air Force. If Boeing were to lease the 767s directly to the Air Force, Boeing would have toretain ownership of the 767s and would pay off its construction loans gradually, using proceeds fromthe lease payments. This would require Boeing to carry a significant amount of construction-relateddebt for an extended period of time, which might significantly weaken Boeing's financial condition. Upon the conclusion of the six-year lease period for each group of 767s, the Air Force wouldhave the option of either returning the 767s to the SPE or purchasing the 767s for an additionalpayment of $44 million in current year dollars per plane. Enabling Legislation and Report Language. Theauthority for the Air Force to lease 100 767 tankers (and also 4 Boeing 737 transport aircraft) wasprovided in the following legislation: Section 8159 of the FY2002 Defense Appropriations act ( P.L. 107-117 ofJanuary 10, 2002); Section 133 of the FY2003 Defense Authorization act ( P.L. 107-314 ofDecember 2, 2002); Section 8117 of the FY2003 Defense Appropriations act ( P.L. 107-248 ofOctober 23, 2002); Section 308 of the FY2002 Supplemental. Together, these provisions provide authority for a lease that departs from normal proceduresfor major DOD acquisition programs by: specifying that a particular acquisition method can be used (i.e., a lease of acommercial asset, which would make it an operating rather than a capital lease or aprocurement); specifying the number and type of aircraft to be leased (100 Boeing 767s and4 Boeing 737s); exempting the lease from requirements and limitations that normally governDOD leases of ships and aircraft which are established in 10 USC 2401 and 2401a, includingfunding of termination liability; exempting the lease from a limit established in 31 USC 1553(b)(2) on theamount of appropriations that, under certain circumstances, may be charged to closed-outappropriation accounts; exempting the Air Force from the "Buy American" requirements of the BerryAmendment (10 USC 2533a); establishing a special congressional approval process for the lease whereapproval would be either through authorization and appropriation language, or through a new startnotification to be approved by the four congressional defense committees at anytime. It should be noted that Section 8159 is not the first provision permitting DOD to leaseaircraft. The FY2000 Defense Appropriations Act ( P.L. 106-79 enacted on October 25, 1999)contained a provision (Section 8133) somewhat similar to section 8159 that permitted the Air Forceto lease six aircraft "for operational support purposes, including transportation of the combatantCommanders in Chief," (i.e., the top U.S. officers in charge of U.S. military forces operating invarious regions of the world). Section 133 of the FY2003 defense authorization act ( P.L. 107-314 of December 2, 2002)states that the Air Force may not enter into a lease for the acquisition of tanker aircraft under Section8159 of P.L. 107-117 until authorization and appropriation of funds necessary to enter into the leaseare provided by law or until DOD submits to and the four congressional defense committees approvea new start reprogramming notification for the lease in accordance with established reprogrammingprocedures. This is an unusual if not unprecedented way to approve a major procurement programsince reprogramming or transfers of funds between appropriations are generally used for minoradjustments to ongoing programs. Status of Congressional Approval Process. Section8159 of P.L. 107-117 states that the Air Force may not enter into the lease until it submits a reportto the congressional defense committees -- the House and Senate Armed Services committees andthe House and Senate Appropriations committees -- on its plans for implementing the lease and untila period of not less than 30 calendar days has elapsed after submitting the report. The practical effectof this provision is to prevent the lease from being implemented until the four congressional defensecommittees have signaled their approval of the lease. On July 10, 2003, the Air Force submitted the report required by Section 8159 of P.L.107-117 to the four defense oversight committees. The 7-page report (plus a 1-page summary and4 pages of appendices listing specific lease terms and conditions) discusses the operationalrequirement for tankers, alternative tanker-force investment options, the estimated costs of leasingand procuring the 767s, the Air Force's plan for implementing the lease, and basing plans for the767s. Following the July 10th report, the Air Force submitted a new start reprogrammingnotification for 767 lease mentioned in Section 133 of P.L. 107-314 . Through late August 2003, 3of the 4 congressional defense committees had approved the KC-767 new start reprogramming. TheSenate Armed Services Committee has not yet signaled its approval or disapproval. Both the SenateArmed Services Committee and the Senate Commerce Committee have scheduled hearings for earlySeptember 2003. For congressional policymakers, the merits of the decision to approve or disapprove theKC-767 lease relate in part to examining the following questions: Is there an urgent need to replace the oldest KC-135s? Is the KC-767 the best aircraft for the job? What are the industrial base concerns? Given the uncertainties involved in this unusual acquisition mechanism, arethe costs projected by the Air Force the most authoritative? What potential long term implications does this lease present in terms ofbudget and congressional oversight? by [author name scrubbed] (707-2577) Much of the Air Force's argument for leasing 100 KC-767s is based on its assessment thatit has an urgent need to replace the oldest KC-135s: that operations and support costs are too high,that mission availability is too low, that the aircraft is wearing out prematurely due to high operationstempo, and that it is vulnerable to catastrophic problems. (11) The Air Force argues that leasing the KC-767 will result in fasterdeliveries -- under the Air Force's self-imposed funding limits - than will purchasing them, whichmay be important if the need to recapitalize is urgent. A key judgement for policy makers is whether the need to replace the KC-135E fleet is urgentenough to justify the leasing procedure. If the need is urgent, then the higher costs of leasing ratherthan purchasing new aircraft may be justified. If the need is not so urgent, then it may be moreprudent to delay any action on new aircraft. In this case, critics of the lease point out that an analysisof alternatives (AOA) could be performed over the next few years to more accurately determine whatjoint aerial refueling requirements may be, prior to embarking on tanker recapitalization. Recently, Air Force officials have argued that a number of the ESLS findings that could beinterpreted as supporting a more gradual approach to tanker recapitalization no longer appearaccurate or valid. In congressional testimony, official statements, and numerous press interviews AirForce officials have offered four general arguments for why replacing the oldest KC-135E modelswith new aircraft is urgent: New data and analysis show that KC-135 O&S costs will rise faster than theESLS predicted; KC-135s mission capable rates (MCR) are too low, they spend too much timebeing repaired and maintained in depot, and are thus too frequently unavailable to thewarfighter; The KC-135 is vulnerable to catastrophic problems that could cause the entirefleet to be grounded; Tanker requirements, and assumptions about KC-135 usage rates, were formedprior to the terrorist attacks of September 11, 2001. Usage rates have, and tanker requirements likelywill, increase in the new security environment. Each of these issues will be addressed in the sections below. New Findings on KC-135 Costs. Air Force andDOD officials argue that recent estimates of KC-135 costs have been higher, and future costs willalso be higher than the ESLS projected. They say that the ESLS study was "extremelyoptimistic," (12) especiallyin its assumptions and projections on key operation and support (O&S) cost drivers. For example,depot labor rates have increased much more quickly than anticipated: from $111 per hour in 2001to $160 per hour in 2002, and $210 per hour forecast for 2003. The cost of repairing the enginestruts on the KC-135Es increased from $1 million per aircraft in 2001 to $3 million per aircraft in2002. (13) The effect of the optimistic projections contained in the ESLS study becomes evident, DODofficials argue, by comparing ESLS projected 2001 costs to actual 2001 costs. While the ESLSprojected 2001 O&S costs to be $2.1 billion, the Air Force actually spent $2.26 billion, an increaseover ESLS estimates by $250 million or 11.9 percent. Revised Air Force projections now assumethat the annual KC-135 O&S costs will escalate from $2.26 billion to $3.4 billion in 2040. (14) While the ESLS predicted1 percent real cost growth per year and 43 percent cumulative real cost growth by 2040, the newestimates predict 1.5 percent real cost growth per year and 64 percent cumulative cost growth by2040. (15) Many of those opposed (16) to the KC-767 lease do not dispute the higher O&S costs incurredin 2001. Instead, they take issue with the assertion that costs will continue to rise at the same rate.One year of increased costs, opponents say, does not amount to a 39 year trend. The Air Forceappears to be making a linear extrapolation from 2001 to 2040. The $3.4 billion figure for 2040 costsis derived by assuming that costs will continue to increase by 1.5 percent for the next 39 years ratherthan the ESLS one percent estimate. The Air Force has provided no analysis or proof that theincreased costs incurred in 2001 aren't a one-time anomaly, opponents argue, and thus, the ESLS costprojections to 2040 are still the most authoritative. The increased costs for 2001, lease opponentsargue, are likely caused by the considerable efforts the Air Force made to "fix the KC-135 depot"(see availability section below) and now that the depot is running well, it is not a given that costs willcontinue to increase at the same rate. Those opposed to the KC-767 lease also take issue with the Air Force claim that the ESLSstudy was optimistic. On the contrary, they say, the ESLS took a conservative approach in itsprojections of future KC-135 costs. For example, the ESLS airframe cost estimates (the largest costdrivers in Figure 1 above) are made up of programmed depot maintenance, major structural repairs,and structural investments. The ESLS identified two structural investments that were needed --KC-135E struts, $1 million per aircraft, and topcoat removal, $500,000 per aircraft. Recognizingthe uncertainty of predicting future repairs, the ESLS estimates included $6 million per aircraft ofnotional repairs that may not, in fact, ever be needed: upper wing skins ($2 million per aircraft),fuselage skins ($2 million per aircraft), and unknown structures ($2 million per aircraft.) Also, whilesome costs (notably programmed depot maintenance, or PDM) have gone up, others have gonedown, or have been eliminated. Depot engineers, for example, have learned how to save $500,000per aircraft by conducting periodic inspections and maintenance instead of removing flaking topcoat(a corrosion preventative material). Air Force officials state that they have, in fact, gone beyond a linear extrapolation of 2001KC-135 O&S costs and conducted a recent analysis of future costs. (17) In this May 1, 2003 study, the Air Force re-evaluated ESLS projections. The Air Force accepted all ESLS assumptions and dataexcept for PDM estimates, aircraft modifications and military personnel estimates. By updating thesedata, and by using more sophisticated analytical tools, such as compound growth modeling anddiscounting ESLS constant-year dollars (CY) into net present-value (PV) dollars, the Air Forceprojected KC-135 O&S costs to the year 2017 and believes they will be considerably higher than theESLS projected two years ago. Figure 4 illustrates the new projections compared to ESLSprojections. (18) Figure 4. KC-135 Cost Projections from 2001 (ESLS) and 2003 (BCA) This new analysis, Air Force officials argue, suggests that KC-1365 O&S costs are not justhigher today than previously anticipated, but will also likely continue to exceed projections. Thesenewer, and higher cost estimates, the Air Force says, support their argument that re-capitalizing theKC-135 fleet sooner rather than later makes good economic sense. As a recent study, the Air Force's most recent projection of future KC-135 costs has not yetbeen widely disseminated, and thus, reaction to it has been minimal. Lease opponents could expressdissatisfaction with the newer cost projections on at least two levels. First, opponents could arguethat the Air Force does not fully explain its rationale for the changes it made in ESLS assumptionsand data, and the effect that these new data have on future cost projections. What changes weremade in the original ESLS projections on military personnel, for example, and what percentage ofthe newer, higher cost estimates are attributed to this change? The new study provides noexplanation or rationale. Second, opponents could argue that the fact that the Air Force hasperformed two different studies in such a short time period that produce such different outcomescalls into question the credibility of those findings. What confidence can readers have in the newprojections, opponents could argue, when just two years ago, the Air Force presented the ESLS asthe definitive study? KC-135 Mission Availability. Air Force officialsargue that as aircraft age, the oldest KC-135's mission capable rates (MCR) will decline, and that theaircraft spends too much time in maintenance depots. These two factors will combine to reduce thenumber of available aircraft to unacceptably low levels. The Air Force needs, they argue, torecapitalize the KC-135 fleet with new aircraft that will satisfy mission availability requirements. The Air Force has a goal of an 85 percent mission capable rate (MCR) for tanker aircraft. The MCR is the percent of time that an aircraft is available to perform its assigned mission. Makingjudgements on the adequacy of KC-135 MCR is complicated because the MCR appears highlydependent on the time period considered and whether the aircraft is in the active or reservecomponent. Air Force officials have testified that over the last five years, KC-135Rs have averaged a 78percent MCR and the KC-135Es a 71.9 percent MCR, well below the 85 percent goal. (19) This testimony appearsto roughly correlate with a 2002 Air Force study that showed active duty KC-135Rs with an MCRabove 80 percent for FY1997, 1998, 1999, 2001 and 2002. The active duty "R" models MCR's fellslightly below 80 percent in 2000. KC-135Rs in the reserve fleet had generally higher MCRs thanKC-135Es, which fluctuated between the low 60s and high 70s. The 2002 study, also states,however, that "Mission capable rates are holding steady" which appears to contradict some KC-767lease proponents' assertions that the MCR is getting worse. (20) The General Accounting Office (GAO) has also written that the KC-135 rates are holdingsteady -- "...there has been no indication that mission capable rates are falling or that the aircraftcannot be operated safely." (21) Also, the GAO asserts "KC-135s in the active duty forces aregenerally meeting the 85-percent goals for mission capable rates." (22) Moreover, a January 2003Air Force study also shows the MCR for both the KC-135E and the KC-135R as 85%. (23) The study did not give atime period for this MCR estimate. Because of the GAO and Air Force studies, some debate has focused on the time, or durationof MCR estimates and the impact that these factors might have on the applicability of estimatingover the long term. For example, the Air Force has discounted some GAO MCR estimates, notingthat they were for short time periods, and that even aircraft with low MCRs can have "spikes" ofhigher availability. The KC-135's performance during Operation Iraqi Freedom is an example of thisphenomenon, KC-767 lease supporters say. The KC-135's 86.4 percent MCR during this conflicthas not been sustained over the long term, lease supporters argue. Lease opponents would agree that short term MCRs might not be the most reliable of anaircraft's long term MCR. But, lease opponents argue, "when the chips were down," the KC-135 fleetdid achieve, and actually exceeded MCR goals. Also, the KC-135's 86.4 MCR was higher than theMCRs for many other aircraft that participated in the Iraq war: A-10, B-1B, B-2, B-52, E-3B, E-8C,F-117, F-15 (all models), F-16 (all models), KC-10, U-2, and Predator and Global Hawk UAVs. Lease opponents concede that the KC-135's 86.4 percent MCR is higher than normal and likely dueto extraordinary wartime efforts. But that is also likely the case for the 13 other aircraft types thathad lower MCRs than the KC-135. This comparison shows, opponents argue, that KC-135availability can be on par with, if not superior to other aircraft, and claims about low MCR are nota compelling reason to retire the fleet prematurely. The MCR is only calculated for those aircraft not otherwise unavailable due to depotmaintenance or training requirements. Few KC-135Rs and no KC-135Es are used for training. Therefore, the number of aircraft in depot, and the amount of time they spend there are alsoimportant factors that affect aircraft availability. The KC-135's maintenance history is well established. As the aircraft has aged and asage-related problems have become more acute, it has taken more effort to complete scheduledmaintenance, called Programmed Depot Maintenance (PDM). The KC-135's maintenance problemsappeared at their worst in 1999, when 176 aircraft (32 percent of the fleet) were in depot at the sametime. It was at this point, both the Air Force and KC-767 lease opponents agree, that the Air Forcehad to make a concerted effort to improve depot maintenance and processes. According to one AirForce study, the Chief of Staff of the Air Force directed his staff and the Air Force MobilityCommand to "fix the depot." (24) The result was a marked improvement in aircraft availabilityfrom FY2001 to FY2003. By some estimates, KC-135s are today spending 45 percent less time indepots than they were two years ago, (25) and 100 more aircraft are now available to the warfighter thanin July 2000. (26) Wherethe Air Force and KC-767 lease opponents diverge, however, is what this recent improvement inavailability implies for the future. The Air Force acknowledges that fewer KC-135s are in depot. However, this doesn't meanthat less work is being done to maintain the KC-135, officials say. In fact, the opposite is true; morework is being done on them while they are in depot. KC-135 depots added a second shift, and PDMman-hours have doubled from 16,000 to 33,000 despite the improvement in the number of aircraftin depot. (27) Reducingthe number of KC-135s in depot to a manageable level is a real success story, Air Force officials say.However these improvements have come at a real monetary cost, and aren't expected to get anybetter. According to one Air Force official, "we mined all the gold we can there." (28) Lease opponents say that Air Force assertions that depot maintenance can't further improveare unproven. When the Air Force projects the future costs of acquiring new aircraft (such as theF/A-22) it often banks on "future savings" that will result from manufacturing improvements thatdon't exist today, but are expected to emerge in the future. Why are depot maintenance improvementsa dead end, lease opponents ask, when manufacturing improvements for new aircraft are projectedto occur as an article of faith? For example, depot workers discovered how to save $500,000 peraircraft by conducting 60-hour fuel filter checks and scrubbing fuel tanks rather than engaging intopcoat removal procedures. KC-135 depots improved their processes by paying heightenedattention to critical path management, and "kitting" major structural repair parts. (29) Current workers at Tinker,AFB -- one of three KC-135 depots -- report that present flow time for aircraft in and out of PDMis still decreasing thanks to process improvements. (30) What is prohibiting, lease opponents ask, depot workers from"climbing the learning curve," and discovering new maintenance improvements? Corrosion and Fleet-Wide Grounding. The AirForce has recently said that the need to replace the KC-135 fleet is urgent because the aging aircraftis prone to mechanical or structural problems that could result in a fleet-wide grounding. The July10th Air Force report to Congress on the KC-767 lease argued that there were "...increasingpossibilities that this 43-year-old aircraft could encounter a fleet-grounding event, crippling ourcombat forces." (p.2.) Former acquisition chief Pete Aldridge, for example, remarked, "'We cannotcontinue to fly the KC-135s forever, and the longer you wait to recapitalize, the more you run therisk...of a fleet of those aircraft being grounded for some reason.'" (31) Much of the Air Force's concern over the prospects of fleet-wide grounding is based on theKC-135's problems with corrosion. The KC-135 is particularly susceptible to corrosion. Thematerials and manufacturing techniques used to produce this aircraft in the 1950s did not reflectmodern corrosion prevention techniques. The Air Force cannot accurately predict the extent or costof corrosion, Air Force officials now say, and currently lacks mature diagnostic tools that could helpsafely and economically extend the life of the KC-135 fleet. (32) Because of corrosion'sunpredictability, the Air Force is concerned that it has little idea if, when, or how badly the next bigcorrosion problem will appear. Air Force officials say they have recently experienced a "wake up call" regarding the viabilityof the KC-135 fleet, and it is prudent to take heed of this warning. On January 13, 1999 a KC-135crashed in northwestern Germany, killing all four crew members onboard. Investigating the causeof this accident, Air Force officials found problems with the aircraft's stabilizer trim actuators.Between September 1999 and February 2000, 139 aircraft (24% of the total fleet, 40% of the aircraftavailable) were grounded for repair. (33) If this grounding had happened during an important operation,such as, Operation Iraqi Freedom, the Air Force's ability to project power would have beendiminished, and the conflict could have been prolonged, possibly resulting in higher casualties. Thebottom line for the Air Force is, in the words of acquisition chief Marvin Sambur that "we have noconfidence in the Es right now." (34) Lease opponents do not dispute the fact that the KC-135 is old or that is has corrosionproblems. They take issue however, with the Air Force's depiction of the problem. The KC-135 fleet clearly suffers from corrosion, and this causes noteworthy maintenanceproblems. However, lease opponents say, the Air Force makes observations about corrosion thatappear out of sync with the experience of other military services. The Navy and Marine Corps havehad to deal with the effects of corrosion since the inception of naval aviation because their aircraftoperate in much more corrosive environments that the Air Force typically does. Engineers at theNavy's Naval Air Systems Command remark that "corrosion is a known problem that the Navy takesproactive steps to manage." (35) As far back as 1965, the Air Force recognized that corrosion was a problem that it wouldincreasingly face in the future. One study recognized that the Navy had instituted effective corrosionprotection and prevention measures and recommended that the Air Force emulate Navy proceduresand initiate additional procedures to better mitigate corrosion problems. (36) Why, lease opponents ask,is corrosion difficult for the Air Force to predict, and why are its diagnostic tools "immature," whenthis problem has been known for 40 years? Current claims that corrosion is difficult to predict alsoappear in conflict with Air Force statements in the ESLS of just two years ago that appear quitepredictive: "Aging-related structural repairs due to corrosion will continue to increase at amanageable rate." (37) Lease opponents also say that the Air Force appears to be exaggerating the risks andpotentially the consequences of a fleet-wide grounding of the tanker fleet. Many note that "By having90 percent of its refueling fleet in one aircraft type, the Air Force for some years now has beenaccepting the risk of fleet-wide problems that could ground the entire fleet." (38) If the Air Force has beenliving with this risk for many years, why, lease opponents ask, has concern only been voicedrecently? The Air Force claims that the September 1999-to-February 2000 grounding of 24% of theKC-135 fleet was a serious warning that similar groundings could happen in the future, and that suchevents could threaten U.S. power projection capabilities. If true, lease opponents ask, why has theAir Force only begun discussing this recently? The 2001 ESLS study did not mention concern overfleet-wide grounding. No Air Force congressional testimony included discussion of this event untilJune 2003, and no Air Force or DOD official was reported in the press to have expressed anyconcern about fleet-wide grounding prior to April 2002. (39) If the Air Force were concerned about the risks of fleet-widegrounding, lease opponents say, it would have made this case soon after the four-month event. Waiting until the KC-767 lease was being debated diminishes the strength of the Air Force'sargument, lease opponents say. Furthermore, critics say, the Air Force appears to be overstating theconsequences of the four-month KC-135 grounding episode. The United States successfullyprosecuted Operation Allied Force (the air war over Kosovo), with 40% of the fleet unavailable. This conflict saw the largest deployment of air assets and aerial refueling aircraft since the 1991 warin Iraq, proving, critics say, that the Air Force was clearly able to make do with their diminishedassets. Furthermore, the United States also participated in far-flung stabilization and humanitarianoperations in Venezuela and East Timor at the same time as forces were engaged in Kosovo. Aircraftare frequently grounded to address new-found mechanical problems (40) , critics say. Moreover,there's nothing to say that the KC-135 fleet is any more prone to a catastrophic event than many otheraircraft in the Air Force and Department of Navy inventories. Post 9/11 KC-135 Usage and New MilitaryStrategy. The Air Force has recently argued that another factor contributing to theurgency of replacing the KC-135 fleet is the unanticipated increase in KC-135 flying hours. Relatedly, the Defense Department revised its military strategy in light of post September 11thsecurity requirements, and this new strategy will put increased strains on a force that already fallsshort of tanking needs. Since September 11, 2001, Air Force officials say, the tanker fleet has been key to protectingthe U.S. homeland (Operation Noble Eagle), and prosecuting the global war on terrorism (OperationsEnduring Freedom and Iraqi Freedom). While performing admirably, Air Force officials say "...theKC-135's...are beginning to show real signs of wear and are being used at a steady state tempo overthe last two years that were never forecast or even imagined before September 11, 2001." (41) Flying hours for theKC-135s averaged about 300 hours per year between 1995 and September 2001. Since thenaccording to the GAO, employment is averaging about 435 hours per year. (42) This unanticipated use,KC-767 lease proponents say, is wearing out the 42 year old aircraft even faster than anticipated justthree years ago. Lease opponents recognize the upturn in flight hours, but challenge that the consequencesare as negative as the Air Force contends. Corrosion, lease opponents point out, is the limitingproblem with the KC-135, and increased use does not make corrosion worse. If the KC-135'slimiting factors were flying hours, or metal fatigue, for example, the increase in flying hours couldhave a noteworthy detrimental impact on the KC-135's remaining life. Increased flying hours,however, have less impact on the aircraft's corrosion problems, they say. Lease advocates concedethat increased flying hours do not directly make corrosion worse. They point out however, thatincreased flying hours may lead to deferred depot maintenance, where corrosion problems would beaddressed. Thus, increased flying hours can indirectly exacerbate corrosion problems. The Air Force also argues that today's tanker fleet is facing a new set of requirements that ismore challenging than past requirements -- and that the fleet could not satisfy the old requirements.Rather than defeat two major regional adversaries (the old strategy), the new strategy (outlined inthe Defense Planning Guidance FY2004-09) requires the military to 1) defend the United States, 2)deter aggression and coercion in four critical regions, 3) swiftly defeat aggression in two overlappingmajor conflicts, and 4) upon the President's direction, win decisively against one of the two majorconflict adversaries. According to Air Force documents the new strategy "...coupled withanti-access/area denial challenges show increasing importance and reliance on a viable, sustainable,effective tanker fleet." (43) These increased requirements argue strongly, the Air Force says, for recapitalizing the tanker fleetas soon as possible. Those skeptical of the KC-767 lease challenge the Air Force assertion that the new strategywill automatically result in increased tanking requirements. Opponents challenge this assumptionfirst, because the Air Force has not conducted a tanker requirements study since the new strategy hasbeen declared. When asked how the Air Force could be so sure of its future requirements consideringthe lack of analysis, one Air Force official replied: Because we're convinced that the requirement for airrefueling is large and will continue to be very large. As we talked just a moment ago, the requirementis growing, actually, although I can't give you a specific number right here for how much it's grown,based on the new Defense Planning Guidance, yet. But we know it's growing, we know it's going tocontinue to be very large... (44) Lease opponents agree that conventional wisdom suggests that the new military strategycould demand increased tanker capabilities. However, they say, conventional wisdom is oftenwrong. Determining future tanker capabilities is very complex, and really requires serious analysis. The Air Force does not know what its requirements are going to be 10, 20, 30, or 40 years hence, andit certainly does not know what future Navy or Marine Corps tanker requirements will be. What willbe, opponents ask, the net effect on tanking of more aggressive and pervasive fielding of unmannedaerial vehicles (UAVs)? Will these more fuel efficient platforms reduce requirements as they replacemanned aircraft in the inventory? Or will UAVs continue to augment, rather than replace mannedaircraft, and thus add to tanker requirements? Many suggest that air ships (blimps) and unmannedtethered balloons (aerostats) will likely replace AWACS for a variety of surveillance missions in thefuture; such as homeland defense. If this transition occurs, and when, may have implications forfuture tanker requirements. Lease opponents also note that dramatic improvements in targeting and weapon miniaturization is translating into fewer combat sorties, which, in turn, means fewer refuelingsorties. Although a simple comparison, lease opponents say one can compare airpower in the lasttwo wars with Iraq and conclude that, the Air Force can already do "more with less." How muchmore effective will tomorrow's air operations become as current R&D programs reach fruition, andwhat effect will this have on tanking needs? These questions, lease opponents argue, require a studyto answer, and it cannot be assumed that tomorrow's aerial refueling needs will exceed today's. Table 1. Aerial Refueling and Combat in TwoConflicts a. Gulf War Air Power Survey . Statistical Compendium and Chronology. Vol. V. Washington, DC.1993. P.232. b. Operation Iraqi Freedom -- By the Numbers . USCENTAF. Assessment and Analysis Division.April 30, 2003. p.7-8. Finally, lease opponents ask why the Air Force is planning to prematurely retire 68 KC-135Emodels. If the current fleet is deficient today, and tomorrow's requirements are to be even moredifficult to satisfy, why doesn't the Air Force want new tankers in addition to, rather than in lieu of,the 68 KC-135Es, lease opponents ask. Premature retirement of 68 KC-135Es, they say, reduces thestrength of the Air Force's argument that recapitalization is required to satisfy growing tankerrequirements. Air Force officials recognize that, on one level, retiring 68 KC-135Es can appear inconsistentwith the stated concern over increasing tanker requirements. Also, Air Force studies, such as the May1, 2003 BCA, do indicate that early retirement does incur a small amount of risk in terms of reducedtanker capabilities between the years FY2003 and FY2014. However, the O&M costs of maintainingthe oldest KC-135Es is so onerous, the Air Force says, that cost savings achieved from retirementmore than make up for this slight decrease in capability. Furthermore, savings from retiring the 68aircraft can be reinvested in the remaining fleet to increase its availability, and also help fund tankerrecapitalization efforts. (45) by [author name scrubbed] (707-2577) If the Air Force need to replace the KC-135E fleet is urgent, then the number of replacementoptions is narrowed. Those options that can be implemented more quickly become more attractivethan those that take longer to implement. The Air Force presents the KC-767 lease as the most timelysolution to its recapitalization problem, and the KC-767 airframe as the most effective way toimprove aerial refueling capabilities. It is important to understand how well KC-767 attributes match Air Force needs because ifleased and then purchased, these 100 aircraft could likely be in the inventory for at least 50 years. Also, many believe that if the Air Force is successful in leasing and purchasing these 100 aircraft,it will attempt to lease and/or purchase some additional number of KC-767s, perhaps up to another100. (46) Former defenseacquisition chief Pete Aldridge, for example, was reported to have said that DOD plans to purchasemore than the initial 100 KC-767s. Aldridge said that DOD was successful in negotiating a lowerprice for the KC-767 by promising follow-on purchases. (47) Boeing officials deny any government commitment for anythingbut the number of aircraft in the current KC-767 lease. (48) Five comparisons can be made when considering the KC-767 aircraft and its ability to satisfythe aerial refueling mission needs: How does the KC-767 compare to the aircraft it willreplace? How well does the KC-767 meet operationalrequirements? How does the KC-767 compare to surplus aircraft available on the commercialmarket? How does acquiring the KC-767 compare to re-engining theKC-135Es? How does acquiring the KC-767 compare to leasing aerial refuelingservices? KC-767 vs KC-135. The Air Force compares theKC-767 to the KC-135, and says that the new aircraft is clearly superior to the old. The KC-767 ismore flexible and more capable than the KC-135, supporters argue. All KC-767's for example, likethe KC-10, will be aerial refuelable. The KC-767 can carry 108 patients in its Aeromedical role,compared to the KC-135's 24 patients. The KC-135 can only refuel Navy and coalition aircraft aftermaintenance personnel spend six-to-24 hours attaching a temporary drogue to the refueling boom. The KC-767's drogue is integral to the aircraft. Furthermore, the KC-767 can use either the boom(to refuel Air Force aircraft) or the drogue (to refuel Navy, Marine Corps, or allied aircraft) on thesame mission. The KC-135 can use either the boom or the drogue on the same mission, but not both. The KC-767's cargo carrying capacity is over twice as large as the KC-135s: 77,000 lbs on 19 palletscompared to 36,000 lbs on 6 pallets. (49) Also, the KC-767's ability to operate from shorter runways (8,000feet) than the KC-135 (12,000 feet) will provide greater flexibility and options. There areapproximately 8,000 airfield world wide from which the KC-767 will be able to operate comparedto 228 for the KC-135. (50) In addition to being more capable, the KC-767 should also be much more available than theKC-135, the Air Force says. As demonstrated by Table 2 below, the KC-767 is estimated to be moreavailable to the warfighter than the KC-135. Over a six-year period, a given KC-135E aircraft canbe expected to be available only 60 percent of the time. The 870 days of unavailability (out of a totalnumber of 2,190 days in six years) is caused by the maintenance activities and modificationsdescribed below. Flight line and scheduled depot maintenance cause the bulk unavailability. Table 2: Projected Aircraft Availability ( Days not available tothe warfighter in a six-year period peraircraft ) (51) * Based on actual data extended over a six-year operational time frame ** Based on FY2012 fleet projections extended over a six-year period. KC-767 versus Operational Requirements. Inmany ways, lease opponents admit, the KC-767 does compare favorably to the KC-135. However,lease opponents say, the Air Force does not make the most important comparison between theaircraft, which is maximum fuel capacity. Despite its modernity, the KC-767 only carries 1 percentmore fuel (2,000 lbs) than the KC-135. The KC-767's cargo and aeromedical capabilities, forexample, are second order issues for consideration, lease opponents say. These aircraft are beingacquired to provide fuel, and when comparing total fuel carrying capability, the KC-767 representsalmost negligible improvement over the KC-135. Another more meaningful evaluation of the KC-767's performance is how it compares to AirForce requirements. Air Force aerial refueling requirements are expressed in the OperationalRequirements Document (ORD) (HQ AMC/XPR, October 22, 2002). Lease opponents say that theKC-767, while looking good compared to the KC-135, does not measure up in many important areasto the ORD yardstick. The ORD requires, for example, that the KC-135's replacement be able to refuel two aircraftsimultaneously with the hose-and-drogue system. The KC-767 variant being considered in this leasecannot satisfy this requirement. It can only refuel one aircraft at a time with the hose-and-droguewhich considerably reduces, opponents say, its operational capabilities. Another KC-767 shortcoming, opponents say, is the aircraft's inability to offload multipletypes of fuel on the same mission. The ORD lists this objective because it would greatly enhancethe aircraft's ability to simultaneously fuel both Air Force and Navy and Marine Corps aircraft. Bothservice's aircraft can operate on the same fuel if necessary. However, to minimize the hazard ofshipboard fires, Navy and Marine Corps aircraft regularly use a type of fuel less prone to ignitionthan the standard Air Force fuel. Carrier-based Navy and Marine Corps aircraft will only use AirForce fuel infrequently, because their tanks must be emptied prior to landing, and their fuel systemsmust be flushed clean to avoid contaminating the carrier's fuel supply with the Air Force's morecombustible fuel. Thus, a KC-767 able to offload only one type of fuel on a single mission is muchmore limited in the types of aircraft it can service, contend lease opponents. Some of the capabilities that the Air Force and Boeing tout sound attractive, opponents say, but they aren't required by the ORD. This brings into question how important thesecapabilities really are. The ability to operate from runways less than 12,000 feet is one example. The Air Force also reportedly wanted the KC-767 built in a "combi" configuration that would permitit to carry passengers and cargo at the same time. This configuration, however, would have requiredbuilding a special bulkhead, and would have presumably increased the cost of the aircraft, so the planwas dropped. (52) Theloss of this capability, opponents say, is another example of how the KC-767 might look goodcompared to a 42 year-old aircraft, but still might not have the attributes most attractive in a newaerial refueling aircraft. The Air Force and other lease supporters could counter these criticisms by pointing out thatthe KC-767 does satisfy the majority of ORD requirements. It is unrealistic to expect an aircraft tosatisfy all of the requirements, and the many that the KC-767 does satisfy more than make up for theone or two that it does not. The ability to offload more than one type of fuel on a single mission isan ORD objective, lease supporters argue, not a requirement. Also, supporters point out, provisionshave been made to add hose-and-drogue wing pods -- which would enable simultaneous refuelingof two aircraft -- if future needs warrant. KC-767 versus Other Aircraft. Another way todetermine if the KC-767 is the best aircraft for the job is to compare it to other available aircraft. TheAir Force says that it evaluated 747, 757, 767, 777, and A330 aircraft, and found the 767 the bestcandidate for the aerial refueling mission. (53) These aircraft are not the only alternatives to be considered,critics argue. Lease opponents note that there is currently a glut of excess commercial airliners onthe market, and the Air Force could more cheaply buy some number of these unwanted aircraft andconvert them into tankers. Some estimate that over 700 surplus commercial airliners are in long-termstorage facilities in the American southwest alone. (54) Surplus Boeing DC-10 aircraft, for example, appear to be excellent candidates for conversioninto tankers and for recapitalizing some portion of today's KC-135 fleet, lease opponents say. TheAir Force already operates 59 converted DC-10s -- called KC-10 Extenders . These aircraft havealmost twice the maximum fuel capacity of both the KC-135 and the KC-767. Using the Air Force'sown comparative metrics, the KC-10 is a 1.95 KC-135 equivalent -- in other words, it has 195percent of the KC-135's fuel carrying capabilities. Thus, 50 KC-10s have roughly the same tankercapabilities as 100 KC-135s. Also, lease opponents point out, the KC-10 can use the refueling boomand the hose-and-drogue systems on the same mission. The KC-10 also has a much larger cargocarrying capacity (170,000 lbs) than either the KC-135 or the KC-767. This large capacity wouldalso be a boon to the Air Force's strategic airlift capabilities, which are currently hard pressed to meetthe requirements established in the Air Force's latest requirements study. (55) In addition to these operational advantages, lease opponents point out that buying andconverting surplus DC-10s into KC-10s offers significant financial advantages over the KC-767. Surplus DC-10s are being offered for sale for $600,000 to $10.3 million each. (56) If 50 surplus DC-10s couldbe purchased for $10 million each, and if the tanker conversion cost another $40 million (57) , the Air Force couldreplace the oldest 100 KC-135s with 50 tankers that are twice as capable for a only $2.5 billion, leaseopponents say. Just as important, the Air Force has already invested in KC-10 training, O&M, andmilitary construction. These investments would have to be borne anew for a KC-767 fleet. Between42 and 57 DC-10 aircraft were available for sale or lease between September 2002 and August2003. (58) At least twentyfive of these aircraft were equipped with the same CF6-50C2 engines as the Air Force's KC-10fleet. (59) The Air Force could counter the arguments above with several points. First, surplus DC-10sare used aircraft. Used aircraft conditions vary widely, and not all may be in acceptable condition. How much life is left in each aircraft? Commercial airlines put many more flight hours annually ontheir aircraft than does the military. How well has the aircraft been maintained? The Air Force haspurchased and converted surplus commercial aircraft before, it says, and has run into difficulties. TheAir Force's first two E-8A JSTARS development airplanes were 20-year-old commercial Boeing707s. Conversion difficulties and questions of remaining service life convinced the Air Force thatit needed to design and implement a more robust inspection and verification program to ensure thethat surplus aircraft being considered actually have the capabilities and characteristics advertised. Relatedly, the Air Force could argue, the DC-10 is yesterday's technology. While the Air Force's 59KC-10s are very capable tankers, their future is limited. The DC-10's 1980s-era design andcomponents do not offer all the opportunities represented in a brand new aircraft. The KC-767 willoffer room for technological growth that the KC-10 can't match. Figure 5. DC-10 Availability KC-767 versus Re-Engining KC-135Es. Anothercontentious debate has arisen over re-engining KC-135E aircraft -- essentially turning them intoKC-135Rs. KC-767 lease critics say that re-engining the KC-135E has many merits that should beconsidered as an alternative to leasing 100 new aircraft. Upgrading the E's engines will increase theaircraft's takeoff power, cruise speed and other performance parameters. Despite their old age, theKC-135Es have only used approximately half their flying hours. Re-engining them to improve theirperformance over their remaining lifetime, perhaps 35 more years, would be a cost-effective andprudent step, many argue. A major advantage of this approach, lease critics say, is timeliness. If the need for improvedtanker capabilities is urgent, as the Air Force argues, then upgrading the "E" fleet to R models maybe the quickest solution. (60) The second advantage of this approach is cost. The GAO estimates that re-engining 127KC-135Es would cost $3.6 billion, a much lower figure, lease opponents say, than the Air Force's$17.2 billion estimate for leasing the KC-767, or the $24.6 billion total program cost (plus the $4.4billion likely spent at the end of the lease to purchase the aircraft.) (61) Not only is the cost of there-engining procedure low, compared to the 767 lease, but this approach also saves money byavoiding projected maintenance on the old engines that will be replaced. Much of the increased costprojections for the KC-135 from 2001 to 2040 have to do with engine maintenance. According tothe ESLS study: "E-model per A/C Engine Costs are 20 times the R-Model." (62) Thus, the out-yearmaintenance costs avoided by this re-engining will help finance the $3.6 billion initial investment,lease opponents argue. A third advantage of re-engining is that it will eliminate one of the KC-135E's mostchallenging maintenance problems: corrosion of the engine strut. Corrosion-induced maintenanceand repair of the KC-135E engine struts have recently been estimated at $3 million per aircraft. (63) Concerns over the effectsof corrosion on this key structure have also led the Air Force to impose flight restrictions on theE-models. Eliminating these problems, in addition to the cost savings and performanceimprovements, argues strongly for re-engining, lease opponents say. The Air Force is strongly opposed to re-engining the KC-135E fleet. According to the GAO,the Air Force has not requested funds for re-engining E-models since 1993. Congress or DOD haveadded funds to upgrade approximately 2 E Models per year to R Models at a cost of about $29million per aircraft." (64) The Air Force makes a number of arguments against re-engining. First, only 100 of the E-modelsare candidates for re-engining. (65) So, if re-engined, the final number of R-models in the inventorywould be at least 27 fewer than advocates of this approach believe. Second, re-engining will improvesome of the KC-135E's capabilities, but it does nothing to address the underlying issue of the agingaircraft fleet. According to former DOD acquisition chief Pete Aldridge, the upgrade from E-modelsto R-model "will not buy you any lifetime, and that's what we need to buy: additional life." (66) The third argument the Air Force makes against re-engining the KC-135Es is one ofimmediate and longer-term availability. Re-engining the Es would remove them from the activeinventory for at least six months. Re-engining, the Air Force argues, would decrease the availabilityof air refueling tankers when the Air Force has the highest demand on tankers -- now, during a war.Re-engining the KC-135E fleet would leave "tired iron" in the inventory that would degrade missioncapable rates relative to a new aircraft. Fourth, the Air Force says, while re-engining may obviate corrosion problems with the enginestrut, it will not address any of the numerous remaining problems such as the wing attachmentfittings, electrical wire replacement, and body skin replacement that will continue to plague theKC-135R fleet. The final Air Force argument against re-engining the E-fleet is economic. KC-135Es haveapproximately 80 percent the capability of a KC-135R. If the Air Force were to re-engine andconvert the E-model to an R-model, it would gain a 20 percent increase in capability for the $38million investment. This is a poor deal, the Air Force argues. Also, according to Air Force studies,converting E-models to R-models exacerbates the recapitalization problem considerably, becauseit does not satisfy recapitalization requirements, it only postpones them. Furthermore, it postponesrecapitalization with a significant investment ($3.87B for 100 aircraft) that will take decades to payfor itself, the Air Force argues. (67) KC-767 versus Leasing Tanker Services. Thosecritical of the proposed 767 lease also say that there are other alternatives to purchasing or leasingan aircraft. Instead, the Air Force could reduce the KC-135's workload and buy time to explore otherrecapitalization options by leasing tanker services. The U.S. Navy, for example, has signed afive-year deal with a private company to refuel Navy and Marine Corps aircraft participating inexercises or flying from Atlantic to Pacific Coasts. The Navy does not own, or even lease the aircraft.It contracts to have tanker services provided. The Navy is reportedly satisfied with the company'scost -- about half that of military aerial refueling -- and reliability. (68) The United Kingdom is also soliciting bids from private firms to provide its military withaerial refueling services. As a private finance initiative the source of refueling services wouldprovide the Royal Air Force (RAF)with both the tanker and the support services. The RAF willown the services of the fleet -- 10 aircraft for 27 years -- but not the aircraft. The vendor wouldtechnically own the aircraft (which appear likely to be 767s) and would also make them availablefor third-party usage when not demanded by the RAF. (69) Leasing tanker services would be more advantageous than leasing or buying KC-767's, leaseopponents argue, for several reasons. Leasing tanker services could augment the Air Force's tankingquickly, thereby satisfying the Air Force's stated urgent need. Also, leasing service would avoid anykind of cost associated with recruiting, training and paying an aircrew. The Air Force currentlysuffers from very high operations tempo (OPTEMPO), as it deals with the unanticipated strains offighting the global war on terrorism, lease opponents point out. This high OPTEMPO exacerbatesa long standing problem the Air Force has had with too few KC-135 crews. Leasing tanker servicescould immediately ameliorate this problem. The current DOD leadership has a consistent trackrecord of promoting outsourcing and privatization. Why not apply the same principles torecapitalizing the aerial refueling fleet, critics of the 767 lease ask? Unlike the Navy, the Air Force has not yet hired private refueling services to supportexercises or training. Supporters of the proposed 767 lease may argue that such services areinherently limited in their application: companies have a difficult time getting insurance for aircraftthat fly into war zones. Also, it would be difficult, they argue to get private pilots to fly intocontested areas. During Operation Iraqi Freedom the Air Force aggressively flew tankers well intoIraqi airspace. Would private pilots balk if asked to do the same? The number or companies willingto engage in such business is limited, lease supporters argue, and it is unlikely that companiescurrently in this line of work could provide the Air Force with the number of aircraft required tomeet anticipated needs. So, while there may be some niche applications for leasing tanker services,most believe it is no replacement for fleet recapitalization. Also, most private companies can refuelNavy and Marine Corps aircraft, but not Air Force aircraft, so their application may be limited in thatdimension as well. Outsourcing and privatization do have their applications, lease supporters agree,but Air Force tanker aircraft are combat systems, not a commissary or depot. To be effective andreliable, combat systems must be operated by, and controlled directly by the military, who are trainedand disciplined to deal with combat situations. by Dan Else (707-4996) In addition to the operational urgency arguments outlined above, the Air Force and leasesupporters say that two industrial base concerns argue strongly for immediately implementing theKC-767 lease: leasing the 767 before its production line closes, and supporting the Boeing Companyduring a period of unusual economic hardship. Viability of the 767 Production Line. The Air Forceargues that the KC-767 lease should be implemented immediately because a lack of business mayforce Boeing to shut down this production line in the near future. In essence, if the Air Force doesnot act now, it may not have this opportunity again. (70) A review of publically available information on the 767's business suggests that the 767production line is not in imminent danger of being shut down. The backlog of production orders onthe 767 line as of mid-August 2003 appears to be sufficient to sustain minimum-rate productionthrough at least February 2006. (71) Boeing's 767 production line has been able to maintain a production rate of 20 aircraft or lessper year (less than two per month), and industry analysts estimate that the minimum sustainable ratefor Boeing's commercial aircraft lies at approximately one aircraft per month. (72) At the end of 2002, thirtynine 767s had been ordered but not delivered. During 2003, 19 of these aircraft were completed anddelivered, and another 11 were put on order. This means that, as of mid-August 2003, there is a production backlog of 31 commercial 767s. At the minimum sustainable production rate of 1 aircraftper month, therefore, Boeing's production line for the 767 could possibly operate until February 2006without any additional orders being placed. (73) Beyond February 2006, the viability of the 767 production line is less certain. Commercialmarket demand for the 767 appears weak and shows few signs of future strength. The aircraft hassteadily lost ground to its near-peer competitor, the Airbus A330, since 1998. (See Figure 6 below.) Boeing is in the late developmental stages of a new aircraft, the 7E7 Dream Liner , that will beoffered for sale in 2004 and is expected to enter service in 2008. (74) Figure 6. Boeing 767 and Airbus A330 Production Backlog Some analysts have predicted that Boeing's alleged lack of commitment to marketing andimproving the 767, coupled with the introduction of the 7E7, will not add many new sales to thecurrent backlog, and could kill the civil airliner version of the aircraft. (75) The production of thecivilian 767 is now projected (See Figure 7 below) to continue at the rate of 12-15 aircraft per yearonly through mid-2008. (76) Figure 7. Projected 767 Production Source: Teal GroupCorp. Lease opponents are likely to point to these current and future business projections and arguethat there is no urgency to leasing the KC-767. It could be available to the Air Force until at least2006 and perhaps until 2008. Lease supporters, however, may say that these projections prove thatthe Air Force must move more quickly than its previous plan, which was to begin recapitalizationin 2012. No one expects the 767 to remain in production that long, they may argue. Furthermore,supporters may argue, there is no guarantee that the line will stay open until 2006. The profit marginrealized from building 767s at the minimum sustaining rate (one aircraft per month) is likely to bevery small. Boeing could decide that in light of dwindling business, it may be more profitable in thelong term to shut down the line sooner than 2006. (77) The Need to Help Boeing . Some critics have portrayed the leasing arrangement as somewhatof a financial boost for a company in difficulty, (78) and other analysts have speculated on the benefits of the numberof jobs the construction and deployment of 100 new airplanes are likely to preserve and create. (79) Boeing is the largest manufacturer in the U.S. aerospace industry, directly employing 166,000workers and generating more than $54 billion in sales during 2002 that was split almost exactly inhalf between its two major divisions, Commercial Airplanes and Integrated Defense Systems. Inaddition, it provides work for many thousands of employees in companies that supply parts,components, and services to its operations. Boeing is ranked No. 15 in the most recent Fortune 500and No. 104 in the Financial Times Global 500 lists of corporations. It is included in both theStandard & Poor's 500 index and the Dow Jones industrials index. (80) In the civil aviationindustry, Boeing has traditionally dominated world sales in large commercial jet aircraft, but isfacing strong competition from rival Airbus. In the defense sector, Boeing and Lockheed Martincompete for the number one spot in world sales. Perhaps because of the recent softening in general worldwide demand for commercialaircraft, Boeing recently restructured its corporate organization, moving its headquarters from theSeattle, Washington, area (where its principal commercial aircraft manufacturing facilities lie) toChicago, and combined what had been its military aircraft and space and communications units intoIntegrated Defense Systems. One analyst has characterized this as a "controlled de-emphasis" of thecompany's traditional focus on commercial air transports in order to concentrate on areas such assatellite communications, space-imaging, flight services, and unmanned aerial and unmanned combataerial vehicles (UAVs and UCAVs respectively). (81) The impact of a 100-aircraft order on Boeing's Overall Production Output. The delivery of 100 new 767 Tankers to the United States Air Force over a six-year period wouldrepresent a relatively small addition to existing and anticipated production. However, some analystsexpect the profit accruing to the company upon the sale of each 767 Tanker to exceed that of acomparable commercial jet, exerting a positive influence on corporate profits. Boeing Commercial Airplanes delivered 379 aircraft of various models worth approximately$25 billion during 2002 (this was down from the 526 aircraft delivered during 2001). Of these 379airframes, 35 were 767s. Figure 8 illustrates Boeing new aircraft deliveries from 1998 through 2002and projects production through 2011 (82) with 767 and KC-767 production highlighted. Figure 8. Boeing Civil Airframe Production Sources: Aerospace Industries Association(1998-2002); Teal Group (2003-2011). Without the KC-767, Boeing will have built 5,308 civil aircraft during these fourteen years,including 293 767s. This represents 5.5% of the airframes manufactured. If 86 KC-767s are added(the remaining 14 are scheduled for 2012 delivery), the total 767 production accounts for 7.0% ofBoeing production. Therefore, it appears that the KC-767 program is not critical to BoeingCommercial Aircraft, but is critical to one of the company's six existing civil aircraft assemblylines. (83) A May 2003 report prepared by Morgan Stanley Research calculated and compared theexpected profit of the sale of Boeing's KC-767 with other Boeing commercial jet aircraft. (84) The report finds that thesale of each Boeing KC-767 under the conditions announced publicly by Boeing and the U.S. AirForce would generate approximately seven times the profit of a single Boeing 737, the company'smost popular commercial airplane. A comparison such as this is more valid if the KC-767 is compared with a commercial saleof the civil 767. If the assumptions published in the report are used to calculate and compare profitson the 767, it seems that the KC-767 may generate company profits equal to approximately three tofour 767s. Table 3 illustrates how this number was generated. Table 3. KC-767 and Civil 767 Profits Data Source: Morgan Stanley * Boeing has agreed to cap its operating profit margin at 15% of the converted tanker sale price. ** Boeing's advertized list price for the 767-200ER is $101.0-$112.0 million in 2002 dollars. Theactual price of a given aircraft depends on the configuration and special features selected by thecustomer. Price quotes are available on the World Wide Web at http://www.boeing.com/commercial/prices/ . Aircraft prices are negotiable, though, and airlinecustomers can often win substantial discounts. *** Profit calculation: CRS The KC-767 as a Jobs Program. An order for 100 767 aircraft and theirconversion to tanker configuration is likely to increase the number of workers that would otherwisebe employed by Boeing's Commercial Airplanes unit and by the company's second-tier and belowsuppliers. (85) In anOctober 2002 letter to the White House Chief of Staff, Secretary of the Air Force James Rochequotes Boeing as estimating that the program would create 11,000 new jobs at Boeing itself andanother 28,000 at its component makers, for a total of approximately 39,000 new positions. (86) In order to gain an appreciation of what this means, it should be viewed in the context ofBoeing's recent job losses, which have been significant since 1997 (See Figure 8). That year, the yearafter Boeing acquired McDonnell Douglas, the Commercial Airplanes unit employed more than108,000 workers. This rose in 1998 to more than 117,500 as the company increased the pace of itsjet deliveries. During 1999, however, Commercial Airplanes employment fell by more than 22,000,to 94,700, mirroring a slowdown in the deliveries of both single- and multi-aisle aircraft.Employment continued to decline through 2000 and 2001 until, at the end of that year, the unitemployed 89,400, or more than 28,000 workers below the 1998 employment peak. Near the end of2001, the company announced that the post-September 11 effect on the airline industry would requirethe layoff of approximately 30,000 workers. By the end of 2002, Commercial Airplanes unit employment stood at 66,500 workers, a lossof 22,900 during the year and an overall loss of more than 59,000 jobs from the peak year of 1998.Assuming an average of $49,700 in annual wages per production position, with approximately 2.5supplier jobs linked to each Boeing job, this five-year decrease in employment represents as muchas $10.4 billion in wages in 209,000 jobs nationwide, and $2.9 billion in wages at Boeing, that havebeen either diverted to other employment within the aviation industry, moved to positions outsidethe aerospace sector, or eliminated. (87) If the 11,000 anticipated direct employment positions at Boeing's Commercial Airplanes unithad materialized during 2002, the limiting best case, they would have reinstated slightly less thanhalf of the positions actually lost during that year. Figure 9 presents Boeing's Commercial Airplanesemployment history in graphic form. The thick line on the right of the graph represents the additionof 11,000 hypothetical jobs during 2002. Figure 9. Boeing Commercial Airplanes Direct Employment However, it is not clear whether all of these jobs will be new, or whether some might betransferred from the 747 production line, which is also facing difficulties. Should the 747 productionline be shut down or its workforce cut back, this skilled labor would presumably be available for useon the 767 production line, potentially reducing the number of new or rehired workers. (88) by [author name scrubbed] (707-7610) If there is an urgent need to acquire tanker aircraft, and if tankers based on the Boeing 767are the best aircraft to acquire, then a follow-on question is how the cost of acquiring these aircraftthrough a lease compares to the cost of acquiring them through a purchase (i.e., procurement). Estimated Total Cost and Factors That Can Change TheCalculation. The Air Force report presents estimates for the total cost of the leasingand procurement options that have been calculated on a net present value (NPV) basis (see AppendixB for a description of NPV analysis). The report states that when calculated on an NPV basis,leasing the 767s would be about $150 million, or about 1%, more expensive than purchasing (i.e.,procuring) them. Specifically, the report states that leasing would have an NPV of $17.2 billionwhile purchasing would have an NPV of $17.1 billion. These two NPV figures are rounded to thenearest tenth of a billion. When the difference between them is measured more precisely, it becomes$150 million. (89) Although the Air Force report presents this $150-million difference as a single answer to thequestion of the comparative total costs of leasing vs. purchasing the 767s, the cost comparison, asthe report notes, can be significantly affected by decisions one makes on certain key variables orassumptions involved in the calculation. Included among these variables and assumptions are thefollowing: Should a multi-year procurement (MYP) arrangement be used in calculatingthe cost of the procurement option? How much would using MYP arrangement reduce the cost of the procurementoption? What is the correct discount rate to use in performing the NPV costcomparison? What progress payment schedule should be used in estimating the cost of theprocurement option? How should inflation be used in calculating the cost of the progress paymentsunder the procurement option? What interest rate should be used for the bonds floated by the Special InterestEntity (SPE)? What interest rate should be used on the construction loans that the SPE wouldtake out under the leasing arrangement to finance the building of the 767s? What estimate should be used for the imputed government self-insurance costincluded in the cost of the procurement option? Each of these questions is discussed below. Several of these factors could individually shiftthe result of the NPV analysis by hundreds of millions of dollars. In combination with one another,they could shift the result by an even greater sum. Use of MYP Arrangement For Procurement Option. In calculating the costs of the 767 leasing and procurement options, the Air Force assumed that theprocurement option, like most major DOD acquisition programs, would use annual contracting. Ifthe calculation had instead assumed the use of multi-year procurement (MYP) for the procurementoption (see Appendix C for a discussion of MYP), the NPV analysis could have favored theprocurement option by several hundred million additional dollars. (90) The Air Force states that it used annual contracting rather than MYP for the procurementoption for the following reasons: MYP has never before been used at the start of a DOD aircraft procurementprogram. Using MYP at the start of a procurement program would not be consistent withthe statutory requirement that weapons and platforms being considered for MYP have a stable design(i.e., a design that has been in production for several years and been proven through actual use, andis thus unlikely to need to be altered during the period covered by the MYP due to the discovery ofdesign problems). Congress passed a provision authorizing a lease of 767s and did not pass aprovision authorizing a multi-year procurement of 767s. If Congress had been open to consideringan MYP arrangement for the 767s, it would have passed legislation granting such authority. (91) Those who support the idea that the Air Force should have assumed the use of MYP incalculating the cost of the procurement option might argue the following: The leasing arrangement approved by Congress inherently involvesmaking a multi-year commitment to the 767 program . Leasing opponents may maintain thatsince the leasing option is inherently a multi-year option, it should have been compared to amulti-year procurement option to ensure an apples-to-apples comparison ofcosts. Supporters of the lease have argued that it constitutes an innovation indefense acquisition. Using MYP at the start of a 767 tanker procurement would equallyrepresent an innovation. Opponents may argue that although DOD has leased aircraft in the past,the 767 lease is precedent-setting in several regards, including the larger number of aircraft involved,the large total cost of the lease, and the use of a relatively short-term operating lease for an asset thatthe Air Force will likely continue to require for a much longer period of time. In addition, thelegislation setting up the lease exempted the Air Force from a requirement to include the full amountof funding that the government would be liable for in case of cancellation, and established a specialcongressional process for approving the lease. Leasing opponents may assert that Congress arguablysent a signal in passing the legislation setting up the lease that, in the case of the 767s, it is preparedto consider highly novel acquisition approaches. From their perspective, using MYP for the 767swould be no more irregular, and possibly less irregular, than the leasing arrangement. The fact thatCongress approved one kind of authority (leasing) and not another (MYP) does not prove lack ofcongressional interest in approaches other than leasing. They might maintain that it is the role ofCongress, not the Air Force, to decide what options Congress would be willing toconsider. There is precedent for Congress granting DOD a multi-year contractingauthority similar to MYP at the start of a major DOD acquisition program involving aplatform with a complex design: Congress, in acting on the FY1998 defense budget, passed aprovision granting the Navy a special block-buy contracting authority for the first four Virginia-classnuclear-powered attack submarines. This authority was similar to MYP authority in that it permittedthe Navy to sign a single contract covering 4 submarines that were to be procured over the five-yearperiod FY1998-FY2002. These 4 submarines have a combined estimated procurement cost of morethan $10 billion. In terms of design and engineering, nuclear-powered submarines are at least ascomplex, if not more complex, than tanker aircraft, and Congress passed this legislation in 1997,before construction of the first Virginia-class submarine had even started. There is precedent for a service requesting MYP authority for a programthat has not yet produced a single completed unit and consequently has not demonstrateddesign stability through the traditional means of successfully testing one or more fully builtunits in their intended operating environment: The Navy, as part of its FY2004 budgetsubmission, requested that Congress grant full MYP authority for a group of 7 Virginia-classsubmarines to be procured during the five-year period FY2004-FY2008. The Navy requested thisauthority even though construction of the first Virginia-class boat is still not complete. (It was about85% complete at the time the Navy submitted its proposed FY2004 budget to Congress in February2003.) Instead of demonstrating the stability of the Virginia-class design in the traditional manner-- by completing construction of at least one boat and showing, through real-world operations, thatthe boat's design does not need to be changed to fix previously undiscovered design problems -- theNavy is advancing the novel argument that the relatively small number of design changes that haveoccurred during the lead ship's construction (compared to the number of design changes thatoccurred during construction of the lead ships of previous classes of U.S. submarines) is sufficientto demonstrate that the Virginia-class design is stable. There is precedent for a service assuming the use of a precedent-settingMYP in a major defense acquisition program when making an important cost calculation thatwas forwarded to Congress: In estimating projected cost growth in the Virginia-class program --a projection that the Navy forwarded to Congress -- the Navy this year assumed the use of MYP inthe Virginia-class program for FY2004-FY2008. The Navy made this assumption even thoughCongress has not yet approved the MYP arrangement for the Virginia class, and even thoughapproving it would set a precedent because the first boat has not yet been completed, let alone tested. If the Navy had not assumed the use of MYP in its cost calculation, the projected amount of costgrowth in the program would have been substantially higher, and would have triggered theNunn-McCurdy provision (10 USC 2433), a law under which a defense program reporting more than25 percent projected unit cost growth is to be terminated unless the Secretary of Defense submits toCongress certain certifications about the program's importance and management. There is precedent for a service requesting MYP authority for anair-vehicle program that has not demonstrated design stability through the traditional meansof completing testing and having multiple production copies completed and in the operationalinventory: The Navy, as part of its FY2004 budget submission, requested that Congress grant MYPauthority for 1,748 Tactical (Block IV) Tomahawk cruise missiles to be procured during the five-yearperiod FY2004-FY2008. The Tactical Tomahawk is a reengineered (redesigned) version of the olderTomahawk cruise missile (the Block I through Block III version) that ended procurement in FY1999. The Tactical Tomahawk was reengineered to be built at roughly half the cost of the older Tomahawkand differs in many ways from the older Tomahawk at the piece-part level. The first TacticalTomahawks meant for operational use were procured in FY2002. Construction of these missiles isto begin at the subcontractor level in 2003, and assembly of the missiles is scheduled for 2004. TheNavy requested an MYP arrangement for the Tactical Tomahawk program even though testing ofthe Tactical Tomahawk is still underway, and even though the first production missiles procured inFY2002 have not yet been completed, are being built following a two-year (FY2000-FY2001)interruption in procurement of new-built Tomahawks, and are not scheduled to enter the operationalinventory until May 2004. In addition, a DOD decision on whether the Tactical Tomahawk programis ready to proceed to full-rate production is not to be made until May or June 2004. (92) The 767 tanker will have as much, if not more, design stability than theVirginia-class submarine or Tactical Tomahawk cruise missile. The 767 tanker design is basedon the airframe for the Boeing 767 commercial airliner. Boeing has considerable experiencebuilding this airframe: It delivered the first 767 airliner in 1982 and has delivered a total of 908through June 2003. The equipment that is to be added to the basic 767 airframe to convert the planeinto a tanker is not new technology. And the task of integrating these components into the basic 767design will be done to sell the 767 tanker design to the governments of Italy and Japan, which arein line to acquire four 767 tankers each before 767 tankers are to be delivered to the AirForce. The start of the MYP arrangement could in any event be delayed untilsometime after the start of the procurement option. As noted in the August 26, 2003,Congressional Budget Office (CBO) report on the 767 lease proposal, Congress in any event couldwait until the third 767 production lot (i.e., the 21st plane) to grant MYP authority, and use the firsttwo production lots (totaling 20 planes) to demonstrate design stability in the program. Such anoption, CBO stated, would still capture roughly 80% of the cost-reduction benefits of using MYPfor the procurement option. (93) Air Force officials have stated that the issue of whether to assume MYP in the procurementoption is in any event moot, because the Air Force budget is insufficient over the next few years tomeet the near-term funding requirements of a 767 procurement program without requiring unduereductions in other Air Force programs. Indeed, they could argue that using MYP would requireeven more near-term funding than an annually contracted procurement program, due to the need tofund the MYP's economic order quantity (EOQ) purchase (i.e., up-front batch order) of selected 767tanker components. (94) Those who believe that an MYP arrangement should be used in calculating the cost of theprocurement option could argue that the issue is not necessarily moot, because it is possible tostructure a 767 tanker procurement option using MYP that features reduced near-term fundingrequirements. Specifically, they could argue, the Air Force could procure the 767s under anapproach that combined MYP, incremental funding, and possibly a delayed EOQ purchase or noEOQ purchase at all. Such an approach, they could argue, would (through MYP) reduce the totalprocurement cost of the 767s below what the Air Force estimated in its report and defer (throughincremental funding) portions of the procurement cost of the 767s into future years, so as to addressthe Air Force's requirement to minimize near-term funding requirements. Deferring the EOQ purchase (and thereby applying it only to later planes in the 100-planeeffort, rather than to all 100 aircraft) would reduce the amount of savings achieved through the MYP(since EOQ purchases are a significant contributor to overall MYP savings), but it would also deferthe funding requirements of the EOQ to a later year and reduce the scope and cost of the EOQ whenit does occur, addressing the Air Force's need to minimize near-term funding requirements. Completely eliminating the EOQ purchase would further reduce the savings achieved by the MYP,but still permit some MYP-related savings to be achieved (through work force optimization andinvestment in improved production equipment at the final assembly plant) while eliminating theEOQ purchase as a possible source of near-term funding pressure. Opponents of an incrementally funded MYP could argue that it would not only set aprecedent by using MYP at the start of an aircraft procurement program, but also violate the fullfunding policy governing defense procurement. In acting on the FY2003 budget request, they canargue, Congress altered the Air Force's proposed funding profile for the C-17 program and passedother legislation specifically to reinforce the principal that procurement programs using MYP areno less subject to the full funding policy than annually contracted programs. (95) Supporters of an incrementally funded MYP with a delayed or eliminated EOQ purchasecould argue that although Congress, in acting on the FY2003 budget, reinforced the application ofthe full funding policy to MYP programs, this was intended to send a general signal on defensebudgeting procedures that need not apply to the 767 program because Congress, in passing thelegislation setting up the 767 lease, indicated that, in the case of the 767s, it was prepared to considerhighly novel and irregular acquisition approaches. An incrementally funded MYP with a delayedor eliminated EOQ purchase, they could argue, would be no more irregular, and possibly lessirregular, than the leasing arrangement. Supporters of the lease have argued that it constitutes aninnovation in defense acquisition. Supporters of an incrementally funded MYP could argue that it,too, would represent an innovation. As recent precedents for the use of incremental funding in amajor DOD acquisition program, they could cite the following examples: Congress, in the FY2000 and FY2001 defense appropriation bills, directed theNavy to use incremental funding to procure an amphibious assault ship called LHD-8 -- a relativelyexpensive ($2.0 billion) ship that, if fully funded in a single year, could have required reductions inother Navy programs that year. The Navy, through use of advanced procurement funding in FY2001-FY2006and so-called split funding in FY2007-FY2008, plans to procure a new aircraft carrier calledCVN-21 in FY2007 using a funding profile that amounts to a form of incremental funding, eventhough this ship is nominally subject to the full funding provision. CVN-21 is a very expensive($8.6 billion) ship that, if fully funded in a single year, could require significant reductions in otherNavy programs that year. DOD in the 1990s in effect used a form of incremental funding to acquiremilitary sealift ships called Large, Medium-Speed, Roll-on/Roll-off ships (LMSRs) that wereprocured through the National Defense Sealift Fund (NDSF). The NDSF is a DOD revolving fundthat is not subject to the full funding provision because it is outside the procurement title of the DODappropriation act. Future ships procured through the NDSF, including Navy Lewis and Clark(TAKE-1) class auxiliary cargo ships, could be built using a similar fundingapproach. Supporters of an incrementally funded MYP for the 767s could argue that procurement of767s, if necessary, could be moved to a DOD budget account that is outside the procurement titleof the defense appropriations act and therefore not subject to the full funding policy. Pastcongressional action, they could argue, establishes some precedent for this: As part of its action onthe FY2001 defense appropriation bill (H.R. 4576/S. 2593), Congress establisheda National Defense Airlift Fund (NDAF) -- a revolving fund outside the procurement title of theDOD appropriations act that was analogous to the NDSF -- and directed that C-17 airlift aircraft beprocured through this fund rather than in the Air Force's aircraft procurement account. (96) Although Congressdirected that C-17 procurement in the NDAF conform to the full funding policy, supporters of anincrementally funded MYP for the 767s could argue that Congress, in passing the legislation settingup the 767 lease, signaled that, in the case of the 767s, it was prepared to consider new approaches,such as incremental funding. Amount of Savings From Using MYP In ProcurementOption. The Air Force's estimate that using MYP for the procurement optionwould reduce the cost of the procurement option by about $900 million on an NPV basis was derivedby reducing the estimated cost of the procurement option by 7.4%. The 7.4% figure was taken froma 2001 report from the RAND Corporation that examined the estimated savings of 12 previous actualor proposed uses of MYP in DOD procurement programs. (97) The 7.4% figure was anaverage obtained by excluding the highest and lowest estimated savings rates in the programsexamined (more than 14.3% for the Army Javelin anti-tank missile and 3.9%-4.7% for the Air ForceF-22 fighter, respectively). Including these two cases would produce an estimated savings rate of7.7%. The remaining 10 cases varied between 5.4% and 10%. If applying MYP to the 767 procurement option produce savings of as little as 5.4% or asmuch as 10%, then MYP might reduce the cost of the procurement option on an NPV basis by aslittle as about $660 million (using the 5.4% figure) or as much as about $1.2 billion (using the 10%figure). Using a delayed (and thus reduced) EOQ, or no EOQ at all, would result in a smalleramount of cost reduction. Discount Rate Used in NPV Analysis. OMB circularA-94 provides guidance to executive branch agencies on what discount rates to use in calculatingthe NPVs of leasing and purchasing options. These rates are based on the yields (i.e., interest rates)on U.S. Treasury notes and bonds of specified maturities. As set forth in the most recent (January2003) version of Circular A-94, those rates are as follows: Table 4. Discount Rates for Lease-vs.-Purchase NPVComparisons (Appendix C, OMB Circular A-94, revised January2003) Section 8(c) of Circular A-94 further instructs agencies, in choosing a discount rate, to use "the Treasury borrowing rate on marketable securities of comparable maturity to the period ofanalysis." In selecting a rate to use from the table above, OMB and the Air Force considered at leastthree alternatives that might qualify as being "of comparable maturity to the period of analysis" --a six-year rate (which would cover the six-year lease period for each aircraft), a nine-year rate (whichwould cover both the three-year construction period and six-year lease period for each aircraft) anda 15-year rate (which would span the entire period from the start of construction of the first aircraftthrough the end of the lease of the 100th aircraft). OMB and the Air Force settled on using anine-year rate, which was then calculated by interpolating between the seven-year and 10-year ratesshown on the above table. (98) Was a nine-year Treasury bond rate the correct rate to use as the discount rate in the NPVcalculation? (99) CRSanalysis indicates that a different Treasury bond rate should have been used. Specifically, CRSanalysis indicates that the NPV calculation should use the Treasury bond rate for bonds having an average maturity equal to the bonds that the U.S. government would likely use to raise the fundsneeded for the cash flows involved in the lease arrangement. In the case of the 767 lease, CRScalculates this average maturity at something between 3.5 and four years. (100) Using a four-yeardiscount rate instead of the nine-year rate in the Air Force report would favor the procurement optionby an additional $520 million. (101) Using a 3.5-year rate instead of the nine-year rate would favorthe procurement option by an additional $610 million. (102) It is possible that the interest rates shown in Table 5, particularly the rates for the shorter-termbonds, are too low. The Congressional Budget Office is projecting 10-year government borrowingrates that are higher than those shown in Table 5 (103) Using higher interest rates than shown in Table 5, particularlyfor shorter-term bonds (such as a bonds with a 3.5- or four-year maturity) would by itself favor theleasing arrangement by some additional amount of money. If government borrowing rates shift upfrom the rates shown in Table 5, however, corporate borrowing rates would likely also shift up,offsetting some portion (possibly all) of the relative advantage gained by the leasing option ofassuming an upward shift in Treasury bond rates. Progress Payment Schedule For Procurement Option. In estimating the cost of the procurement option, the Air Force report used a 15/30/30/25 progresspayment schedule, meaning that the Air Force under the procurement option would provide Boeingprogress payments during the construction of each aircraft (or group of aircraft) as follows: 15% ofthe cost of the aircraft three years prior to delivery, 30% two years prior to delivery, another 30%one year prior to delivery, and 25% at delivery. The Air Force states that it used the 15/30/30/25schedule in modeling the cost of the procurement option because this is the schedule that has beenused in discussions of the lease option under which Boeing would draw on the SPE's bank line ofcredit (i.e., the construction loan) to finance the construction of the planes for sale to the SPE. Usingthis same schedule for modeling the progress payments under the procurement option, Air Forceofficials argue, ensures a more apples-to-apples cost comparison. An alternative view is that regardless of the line of credit draw-down schedule that was usedin discussing the lease option, the procurement option should be modeled using a progress paymentschedule that reflects actual progress payment schedules used in previous Air Force aircraftprocurement programs involving aircraft built over a three-year construction period. An exampleof such a schedule, based on part programs, would be 10/24.5/43.5/22. This alternative schedule hasbeen referred to by some observers as a "compressed" schedule. Others, however, might view it asa traditional or typical schedule for a procurement program involving aircraft that take three yearsto build. Compared to the 15/30/30/25 progress payment schedule, this alternative schedule wouldshift a portion of the progress payments into later years, with the result that they would be discountedmore heavily, reducing the NPV of the procurement option. The Air Force states that using thisalternative progress payment schedule for the procurement option would favor the procurementoption by an additional $200 million. Treatment Of Inflation In Progress Payments For ProcurementOption. In estimating the cost of the procurement option, the Air Forcecalculated each progress payment to include an amount of inflation that would result as if all fourprogress payments for a given aircraft (or groups of aircraft) were made at the time of delivery, eventhough three of the progress payments would actually be made in earlier years. The Air Forces statesthat it calculated the progress payments for the procurement option this way because this was thesame basis for calculating the lease cost of the aircraft under the lease option. Using this samemethod, Air Force officials argue, ensures a more apples-to-apples cost comparison. An alternative view is that procurement programs in the past have calculated progresspayments in one of two ways -- by including inflation through the year of delivery on all thepayments, as described above, or by including an amount of inflation on each progress paymentsufficient to cover inflation up to the point in time when each payment is made. The Air Force statesthat using the second method would favor the procurement option by an additional $500 million. Interest Rates For Bonds Floated By SPE. Comparingthe costs of the leasing and procurement options involves making an assumption, for the leasingoption, about the interest rates of the bonds that would be floated by the Special Purpose Entity(SPE) to raise the cash needed to purchase the 767s from Boeing. The higher (or lower) theseinterest rates are, the higher (or lower) the lease payments would need to be to cover the SPE'sborrowing costs, and thus the higher (or lower) the total cost of the lease option. Under the proposed approach for implementing the 767 lease, the SPE would float threekinds of bonds called G bonds, A bonds, and B bonds. These bonds would present different amountsof risk for the bondholders and would thus carry different interest rates. In the Air Force report, the assumed interest rate for the G bonds was derived by taking theJanuary 2003 OMB forecast for five-year Treasury Bonds and then increasing it by 56 basis points(i.e., 56 hundredths of a percentage point). (104) The result was that the interest rates for the G bonds wereassumed to be 5.70%-5.91% during the period FY2006-FY20011 (the period during which the bondswould be floated). The assumed interest rate for the A bonds was derived by taking the January 2003 OMBforecast for two-year Treasury bonds and then increasing them by 100 basis points (i.e., a fullpercentage point). The result was that the interest rates for the A bonds were assumed to be5.84%-6.04% during the period FY2006-FY2011. The assumed interest rate for the B bonds was based on expected (i.e., forecasted) rates forhigh-yield corporate bonds, which resulted in a 10% interest rate for the period FY2006-FY2011. The actual interest rates for all these bonds will not be known until the SPE actually floatsthem in the bond market. These actual rates could be higher or lower than the rates assumed in theAir Force report. If the actual rates turn out to be higher (or lower) than assumed in the Air Forcereport, then the cost of the lease will be higher (or lower) than shown in the Air Force report. As a means of illustrating the sensitivity of the NPV cost calculation to any differencebetween the assumed and actual interest rates for the SPE bonds, it can be noted that if the actualinterest rates for all three kinds of bonds turn out to be 50 basis points higher (or lower) thanassumed in the Air Force report, then the total cost of the lease, when calculated on an NPV basis,would be about $270 million higher (or lower) than the cost shown in the Air Force report. (105) This figure of about$270 million can be used as a rough yardstick for estimating changes in the cost of the leaseresulting from a difference between assumed and actual rates that is different than 50 basispoints. (106) Potential questions for Congress arising out of the issue of the assumed SPE interest ratesinclude the following: What was the analytical basis for the approach that was used in the Air Forcereport to derive the estimated interest rates for the SPE bonds? Was this approach reasonable? Whatother approaches might have been used to estimate these interest rates? Given changes in various economic factors since January 2003, includingprojected federal borrowing needs, what is the likelihood that the interest rates forecasted by OMBin January 2003 will turn out to be higher or lower than actual rates? Historically, in situations where similar estimates had to be made about futurebond interest rates, how much of a difference did there turn out to be between projected and actualinterest rates, and was the difference more likely to be in one direction thananother? Interest Rates for Construction Loans Taken Out BySPE. Comparing the costs of the leasing and procurement options alsoinvolves making an assumption, for the leasing option, about the interest rates of the constructionloans that the SPE would take out from banks to finance the construction of the 767s prior to Boeingselling them to the SPE. The higher (or lower) these interest rates are, the higher (or lower) wouldbe the construction-financing cost that is included in lease price for each airplane, and thus the higher(or lower) the lease payments would need to be to cover the lease cost of the airplanes. The Air Force report assumes that the SPE will be able to borrow money for 767 constructionloans at an interest rate that would result in an average of $7.4 million in construction-financing costsfor each plane. This $7.4-million cost is added into the lease price of each 767, bringing the averagelease price to $138.4 million per plane. The actual interest rates for the construction loans will not be known until Boeing takes outthese loans. These actual rates could be higher or lower than the rates assumed in the Air Forcereport. If the actual rates turn out to be higher (or lower) than assumed in the Air Force report, thenthe cost of the lease will be higher (or lower) than shown in the Air Force report. As a means of illustrating the sensitivity of the NPV cost calculation to any differencebetween the assumed and actual interest rates for the construction loans, it can be noted that if theactual interest rates turn out to be 50 basis points higher (or lower) than assumed in the Air Forcereport, then the total cost of the lease, when calculated on an NPV basis, might be several tens ofmillions of dollars higher (or lower) than the cost shown in the Air Force report. (107) This potential degreeof change can be used as a rough yardstick for estimating changes in the cost of the lease resultingfrom a difference between assumed and actual rates that is different than 50 basis points. Inclusion of Imputed Self-Insurance Cost in ProcurementOption. The total cost of the 767 lease option includes a cost for privateinsurance policies that the SPE would take out to protect bondholders against events such as theaccidental crash and loss of one or more of the 767s. In the event of such a loss, the proceeds fromthe insurance policy would be used to pay off the bondholders. If the 767s were procured rather than leased, no such insurance policy would be taken out bythe government. Instead, the government would simply bear the risk of such a loss (i.e., employself-insurance). Bearing this risk incurs no immediate additional cost to the government. OMBCircular A-94, however, instructs agencies, when comparing the costs of leasing and purchasingoptions, to include in the cost of the procurement option an imputed (i.e., synthetic or virtual)self-insurance cost. OMB Circular A-94 instructs agencies to include such a cost because there isa risk that one or more of the 767s would be lost during their years of operation, and the government,in the case of the procurement option, would have to bear the cost of such a loss either operationally(due to the reduced capacity of the remaining 767 fleet) or financially (due to the need to spendadditional funds to procure replacement aircraft). For this reason, OMB believes, including animputed self-insurance cost ensures a more apples-to-apples comparison of costs between leasingand purchasing options. The cost comparison in the Air Force report, as instructed by Circular A-94, includes animputed self-insurance cost for the procurement option. The Air Force report estimates this cost at$100 million on an NPV basis. The question is whether $100 million figure is a reasonable estimate of the government'sself-insurance cost. The government's self-insurance cost would likely be lower than the cost ofprivate insurance, since the cost of private insurance includes, among other things, a profit for theinsurance company. The government's self-insurance cost would also likely be greater than zero,since there is a risk greater than zero of losing one or more of the 767s during their years ofoperation. Beyond these two bounding observations, however, calculating the cost of self-insuranceposes methodological uncertainties that could lead to results either higher or lower than $100 millionon an NPV basis. If alternative estimates put the cost of self-insurance at something higher than$100 million, this would make the cost comparison more favorable to lease option. If they put it atsomething lower than $100 million, thus would make the comparison more favorable to theprocurement option. The table immediately below summarizes the potential effect of the above variables andassumptions on the outcome of the cost comparison. Table 5. Summary of Variables, Assumptions, and PotentialChanges in NPV Cost Calculation Source: Congressional Research Service. by [author name scrubbed] (707-7627) A final set of questions addresses implications of the tanker lease for Congressional oversightof defense programs and long-term budget plans. If all four congressional committees approve the$720,000 new start notification submitted on July 11th, the Air Force will sign a contract with BoeingAircraft that will commit the Air Force to a $24.6 billion program over the next fifteen years. Approving a major weapons system program with substantial funding over a long period through anew start notification, rather than through approval of funds in DOD's annual appropriation andauthorization bills, appears to be unusual if not unprecedented. (108) The Air Force and others argue that the lease is attractive because it allows the Air Force toacquire 100 tanker aircraft with relatively little money spent up front. (109) On the other hand, theproposed lease appears to be, in many ways, an unprecedented method of undertaking a major newdefense procurement and is at odds with longstanding laws and regulations that apply to budgetingand procurement of defense systems. The proposed tanker lease raises a number of broader policyissues, particularly, the visibility of full cost of planned defense programs in the Congressionaloversight process. The chief issues raised are the following. Locking in substantial budgetary resources when long-term budgets areuncertain. If Congress approves the new start notification, the Air Force will make a contractualcommitment that "locks-in" an estimated $24.6 billion or more between 2003 and 2017 for theBoeing tanker lease. These funds have not been included in the Air Force budget. And while thelease approach reduces Air Force budget requirements in the short-term, it does so only by pushingcosts out into future years when potentially necessary trade-offs with other defense programs are lessvisible to policy makers but may be no less difficult. Locking in funding when program costs are uncertain. By proposing tolease rather than purchase the aircraft, the Air Force adds considerable uncertainty to the cost of theprogram that might not be experienced in a straight purchase. In this proposed lease, the Air Forcewould make itself subject to the volatility of the bond markets. Because of the high cost oftermination liabilities, the Air Force would be unlikely to cancel the lease even if financing costsincreased substantially. The total cost of the program is also likely to be higher because, accordingto many observers, the Air Force is likely to purchase the aircraft at the end of each six-year lease. Does the proposed lease comply with the statutory requirements and OMBrules for operating leases? Some observers have questioned whether the K767 tanker proposal isappropriately categorized as an operating lease. Budget rules provide that payments for operatingleases are to be counted or scored in agency budgets on an annual basis as payments are made. Ifthe tanker deal is categorized as a capital lease, then OMB would require that DOD budget $11.6billion up front to cover the full cost of the lease in present value terms. (110) Those rules aredesigned to ensure that the full scope of the government's obligations are visible to policymakers inorder to foster cost-effective decisions. Use of a Special Purpose Entity decreases visibility . The Air Force plan torely on a Special Purpose Entity (SPE) or Variable Interest Entity (VIE) to float the bonds to financethe program creates additional uncertainties and reduces visibility about likely cost. Some observershave suggested that using an SPE also masks the financial commitment of the government becausethe full government liability is not scored or counted in terms of budgetaryresources. Is the proposed lease a good deal for the government? The dollar value ofthe proposed lease is predicated on covering 90% of the "fair market value" of the aircraft in orderto minimize the amount of funding that would be considered risky - and hence command a largerpremium - by bondholders. That pricing does not reflect either the length of the lease or the wearand tear on the aircraft. Some have also questioned whether the "fair market value" of the aircraftis the best price for a tanker particularly since the Air Force negotiated both the lease and supportcontract without competition. Deviation from full-funding of the government's contractual liability. Thestatutory language applying to the multi year tanker lease exempts the Air Force from therequirement to budget for its potential termination liability, i.e. penalty payments for cancellationof the contract. Congress has thus exempted this Air Force action from the longstandingAnti-Deficiency Act which requires that government agencies have resources on hand to cover thegovernment's contractual liabilities. The following discussion analyzes each of these issues in turn. The previous sectioncompares costs of various program options using net present value or discounted dollars in order tocapture the effects on costs of different funding streams. The section below compares costs incurrent year dollars because that is the way program costs are generally expressed and how budgetchoices are generally made. Unless stated otherwise, all figures in this section are in current yeardollars and convert Air Force numbers from outlays to budget authority. (111) Locking in Substantial Resources When Long-term Budgets AreUncertain. Locking in the tanker lease program over the next 15 years couldsqueeze other programs. Although the Air Force has included some future funding for a newundefined tanker in DOD's planning documents and hopes to reap savings from retiring 68 oldKC135Es, those funds are not sufficient to fund the proposed lease. There is also someCongressional opposition to the proposed retirements, which could reduce resources further ifincluded in the final version of the FY2004 DOD Authorization Act. (112) Based on a recent CBOreport, budgetary pressures on all Air Force programs could be substantial beyond 2008 at the samepoint as lease payments would grow substantially (see Table 6). (113) If total defensespending grows only modestly in later years as is predicted in the FY2004 budget resolution, AirForce choices could be still more difficult. Implications of Air Force Decision To Opt For A Lease Over ABuy. According to Air Force figures, the total program cost of the proposedlease is $24.6 billion compared to $20.7 billion for a non-multi-year buy in current dollars. The leaseis $3.9 billion or 19% more expensive than a non-multi year buy (see Table 6 below). (114) Both options includeover $8 billion in support costs. Since support costs are comparable, the more valid comparison maybe between the lease payments and the non-multiyear buy. In that case, the lease would be more than30% more costly. (115) Although the Air Force acknowledges that the lease is more expensive, the Air Forcecontends that resources are not available to fund a buy in the next several years because of otherprogram demands. Table 6 shows that from FY2003 through FY2009, only $5.5 billion would berequired for the lease compared to $17.0 billion for a non-multiyear buy. On the other hand, thebudgetary pressures would simply be transferred to later years. From FY2009 to FY2017, the leasewould require $19.9 billion compared to $3.7 billion for the non-multiyear buy. Table 6. Comparison Of Lease vs. Buy Options For The Tanker Lease Program Using Air Force Assumptions in billions of current year dollars Sources : CRS Calculations based on Air Force Model, Business Case Analysis Model 1, July 2003. Notes : a Assumes lease and return of planes to Trust to be sold; for comparability, assumes purchase and then sale of aircraft. Includes cost of leasing or buyingaircraft and support costs for operating, maintaining and training on aircraft, aircraft insurance for potential damage. Program total includes aproposed rebate, estimated by the Air Force at $800 million, that it would receive at the end of the lease assuming the sale price of aircraft exceededoutstanding loans to bondholders. Negative numbers reflect sales or lease rebates. That rebate is not included in the individual lease and supportcosts. b Includes other government support and contract costs. Future Budget Pressures On The Air Force MayIncrease. A recent CBO report that estimates long-term costsof the current program suggests that the Air Force's investment programs are likelyto continue a sharp upward path in the years beyond 2009 reflecting the demands onthe budget of buys of the F/A-22 new fighter aircraft, the Joint Strike Fighter,increases in intelligence and command-and-control as well as a tanker lease andsubsequent buy. In later years, pressure may grow on the Air Force budget becauseof investment in a successor to the B-2 long-range bomber and a replacement of theMinuteman intercontinental missile. CBO projects that Air Force investment wouldhave to grow from $58 billion in 2009 to an average of $64 billion annually between2010 and 2020 in 2004 dollars if all planned Air Force programs are funded. (116) Funding such increases could be difficult unless the defense budget continuesto grow substantially. The FY2004 budget resolution, however, projects thatincreases for defense will drop from $20 billion per year to less than $10 billionbeginning in FY2009. (117) If this path materializes, DOD would facesubstantial pressures to make trade offs between defense programs. Such choicescould be more difficult with the resources for the lease program off-limits. While estimates of future defense spending could, of course, change, over thelong-term, pressures to hold defense spending down could re-surface starting aroundthe end of the decade with the retirement of the baby boom generation. If the tankerlease is approved, some observers have predicted that operating leases could be usedmore widely. That could, in turn, lock in large amounts of future budget resourcesand reduce congressional choices and oversight. Locking in Resources When Program Costs AreUncertain. The Air Force's current $24.6 billion estimate for totalprogram costs could prove unrealistic for several reasons. Even if costs grow,however, the Air Force is unlikely to cancel the program. Air Force Is Likely To Purchase thePlane. Although current Air Force plans do not envisionpurchase of the aircraft and the Air Force would have to request funds fromCongress, many observers believe that a purchase is likely. The Air Force wouldcontinue to need the plane, particularly if they retire 68 older KC-135s as planned,and the plane would have a useful life of another twenty years or more after the leaseis complete. And with all but 10% of the "fair market value" of the aircraft alreadypaid for, few would question that a purchase would be a good deal unless the aircraftperformed poorly. A purchase of all 100 planes would cost an additional $4.4 billionraising total program cost from $24.6 billion to $29 billion. The structure of theoperating lease makes it likely that the Air Force would choose to buy the planes,which could reduce the risk faced by the "B" tranche bondholders who are financingthe final 10% of the cost to be paid off when the planes are ultimately sold. Changes in Interest Rates Could Change Program CostsSignificantly. According to the Air Force's analysis, the totalcost of the multiyear lease itself is about $17.1 billion in current dollars, excluding$8.3 billion for support costs. (118) Of that total, about $3.9 billion, or about19%of the lease total represents financing costs (see Table7 below). (119) Whenthe bonds are floated starting in 2006, those costs could change in response toeconomic circumstances, prospects for the defense budget, or programmaticdevelopments. Based on information provided by the Air Force, Table 7 shows how shiftsin interest costs of plus or minus .5% and 1.5% for all three tranches would affectfinancing and total costs. If interest rates proved to be .5% higher or lower thananticipated by the Air Force, the cost of the lease would rise by $400 million incurrent year dollars. A sharper change of 1.5% from current assumptions wouldincrease or decrease the cost of a lease by $1.4 billion in current year dollars. Table 7. How Interest Rates Change 767 TankerLease Program Costs in billions of current year dollars a Notes: a All costs are in current dollars which include the effects of inflation. a Based on comparisons to the Air Force's baseline case, a non-multiyear buy. Sources : From sensitivity runs of Air Force Model, August 2003. By obligating the government to cover the cost of financing the aircraft, theAir Force subjects itself to the volatility of the bond market between 2006 and 2011,which would not be the case in a purchase. The Air Force would also have a contractual commitment to the entire program as well as substantial penalties fortermination. Compliance of Lease With Statute and RegulationsIs An Issue. Some observers have questioned whether the proposedlease complies with the statutory language in Section 8159 of the FY2002 DODAppropriations Act, P.L 107-117. That language requires that the lease be consistentwith OMB Circular A-11 which establishes the criteria that distinguish operatingleases from capital leases. Appropriateness of Using An OperatingLease. Operating leases are generally intended to be usedwhen an asset is needed for only a limited period of time and the user does not needor intend to purchase the asset. If the business or agency needs the asset on along-term basis, however, then a purchase generally makes more economic sense. To guard against agencies using operating leases to "buy on the installmentplan," or incrementally fund a purchase, the government has adopted a series ofguidelines for analyzing the trade-offs and for accurately reflecting the cost to thegovernment. Both CBO and OMB follow the same guidelines, which reflect the1997 Budget Enforcement Act. (120) Much of the debate about the proposed Air Force tanker deal has focused onthe appropriateness of using an operating lease rather than a straight buy. If thetanker deal were scored or counted as a capital lease rather than operating lease,under current budget rules, the Air Force would be required to provide $11.6 billionin budgetary authority (BA) upfront to reflect those costs. (121) Thatrule is designed to ensure that government policymakers are fully aware of the fullcost when decisions are made. The Air Force believes that the tanker deal, as currently structured, isconsistent with the budgetary guidelines. (122) The issue of whether the tanker proposal meetsthe criteria for an operating lease has been disputed within the Administration andCongress since passage of the 2002 leasing authority. Criteria For Operating Leases. Toqualify as an operating lease, OMB Circular A-11 requires that a lease must fulfillthe following six criteria: (1) Ownership of the asset remains with the lessor during the term of thelease and is not transferred to the government at or shortly after theend of the lease term; (2) The lease does not contain a bargain-basement price purchase option; (3) The lease term does not exceed 75% of the estimated economic lifeof the asset; (4) The present value of the minimum lease payments over the life of thelease does not exceed 90 % of the fair market value of the asset at thebeginning of the lease term; (5) The asset is a general-purpose asset rather than being for a specialpurpose of the government and is not built to the unique specificationof the government as lessee; and (6) There is a private-sector market for the asset. (123) These criteria are designed to ensure that federal agencies are not usingoperating leases with the ultimate intent of buying the asset once the lease is over. Similarly, the 75% cap on the length of the lease and the 90% cap on the fair marketvalue of the asset are intended to stop agencies from leasing assets which they needfor a long time and therefore would be better off buying. Finally, the last two criterialimit operating leases to items which are not peculiar to the government and have acommercial market because the government is more likely to get a reasonable pricefor assets which could also be leased or sold elsewhere. Congressional Intent About The TankerDeal. Although the statutory language for the tanker deal inDOD's 2002 Appropriation Act does not explicitly authorize an "operating lease," thelanguage requires that the Air Force "accept delivery of the aircraft in a generalpurpose configuration," and return the aircraft to the lessor "in the sameconfiguration." The act also does not authorize purchase of the aircraft. These are allOMB criteria that distinguish an operating lease. (124) The lease is also not to include modification of this commercial configuration"unless and until separate authority for such conversion is enacted," and budgetauthority is provided. (125) This language is designed so that a tankerlease would comply with OMB's criteria that the system be a "general purpose asset." In its report language, the Senate Appropriations Committee signaled itsintent that the authority was to be used for an operating lease. (126) Theconference committee simply notes that the statutory language was expanded inconference. (127) In addition, in a colloquy with Senator Inouyeabout the 767 lease, Senator Murray asked Senator Inouye whether a general purpose aircraft that will meetthe general requirements of many customers; that can operate as a passenger aircraft,a freighter, a passenger/freighter "combination" aircraft, or as an aerial refuelingtanker; and is available to either government or private customers meets thedefinition of a general purpose, commercial configured aircraft? (128) Senator Inouye agreed with this characterization, which implies that even if the AirForce modified the Boeing 767 to make it an air refueling aircraft, a military use, theaircraft could still be considered "commercial" item as required for operating leases.In support of this characterization, Senator Roberts noted that both Italy and Japanhave purchased modified 767 aircraft as tanker aircraft. (129) Although a colloquy on the floor is an indication of Congressional intent, it does notcarry the same force as language included in a conference or committee report, whichreflects the views of the authorizing or appropriating committee. Disputes About Whether The Tanker Deal Is An OperatingLease. Within both the Administration and Congress, somehave questioned whether the proposed lease complies with OMB's criteria for anoperating lease. Below is a summary of the chief arguments made on both sides. (130) (1)Whether ownership will be transferred to the government shortly afterthe end of the lease. The Air Force would say that the Special Purpose Entity,Wilmington Trust, owns the asset if and until the Air Force makes a decision aboutwhether to buy the aircraft. The lease calls for return of the aircraft after six yearsalthough the Air Force would be permitted to buy the planes at any time if it getsauthorization and appropriation of funds. Others have pointed out that even though the Special PurposeEntity technically owns the plane, that entity only exists as a conduit for the AirForce. Under revised OMB regulations issued in July 2003 - after completion of thetanker proposal - Wilmington Trust would be considered a "governmental" ratherthan a private entity. (131) Others have noted that the contract permits thegovernment to buy the aircraft at any point during the lease and that the lease pricemakes purchase of the aircraft after the lease attractive because the Air Force willalready have paid 90% of the fair market value, and will have a continuing need forthe aircraft. The Air Force Report to Congress also notes that DOD is committed to"earmark an additional $2 billion in FY2008 and FY2009 for the purchase of aircraftcovered by the multi-year pilot program." (132) (2) The lease does not include a bargain-price purchaseoption. The lease permits the Air Force to purchase the aircraft for $44million per aircraft, the remaining balance of the loan to the bond holders, or 10%of the fair market value. The Air Force estimates that the aircraft could be sold asfreighters for about $51 million per aircraft at the end of the lease, a price that isabout 15% higher than the Air Force will pay. (3) The lease does not exceed 75% of the economic life of theasset. The six-year lease constitutes one-quarter of the estimated 25year life of the aircraft. (4) The present value of the lease payments does not exceed 90% of thefair market value of the aircraft. The Air Force argues that its payments are 89.9% of the initialfair market value of the KC-767 tanker based on a per plane price of $138 million in2002 dollars. In its report to Congress, the Air Force acknowledges that thelease payments would be 93% of the fair market value, thus breaching the threshold,if the Air Force used the $131 million (2002$) price for the aircraft, which excludes construction financing as part of the price. (133) Somewould not consider those financing costs to be part of the value of the aircraft sincethey would not be part of the government's purchase price. (134) (5) The asset must be general purpose rather than built to governmentspecifications. The Air Force notes that the 767 was commercially developed,and that other customers have added as much as 35% "customer specific"equipment. Critics would argue that the tanker configuration in the leaseis unlikely to be used by many other customers, and is therefore not a commercialaircraft. The fact that the Air Force version of the aircraft is priced substantiallyhigher than the cost of a freighter version suggests substantial governmentmodifications although Air Force estimates do not include monies to 'de-convert' theaircraft. (6) Asset must have a private sector market. The Air Force argues that Italy and Japan have already boughttankers and suggest that there is a potential market in as many as 25 countries as wellas commercial buyers (e.g. Fed Ex, UPS). In its current configuration, critics suggest that the commercialmarket is small and that there would not be customers for 100 aircraft, and that at theAir Force cost of about $165 million per aircraft - substantially higher than the $60million cost of a commercial 767 - there would be few takers. Implications of Using A Special PurposeEntity. The Air Force's reliance on a special purpose entity (SPE)has raised questions about whether the total cost and financial risks to thegovernment may be obscured leaving decision makers less able to makecost-effective decisions. Budget scoring rules - as expressed in OMB Circular A-11and the 1997 Budget Enforcement Act - did not anticipate government use of SPEs,and reliance on SPEs makes it easier for agencies to argue that the full costs of aprogram should not be considered as government liabilities even when there is noreal distinction between the trust and the government. In the case of WilmingtonTrust, the government is the sole beneficiary, making it essentially an "extension ofthe government" according to CBO's definition. (135) In the case of the tanker lease, this lack of distinction is captured by the factthat Wilmington Trust is a non-profit entity that bears no risk but instead, actsessentially as a conduit for funds between Boeing, the Air Force, and thebondholders. Through its contractual commitment to the Trust, the governmentshoulders the financing risks, including most of the risk of cancellation of the lease. The bondholders would bear a portion of the risk of termination of the lease and thefull risk that the Air Force would not buy the planes at the end of each lease. Concerns With Precedents. The AirForce use of an SPE for this lease raises additional concerns because it maystrengthen the trend in which federal agencies use SPEs to budget off-line, and notshow or record the full cost of obligations of the government. Budget rules areambiguous about how to identify government liabilities in public/private ventures. In its February 2003 report, CBO describes several cases in which federal agencieslaunched programs without "scoring" or counting the full scope of the government'sliabilities. For example, CBO estimates that DOD has used public/private venturesto obtain about $2.3 billion in military housing while recording $255 million inobligations, almost a ten to one ratio. In the case of the tanker lease, the ratio would be even more dramaticassuming that the lease is scored as an operating lease. OMB has not taken anofficial position on whether the lease should be scored as an operating or a capitallease. Oversight Mechanisms For SPEs . Inreaction to the tanker lease, as well as increasing use of SPEs by governmentagencies, OMB recently revised its scoring rules in OMB Circular A-11. Issued inJuly 2003, the revised rules specify that in any public/private partnership where thegovernment benefits by leasing back the asset, the arrangement would be considereda capital lease and the net present value of all lease payments scored up front. Unlessthere is substantial private participation in the SPE, its transactions are to be scoredas governmental. (136) If these new rules had been in effect, the AirForce tanker lease would probably have been considered a capital lease. Some might consider that scorekeeping rules might not ensure that thebudgetary and financial implications of leases were fully considered by decisionmakers. Based on current rules, CBO scores leases when legislation is beingconsidered and OMB scores leases upon enactment or when the government makesa contractual commitment. CBO has proposed that all leases be authorizedindividually. (137) In the tanker lease legislation, the Air Forcehad two ways to get approval of the proposal - with authorization and appropriationlanguage or a new start notification. The Air Force chose the latter simpler route. Questions About Whether The Proposed Lease IsA Good Deal for the Government. Some observers have questionedwhether the lease is a good deal for the government - as a lease or as a way to acquiretankers. GAO and others have raised concerns about the lack of competition for boththe lease and the support cost package. To meet concerns within the Administration,the Institute for Defense Analysis was commissioned to assess the price. Air Force's Lease Price Is Higher Than CommercialRates. On July 24, 2003, John Plueger, CEO of InternationalLeases Finance Corporation, a large, company that leases 600 jet aircraft to about 160airlines worldwide, testified to the House Armed Services Committee about howcommercial leases work. In light of today's oversupply of commercial aircraft, JohnPlueger suggested that a lease of 100 wide-body aircraft like the 767, particularly tothe U.S. government, "the most creditworthy buyer" would "certainly command thehighest concession levels offered by any aircraft manufacturer forcommercial/civilian airliners." (138) Mr. Plueger suggested that commercial lease rates on new widebody aircraftlike the 767 generally range from about five-tenths to eight tenths of a percentagepoint per month times the cost of the aircraft. (139) If thatrate were applied to the Air Force's estimated fair market value of the 767 tanker -an average of about $165 million in current dollars - the cost of the Air Force leasewould range from $59 million to $95 million per aircraft per six-year lease, or about35% to 57% of its value. The Air Force is planning to pay about 90% of the aircraft'smarket value, or about 40% to 60% more than suggested by the commercialformula. (140) In a competitive market, why would the Air Force negotiate a lease at 90%of the value of the aircraft for a lease that would use the aircraft for less thanone-quarter of its useful life? According to the Air Force, the lease price wasnegotiated in order to minimize the amount of the loan that would need to be repaidto bondholders at the end of the lease. That decision, in turn, was designed to limitthe amount of funds that would be loaned at the highest rate, estimated to be 10% (ajunk bond rate), to cover the risk that the Air Force would not buy the plane at theend of the lease. Instead of negotiating the lease price to reflect the usage - either the length oftime or the amount of hours flown - the Air Force negotiated the price to minimizefinancing costs and to make it easier for the Air Force to find resources to buy theaircraft at the end of the lease. Proposed Cancellation Payments. Theproposed contract for the lease includes substantial penalties for cancelling the lease,which could make it difficult for the Air Force to cancel. According to the proposedcontract, the Air Force would be liable to make a "special payment" or penaltycharges of an additional year's lease costs in case of cancellation. At the height of thelease, those payments would be about $2.7 billion (see Table 8). In addition, the AirForce would be liable for unamortized costs incurred by the contractor on aircraft thatwere planned to be built but where Boeing had not yet started construction. The AirForce has not estimated those costs. (141) Table 8. Estimated Air Force TerminationLiabilities, 2003-2017 in billions of current year dollars Notes: a The Air Force would also be responsible for unamortized costs associated with theremaining aircraft out of the 100 in the lease that had not yet been built; the Air Forcehas not estimated the size of these potential costs. Sources: Air Force Model and CRS calculations. Is The Lease A Good Deal Compared To A MultiyearBuy? As discussed previously, some would argue that thecost of the proposed multiyear lease should be compared to a multiyear buy to set upa "level playing field." In its report to Congress, the Air Force acknowledged that onthis basis, the gap would widen between the cost of the lease and a buy in terms inboth present value and current dollars. As discussed previously, other changes in other assumptions that would affectthe comparison of costs made in the Air Force analysis were debated within theAdministration, including: whether to assume a progress payment rate closer to standardrates for Air Force aircraft programs rather than the rates desired byBoeing; whether to compute inflation based on progress payments ratherthan compounded to the amount experienced at the time when the entire set ofaircraft was completed as the Air Force assumed; and whether to decrease the government's imputed cost of insurancebelow commercial rates to reflect lower risk. If these assumptions are changed, the gap between the cost of the lease compared toa multiyear grows from $3.9 billion to $5.7 billion in current dollars (see Table 9). Hence, by opting for a lease, the Air Force would be agreeing to pay a premium offrom 19% to 27% more in order to have the convenience of paying lower amountsin earlier years. If the Air Force were to spend the lease dollars on aircraft rather thanexploiting the lease in order to pay less in earlier years, those additional dollars couldpurchase about 35 more tankers. (142) Table 9. Cost of Lease vs. Multiyear Buy andAlternate Assumptions (in billions of dollars/percent difference) Notes: This table compares the cost of the lease payments and a subsequent purchaseof the aircraft to a multiyear purchase with lower inflation, insurance, and progresspayments. It excludes support costs, which would not be affected by the options. Source: CRS calculations based on Air Force Model, July 1,2003. Deviation From Full Funding. Under Section 8159 of P.L. 107-117 ,which sets up the special rules for the tankerlease, the Air Force is exempted from the requirement to budget for potentialtermination liabilities. (143) This exemption is a significant departure fromthe longstanding government policy to provide full-funding of potential governmentliabilities in order to ensure compliance with the Anti-Deficiency Act, a law datingback to 1861. (144) That law prohibits any government employeefrom authorizing government spending unless there are sufficient appropriations topay the government's contractual obligations. The Air Force considered providingthe substantial funding for termination liability too difficult, and Congress authorizedan exemption. Section 8159 permits the Air Force to include special payments forcancellation of up to one year's additional lease payments. The proposed contract forthe tanker lease adopts that cancellation schedule (see Table 8 above). Under thiscontract clause, the Air Force would be liable for termination payments that could bemore than $2.7 billion at the high point of the lease in 2011 without having funds inits budget. In 2003, Congress provided that the Air Force could draw onappropriations for operations and maintenance or for procurement to make thosepayments. (145) This language parallels the special exemptionfrom funding termination liabilities that is provided for multi-year procurement. Comparison To Statutory Requirements For MultiyearProcurement. Like the proposed long-term tanker lease, amultiyear procurement also represents a long-term commitment by the governmentover a period of years, and is also exempted from funding termination liability. DOD's multi-year programs, however, are required to meet a set of criteria set out instatute, to get specific authorization, and DOD must certify that budgetary resourceshave been set aside for the program. (146) These strict rules are designed to ensure thatthe loss of budgetary flexibility and the exemption from the funding terminationliability are offset by the benefits to the government. For DOD's multiyear programs, Congress established the followingconditions: the program results in substantialsavings; the requirement, funding, and design arestable; the cost estimates are realistic; and the Secretary of Defense certifies that funds have been set asidein future years. (147) These criteria are designed to ensure that programmatic risks are low and DODachieves significant savings that offset the loss of flexibility of a long-termcommitment. Because multi-year procurements must also be specifically authorized, thesecriteria are considered during the normal budgetary review. In addition, DODgenerally provides funds for the annual portion of the contract as well as additionalinvestment to increase the overall efficiency of the production. DOD must certify thatresources have been included in future years. In the case of the tanker lease, Congress provided special authorities for thetanker lease and exempted the Air Force from the requirement to budget fortermination liability with the following requirements: the Air Force must submit a report that outlines the terms andconditions of the proposed contract and "expected savings, if any," between a leaseand a purchase as well as annual reports thereafter; a contract cannot be signed until at least 30 calendar days haveelapsed since submission of the report; the present value of the total payments of the lease cannotexceed 90 percent of the fair market value of the aircraft as required by OMBCircular A-11; the Air Force must accept delivery and return aircraft in acommercial configuration; and aircraft cannot be modified unless special authority is providedin an appropriations act or the aircraft is transferred to the Air Force, which requiresseparate authorization. (148) Under these requirements, the benefits to the government from locking inresources and shouldering additional financial risk are less clear. Statutory authority for the Air Force to lease 100 767 tankers (and alsoBoeing 737 transport aircraft) was provided in sections included in the FY2002 DODAppropriations Act ( P.L. 107-117 ), the FY2002 Supplemental ( P.L. 107-206 ), theFY2003 DOD Appropriations Act ( P.L. 107-248 ), and the FY2003 DODAuthorization Act, ( P.L. 107-314 ). Statutory language for the relevant sections arein italics below). Section 8159, FY2002 DOD Appropriations Act ( P.L. 107-117 ) Section 8159 of the FY2002 DoD appropriations act ( P.L. 107-117 )authorizes the Air Force to undertake a lease of up to 100 Boeing 767s in acommercial configuration, exempts the Air Force from standard requirements forlong-term leases, including providing funding for termination liability (see Section2401 and 2401 of Title 10 below) if the Air Force submits a report to Congress onthe lease and wait thirty days. SEC. 8159. MULTI-YEARAIRCRAFT LEASE PILOT PROGRAM. (a) The Secretary of the Air Force may, fromfunds provided in this Act or any future appropriations Act, establish and makepayments on a multi-year pilot program for leasing general purpose Boeing 767aircraft and Boeing 737 aircraft in commercialconfiguration. (b) Sections 2401 and 2401a oftitle 10, United States Code, shall not apply to any aircraft lease authorized by thissection. (c) Under the aircraft lease PilotProgram authorized by this section: (1) The Secretary mayinclude terms and conditionsin lease agreements that arecustomary in aircraft leases bya non-Government lessor to anon-Government lessee, butonly those that are notinconsistent with any of theterms and conditionsmandated herein. (2) The term of any individual lease agreement into which theSecretary enters under this section shall not exceed 10 years,inclusive of any options to renew or extend the initial lease term. (3) The Secretary may provide for special payments in a lessor if theSecretary terminates or cancels the lease prior to the expiration of its term.Such special payments shall not exceed an amount equal to the value of 1year's lease payment under the lease. (4) Subchapter IV ofchapter 15 of title 31,United States Codeshall apply to the leasetransactions under thissection, except that thelimitation in section1553(b)(2) shall notapply. (5) The Secretary shalllease aircraft underterms and conditionsconsistent with thissection and consistentwith the criteria for anoperating lease asdefined in OMBCircular A--11, as ineffect at the time of thelease. (6) Lease arrangementsauthorized by this section may not commenceuntil: (A) TheSecretarysubmits areport to thecongressionaldefensecommitteesoutlining theplans forimplementingthe PilotProgram. Thereport shalldescribe theterms andconditions ofproposedcontracts anddescribe theexpectedsavings, if any,comparingtotal costs,includingoperation,support,acquisition,and financing,of the lease,includingmodification,with theoutrightpurchase of theaircraft asmodified. (B) A period ofnot less than30 calendardays haselapsed aftersubmitting thereport. (7) Not later than 1 year after the date on which the first aircraft isdelivered under this Pilot Program, and yearly thereafter on theanniversary of the first delivery, the Secretary shall submit a reportto the congressional defense committees describing the status of thePilot Program. The Report will be based on at least 6 months ofexperience in operating the PilotProgram. (8) The Air Force shallaccept delivery of theaircraft in a generalpurposeconfiguration. (9) At the conclusionof the lease term, eachaircraft obtainedunder that lease maybe returned to thecontractor in the sameconfiguration in whichthe aircraft wasdelivered. (10) The present valueof the total paymentsover the duration ofeach lease entered intounder this authorityshall not exceed 90percent of the fairmarket value of theaircraft obtainedunder that lease. (d) No lease entered into under this authority shall provide for-- (1) the modification ofthe general purposeaircraft from thecommercialconfiguration, unlessand until separateauthority for suchconversion is enactedand only to the extentbudget authority isprovided in advance inappropriations Actsfor that purpose;or (2) the purchase of theaircraft by, or the transfer of ownership to, the Air Force. (e) The authority granted to the Secretary of the Air Force by this section isseparate from and in addition to, and shall not be construed to impair orotherwise affect, the authority of the Secretary to procure transportation orenter into leases under a provision of law other than thissection. (f) The authority providedunder this section may be usedto lease not more than a totalof 100 Boeing 767 aircraft and4 Boeing 737 aircraft for thepurposes specifiedherein. U.S. Code, Title 10l Sections 2401 and 2401 (a) Sections 2401 and 2401a of title 10 of the U.S. Code, referred to in subsection(b) of Section 8159 above, are laws that set forth the requirements and limitationsthat normally govern DoD leases of aircraft and ships. Those requirements include: that the contract include a substantial termination liability(defined in law); that the lease be specifically authorized inlaw; that a specific description of the terms of the contract beprovided to the defense committees and a period of 30 days of continuous session ofCongress elapse; that the Secretary of Defense submit an analysis of the cost ofthe lease vs. the cost of a buy that has been evaluated by the Director of the OMB andthe Secretary of the Treasury, who must submit their evaluation to Congress within45 days of when DOD submits its analysis; that the Director of OMB and the Secretary of the Treasurydevelop guidelines for determining when to lease and when to purchase ships andaircraft. U.S. Code, Title 31, Chapter 15, Subchapter IV Section 8159 states that Subchapter IV of chapter 15 of Title 31 applies to thelease except for Section 1553(b)(2). Subchapter IV sets out the rules for theavailability of unobligated balances after the closing of accounts (see below). Thelimit of 1% of the appropriation in section 1553(b)(2) of title 31 that can be paid outdoes not apply to the lease, however. Section 1553(b)(1)) permits funds to be drawnfor the same purpose after the closure of an account for: obligations and adjustments to obligations that would have been properly chargeableto that account, both as to purpose and in amount, before closing and that are nototherwise chargeable to any current appropriation account of the agency may becharged to any current appropriation account of the agency available for the samepurpose. FY2002 Supplemental Appropriations Act, P.L 107-206 Section 308 of P.L. 107-206 , the FY2002 Supplemental Appropriations Actexempts the lease that is authorized in Section 8159 above from the Title 10, Section2533a, popularly known as the Berry amendment, which requires that DOD rely onU.S. sources unless the Secretary of Defense determines that relying on U.S. sourceswould be inconsistent with the public interest (Title 10, Section 2533a). Sec. 308. During the current fiscal year and hereafter, section 2533a of title10, United States Code, shall not apply to any transaction entered into to acquire orsustain aircraft under the authority of section 81598 of the Department of DefenseAppropriations Act, 2002 (division A of Public Law 107-117; 115 Sta. 2284). Report language in H. Rept. 107-732 accompanying H.R. 5010, the FY2002DOD Supplemental states: APPLICATION OF BERRY AMENDMENT TO MULTI-YEAR AIRCRAFT LEASE PILOT PROGRAM Due to the special circumstances surrounding the Multi-Year Aircraft Lease PilotProgram authorized in fiscal year 2002, Congress enacted Section 308 of P.L.107-206 to clarify Berry Amendment restrictions on the use of foreign sourcedspecialty metals in commercial aircraft to be leased under this program. In this case,the Congress concurred with the views expressed by Air Force officials that theunique financial and time-sensitive requirements of the aircraft lease arrangementand the administrative complexity involved in making Berry Amendmentdeterminations on a plane-by-plane basis for over 100 aircraft built under commercialpractices instead of under military acquisition procedures would add so much costand delay the entire program would be undermined. Enactment of Section 308 wasintended to provide the opportunity to ensure that the Air Force would be able toeconomically procure air refueling tanker replacement aircraft necessary to thenational security while maintaining the overall integrity of the Berry Amendment forfuture application. FY2003 DOD Appropriations Act, P.L. 107-248 Section 8117 of P.L. 107-248 , the FY2003 DOD Appropriations Act amendsSection 8159 to provide that: the Air Force can make annual lease payments in advancerather than at the end of the delivery period as is the standard practice (see Title 31,Section 3324); and permits the Air Force to draw on available operation andmaintenance and procurement appropriations to fund the lease or the specialpayments for termination, thus exempting the Air Force from the requirement tobudget for special payments for termination (see Section 8159 (c) (3). Multiyearprocurement is also granted an exemption from budgeting for termination liabilitywith language similar to that in paragraph (g) below (see Title 10, Section 2306(b)(f)). Sec. 8117. Section 8159 of the Department of Defense Appropriations Act,2002 (division A of Public Law 107-117; 115 Stat. 2284) is revised as follows: (1) in subsection (c) by inserting at the end of paragraph (1) the followingnew sentence: "Notwithstanding the provisions of Section 3324 of Title 31,United States Code, payment for the acquisition of leasehold interest underthis section may be made for each annual term up to one year in advance." (2) by adding the following paragraph (g): (g) Notwithstanding any other provision of law, any payments required fora lease entered into under this Section, or any payments made pursuant tosubsection (c) (3) above, may be made from appropriations available foroperation and maintenance or for lease or procurement of aircraft at the timethat the lease takes effect; appropriations available for operation andmaintenance or for lease or procurement of aircraft at the time that thepayment is due; or funds appropriated for those payment." FY2003 DOD Authorization Act, P.L. 107-314 Section 133 of P.L. 107-314 , the FY2003 DOD Authorization Act amendsSection 8159 to require that in addition to submitting the report required by Section8159, the Secretary of the Air Force must get approval for the lease through either : authorization and appropriation of funds is provided bylaw; or: DOD request and receive approval from the four congressionaldefense committees for a new start reprogramming notification for funds to start thelease using standard reprogramming procedure. SEC. 133. LEASES FOR TANKER AIRCRAFT UNDER MULTIYEARAIRCRAFT-LEASE PILOT PROGRAM. The Secretary of the Air Force may not enter into a lease for the acquisitionof tanker aircraft for the Air Force under section 8159 of the Department ofDefense Appropriations Act, 2002 (division A of Public Law 107-117; Stat.2284; 10 U.S. C. 2401a note) until-- (1) the Secretary submits the report specified in subsection (c) (6) ofsuch section; and (2)either-- (A) authorization and appropriation of funds necessary to enter intosuch lease are provided by law: or (B) a new start reprogramming notification for the funds necessaryto enter into such lease has been submitted in accordance withestablished procedures. FY2000 Defense Appropriations Act, P.L. 106-79 Section 8133 of the FY2000 defense appropriations act ( P.L. 106-79 ) issomewhat similar to section 8159 above that permitted the Air Force to lease sixaircraft "for operational support purposes, including transportation of the combatantCommanders in Chief," which are the U.S. military officers in charge of U.S. militaryforces operating in various regions of the world. Net present value (NPV) analysis is a method of calculating and comparingcosts that takes into account the time value of money. The time value of moneyrefers to the fact that a dollar available today (i.e., in the present) is worth more thana dollar available in the future, because inflation reduces the purchasing power ofmoney over time, and because money available today can be invested to generate andreturn and grow over time. NPV analysis essentially adjusts the value of future sumsof money to account for the investment value of money over time. Both businesses and governments use NPV analysis. Governments can useNPV analysis for comparing spending options that involve making payments indiffering years. The Office of Management and Budget (OMB) instructs executivebranch agencies to use NPV analysis in comparing the costs of leasing andprocurement options. This guidance is provided in OMB circular A-94, which setsforth guidelines for executive branch agencies to use in conducting benefit-costanalyses and evaluating federal programs. (150) Sinceprocurement options usually involve making relatively large payments in the nearerterm while leasing options usually involve making a series of smaller payments overa longer period of time, OMB officials and financial analysts elsewhere believe thatNPV analysis, by accounting for the time value of money, provides for amethodologically more fair comparison. Alternatives to NPV analysis include nominal (unadjusted) analysis and real(i.e., inflation-adjusted) analysis. Since procurement options usually involve makingrelatively large payments in the nearer term while leasing options usually involvemaking a series smaller payments over a longer period of time, nominal costcomparisons tend to be the least favorable to leasing options, real cost comparisonstend to be somewhat more favorable to leasing options, and NPV cost comparisonstend to be the most favorable to leasing options. To illustrate the differences between nominal, real, and NPV costcomparisons, consider a simplified example involving hypothetical options forprocuring or leasing four airplanes. For purposes of the example, assume that thefour planes have a total of procurement cost of $500 (i.e., they cost an average $125each to procure); that under the procurement option, the planes would be purchasedusing two annual payments of $250; and that under the leasing option, the planeswould be leased for a period of five years, with annual lease payments of $108 peryear. Assume also that the anticipated rate of inflation during this five-year periodis 2% per year, and that the anticipated nominal rate of return on investments duringthis period is 5% per year (i.e., 3% per year more than the anticipated rate ofinflation). What are the comparative costs of these two options? In a nominal (i.e., unadjusted) calculation, also called a then-year dollarcalculation, neither the effect of inflation on eroding purchasing power nor theinvestment value of money over time is taken into account, and the cost comparisonlooks like this: As can be seen in the table, when calculated this way, the lease option is $40more expensive than the procurement option. In a real calculation, which adjusts the values of sums of money in futureyears to account for how inflation (in this case, at 2% per year) erodes the purchasingpower of those sums, the cost comparison looks like this: As can be seen in the table, when anticipated inflation is taken into account,the difference in cost between the two options is reduced from the $40 shown in thenominal calculation to $23.83. The entries in this table can be used to answerquestions such as: "What is the purchasing power, in today's prices, of $108 in Year5?" The answer is that, assuming a 2% annual rate of inflation, $108 in Year 5 wouldpurchase $99.62 worth of goods in today's prices. In an NPV calculation, which adjusts the values of sums of money in futureyears to account for the investment value of money over time (in this case, a 5%annual return on investment), the cost comparison looks like this: As can be seen in the table, when the investment value of money over timeis taken into account, the difference in cost between the two options is reduced fromthe $40 shown in the nominal calculation to $2.86. The entries in the NPV table canbe used to answer questions such as: "What sum of money, if invested today at a 5%annual rate of return, would grow to a nominal total of $108 in Year 5?" The answeris that $88.85, if invested today at a 5% rate of return, would grow to a nominal totalof $108 dollars by Year 5. As shown in the table above, the NPV of the procurement option is $488.10while the NPV of the lease option is $490.96. What these NPVs mean is thatspending $488.10 now (i.e., in the present) is the same, from a financial point ofview, as spending $250 now and $250 next year, while spending $490.96 now is thesame, from a financial point of view, as spending $108 per year for the next fiveyears. The annual rate of return on investment used in an NPV analysis is called thediscount rate because this is the rate at which the value of future sums of money isadjusted downward (i.e., discounted). Discount rates can be expressed in nominalterms (so as to include the annual inflation rate) or in real terms (so as to show therate of return above the anticipated inflation rate). The example discussed here useda nominal discount rate of 5%, which was equivalent to a real discount rate of 3%(i.e., 5% minus the anticipated inflation rate of 2%). The higher the discount rate, the greater the reduction in value over time. Consequently, a key factor in NPV analysis is to choose the correct discountrate. (151) What Is MYP And How Does It Differ From Annual Contracting? Three Key Differences. Multi-year procurement (MYP), also called multi-year contracting, is a specialcontracting authority that Congress approves for a few major DoD procurementprograms. The statute covering multi-year contracting for acquisition of property is10 U.S.C. 2306b. (153) Key differences between annual contracting,which most DoD procurement programs use, and MYP include the number of yearsof purchases covered, authority for Economic Order Quantity (EOQ) purchases, andtermination liabilities. Contracts Cover two to five years of PlannedPurchases. The principal difference between annualcontracting and MYP concerns the number of years of purchases that can be coveredby a single contract. Under annual contracting, DoD is permitted to sign a contractto purchase no more than a single year's purchase of a weapon or platform, and onlyafter Congress has provided the necessary funding for that year's purchase. UnderMYP, in contrast, DoD is permitted sign a contract covering two to five year's ofplanned purchases of that weapon or platform, including the initial year's purchasethat Congress has already funded and one to four additional years worth of plannedpurchases that will not be funded until Congress passes the DoD budgets for each ofthose future fiscal years. As an example, consider a case in which DoD plans to procure a total of 40airplanes during the five-year period FY2004-FY2008 in annual quantities of 4, 10,10, 10, and 6. Under annual contracting, following enactment of an FY2004 DoDbudget that funds the procurement of the first 4 planes, DoD could sign a contract topurchase those 4 planes. A year later, following enactment of an FY2005 budget thatfunds the procurement of the next 10 planes, DoD could sign a second contract topurchase those 10 planes. And so on. Under MYP, in contrast, following enactment of the FY2004 budget thatfunds the procurement of the first 4 planes, DoD could sign a contract covering upto5 years of planned purchases (all 40 planes), even though Congress at this point hasfunded the procurement of only the first 4 planes. Authority For Economic Order Quantity (EOQ)Purchases. A second difference between annual contractingand MYP is that programs approved for MYP have the authority to make use ofEconomic Order Quantity (EOQ) purchasing. EOQ authority, which is written into10 USC 2306b, permits programs using MYP to make up-front batch purchases ofcertain components of all the weapons or platforms being procured under the MYPcontract, so as to get better prices on those components from the subcontractors thatprovide them. Ordering components this way can be referred to as o rdering them in e conomic q uantities, which (after some reversing of word order) leads to theacronym EOQ. EOQ purchases are a principal means by which MYP contractingreduces costs compared to annual contracting, and programs approved for MYP areexpected to take advantage of EOQ purchases so as to generate these savings. As an illustration using the example from above, if DoD has been grantedauthority to sign a five-year MYP covering the 40 planes planned forFY2004-FY2008, DoD might bundle together the 50 sets of landing gear intendedfor those planes and order them all together in FY2004, the initial year of thecontract. The FY2004 budget for the program consequently would include fundingsufficient to procure not only the first 4 planes, but 40 sets of landing gear as well. In a detailed presentation of the FY2004 budget request for the program, the fundingfor the 40 sets of landing gear would appear as advanced procurement (AP) fundingin support of the MYP, sometimes abbreviated as AP (MYP). Larger Termination Liability. A thirdway in which MYP differs from annual contracting is that MYP contracts can featurelarger termination liabilities (i.e., cancellation penalties) than annual contracts. Theselarger termination liabilities protect contractors from the financial consequences ofa decision by DoD to change its mind in the middle of a multi-year procurement andnot procure the minimum number of units each year established in the MYP contract. Specifically, the larger termination liability is intended to ensure that a contractor iscompensated for any investments in work force optimization and improvedproduction equipment that the contractor has made as a consequence of thegovernment's MYP commitment, but which the contractor will no longer be able tofully exploit due to DoD's change of mind. The larger termination liability detersDoD from changing its mind, giving the contractor confidence that DoD will fulfillits MYP commitment. One Similarity: Full Funding Policy StillApplies. One way in which MYP does not differ from annualcontracting is that MYP programs, like annually contracted programs, are subject tothe full funding policy regarding defense procurement. Obtaining MYP authority fora program, in other words, does not exempt that program from the requirement tofully fund each year's worth of procurement. The up-front EOQ purchase in an MYPprogram must also be fully funded. Thus, in the example above, the FY2004 budgetmust fully fund the 4 planes being procured that year as well as the 40 sets of landinggear being purchased under EOQ authority. No portion of the procurement cost ofthe 4 planes or the 40 sets of landing gear may be funded in a fiscal year afterFY2004. The FY2005 budget must fully fund the 10 planes to be procured inFY2005 (minus the cost of their landing gears, which were paid for in FY2004), andno portion of their procurement cost may be funded in a fiscal year after FY2005. And so on. (154) How Does Use of MYP Reduce Cost? Using MYP generally reduces the procurement cost of the items coveredunder the MYP contract in two ways. One way, discussed above, is by reducing thecost of components that are procured up-front in large batches through the use of theEOQ authority that comes with MYP. The second way that using MYP generally reduces the procurement cost ofthe items covered under the MYP contract is by giving the prime contractor theconfidence to make investments in work force optimization and improved productionequipment that the contractor would not be able to justify making in a situation ofannual contracting. Under annual contracting, the prime contractor faces someuncertainty about whether procurements planned for future years will actuallyhappen. MYP reduces that certainty and thus makes it less risky for the contractorto make investments in work force optimization and improved production equipmentthat can reduce unit production costs but would make economic sense for thecontractor (i.e., generate a sufficient return on investment for the contractor) only ifthe contractor produces a certain minimum number of units over a period of severalyears. Investments in work force optimization can involve providing extra trainingto workers to improve their productivity, or keeping on the payroll highly productiveworkers who might be laid off after completing their portion of the work involved inproducing a single year's worth of production. Investments in improved productionequipment can involve purchasing new machine tools that make components morequickly, more accurately, or with less waste. How Much Does Use Of MYP Reduce Costs? Savings from use of MYP vary from program to program, but typically, theycan reduce the combined procurement cost of the items being procured under theMYP contract by 5% to 10%. A significant share of this savings is achieved by usingthe EOQ authority that comes with MYP. If an MYP program uses a delayed (andthus smaller) EOQ than would be typical for the program (a possibility discussed inthe main body of this report), then the total savings in procurement costs achievedwould likely be smaller than the typical 5% to 10%. Why Not Use MYP For All DoD Procurement Programs? If using MYP can reduce the cost of a DoD procurement program, why doesCongress grant authority only sparingly, for a few DoD programs? One reason is thatCongress as a general practice prefers to avoid taking actions that commit futureCongresses to a particular course of action, which is sometimes called "tying thehands" of future Congresses. Permitting the use of MYP on a program effectivelyties the hands of future Congresses with respect to that program by committing futureCongresses to procuring a certain minimum number of units over a period of severalyears. In addition to tying the hands of future Congresses, MYP, by effectivelylocking a program into place for several years, reduces the DoD's and Congress'options for making adjustments (particularly downward adjustments) to the DoDbudget to respond to changing military needs or budgetary circumstances. DoD andCongress usually cannot make substantial downward adjustments to MYP programsunless they are prepared to incur the sizeable termination liability costs that can bewritten into MYP contracts. As a result, any changes that DoD or Congress mightneed to make to the DoD budget to respond to changing circumstances will now fallmore heavily on the non-MYP programs in the DoD budget. The larger the numberof DoD programs that are approved for MYP, the more heavily the remainingnon-MYP programs might have to bear the burden of any downward adjustment inthe DoD budget. Shifting all DoD procurement programs, or many of them, to MYPwould eliminate or significantly reduce DoD's and Congress' flexibility in adjustingthe DoD budget in future years to respond to changing circumstances. Thus, in considering a DoD request for MYP authority for a particularprocurement program, Congress balances the potential savings that can be achievedby using MYP on the program against the effect that approving the use of MYPwould have in tying the hands of future Congresses and reducing DoD's andCongress' flexibility in making adjustments to the DoD budget in the future torespond to changing circumstances. This weighing of potential advantages anddisadvantages traditionally has resulted in a situation where only a few major DoDprocurement programs at any one time are given MYP authority while most DoDprocurement programs use annual contracting. How Does Congress Approve MYP? Defense Appropriation Act. Subsection (l)(3) of 10 USC 2306b states that "The head of an agency may notinitiate a multi-year procurement contract for any system (or component thereof) ifthe value of the multi-year contract would exceed $500,000,000 unless authority forthe contract is specifically provided in an appropriations Act." The appropriation actthat usually provides MYP authority for DoD procurement programs is the annualdefense appropriation act. The authority is usually granted through a provision inTitle VIII of the act, which is the general provisions title. In recent years it has beenSection 8008. In the FY2003 defense appropriations act, for example, Section 8008provided MYP authority for the Air Force C-130 cargo plane program, the Army'sFamily of Medium Tactical Vehicles (FMTV) program, and the Navy's F/A-18E/Fstrike fighter aircraft program. Defense Authorization Act. Subsection (i)(3) of 10 USC 2306b states that "In the case of the Department ofDefense, a multi-year contract in an amount equal to or greater than $500,000,000may not be entered into for any fiscal year under this section unless the contract isspecifically authorized by law in an Act other than an appropriations Act." The "Actother than an appropriations Act" where DoD MYP contracts are authorized isusually the defense authorization act. In the defense authorization act, MYP isauthority is usually granted on a program-by-program basis through separate sectionsin Title I of the act (the procurement title). In the FY2003 defense authorization act,for example, MYP authority was provided for the Air Force C-130 cargo planeprogram in Section 131, for the Army's FMTV program in Section 113, and for DoDprocurement of certain chemicals relating to the U.S. space program in Section 826. In addition, Section 121 of the act extended the duration of a previously authorizedMYP for the Navy's DDG-51 destroyer program. Associated Committees. Giventhat MYP authority for a DoD procurement program is usually provided throughprovisions in both the defense appropriation and authorization bills, the granting ofMYP authority for a DoD procurement program usually reflects a favorablerecommendation on the issue by the committees with principal jurisdiction over thesetwo bills -- the House and Senate Appropriations committees and the House andSenate Armed Services committees, respectively. What Criteria Do Programs Need To Meet To Qualify For MYP? Subsection (a) of 10 USC 2306b sets forth 6 criteria that DoD procurementprograms need to meet to qualify for MYP: To the extent that funds are otherwiseavailable for obligation, the head of an agency may enter into multi-year contracts forthe purchase of property whenever the head of that agency finds each of thefollowing: (1) That the use of such a contract willresult in substantial savings of the total anticipated costs of carrying out the programthrough annual contracts. (2) That the minimum need for theproperty to be purchased is expected to remain substantially unchanged during thecontemplated contract period in terms of production rate, procurement rate, and totalquantities. (3) That there is a reasonableexpectation that throughout the contemplated contract period the head of the agencywill request funding for the contract at the level required to avoid contractcancellation. (4) That there is a stable design for theproperty to be acquired and that the technical risks associated with such property arenot excessive. (5) That the estimates of both the costof the contract and the anticipated cost avoidance through the use of a multi-yearcontract are realistic. (6) In the case of a purchase by theDepartment of Defense, that the use of such a contract will promote the nationalsecurity of the United States. Criterion (1) is intended to disqualify programs where the anticipated savingsfrom using MYP are relatively minor and thus not worth the consequences in termsof tying the hands of future Congresses and reducing DoD's and Congress's flexibilityfor making adjustments to future DoD budgets in response to changingcircumstances. The clause previously required a minimum anticipated savings of10%, but was changed in the early 1990s to a requirement for "substantial savings,"which in practice might be understood to mean at least 5% or so, and preferablysomething closer to a minimum of10%. Criterion (2) is intended to disqualify programs where there might be asignificant risk of DoD changing its mind about the need for procuring the item inthe annual and total quantities set forth in the MYP contract due to changing militaryrequirements -- a decision which could incur a sizeable termination liability. Criterion (3) is similarly intended to disqualify programs where there might be asignificant risk of DoD changing its mind about the need for procuring the item inthe annual quantities set forth in the MYP contract due to a service's inability to fullyfund the program. Criterion (4) is intended to disqualify programs where there mightbe a significant risk of incurring the potentially high costs associated with issuingchange orders to alter the design of weapons and platforms that are underconstruction. | The Air Force wishes to replace its KC-135E aircraft by leasing 100 new Boeing KC-767tankers. The Air Force indicates that leasing is preferred because it will result in faster deliveriesthan outright purchasing. Air Force leaders argue that a lease will allow them to husband scarceprocurement dollars by making a small down payment. Although Congress authorized the proposedlease in the FY2002 DOD Appropriations Act, it stipulated that the defense oversight committeesmust approve the lease -- only the Senate Armed Services Committee has yet to approve. The leaseproposal has been controversial and issues raised thus far include: Whether there is an urgent need to replace the KC-135 fleet. The Air Force states that replacingthe KC-135 is urgent, citing high costs, aircraft vulnerability to catastrophic problems, and theimminent closing of the 767 production line. Opponents of the lease state that operating costs arecontrollable and will be far lower than the overall costs of leasing the 767; that the vulnerability isno more than depicted in a two-year old study which the Air Force found acceptable; and that the767 production line is viable until 2006-2008. Whether the KC-767 is the right airplane. If acquired, the KC-767 may be in DOD's inventoryfor 50 years. The Air Force says that the KC-767 is much more capable than the KC-135. Opponents say that other aircraft are even better than the KC-767 in meeting the Air Force'srequirements. The Air Force opposes re-engining KC-135Es, but opponents say it merits attention,as does outsourcing aerial refueling. Whether the Air Force cost comparison is authoritative. The Air Force's report to Congresscalculates that a 767 lease would cost $150 million more than a purchase on a net present valuebasis. This calculation, however, is sensitive to many assumptions. CRS analysis shows that severalassumptions built into the calculation, if treated differently than in the Air Force report, could changethe calculation by hundreds of millions of dollars each. Although some could change the calculationto favor either the lease or the purchase, others -- such as the discount rate used to calculate netpresent value and whether to use multi-year procurement for the purchase option -- could be morelikely to alter the comparison more in favor of the purchase option. Whether this lease has implications for congressional budget oversight. The proposed leaseappears to be an unprecedented method of funding a major new defense procurement. Critics pointout that this approach is coupled with exemptions from longstanding laws on budgeting and defenseprocurement. The proposed lease raises policy issues regarding the visibility of full costs for DoDprograms in the congressional oversight process, including questions concerning locking inbudgetary resources when costs are uncertain, appropriateness of using an operating lease for thisproposal, the impact of a Special Purpose Entity, and the potential for deviation from full-fundingof the government's contractual liability. This report will not be updated. |
Most civilian federal employees participate in one of two federal retirement systems. In general, employees hired before 1984 are covered by the Civil Service Retirement System (CSRS) and those who were hired in 1984 or later are covered by the Federal Employees' Retirement System (FERS). Employees enrolled in CSRS do not pay Social Security taxes and do not earn Social Security benefits based on their employment in the federal government. Employees enrolled in FERS pay Social Security taxes and earn Social Security benefits. Employees in either system can contribute to the Thrift Savings Plan (TSP), but only employees enrolled in FERS receive employer matching contributions. As governmental plans, CSRS and FERS are not subject to the Employee Retirement Income Security Act of 1974 (ERISA; P.L. 93-406 ), which governs many aspects of employer-sponsored retirement plans in the private sector. ERISA establishes certain rights for the spouses and former spouses of participants in private-sector plans. To protect spouses and former spouses, ERISA requires that the default form of benefit in a defined benefit pension plan must be a joint and survivor annuity with at least a 50% survivor benefit; a retirement plan must comply with the terms of a qualified domestic relations order (QDRO) issued by a state court that divides retirement benefits between the parties to a divorce; the written consent of both spouses must be secured in order for a married participant in a defined contribution plan to name anyone other than his or her spouse as the beneficiary if the participant were to die; and the default form of annuity in a defined contribution plan that offers this form of benefit must be a joint and survivor annuity. Retirement benefits for federal employees are governed by chapters 83 (CSRS) and 84 (FERS) of Title 5 of the United States Code. These chapters establish rights of the spouse or former spouse of a current or former federal employee that are similar in many respects to those established by ERISA for private-sector plans; however, there are a few important differences. For example, like ERISA, Title 5 requires the default form of benefit under CSRS and FERS to be a joint and survivor annuity, and both ERISA and Title 5 require the written consent of the participant and spouse in order to waive the survivor annuity. On the other hand, while both ERISA and Title 5 allow a pension to be divided between the parties to a divorce, the laws differ with respect to when pension payments to the former spouse can begin. Under ERISA, a court can require a plan to begin paying benefits to the former spouse when the plan participant has reached the earliest retirement age under the plan, regardless of whether the participant has yet retired. In contrast, even if a state court decree of divorce or annulment has awarded a share of a federal employee's retirement annuity to a former spouse, Title 5 prohibits payment of any part of a CSRS or FERS annuity to a former spouse until the employee has separated from federal service, is eligible to receive a CSRS or FERS annuity, and has applied for an annuity. Another difference between ERISA and Title 5 is in the designation of beneficiaries in defined contribution plans. ERISA requires a married participant in a defined contribution plan to secure the written consent of his or her spouse in order to name anyone other than the spouse as the plan beneficiary in the event of the participant's death. In contrast, federal regulations allow a participant in the Thrift Savings Plan for federal employees to name anyone as the plan beneficiary in the event of the participant's death "without the knowledge or consent of any person, including his or her spouse." A state court decree of divorce, annulment, or legal separation can award a former spouse of a federal employee either a share of the employee's retirement annuity, a survivor annuity, or both types of annuity. To award a former spouse both a share of the employee's retirement annuity and a survivor annuity, the court order must specify both benefits. The Office of Personnel Management (OPM) will pay only the benefits that are specified in the court order. Section 8346 of Title 5 generally exempts CSRS from the proceedings of state courts. However, Section 8345 of Title 5 allows a former spouse of a federal employee to be awarded a share of the employee's CSRS retirement annuity in accordance with the terms of a state court decree of divorce, annulment, or legal separation or a property settlement pursuant to such decree. OPM will divide the retired employee's monthly annuity as directed by the court order and pay the specified share to the former spouse. Only payments made after OPM receives the court order will be divided between the employee and his or her former spouse. OPM will not execute a court order dividing a federal employee's retirement annuity until the employee has separated from federal service, is eligible for an annuity, and has applied for an annuity. The right of a former spouse to receive a share of a retired federal employee's retirement annuity terminates when the retired employee dies. For the former spouse to receive a survivor annuity, either the retiree must have elected a survivor annuity for the former spouse or a court order must specify that the former spouse is to receive a survivor annuity. A former spouse of a deceased federal employee may receive a CSRS survivor annuity if the employee elected a survivor annuity for the former spouse or if a state court decree of divorce, annulment, or separation requires a survivor annuity. A CSRS survivor annuity is 55% of the single-life annuity that the retired worker would have received. To fund the joint and survivor annuity, the retired worker's annual pension is reduced by 2.5% of the first $3,600 plus 10% of the annuity above that amount. This entitles the worker's spouse or former spouse to a survivor annuity equal to 55% of the worker's full annuity before the reduction for survivor benefit is taken into account. The sum of CSRS survivor annuities paid to the employee's spouse at the time of death and all former spouses cannot exceed 55% of the single-life annuity to which the annuitant was entitled. If the full amount of a survivor annuity has been awarded to a former spouse through a court order, the employee's current spouse is not entitled to receive a survivor annuity unless the former spouse has died or remarried before the age of 55. A survivor annuity paid to a former spouse of a federal employee terminates when the former spouse dies or if he or she remarries before the age of 55. There is an exception to the termination of a survivor annuity paid to a former spouse in the case of remarriage prior to age 55 if the former spouse's marriage to the employee lasted at least 30 years (applicable to remarriages that have occurred on or after January 1, 1995). If the remarriage ends in death, divorce, or annulment, the annuity restarts in the same amount. An employee's election to provide a survivor annuity, or a court order awarding a survivor annuity to a former spouse, can be modified only before the employee retires or dies. A court order awarding a survivor annuity to a former spouse of an employee will not be honored by OPM if the former spouse previously waived his or her right to a survivor annuity. If an employee separating from federal service elects to receive a refund of his or her contributions to the retirement system, he or she forfeits the right to receive a CSRS annuity. Section 8342 of Title 5 allows a state court to block payment of a refund if a former spouse has been awarded a share of the employee's annuity or a survivor annuity. Section 8470 of Title 5 generally exempts FERS from the proceedings of state courts. However, Section 8467 allows a FERS retirement annuity to be divided between a federal annuitant and a former spouse, pursuant to a state court decree of divorce, annulment, or legal separation. OPM will divide the retired employee's monthly annuity as directed by the court order and pay the specified share to the former spouse. Only payments made after OPM receives the court order will be divided between the employee and his or her former spouse. OPM will not execute a court order dividing a federal employee's retirement annuity until the employee has separated from federal service, is eligible for an annuity, and has applied for an annuity. The right of a former spouse to receive a share of a retired federal employee's retirement annuity terminates when the retiree dies. For the former spouse to receive a survivor annuity, either the retiree must have elected a survivor annuity for the former spouse or a court order must specify that the former spouse is to receive a survivor annuity. Section 8445 of Title 5 allows a federal employee to elect a FERS survivor annuity for a former spouse, and it permits a state court to award a former spouse of a federal employee a survivor annuity in the event that the employee predeceases the former spouse. A survivor annuity under FERS is equal to 50% of the single-life annuity to which the retired worker would have been entitled. The joint and survivor annuity is funded by reducing the retiree's single-life annuity amount by 10%. In return for this reduction, the worker's spouse or former spouse is entitled to a survivor annuity equal to 50% of the worker's full annuity before the reduction is taken into account. An employee may provide for the equivalent of no more than one FERS spouse survivor annuity. The sum of FERS survivor annuities paid to the employee's spouse at the time of death and all former spouses cannot exceed 50% of the single-life annuity to which the annuitant was entitled. If the full amount of a survivor annuity has been awarded to a former spouse through a court order, the employee's current spouse is not entitled to receive a survivor annuity unless the former spouse has died or remarried before the age of 55. A survivor annuity terminates when the spouse or former spouse dies or if he or she remarries before the age of 55. In the case of remarriage prior to age 55, there is an exception to the termination of a survivor annuity paid to a former spouse if the former spouse's marriage to the employee lasted at least 30 years (this exception applies to remarriages that have occurred on or after January 1, 1995). If the remarriage ends in death, divorce, or annulment, the annuity restarts in the same amount. An election to provide a FERS survivor annuity or a court order awarding a FERS survivor annuity to a former spouse can be modified only before the employee retires or dies. A court order awarding a survivor annuity to a former spouse of an employee will not be honored by OPM if the former spouse previously waived his or her right to a survivor annuity. If an employee participating in FERS dies after having completed at least 18 months of service, but fewer than 10 years of service, his or her spouse is eligible for a lump-sum survivor benefit equal to one-half of the employee's annual basic pay plus a lump-sum payment (approximately $31,786 in 2014). This lump-sum survivor benefit may be paid to a former spouse or divided between a current and former spouse, pursuant to a state court order. If an employee dies after completing at least 10 years of service, the surviving spouse (or former spouse, pursuant to a court order) receives a lump sum and an annuity equal to 50% of the annuity that the employee had earned at the time of his or her death. A separating employee who elects to receive a refund of contributions to the retirement system forfeits the right to receive a FERS annuity. A state court can block this refund if a former spouse has been awarded a share of the employee's FERS retirement annuity or a FERS survivor annuity. An employee or former employee can designate a beneficiary or beneficiaries who will receive his or her TSP account balance in the event of the participant's death. This must be done by filing Form TSP-3 with the Federal Retirement Thrift Investment Board. The Thrift Board is not authorized to recognize wills or other estate planning documents. A married participant is not required to designate his or her spouse as the beneficiary of the TSP account, nor is the spouse's consent required to designate someone other than the spouse as the beneficiary of the TSP account. A married FERS participant must obtain his or her spouse's written consent before receiving a loan from his or her TSP account, receiving an in-service distribution from the TSP, and withdrawing money from the TSP after leaving federal employment. CSRS participants are not required to obtain the spouse's written consent, but the spouse will be notified by the TSP before a loan is approved or in the event of an in-service or post-employment withdrawal from the TSP. The spouse of a married FERS participant is legally entitled to a joint and survivor annuity with 50% survivor benefit from the TSP. The participant's spouse must waive his or her right to that annuity in writing before the participant can withdraw money from the TSP. The TSP is authorized to recognize state court orders of divorce, annulment, or legal separation and property settlements pursuant to a court order. The TSP also is authorized to recognize state court orders respecting payment of alimony and child support. Federal employees enrolled in FERS participate in Social Security. The former spouse of a worker is eligible for a Social Security spouse's benefit at the age of 62 if the couple were married for at least 10 years, and if the worker is receiving, or is entitled to, Social Security benefits. If the former spouse of the worker remarries, he or she generally cannot collect benefits on the worker's record unless the marriage ends by death, divorce, or annulment. The divorced spouse of a worker insured by Social Security can receive widow or widower benefits if the couple were married at least 10 years. Survivor benefits terminate if the divorced spouse remarries before the age of 60 unless the later marriage ends, by death, divorce, or annulment. Remarriage does not affect Social Security survivor benefits being paid to the children of a deceased worker. | A former spouse of a federal employee may be entitled to a share of the employee's retirement annuity under the Civil Service Retirement System (CSRS) or the Federal Employees' Retirement System (FERS) if this has been authorized by a state court decree of divorce, annulment, or legal separation. An employee also may voluntarily elect a survivor annuity for a former spouse. A state court can award a former spouse a share of the employee's retirement annuity, a survivor annuity, or both. A court also can award a former spouse of a federal employee a portion of the employee's Thrift Savings Plan (TSP) account balance as part of a divorce settlement. |
Experts widely assess that Afghanistan will remain the world's primary source of opium poppy cultivation and opium and heroin production, as well as a major global source of cannabis resin, in the coming years (see Figure 1 below). In 2012, Afghanistan cultivated more than 94% of the world's opium poppy and produced approximately 95% of the world's opium, according to U.S. estimates. For its globally significant role in drug production and trafficking, the President has annually designated Afghanistan as a major illicit drug-producing or drug-transit country. In its 2014 International Narcotics Control Strategy Report , the U.S. Department of State described counternarcotics efforts in Afghanistan as "an uphill struggle and a long-term challenge." The potential consequences of Afghanistan's drug situation are wide ranging, with policy implications for economic and political development, as well as regional security priorities. Reports have long described a symbiotic link between narcotics trafficking in Afghanistan; corrupt government officials at the central, provincial, and district levels; ongoing insecurity; and lack of access to development opportunities. Elements of the insurgency, particularly the Taliban, are variously engaged in drug trafficking and the protection of fields, routes, and laboratories to finance operations. According to the U.S. Department of Defense (DOD), such insurgency involvement is "extensive and expanding." Although estimates vary significantly, the U.N. Security Council's Taliban Sanctions Monitoring Team reported that the Taliban generates an estimated $100 million to $155 million annually in illicit income from the drug trade—a sum that may represent more than a quarter of total Taliban funds. The government of Afghanistan continues to depend on foreign donors for assistance and cooperation in responding to the drug problem. Congress has contributed to counternarcotics responses through the continued appropriation of funds and oversight of civilian, military, and law enforcement programs in Afghanistan. The Special Inspector General for Afghanistan Reconstruction (SIGAR) estimates that the U.S. government has spent at least $7 billion in counternarcotics assistance to Afghanistan since the international community began reconstruction and stability operations in FY2002—including more than $4 billion through the State Department and upward of $3 billion through the Defense Department. As coalition combat operations in Afghanistan draw to a close in 2014 and as the full transition of security responsibilities to Afghan forces is achieved, some Members of the 113 th Congress have expressed concern regarding the future direction and policy prioritization of U.S. counternarcotics efforts in Afghanistan, in light of diminishing resources and an uncertain political and security environment in 2015 and beyond. In early 2014, the Senate Caucus on International Narcotics Control and the House Foreign Affairs Subcommittee on the Middle East and North Africa held hearings to discuss counternarcotics efforts in Afghanistan with witnesses from the Obama Administration. One of the most immediate challenges to counternarcotics efforts in Afghanistan is the upcoming end of coalition combat operations and the full transition of security responsibilities to Afghan forces in 2014. In President Barack Obama's Presidential Determination on Major Drug Transit or Major Illicit Drug Producing Countries for Fiscal Year 2014 , he summarized the key challenges facing Afghanistan's drug situation: As we approach the 2014 withdrawal of international forces from Afghanistan, the country requires continued international support. Even greater efforts are needed to bring counternarcotics programs into the mainstream of social and economic development strategies to successfully curb illegal drug cultivation and production of opium as well as the high use of opiates among the Afghan population. Some, including Special Inspector General for Afghanistan Reconstruction John F. Sopko, are concerned that the military transition, which also corresponds to a reduction in civilian and law enforcement personnel at U.S. Embassy Kabul, will result in a loss of "critical manpower at precisely the time that poppy cultivation and drug trafficking is expanding." Counternarcotics efforts to date have relied heavily on the coalition military presence in Afghanistan, raising concerns among some policy makers regarding the sustainability of U.S. counternarcotics efforts following the transition. The U.S. government updated its counternarcotics strategy for Afghanistan in late 2012 to address transition-oriented objectives. It describes the transition as involving "two simultaneous and parallel transfers of responsibility," which includes not only the transfer of security responsibility to Afghan forces, but also the transfer of counternarcotics responsibilities and law enforcement operational activities to the Afghan government. The U.S. strategy identifies two key priorities: (1) strengthening Afghan government capacity to conduct counternarcotics efforts and (2) countering links between drugs and the insurgency by disrupting drug-related funding to the insurgency through and beyond the security transition. Despite the U.S. strategy, detailed counternarcotics implementation plans beyond 2014 remain in flux as negotiations continue on the Afghanistan Bilateral Security Agreement. Several counternarcotics-related transition changes are, however, underway, including the following: North Atlantic Treaty Organization (NATO) Mission Change. At the end of 2014, the coalition's military mission in Afghanistan is expected to transition to a NATO-led training, advisory, and assistance mission named Resolute Support Mission (RSM). The NATO-led mission, however, will reportedly have a reduced capacity to support counternarcotics efforts at current levels. Military-L ed Counternarcotics Operations. In a November 2013 report to Congress, Progress Toward Security and Stability in Afghanistan , DOD acknowledged that fewer drug-related targets are being prioritized. As coalition forces draw down, it is widely anticipated that diminished military resources will affect the scope and frequency of U.S.-supported counternarcotics operations in 2014, particularly in Helmand and Kandahar provinces. Moreover, SIGAR reports that U.S. and coalition-provided support functions, including air transportation, security, and intelligence for counternarcotics operations, "cannot be replicated by Afghan forces." U.S. Drug Enforcement Administration (DEA) Staffing and Operations. Following the transition, DEA has reported that it will "transition its operational profile to correspond with traditional DEA overseas operations." DEA intends, however, to continue to periodically deploy members of its Foreign-deployed Advisory and Support Team (FAST) to Afghanistan. DEA further anticipates that it will be limited to counternarcotics activities based out of Kabul. Already, SIGAR reported that the coalition's drawdown has reduced security, intelligence, medical evacuation, and tactical air control support for DEA's high-risk operations in country. The transition has also already been linked with a sharp decline in the volume of drugs and precursor chemicals interdicted; the total number of counternarcotics operations between FY2012 and FY2013 declined by 26%. U.S. Department of State Programming. State Department-funded counternarcotics programs are in various stages of transition to full Afghan responsibility. Some are already fully implemented by the Afghan government (e.g., Governor-Led Eradication and the Good Performer's Initiative), while the transition timeline for other programs may span several more years. After 2014, the State Department does not plan to have a permanent counternarcotics presence outside Kabul. U.S. Agency for International Development (USAID) Field Presence. Although alternative development projects are implemented by contractors, some observers indicate that the transition could affect USAID's ability to conduct program monitoring and oversight. As the U.S. government's footprint in Afghanistan recedes, particularly at the provincial and district levels, so have the number of USAID field officers assigned to monitoring programs in Afghanistan. Creation of the Regional Narcotics and Analysis and Illicit Trafficking Task Force (RNAIT-TF ). In its Post-2014 Counternarcotics Strategy for Afghanistan , submitted to Congress in late 2013, DOD proposes the establishment, by the end of FY2014, of a new interagency and international coordination mechanism for counternarcotics-related threats, including counter-threat finance. According to DOD, it is intended to be a "bridge" between current counternarcotics activities inside Afghanistan and more regionally focused efforts following the transition and drawdown of U.S. and coalition forces from Afghanistan. In the context of a growing drug problem in Afghanistan and diminished coalition participation in counternarcotics operations, some observers have questioned whether the drug issue will be an Afghan policy priority following the transition—and whether the U.S. government will lose its ability to exert pressure for counternarcotics actions, including corruption investigations that target high-level officials. Others question whether policy makers are sufficiently prepared for the consequences that the transition may bring to counternarcotics efforts in Afghanistan, including a reduced security forces presence in key drug producing provinces and potentially declining resources for counternarcotics programming, such as alternative development. The transition may also reignite policy debates on the impact and consequences associated with previously controversial policy ideas, including aerial eradication of opium poppy crops, alternative development programming linked to eradication commitments, and the licensing of medical-grade opium production for legal export and sale. The following sections describe key U.S. counternarcotics programs in Afghanistan and identify related policy issues. Key programs discussed include (1) interdiction, (2) eradication, (3) the Good Performer's Initiative, (4) alternative development, (5) demand reduction, (6) public awareness, (7) counter-threat finance, (8) prosecution, (9) institutional development, and (10) international and regional cooperation. As the transition continues through 2014, counternarcotics plans and policy may continue to evolve. A core tenet of counternarcotics policy in Afghanistan has included efforts to disrupt drug trafficking through interdiction operations—a specialized law enforcement capacity that the NATO Training Mission Afghanistan (NTM-A) expects to transition to Afghan responsibility as part of the overall security transition (see Figure 2 below). With State Department, DOD, DEA, and other resources, the U.S. government has played a significant role in the development of Afghan capabilities to conduct successful interdictions through the Counter Narcotics Police of Afghanistan (CNPA), its specialized units, and border and customs enforcement units, as well as other security entities. U.S. interdiction assistance provides funding for the operation and maintenance of CNPA facilities and infrastructure, life support, operational mentoring and administrative capacity building, and salary supplements. In addition to the in-depth support for CNPA specialized units, including the Sensitive Investigative Unit (SIU), Technical Investigative Unit (TIU), and National Interdiction Unit (NIU), other notable interdiction-related programs have included DEA's Foreign-deployed Advisory Support Teams (FAST), a DEA-supported Judicial Wire Intercept Program (JWIP), a joint DOD-DEA Afghan Regional Training Team (RTT), the DOD-funded Afghan Special Mission Wing, a U.S. Embassy Kabul-led Border Management Task Force (BMTF), and specialized training and operational support conducted by the U.S. Department of Homeland Security's Customs and Border Protection (DHS/CBP). Interagency entities, including the Combined Joint Interagency Task Force-Nexus (JIATF-N) and the Interagency Operations Coordination Center (IOCC) have contributed to interdiction efforts by integrating law enforcement and military information in support of counternarcotics operations. Officials often point to the capture of narcotics kingpin Haji Bagcho in 2009, which was achieved with the support of DEA-mentored Afghan vetted units, as an example of U.S. success in developing Afghan counternarcotics capabilities. Beyond assistance to certain specialized counternarcotics units in Afghanistan, the State Department reported in March 2014 that the scope of U.S. support, particularly to the CNPA more broadly, is challenged by limited institutional capacity, corruption, and a lack of CNPA direct authority over its resources in the provinces. As the security transition continues, however, it is unlikely that the pace of interdiction operations programs previously funded by DOD can be sustained due to declines in staffing and regional presence. Compared to FY2011, the number of coalition-supported counternarcotics operations was down 17% in FY2013, heroin seizures were down 77%, and opium seizures were down 57%, according to SIGAR. Moreover, DOD has reported that the effectiveness of interdiction efforts are limited—contributing to "temporary dislocations" of narcotics networks and a "small, though significant, effect on overall insurgent profits from narcotics." Following the transition, some observers question whether interdiction can be a successful policy tool for disrupting major traffickers, particularly if U.S. assistance is limited to specialized counternarcotics units. SIGAR has further questioned whether the Afghan government is prepared to assume full responsibility for some interdiction-related programs, such as the Afghan Special Mission Wing—a program for which DOD and DEA have strongly advocated. In a major policy reversal in mid-2009, the late Special Representative for Afghanistan and Pakistan Richard Holbrooke concluded that western counternarcotics policies had resulted in "failure" in Afghanistan. Chief among his critiques of contemporary counternarcotics policy was the perception that U.S. involvement in opium poppy eradication—which included funding for a centrally directed Poppy Eradication Force (PEF)—had the perverse effect of bolstering the insurgency and undermining security and stability goals. As a result, the U.S. government ceased all direct support and involvement in eradication campaigns throughout Afghanistan. In its place, the U.S. government focused its supply reduction efforts on an Afghan-run program administered by the Ministry of Counter Narcotics (MCN) called the Governor-Led Eradication (GLE) program. Through GLE, the MCN has reimbursed provincial governors for expenses incurred for eradicating poppy fields. Pursuant to MCN strategic guidance, GLE is the only permissible eradication program in Afghanistan and eradication efforts may only be conducted using manual or mechanical, ground-based methods—and only in communities with access to alternative livelihoods. Governors are also prohibited from providing farmers with any financial compensation for destroyed farmland. State Department officials anticipate that GLE's scope would not change significantly following the transition, since the program is already MCN-led. The U.S.-Afghan memorandum of understanding for the GLE program has been renewed in one-year increments. Considering Afghanistan's continued prominence in opium poppy cultivation, many observers have continued to question whether eradication through the GLE program—which in 2013 resulted in 7,348 hectares eradicated (down from 9,672 hectares in 2012) while causing 143 fatalities and 93 injuries to eradication personnel—is a sufficient deterrent threat (see Figure 3 below). It is widely expected that eradication numbers in 2014 will decline, in part because security forces may be less available to support eradication efforts. Moreover, it is unclear whether GLE has had an effect on mitigating Holbrooke's original concern—that eradication efforts were strengthening the insurgency. DOD further reports that the GLE program "has yet to prove its utility in decreasing insurgent funding" and may strengthen links between opium cultivation and the insurgency as increased eradication often results in a shift of cultivation to areas beyond government control. Corruption within the GLE program, according to DOD, "often results in only the poppy fields that do not pay bribes being eradicated." Some policy makers have questioned whether U.S. resources may be better spent on other aspects of counternarcotics policy. In coordination with the GLE program, MCN has also implemented a U.S.-funded incentive program called the Good Performers Initiative (GPI). It is designed to reward provinces that successfully reduce poppy cultivation. As part of the initiative, the United Nations Office on Drugs and Crime (UNODC) verifies the amount of land eradicated and eligible provinces in turn receive funding for local development projects proposed by provincial development councils and governors' offices. In 2012, for example, 21 of 34 provinces were eligible for GPI funding (including 17 provinces that were poppy-free), which totaled $18.2 million. Previous development projects funded through GPI, which has been in existence since 2007, have included schools, transportation infrastructure, irrigation structures, hospitals, and drug treatment centers. State Department officials anticipate that the scope of the GPI program would not change significantly as the transition continues, since the program is already MCN-led. Although the program has been widely supported by provincial governors who qualify for the rewards, some observers have questioned whether the development projects provide a sufficient and sustainable incentive for farmers to switch to licit agricultural products and whether the projects contribute to alternative livelihood development. Local perceptions that funding for GPI projects is misallocated contribute to a sentiment that the program may not reward good governance. According to one observer: "Allocations that are not simply diverted for personal profit often amount to one isolated project here and there at best, rather than any robust rural development.... Promises of systematic rural development and robust alternative livelihoods made to poppy farmers are thus mostly unmet." Research indicates that opium poppy cultivation in Afghanistan is most prevalent in areas characterized by insecurity and a lack of alternative livelihoods, including agricultural assistance. Alternative development programming, long a pillar of U.S. counternarcotics strategies in Afghanistan, is intended to identify and implement interventions that will influence household decision making toward licit livelihood options and away from a reliance on opium poppy cultivation as a source of income. This has included programming that increases household income and employment opportunities while decreasing household expenditures and risk (e.g., by providing licit seeds, fertilizer, farming technology, and access to credit). Several alternative development projects funded by USAID are ending in 2014 and 2015, including the "Incentives-Driving Economic Alternatives-North, East, West in Afghanistan" (IDEA-NEW) program, the Commercial Horticulture and Agricultural Marketing Program (CHAMP), the Agricultural Development Fund (ADF), and the Agricultural Credit Enhancement (ACE) program. Between FY2008 and FY2012, USAID's alternative development programs have reportedly targeted 314,268 hectares of poppy cultivation with alternative crops, increased sales of licit farm and non-farm products, and created more than 190,000 full-time equivalent jobs sponsored by alternative development activities. Earlier efforts prioritized short term stabilization goals, including cash for work projects that have been criticized as distorting local economies rather than addressing the underlying drivers of opium farming. As new alternative development programs are developed and implemented, USAID anticipates that the programs' goals will shift from stabilization to long-term development (e.g., economic growth, job creation, and capacity building). One new alternative development program, the Kandahar Food Zone, builds on the experiences of a former British-led initiative in neighboring Helmand province called the Helmand Food Zone. The Kandahar Food Zone combines the work of USAID and the State Department's International Narcotics and Law Enforcement Affairs (INL) Bureau into four areas of counternarcotics programming: alternative development, GLE, demand reduction, and public awareness. The alternative development piece of the program is intended to be a two-year, $20 million initiative. The latter three areas are managed by the State Department and extend several existing national programs to Kandahar. Other new USAID-funded programs include a series of Regional Agricultural Development Projects (RADP), geographically focused on the south, north, west, east, and central parts of Afghanistan. Independently of U.S. assistance programs, Afghanistan has reportedly expanded the "food zone" model to several additional provinces, including Badakhshan, Farah, and Uruzgan. The International Narcotics Control Board (INCB) expects that such programs, combined with other alternative development measures, could "contribute to tangible progress in preventing and reducing illicit cultivation of opium poppy and cannabis plant in the country in the years to come." Despite these efforts, the INCB has warned that alternative development assistance is still not widely available in Afghanistan. In 2011, for example, surveys found that, of the 191,500 rural households reporting to be dependent on illicit crops for income, only 30% received agricultural assistance during the previous year. Even in areas where programming has contributed to a decline in opium cultivation, such as in the Helmand Food Zone, there are signs that progress may not necessarily be sustainable if alternative development programming were to be reduced, security were to disintegrate, or opium poppy prices were to increase in the coming years. According to surveys among households located within the Helmand Food Zone, some 30% of household income, on average, continued to be derived from ongoing opium cultivation. Additionally, observers have found that the Helmand Food Zone caused a sub-regional "balloon effect" in which poppy cultivation was pushed outside the Food Zone, often into insecure areas that remain under Taliban control. USAID has acknowledged several challenges in the implementation of its flagship alternative development and agriculture programs in Afghanistan, including ongoing insecurity, low crop production, and limited food processing opportunities. USAID implementers continue to be targeted by the insurgency; in March 2014, the Kabul residential compound for one of USAID's alternative development contractors, Roots of Peace, was attacked. SIGAR has in the past reported on USAID oversight problems in some alternative development projects related to equipment procurement and the distribution of cash-for-work payments to local Afghan workers. As domestic drug abuse rates have surged in Afghanistan, calls for improved responses to the problem through drug demand reduction, treatment, and rehabilitation have also grown. Beginning in 2003 from a virtually nonexistent policy platform, the Afghan government and international donors, particularly the U.S. government, have supported the development of a nationwide system of health services for specific populations (e.g., men, women, children, adolescents, and the homeless). Prevention programming includes school- and mosque-based interventions, as well as mobile exhibits, street theater initiatives, and community outreach. The number of treatment facilities in Afghanistan has more than doubled in the past five years, and treatment services now reach between 3% and 5% of estimated opiate users in the country, primarily in key population centers, such as Kabul. Wait lists for new patients are common. As many as 99% of Afghanistan's drug users have not received treatment, according to SIGAR. As part of its transition plans for demand reduction programming, which are slated to continue through at least 2017, the State Department has been working with the Afghan Ministry of Public Health to assume responsibility for staffing and paying for 76 drug treatment programs that INL had previously established and funded. Over the next several years, the State Department also aims to hand over responsibilities for the operations and maintenance of the facilities. INL supports a wide range of Afghan prevention programs and is also reportedly developing protocols to treat opium and heroin-addicted children in Afghanistan. Earlier, INL had funded a National Urban Drug Use Survey to measure the prevalence rate in urban populations; it is now funding a National Rural Drug Use Survey to provide a scientifically valid national prevalence rate. Demand reduction efforts, however, have continued to face several challenges, including a lack of basic data on national drug prevalence rates and treatment effectiveness, consistently applied evidence-based practices in all treatment facilities, licensing and certification mechanisms to identify qualified service providers, and accessible treatment options, particularly in high-risk areas. Although data remain limited, many of these problems may contribute to high relapse rates. Debate has also continued regarding the appropriate use of methadone to treat injecting opioid users in Afghanistan, which can be diverted into illicit channels and abused. A two-year pilot methadone maintenance treatment project was first implemented by a France-based nongovernmental organization in 2010 for high-risk injecting drug users in Kabul, with reportedly beneficial results; it was, however, challenged by difficulties associated with obtaining timely licenses to import methadone into the country. Another component of counternarcotics efforts in Afghanistan has involved the dissemination of public information programming, community engagement efforts, and media campaigns designed to inform, educate, deter, and dissuade the general population, as well as those identified as potential opium poppy farmers, from involvement in the drug trade. The State Department and other international donors contribute to counternarcotics public awareness programming in Afghanistan, as well as management support for the MCN as it develops the capacity to independently conduct national campaigns. Two such U.S.-funded programs include those implemented locally by Sayara Media Communications (e.g., the Counter Narcotics Community Engagement program) and the Aga Khan Foundation grant. The State Department took initial steps in April 2013 toward transitioning public awareness campaign programs to Afghan control by initiating an independent evaluation of MCN programming capabilities; gaps identified in the assessment are intended to provide the State Department with a blueprint for preparing MCN to assume full responsibility for the programs by April 2015. Assessments of the effectiveness of public awareness campaigns, however, are limited. Preliminary surveys indicate that exposure to awareness campaigns can influence, to some extent, household decisions to cultivate opium, although some early media campaigns were found to be generally ineffective. Evidence from the Helmand Food Zone also suggests that public awareness campaigns were a contributing factor to the program's successes. The U.S. government has been actively engaged in counter-threat finance operations in Afghanistan, which are designed to identify and disrupt the sources of insurgent and terrorist funding from the narcotics trade. The Afghanistan Threat Finance Cell (ATFC) has played a central role in such efforts. The ATFC has also facilitated the implementation of targeted financial sanctions and designations against narcotics traffickers pursuant to the Foreign Narcotics Kingpin Designation Act ( P.L. 106-120 ). This interagency effort, based in Kabul, was established in 2008 by the U.S. national security staff and led by DEA with deputies from the Defense and Treasury Departments. The ATFC reportedly played a significant role in revealing high-level corruption and illicit financial networks behind the Kabul Bank investigation. The unilateral and secretive nature of the program, whose activities remain largely classified, has at times caused friction with the Afghan government. Although security officials acknowledge that drug proceeds have played a key role in financing the insurgency, DOD in late 2013 assessed that overall insurgency funding in recent years has remained largely unchanged and that the Taliban is "showing a greater propensity" to participate in narcotics trafficking and production. The future of the ATFC has been in question as transition planning proceeds; staffing for the unit has already been reduced, and executive branch officials have been debating about whether to permanently close the unit or integrate it into existing organizational structures, such as the Interagency Operations Coordination Center (IOCC). Additionally, it remains unclear whether the Afghan government will have the political will or capacity to conduct complex financial investigations and analyses, equivalent to those conducted by the ATFC. According to early 2014 testimony, U.S. and Afghan authorities are in the process of developing a "cadre of Afghan financial investigators who can work independently of foreign mentorship." The Departments of State and Justice have supported the development of Afghan capacity to investigate and prosecute major narcotics and narcotics-related corruption cases through the mentoring of specialized investigators, prosecutors, and judges and the establishment of dedicated facilities at the Counter Narcotics Justice Center (CNJC) in Kabul, which includes a semi-autonomous forensics laboratory, narcotics-specific primary and appellate narcotics courts (Counter Narcotics Tribunal, or CNT), and a detention center. The investigators, prosecutors, and judges that are co-located at the CNJC encompass the Criminal Justice Task Force (CJTF). U.S. assistance has provided support to facilitate linkages between Kabul-based investigations and provincial justice centers. The importance of a functioning domestic counternarcotics justice response is further heightened due to the lack of a formal extradition or mutual legal assistance treaty with the United States. Although drug-related extraditions could be made pursuant to the 1988 U.N. Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, to which both the United States and Afghanistan are party, the State Department has reported that a 2013 domestic extradition law in Afghanistan has added "additional hurdles to any potential extradition process." Since the establishment of the CJTF in 2005 and the opening of the CNJC in 2009, the concept has emerged as a "model of excellence within the Afghan justice system," according to the State Department. In recent years, the CNT has heard upward of 700 cases annually and achieved conviction rates above 90%. One of these recent convictions was that of U.S. narcotics kingpin Haji Lal Jan Ishaqzai in 2013. Despite such progress, the Afghan justice system remains challenged by significant limitations in capacity and effectiveness. Lower-level drug cases that are not prosecuted through the CJTF suffer from the same challenges that hamper overall criminal justice reform in Afghanistan. High-level investigations are also allegedly thwarted by corruption. The highest ranking government official arrested on drug charges in Afghanistan was the provincial police chief of Nimroz, Mohammad Kabir Andarabi, arrested in late 2013. Ultimately, however, he was cleared of the drug corruption charges and instead convicted of obstruction of justice. Some have raised the possibility that some aspects of the CJTF and CNJC could change, including modifications to reduce the annual caseload, which has reportedly been increasing since 2009. Moreover, State Department officials report that the timeline for transitioning the operations and maintenance costs for the CNJC to Afghan control remains unclear. Beginning in late 2010, the State Department initiated an MCN capacity building project in which two dozen Afghan and international mentors and advisors are embedded at the Ministry. The program supports technical capacity building (e.g., information technology, human resources, and budget administration), procurement support and logistical needs, and policy development (e.g., internal training and provincial-level counternarcotics programming). Since this program is based in Kabul, it is anticipated that it would continue past the security transition in 2014. The program was most recently renewed for 18 months. In order to address the cross-border and regional implications of Afghanistan's drug production, the U.S. government has participated in a wide range of initiatives to enhance international and regional cooperation on counternarcotics issues. One such effort is the Central Asia Counternarcotics Initiative (CACI), launched in 2011 by the State Department. For FY2015, the State Department requested $4 million to continue providing specialized training, mentoring, and equipment to enhance regional law enforcement capacity and promote cooperation among counternarcotics units among Central Asian countries. DOD has also been supporting counternarcotics capacity building in the region with its own appropriated funds. Potentially enhancing DOD's support to the region following the transition in Afghanistan, DOD is in the process of establishing a Regional Narcotics and Analysis and Illicit Trafficking Task Force (RNAIT-TF). Other international and regional cooperation efforts include U.S. support for the work conducted by the UNODC, including the Central Asian Regional Information and Coordination Center; INCB (e.g., Project Cohesion on precursor chemical control, which Afghanistan joined in August 2013); Paris Pact Initiative, which launched its fourth phase to combat Afghan opium and heroin trafficking in June 2013; the Colombo Plan, an Asia-Pacific regional collective, which has conducted work on Afghan demand reduction; and the U.S.-Russia Bilateral Presidential Commission Working Group on Counternarcotics. Observers widely assess that international and regional cooperation will feature prominently in Afghanistan-related counternarcotics efforts following the transition. The INCB stressed in its 2013 annual report, released in April 2014, that the drug problem in Afghanistan, as well as in the region, "remains of grave concern" and that international cooperation to address the situation remains paramount. Some, including DOD, suggest that a more regional approach to combating Afghanistan's drug production may be beneficial, as it may provide "greater fidelity" on the illicit networks that operate throughout the region, including not only drug traffickers, but also weapons traffickers and money launderers. Some concern has been expressed that a counternarcotics approach that emphasizes regional cooperation, however, may also be fraught by high levels of corruption, low or mixed enforcement capacities, and political sensitivities. Illustrating such concerns, Ambassador William R. Brownfield, Assistant Secretary of State for International Narcotics and Law Enforcement Affairs, acknowledged in congressional testimony earlier in 2014 that CACI "has not yet been a resounding success" due to a lack of enthusiasm for counternarcotics cooperation among the Central Asian states as well as Russia. The Obama Administration acknowledges that the U.S. government's priorities and interests in Afghanistan will be "tested" in the coming years as security responsibility transitions to the government of Afghanistan, under new political rule, and military activity shifts its mission in the country and the region. For some, Afghanistan's continuing drug problem features prominently as a concern that could affect the country's future trajectory following transition. Most experts expect that drug cultivation and production in Afghanistan will increase, at least temporarily, in the coming years, and that its importance will also increase as a proportion of Afghanistan's overall economy. What is unknown, however, is whether and to what extent such trends will contribute to future political instability, change perceptions of the Afghan government's strength, and lead to the entrenchment of illicit actors at all levels of governance. SIGAR has called drug trafficking in Afghanistan "one of the most significant factors putting the entire U.S. and international-donor investment in the reconstruction of Afghanistan at risk" and identified narcotics as one of several "critical issues" for its activities related to U.S. reconstruction efforts in Afghanistan. Amid such broad ranging risks, some observers worry that international policy interests, resources, and priorities have shifted away from the drug problem in Afghanistan. Counternarcotics efforts in Afghanistan are resource-intensive, and the Afghan government remains dependent on international donors to fund such activities; yet, many question whether and for how long such funding will remain available—particularly in the context of a significantly reduced ability to monitor and oversee assistance programs following the U.S. military drawdown and security transition. The FY2014 omnibus appropriations for the State Department's foreign operations, for example, cut overall assistance for Afghanistan by 50% and directed the State Department and USAID to "prioritize" counternarcotics programs with a "record of success." The FY2014 appropriations ( P.L. 113-76 ) further emphasized the importance of adequate monitoring and oversight, stipulating, among other provisions, that Economic Support Fund (ESF) and International Narcotics Control and Law Enforcement (INCLE), two primary funding vehicles for counternarcotics assistance, may not be used to initiate new programs, projects, or activities for which regular oversight is not possible. As Congress continues to evaluate counternarcotics policy options and programs in Afghanistan, key questions for consideration include the following: How can the U.S. government preserve the counternarcotics gains it has achieved over the past 12 years in Afghanistan and prevent backsliding following transition to a reduced U.S. security presence? What is the risk and potential scale of increased cultivation and production of opium and heroin in Afghanistan in 2015 and beyond? How will the illicit narcotics industry affect overall economic growth and development in Afghanistan? Should the U.S. government remain one of Afghanistan's primary donors of counternarcotics assistance? If so, for how long and at what cost? How can U.S. counternarcotics programs in Afghanistan be appropriately monitored and evaluated, given security constraints on U.S. personnel mobility? What metrics and benchmarks should be used to evaluate success or failure of U.S. counternarcotics efforts in Afghanistan? | Afghanistan is the world's primary source of opium poppy cultivation and opium and heroin production, as well as a major global source of cannabis (marijuana) and cannabis resin (hashish). Drug trafficking, a long-standing feature of Afghanistan's post-Taliban political economy, is linked to corruption and insecurity, and provides a source of illicit finance for non-state armed groups. Based on recent production and trafficking trends, the drug problem in Afghanistan appears to be worsening—just as the U.S. government finalizes plans for its future relationship with the government of Afghanistan in 2015 and beyond and reduces its counternarcotics operational presence in the country to Kabul, the national capital. As coalition combat operations in Afghanistan draw to a close in 2014, and as the full transition of security responsibilities to Afghan forces is achieved, some Members of the 113th Congress have expressed concern regarding the future direction and policy prioritization of U.S. counternarcotics efforts in Afghanistan in light of diminishing resources and an uncertain political and security environment in 2015 and beyond. According to the U.S. Counternarcotics Strategy for Afghanistan, released in late 2012, the U.S. government envisions a counternarcotics policy future that results in "two simultaneous and parallel transfers of responsibility." Not only does it envision the transfer of security responsibility to Afghan forces, but also the transfer of counternarcotics programming responsibilities and law enforcement operational activities to the Afghan government. Assuming a reduced U.S. security presence and limited civilian mobility throughout the country, the U.S. government is also increasingly emphasizing a regional approach to combating Afghan drugs. Although some counternarcotics efforts, including eradication and alternative development programming, are already implemented by the government of Afghanistan or by local contractors, others may require a two- to five-year time horizon, or potentially longer, before a complete transition would be feasible, according to Administration officials. Some counternarcotics initiatives are only in their infancy, including the Defense Department's plans to establish a new Regional Narcotics Analysis and Illicit Trafficking Task Force (RNAIT-TF). Other activities, particularly those that required a significant presence at the local and provincial levels, are anticipated to be reduced or limited in scope. The 113th Congress continues to monitor drug trafficking trends in Afghanistan and evaluate U.S. policy responses. Both the U.S. Senate and House of Representatives held hearings on the topic in early 2014 and included provisions in FY2014 appropriations (P.L. 113-76) that limit the scope of and resources devoted to future counternarcotics efforts in Afghanistan. The Special Inspector General for Afghanistan Reconstruction (SIGAR) has also identified narcotics as a "critical issue" for policy makers. This report describes key U.S. counternarcotics programs in Afghanistan in the context of the 2014 transition and analyzes policy issues related to these programs for Congress to consider as policy makers examine the drug problem in Afghanistan. The report's Appendix contains historical figures and tables on trends in Afghan drug cultivation, production, and trafficking. |
On June 11, 2009, in response to the global spread of a new strain of H1N1 influenza ("flu"), the World Health Organization (WHO) declared the outbreak to be a flu pandemic, the first since 1968. Officials believe the outbreak began in Mexico in March, or perhaps earlier. The novel "H1N1 swine flu" virus was first identified in California in late April. Since then, cases have been reported around the world. The H1N1 pandemic virus is a reassortment of several existing strains of influenza A, subtype H1N1 virus, including strains typically found in pigs, birds, and humans. Since the H1N1 pandemic virus emerged in the spring, the U.S. Centers for Disease Control and Prevention (CDC) has continued the operation of U.S. seasonal (routine) flu surveillance systems, which are normally suspended during the summer. These systems track trends in rates of illness and hospitalization but are imprecise in their accounting for the total numbers of deaths and hospitalizations due to the pandemic. CDC has published an estimate of these counts, stating that between April and October 17, there were between 14 million and 34 million cases of H1N1 infection, between 63,000 and 153,000 H1N1-related hospitalizations, and between 2,500 and 6,000 H1N1-related deaths in the United States. (See " CDC: Disease Surveillance, and Estimates of Illnesses and Deaths .") The CDC reports that the symptoms and transmission of the novel H1N1 flu from person to person are generally similar to seasonal flu. Laboratory testing of the new strain indicates that the antiviral drugs oseltamivir (Tamiflu) and zanamivir (Relenza) are generally effective in treating illnesses caused by the pandemic strain. In contrast to seasonal flu, the pandemic strain appears to cause serious illness more often among children, and less often among the elderly. However, like seasonal flu, pregnant women and individuals with serious chronic diseases appear to be at greater risk of serious illness from the pandemic strain. In response to the outbreak in April, Janet Napolitano, Secretary of the Department of Homeland Security (DHS), assumed the role of Principal Federal Official, coordinating federal response efforts. Charles E. Johnson, then the Acting Secretary of Health and Human Services (HHS), declared a public health emergency, which remains in effect. Among other things, this has allowed the Food and Drug Administration (FDA) to issue Emergency Use Authorizations (EUAs), permitting certain unapproved uses of antiviral drugs (such as in very young children) and some types of protective facemasks, the use of unapproved diagnostic tests for the new flu strain, and the use of the unapproved antiviral drug peramivir. HHS has established a government-wide informational website ( www.flu.gov ) with information for planners, health care providers, and the public. On October 24, President Obama declared the pandemic to be a national emergency, which allowed waivers of some requirements under Medicare and Medicaid law to help health care facilities manage increased numbers of patients. To date, there has not been a presidential declaration regarding the pandemic under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford Act). The applicability of this Act to infectious disease incidents is unclear. (See " Key Federal Government Authorities and Actions " and Figure 1 , "Selected Federal Emergency Management Authorities Applicable to the H1N1 Influenza Pandemic.") Many U.S. communities closed schools when students were found to be infected with the new flu strain. School closure decisions, made by local officials, were based on initial CDC guidance, which was revised as it became clear that the virus was in wide circulation, and that the illnesses it caused were generally mild. CDC now recommends against routine school closures when small numbers of students are infected, arguing that such closures may do little to reduce the spread of the virus, while placing a considerable burden on the affected community. (See " Pandemic Preparedness and Response in Schools .") The U.S. response to the pandemic triggered a slate of plans that were developed, beginning around 2004, to address concerns about the global spread of another novel flu strain, the H5N1 avian flu. (See box below for definitions.) In FY2006 supplemental appropriations, Congress provided $6.1 billion for pandemic planning across several departments and agencies. These earlier efforts, and others aimed at preparedness for bioterrorism and emerging infections in general, have generally streamlined the response to the H1N1 pandemic. To address the H1N1 outbreak, the Obama Administration requested $2 billion in FY2009 emergency supplemental appropriations, and transfer authority for an additional amount of almost $7 billion from existing HHS accounts. On June 26, the President signed P.L. 111-32 , which provided $1.9 billion in FY2009 supplemental appropriations immediately, and an additional $5.8 billion contingent upon a presidential request documenting the need for additional funds. The President has twice requested portions of the contingent funding. (See " Appropriations and Funding .") A voluntary national pandemic vaccination campaign is underway. In June, HHS Secretary Kathleen Sebelius issued a declaration waiving liability and enabling a compensation program in the event that injuries result from use of pandemic vaccine. CDC has developed recommendations for groups of individuals who should be given priority for vaccine when it is available in limited amounts. Costs associated with the vaccination program are being funded through both public and private sources. Vaccine is being provided to states as it becomes available, according to states' populations. Vaccine delivery is carried out by a CDC contractor. Decisions regarding vaccine distribution to health care providers, clinics, schools, and other vaccination sites are the responsibility of state and local governments. There have been a number of problems associated with shortfalls of actual (versus predicted) vaccine availability, and charges that vaccine would not be available for most of the individuals in designated priority groups until after the peak of pandemic virus transmission had passed. (See " Vaccines and Pandemic Influenza .") This report provides information about selected federal emergency management authorities and actions taken by DHS and HHS, and actions taken by state and local authorities, in response to the pandemic. It then lists congressional hearings held to date; provides information about appropriations and funding for pandemic flu preparedness and response activities; summarizes U.S. government pandemic flu planning documents; and lists sources for additional information about the pandemic. An Appendix describes the WHO process to determine the phase of a threatened or emerging flu pandemic, and touches on several related issues. All dates in this report refer to 2009 unless otherwise specified. This report will be continually updated to reflect unfolding events. Under current law, the Secretary of Homeland Security leads all federal incident response activities, while the Secretary of HHS leads all federal public health and medical incident response activities under the overall leadership of the Secretary of Homeland Security. The Government Accountability Office (GAO) has noted, in the context of pandemic flu planning, that "these federal leadership roles involve shared responsibilities between [HHS] and [DHS], and it is not clear how these would work in practice." GAO recommended that HHS and DHS conduct training and exercises to ensure that federal leadership roles are clearly defined and understood. As recently as July 2009, GAO testified that although some recommended exercises had been undertaken, it was unclear whether they rigorously tested federal leadership roles in a pandemic. GAO also recommended, among other things, that federal pandemic plans published in 2006 be updated. In July, DHS Deputy Secretary Jane Holl Lute testified that an implementation plan for response to the current pandemic was being finalized under the leadership of the National Security Council. In August, the President's Council of Advisors on Science and Technology (PCAST) released a report assessing preparations for a possible resurgence of H1N1 flu and recommending additional actions. PCAST also noted the potential ambiguity in the leadership roles of DHS and HHS, and recommended that the Homeland Security Advisor be given primary responsibility for decision making during the pandemic response, saying: The Working Group has some concerns, based on conversations with representatives of the various agencies involved, that decision-making authorities and processes may not be completely clear in all cases. Primary Federal responsibilities for response to an epidemic are lodged in two departments ([HHS] and DHS), with significant involvement of others (Education, Defense, State, Agriculture, Labor), and coordination by White House staff. While the National Strategy for Pandemic Influenza Implementation Plan provides a comprehensive list of assignments for a multitude of offices, agencies, and departments involved in the Federal planning process, the large number of tasks and responsible units tends to obscure the primary seat of responsibility.... The Working Group believes it would be valuable to clarify these matters before events accelerate in September and assign to the Homeland Security Advisor the responsibility for ensuring that all of the important decisions are made in a timely fashion and with appropriate consultation with the President. On October 23, President Obama declared an emergency, pursuant to the National Emergencies Act, with respect to the H1N1 pandemic. Specifically, the President proclaimed that because "the rapid increase in illness across the nation may overburden health care resources and ... the temporary waiver of certain standard Federal requirements may be warranted in order to enable U.S. health care facilities to implement emergency operations plans, the 2009 H1N1 influenza pandemic in the United States constitutes a national emergency." The National Emergencies Act provides the President with broad authority to waive statutory requirements, or to invoke other authorities, limited to those he specifies in an emergency declaration. In this case, the declaration was limited to a set of requirements under the Social Security Act, enumerated in Section 1135 of that Act, that may be waived if there are in effect concurrent ly a declaration of public health emergency and a presidential declaration under either the National Emergencies Act or the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford Act). The National Emergencies Act, the "Section 1135" waiver authority, and other federal emergency management authorities that have been invoked or could be invoked for the response to the flu pandemic are depicted in Figure 1 . Because a public health emergency declaration was already in effect, the declaration under the National Emergencies Act provided the authority for the Secretary of HHS to waive the Social Security Act requirements in order to make it easier for health care facilities to manage surges in patient volume during the pandemic. The Stafford Act has not been invoked for the response to the H1N1 pandemic. Its possible applicability to this incident is discussed in a subsequent section of this report, " Applicability of the Stafford Act ." Also, the "Section 1135" waivers are discussed in more detail in a subsequent section, " Waivers or Modifications Under Section 1135 of the Social Security Act ." On April 27, Janet Napolitano, Secretary of the Department of Homeland Security (DHS), stated in a press briefing that she was serving as the coordinator of the federal response to the flu outbreak, having assumed the role of Principal Federal Official (PFO). According to the National Response Framework (NRF), which guides a coordinated federal response to disasters and emergencies in general, the Secretary of Homeland Security leads federal incident response. As of November 16, the Stafford Act has not been invoked for the response to the H1N1 pandemic. The Act authorizes federal assistance to public and private not-for-profit entities affected by catastrophes, upon a presidential declaration. Two levels of declaration may be made, based on the scope and severity of an incident: a declaration of emergency , which provides a lower level of assistance, and a declaration of major disaster , which provides a higher level. The Stafford Act is administered by the Federal Emergency Management Agency (FEMA), which can draw from a Disaster Relief Fund to provide assistance for activities that are eligible under the Act. Major disaster declarations under the Stafford Act have historically involved common meteorological or geological disasters, wildfires, and terrorist acts such as bombings. The applicability of major disaster assistance to infectious disease threats—whether natural (e.g., a flu pandemic) or intentional (bioterrorism)—has been a matter of debate. Historically, major disaster assistance has been tailored to address disaster consequences such as the destruction of infrastructure or the displacement of victims, neither of which is a likely consequence of infectious disease outbreaks. A legal analysis by CRS concluded that emergency assistance under the Stafford Act could be provided by the President in the event of a flu pandemic, but also noted that whether major disaster assistance would be authorized is not clear. There is no precedent for a major disaster declaration in response to an infectious disease threat. Furthermore, the legislative history of the Stafford Act suggests that this issue was not addressed by Congress when it drafted the current definition of a major disaster, and neither inclusion nor exclusion of flu pandemics from major disaster assistance is required as a matter of statutory construction. In the National Strategy for Pandemic Influenza: Implementation Plan , the George W. Bush Administration assumed that the President's authority to declare a major disaster pursuant to the Stafford Act could be applied to a flu pandemic. In 2007, FEMA issued a Disaster Assistance Policy regarding Stafford Act assistance that may be provided during a flu pandemic, which includes costs associated with emergency medical care when provided by an eligible entity (generally, a public or non-profit private entity). In July, DHS Secretary Janet Napolitano suggested that she did not plan to invoke the Stafford Act for the pandemic response. However, DHS Deputy Secretary Jane Holl Lute has testified that the Stafford Act may be invoked for the pandemic response under certain circumstances, and that DHS has planned accordingly. In information provided by HHS regarding the effects of the presidential declaration of national emergency on October 23, it is suggested that state governors may request that the President make a declaration under the Stafford Act in order to provide assistance if state and local resources become insufficient for the pandemic response. A FEMA fact sheet was referenced in order to assist states in assessing impacts and evaluating the need for federal assistance under the Stafford Act. The Stafford Act and other federal emergency management authorities that have been invoked or could be invoked for the response to the H1N1 flu pandemic are depicted in Figure 1 . When the H1N1 flu outbreak began in the United States, Customs and Border Protection (CBP), in DHS, reported monitoring incoming travelers at ports of entry (typically a visual inspection for possible symptoms), providing information about disease control measures, and referring symptomatic persons to a CDC quarantine station or a local public health official for evaluation. According to DHS, "There are no border restrictions in effect. U.S. Customs and Border Protection continues to monitor the health status of incoming visitors at our land, sea and air ports watching out for illness as part of their standard operating procedure." Administration officials resisted calls for more aggressive measures such as closing the U.S.-Mexico border. WHO and CDC officials commented that scientific evidence does not support closure of a border to travelers as an effective means of controlling the spread of influenza. Also, as a matter of law, U.S. citizens cannot be barred from entering the United States, so any border closure could only exclude aliens. Finally, any such measures would likely be resource-intensive, involving considerable disruption of trade and other economic interests. On April 26, Charles E. Johnson, then the Acting HHS Secretary, declared a public health emergency pursuant to Section 319 of the Public Health Service Act (PHSA). This enabled FDA to implement an authority in the Federal Food, Drug, and Cosmetic Act (FFDCA) allowing for the emergency use of unapproved medical treatments and tests, under specified conditions, if needed during an incident. (See the subsequent section " FDA: Emergency Use Authorizations .") In addition, while a public health emergency declaration is in effect, the HHS Secretary (or Acting Secretary) is authorized to draw funds for response to the situation from a Public Health Emergency Fund. However, this fund has not had a balance since the 1990s, and hence the declaration did not provide access to this (or any other) emergency funding mechanism. (For more information, see the " Public Health Emergency Funding Mechanisms " section of this report.) The public health emergency determination, which would have expired after 90 days, was renewed by HHS Secretary Kathleen Sebelius on July 24 and again on October 1. The public health emergency authority and other federal emergency management authorities that have been invoked or could be invoked for the response to the H1N1 flu pandemic are depicted in Figure 1 . When there are in effect concurrently a declaration of public health emergency and a presidential declaration under either the National Emergencies Act or the Stafford Act, the Secretary of HHS may waive or modify a number of administrative requirements of the Social Security Act and certain health information privacy provisions (as enumerated in Section 1135 of that Act) to streamline the delivery of health care services by facilities facing surges in patient volume. These "1135 waivers" principally involve requirements for reimbursement through the Medicare and Medicaid programs, requirements that most health care facilities in the United States choose to meet. As noted earlier, on October 23, President Obama declared a national emergency pursuant to the National Emergencies Act. (See the " Declaration of a National Emergency " section of this report.) Specifically, the President proclaimed that because "the rapid increase in illness across the nation may overburden health care resources and ... the temporary waiver of certain standard Federal requirements may be warranted in order to enable U.S. health care facilities to implement emergency operations plans, the 2009 H1N1 influenza pandemic in the United States constitutes a national emergency." The President further authorized the Secretary of HHS to "exercise the authority under section 1135 of the Social Security Act to temporarily waive or modify certain requirements of the Medicare, Medicaid, and State Children's Health Insurance programs and of the Health Insurance Portability and Accountability Act [HIPAA] Privacy Rule throughout the duration of the public health emergency declared in response to the 2009 H1N1 influenza pandemic." As noted earlier, a declaration of public health emergency, pursuant to Section 319 of the PHSA, was already in effect. Section 1135 of the Social Security Act was enacted in the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 ( P.L. 107-188 ). Under this provision, the Secretary may, among other things, waive sanctions under the Emergency Medical Treatment and Active Labor Act (EMTALA) for certain transfers or redirections of patients away from hospital emergency rooms, allowing hospitals to perform triage and direct patients with flu symptoms to alternate facilities set up for that purpose. The Secretary may also waive sanctions and penalties for violations of the HIPAA Privacy Rule in order to facilitate medical recordkeeping when such alternate facilities are used. On October 27, the Secretary of HHS implemented the 1135 waivers, which are administered by the HHS Centers for Medicare and Medicaid Services (CMS). Waivers under Section 1135 may be applied by the Secretary to any geographic emergency area subject to the concurrent declarations. Waivers have been implemented several times in recent years, beginning with the response to Hurricane Katrina in 2005, pursuant to concurrent public health emergency and Stafford Act declarations. The H1N1 pandemic is the first instance in which the National Emergencies Act, rather than the Stafford Act, was used to enable the 1135 waivers. The "Section 1135" waiver authority and other federal emergency management authorities that have been invoked or could be invoked for the response to the H1N1 flu pandemic are depicted in Figure 1 . If an emerging defense, national security, or public health threat is identified for which no licensed or approved medical product exists, the FFDCA authorizes the FDA Commissioner, under certain conditions, to issue an Emergency Use Authorization (EUA) so that unapproved but potentially helpful countermeasures can be used to protect the public health. Pursuant to authority provided by the public health emergency determination under Section 319 of the PHSA, FDA has issued EUAs to allow emergency use of (1) the antiviral drugs oseltamivir (Tamiflu), zanamivir (Relenza), and peramivir for the treatment or prophylaxis of influenza; (2) disposable respirators for use by the general public; and (3) unapproved diagnostic tests for the new flu strain. Although Tamiflu and Relenza are already approved for use in the United States, the EUAs support federal recommendations to use them in ways not explicitly approved on the product label, such as the use of a product in young children, or beyond a certain duration of a patient's symptoms. Peramivir is an unapproved antiviral drug that can be given intravenously to seriously ill patients (such as patients on ventilators) who are unable to take the oral Tamiflu or inhaled Relenza preparations. The EUA authority could have been invoked for a pandemic flu vaccine if one had been developed using approaches that are not used in currently licensed products, such as the addition to the vaccine of additives called adjuvants to enhance the immune response. At this time, however, the U.S. government has not purchased H1N1 pandemic vaccines containing adjuvants. All of the government-purchased vaccines have been approved through the routine licensing process used for seasonal flu vaccines. (See the " Pandemic Vaccine Development, Procurement, Production, and Licensing " section of this report.) The Emergency Use Authorization and other federal emergency management authorities that have been invoked or could be invoked for the response to the H1N1 flu pandemic are depicted in Figure 1 . Because illnesses with the novel H1N1 flu have generally been mild, health officials note that the disease may be substantially underreported. Also, health officials in many U.S. states and cities have stopped running confirmatory tests on suspected cases of H1N1 flu, feeling that better use of epidemiology and laboratory resources can be made by monitoring disease spread to new areas, rather than repeatedly confirming its presence in an affected area. To get a clearer picture of the spread of H1N1 influenza in the United States, CDC has continued using its multi-layered surveillance system for seasonal flu (which is normally suspended each year in the spring), to which it has added an additional surveillance component to better track the pandemic. (See box below.) On August 30, CDC began accepting reports from states of all influenza- and pneumonia-associated hospitalizations and deaths for the 2009-2010 season. This component tracks both laboratory-confirmed cases of influenza and "syndromic" reports (i.e., cases coded as having pneumonia or influenza whether or not they were laboratory-confirmed as having influenza). Reporting only laboratory-confirmed cases underestimates the burden of illness due to influenza. (Even when testing is done, the test methods have a significant false-negative rate, meaning that the test is negative even though the patient is infected.) In contrast, syndromic reporting captures some cases of pneumonia that are due to causes other than influenza. As CDC notes, although each measure is imperfect, tracking each one nonetheless provides useful information about trends in the spread of the pandemic, and the burdens experienced by the health care system in responding to it. According to CDC, "Routine seasonal surveillance does not count individual flu cases, hospitalizations or deaths (except for pediatric influenza deaths) but instead monitors activity levels and trends and virus characteristics through a nationwide surveillance system." Except for pediatric deaths, the surveillance mechanisms currently available do not provide health officials with an accurate count of deaths attributable to the pandemic. Instead, officials derive estimates from a number of available sources of information, and these estimates are generally considered to reflect mortality more accurately than do "case counts." On November 12, CDC published a comprehensive estimate of the burden of illness caused by the H1N1 pandemic in the United States, stating that between April, when the novel flu strain was first identified, and October 17, there were between 14 million and 34 million cases of H1N1 infection; between 63,000 and 153,000 H1N1-related hospitalizations; and between 2,500 and 6,000 H1N1-related deaths in the United States. CDC says it plans to update these estimates every three to four weeks. CDC's surveillance systems showed that during the week ending November 7, 2009, all of the typed flu viruses reported nationwide were the H1N1 pandemic strain. Thirty-five influenza-associated pediatric deaths were reported, the highest weekly total since the pandemic began. Almost all of the flu viruses tested were sensitive to the antiviral drug Tamiflu. Forty-six states reported widespread influenza activity. Indicators in some regions of the country showed evidence of increasing transmission of the virus, while indicators in some other regions showed declines from previous weeks. In September, the FDA licensed four vaccines against the H1N1 pandemic flu strain. (A fifth vaccine was licensed in November.) As vaccine became available in early October, federal, state, and local health officials began a voluntary nationwide vaccination campaign, which some have said is the most extensive such effort ever undertaken in the United States. This section discusses the production of the H1N1 pandemic vaccines, various activities involved in conducting the pandemic vaccination program, and associated issues. Vaccination is considered the best preventive measure against influenza. But, because of continuous changes in the genes of flu viruses, vaccines must be "matched" to strains in circulation to provoke good immunity, and new vaccines must be developed for each year's flu season. In the United States, all currently licensed seasonal flu vaccines are produced using a time-consuming process involving specially raised, fertilized hen's eggs. First, the virus is adapted for mass production and suitability for use in a vaccine. (The adapted virus is called a "seed" virus.) Next, the seed virus is grown in the eggs in large amounts. Next, small amounts of finished vaccine are produced for use in clinical trials. Finally, if trials demonstrate that the vaccine is safe and effective, then finished vaccine is mass produced. Production capacity is finite, so vaccine becomes available in batches. To develop vaccine for a typical Northern Hemisphere flu season, three flu strains are selected in January or February of each year (based on strains circulating in the Southern Hemisphere). Vaccine is produced and becomes available over the next six to nine months, typically from September through December of each year, before the peak of each flu season. Adapting and growing the virus can take variable amounts of time, and different flu strains "behave" differently during this process. In the best case, all of the steps described above take at least four months. More typically, at least six months is required. Because flu vaccines cannot be produced until the strains they would protect against are in circulation, it was essential, when the H1N1 pandemic was first recognized in late April, to begin development of a vaccine immediately. Although the new flu strain caused illnesses and deaths across the United States from the time it first emerged, it would be months before any vaccine made using current production methods would be available to protect against it. Recent U.S. pandemic planning efforts have focused on (1) expanding domestic capacity to mass-produce flu vaccine in the near term; (2) developing approaches to speed up and "stretch" existing production capacity, such as through the use of adjuvants, vaccine additives that boost the immune response so that a lower virus dose is effective; and (3) developing better approaches for flu vaccine production in the future. Although recent progress has been made to improve domestic production capacity, the vaccines developed for use in the United States against the H1N1 pandemic strain use the egg-based process, with its significant lag time. This section discusses influenza vaccine development, procurement, production, and licensing for the H1N1 pandemic. Issues related to improving future influenza vaccine production capacity are discussed in a later section of this report, " Ways to Improve Influenza Vaccine Production in the Future ." Federal officials have said that there are three key decision points in developing and using pandemic flu vaccines: (1) to develop adapted "seed" viruses and a prototype vaccine(s), and to conduct clinical trials; (2) to purchase and mass-produce large amounts of a promising vaccine; and (3) to administer the vaccine widely, that is, to conduct a mass-vaccination campaign. These decision points are presented in a timeline of the U.S. pandemic flu vaccine strategy in Figure 2 . The figure also shows that a second wave of heightened transmission of H1N1 flu in the United States in the fall could precede the peak of seasonal flu activity and the initial availability of pandemic vaccine. Finally, the figure shows the overlap between the production of seasonal flu vaccine for the Northern Hemisphere and production of H1N1 pandemic vaccine. Over the spring and summer, HHS issued purchase orders for H1N1 pandemic vaccine, based on existing contracts with producers of seasonal flu vaccines that are currently licensed in the United States. Development and procurement efforts are led by the HHS Biomedical Advanced Research and Development Authority (BARDA), in coordination with the National Institutes of Health (NIH), FDA, CDC, and other HHS agencies. The NIH National Institute of Allergy and Infectious Diseases (NIAID) is responsible for coordinating clinical trials to determine safety, effectiveness, and optimum dosing for the H1N1 pandemic vaccine. Trials conducted in late summer on healthy adults yielded favorable results. First, the same dose of virus that is used in seasonal flu vaccines was protective when used for the pandemic vaccine. Second, one pandemic vaccine provided protection in adults; a "booster" would not be needed. Third, no serious safety concerns were noted. As a result, large numbers of pandemic vaccines could be produced with existing capacity. Also, adjuvants would not be used, which meant that pandemic vaccines could be evaluated for licensing through the usual process for seasonal flu vaccines; namely, as amendments to the existing product licenses. Emergency Use Authorizations would not be necessary. (See the prior section, " FDA: Emergency Use Authorizations ," for more information about this authority.) H1N1 vaccine clinical trials on children, pregnant women, and individuals with HIV are also underway or have been completed. Finally, NIAID has begun clinical trials on H1N1 vaccines containing adjuvant. Officials have said that although they do not think that adjuvanted vaccine will be needed for the domestic pandemic vaccination program, it could be useful to have the option to use adjuvanted vaccine if the virus mutates to a different form (potentially rendering the non-adjuvanted vaccines less effective). They have also said that research on adjuvants contributes to the knowledge base to improve influenza vaccine production in general. On September 16, FDA announced that it had approved H1N1 pandemic flu vaccines made by four companies: Sanofi Pasteur Inc., CSL Limited, Novartis Vaccines and Diagnostics Limited, and MedImmune LLC. On November 10, FDA approved a fifth pandemic vaccine made by ID Biomedical Corporation of Quebec, a subsidiary of GlaxoSmithKline. The Medimmune product is an intranasal vaccine. The other four products are injectable vaccines. The approved uses of each product vary somewhat. In general, for the injectable vaccines, healthy adults should receive one dose, and children aged six months to nine years of age should receive two, in order to raise protective immunity. None of the products is approved for use in infants under six months of age. The approved uses for the intranasal vaccine are more narrow than for the injectable products. In general, the intranasal vaccine is approved for use in healthy individuals aged 2 to 49 years. None of the products contains an adjuvant. The injectable products are available in both multi-dose vials containing a preservative, and in single-dose syringes without a preservative. Congress provided up to $7.65 billion in FY2009 supplemental appropriations to HHS for the pandemic response, part of which has been used to support the purchase of vaccine and associated costs of planning and carrying out a nationwide vaccination campaign. (See the subsequent section " Emergency Supplemental Appropriations for FY2009 .") There are two types of costs associated with furnishing vaccinations to individuals: the costs of the vaccine and associated supplies, and the costs for administration of the vaccine, which typically include the value of a provider's time, costs for refrigerated storage and recordkeeping, and related costs. According to CDC, all pandemic flu vaccines and necessary supplies—syringes, needles, sharps containers, and alcohol swabs—have been purchased by the federal government and are being made available to vaccinators across the country at no cost. In no case may a provider or insurer charge individuals for these costs. Plans for payment of administration costs vary. Medicare, the Department of Veterans Affairs, and many private insurers have said they will cover the costs of administration for seasonal flu vaccine and one or more pandemic vaccines. Private providers (including physicians and chain pharmacies) may charge appropriate fees for the costs of administration if public or private insurance is not available, or they may waive these fees. States are expected to use a portion of the federal funds they received for pandemic planning to support clinics at which individuals who are uninsured can be vaccinated without charge. Also, Federally Qualified Health Centers are expected to provide services, including vaccination for pandemic flu, regardless of ability to pay. Federal officials are working with state and local health officials to implement a "blended" public- and private-sector distribution approach to provide pandemic vaccines to any individuals who want to be vaccinated. During each flu season, much of the vaccine is purchased and delivered through private-sector distributors and providers. For the response to unanticipated threats such as bioterrorism, CDC maintains the Strategic National Stockpile (SNS) of drugs and medical supplies, and provides training and technical assistance to state and local health officials, who are responsible for distribution of stockpile materiel within their jurisdictions. Under the Vaccines for Children program, CDC distributes recommended pediatric vaccines (financed by the Medicaid program) to private providers for administration to eligible low-income children. The blended approach being used for the pandemic vaccination campaign uses portions of each of these mechanisms to make vaccine available to a variety of public- and private-sector providers and clinics. To distribute vaccine as it becomes available, CDC has contracted with McKesson Corporation, the agency's contractor for distribution under the Vaccines for Children program. In early October, limited amounts of the approved intranasal H1N1 pandemic vaccine became available and were provided to states according to their populations. Available amounts were less than expected, posing problems for many states and localities, which had planned to conduct or coordinate vaccination clinics based on projected vaccine availability. In August, CDC reported expecting "... somewhere between 45 million and 52 million doses of vaccine to be available by mid-October. This will be followed by weekly availability of vaccine up to about 195 million doses by the end of the year." In mid-October, CDC reported that only 11.4 million doses of the injectable H1N1 vaccine were available. CDC said that manufacturers were experiencing several problems that affected production volume, including slower than expected growth of the virus in eggs. Despite high demand for the vaccine, some states appear to have had difficulty getting available vaccine into distribution in their jurisdictions. The distribution plan calls on states to "order" vaccine from their allotments when they are ready to direct how it is to be distributed within the state. HHS publishes daily updates of the total (national) amounts of vaccine allocated (i.e., available to states), ordered by states, and actually shipped , as well as daily updates of the number of vaccines shipped to each state. Because vaccine is allocated to states according to population, calculating the number of vaccines shipped to each state according to its population should yield similar ratios if the states are similar in their efficiency at ordering and directing the distribution of vaccine within their jurisdictions. However, a news organization has published such an analysis and found considerable variation among the states. Despite some statements to the contrary, the civilian vaccination program for the H1N1 pandemic is voluntary. There have been no plans at the federal, state, or local level to require that members of the general public be vaccinated. However, requirements have been established by the Department of Defense, and by some states and private health systems, for the vaccination of health care workers. Public health officials recommend that health care workers be vaccinated against influenza (including pandemic flu) not only for their own protection, but also in order to protect patients from infection by their providers, and to prevent levels of absenteeism among providers that could threaten the quality of patient care. CDC advises that anyone who wishes to be vaccinated for seasonal and/or pandemic influenza should seek the vaccine(s) when adequate supplies are available. Certain groups are especially advised to be vaccinated due to their risk of more serious complications from influenza, the risk that they would transmit influenza to others, or both. These groups, identified by the Advisory Committee on Immunization Practices (ACIP, which advises the CDC Director), are pregnant women; persons who live with or provide care for infants aged less than 6 months (e.g., parents, siblings, and daycare providers), because these infants cannot receive the vaccine; health-care and emergency medical services personnel; persons aged 6 months-24 years; and persons aged 25-64 years who have medical conditions that put them at higher risk for influenza-related complications. ACIP estimated that the five groups above comprise about 159 million persons in the United States. Because the H1N1 pandemic vaccine is becoming available in phases, initial demand has exceeded supply. Anticipating this, ACIP also identified a subset of these groups that should be given priority when vaccine supplies are limited. These priority groups are pregnant women (as above); persons who live with or provide care for infants aged less than 6 months (as above); health-care and emergency medical services personnel who have direct contact with patients or infectious material (a subset of the recommended group above); children aged 6 months-4 years (only the youngest children); and children and adolescents aged 5-18 years who have medical conditions that put them at higher risk for influenza-related complications (only children with medical conditions, versus all persons under age 65 with medical conditions). ACIP estimated that this subset of priority groups comprises about 42 million persons in the United States. Available vaccine may be either the injectable or intranasal formulation. In general, injectable H1N1 vaccine may be given to anyone in one of the priority groups who does not have a specific contraindication (such as an allergy to eggs). However, the intranasal vaccine is not licensed for use in some individuals within the pandemic priority groups. Prioritized individuals who should not receive the intranasal vaccine include pregnant women, children younger than two years of age, individuals of any age who have chronic illnesses, and health care workers who care for severely immunocompromised patients, such as those who have recently undergone bone marrow transplantation. Although federal authorities provide guidance on vaccine allocation, final allocation decisions, and any enforcement of them, is made at the state and local levels. Although clinical trials were conducted on the approved H1N1 pandemic vaccines and did not show any serious adverse events (i.e., side effects), rare adverse events would not necessarily manifest until a product was widely used. Health officials plan to monitor for any possible adverse events among persons who receive the H1N1 pandemic vaccine, using, among other approaches, the existing Vaccine Adverse Event Reporting System (VAERS), a national vaccine safety surveillance program co-sponsored by CDC and FDA. VAERS accepts reports from patients, providers, public health officials, and others through a website and toll-free number. In 1976, a U.S. vaccination campaign was carried out for a pandemic flu threat that did not materialize (also called "Swine Flu"). However, evidence suggested that among those vaccinated, there may have been an increased risk of a serious and sometimes fatal neurologic side effect, a form of paralysis called Guillain-Barre Syndrome (GBS). The vaccination campaign was called off, and the credibility of public health officials was significantly compromised by the incident. On June 25, HHS Secretary Kathleen Sebelius issued a declaration under the Public Readiness and Emergency Preparedness Act (PREP Act, Division C of P.L. 109-148 ) regarding the H1N1 pandemic vaccine. The PREP Act waives liability and establishes an injury compensation program for the use of certain "covered countermeasures." The June 25 declaration eliminates liability (with the exception of willful misconduct) for the United States, and for manufacturers, distributors, program planners, persons who prescribe, and employees of any of the above, who administer or dispense an H1N1 pandemic vaccine that qualifies as a "covered countermeasure" under conditions specified by the Secretary in the declaration. Under the law, claims under state law are preempted. As noted in Figure 1 , authorities under the PREP Act are independent from other emergency authorities that have been invoked for the response to the H1N1 pandemic. In addition to the limitation of liability, the PREP Act declaration also establishes a federal program to compensate individuals who are vaccinated for any serious injuries or death that occurs as a result of the H1N1 vaccine, and authority for a fund to pay claims. The compensation program is administered by the HHS Health Resources and Services Administration (HRSA), using the Smallpox Vaccine Injury Compensation Program as an administrative model. The fund, called the Covered Countermeasure Process Fund (CCPF), did not have a balance of funds when the H1N1 pandemic began. However, in providing emergency supplemental funding for pandemic preparedness ( P.L. 111-32 ), Congress authorized the use of an unspecified amount of the appropriation for the CCPF. On July 16, President Obama requested additional contingent funding under the new law, to be used for several activities, including funding for the CCPF. In its 2005 strategy for influenza pandemic preparedness, the George W. Bush Administration set a goal to "establish domestic production capacity to ensure ... [s]ufficient vaccine to vaccinate the entire U.S. population within six months of the emergence of a virus with pandemic potential." Because a flu pandemic could emerge at any time, federal officials saw this as a multi-pronged strategy, requiring concurrent investments in the expansion of production capacity using current approaches, and in the development of new approaches. In January 2009, when announcing federal funding for a new private facility to manufacture cell-based influenza vaccine, an HHS official said that the strategic goal above " ... could not be accomplished using the traditional egg-based method of producing flu vaccine." Nonetheless, significant federal investments were made to expand production capacity for egg-based vaccine in the event that a flu pandemic arose in the near term. Although concerns were largely driven at the time by the spread of H5N1 avian flu, it was the surprising emergence of H1N1 pandemic flu that proved to be the test of the federal strategy. Investments to date have had mixed results. The United States has ordered H1N1 pandemic vaccine sufficient to provide 250 million doses, representing substantially greater total capacity than was available only several years ago. Yet the lag time inherent in egg-based vaccine technology is unavoidable, and its effects are stark as the H1N1 pandemic unfolds in a largely unimmunized population. Several observers have suggested that peak nationwide transmission of the virus will have occurred before substantial amounts of vaccine are available. Some have suggested that even though the lag time to first vaccine availability was unavoidable, there could have been more investment or better planning for the use of egg-based vaccine to avoid the shortage that persists more than a month into the vaccination campaign. For example, some assert that the decision to forgo the use of adjuvants in the pandemic vaccine was made when officials were more optimistic about a timely roll-out of the product, and that more vaccine doses would now be available if adjuvant had been used. However, there are no adjuvant-containing seasonal flu vaccines currently licensed in the United States, so the use of this approach for the pandemic would have required Emergency Use Authorization of the vaccine, which could well have delayed its availability. The use of adjuvants and an emergency licensing process could also have contributed to apprehensions among the public about the vaccine's safety. Other observers assert that greater investment in cell-based (rather than egg-based) vaccine technology could potentially have made that approach viable for the response to the H1N1 pandemic, and that the current vaccination program could have been farther along in that case. In the cell-based approach, the influenza virus is grown in one of a number of types of cells, which are generally easier to manage on the industrial scale than is growth in eggs. The European Medicines Agency (EMEA) licensed a cell-based seasonal influenza vaccine, Optaflu, in 2007, and has also licensed a cell-based H1N1 pandemic vaccine, Celvapan. However, an HHS official, among others, has noted that cell-based approaches to the production of influenza vaccine are not likely to substantially shorten the time to first vaccine availability, compared with egg-based production, because the process still requires growing whole influenza virus in the cells. Rather, the advantage of cell-based over egg-based production in the near term is one of scalability, or "throughput" (i.e., once virus is grown, vaccines can be finished in large quantities quickly, making hundreds of millions of doses available within weeks rather than months from the time the first batches become available). With egg-based approaches, the dependence on specially produced fertilized eggs limits this scalability. If cell-based approaches had been available for the response to the H1N1 pandemic, it is possible that more vaccine could have been finished by this point, although it still might not have first become available until several months into the pandemic, as was the case with the egg-based vaccines in use. Alternative approaches under development for the production of flu vaccine involve technologies that do not require the use of whole viruses (therefore eliminating the need to grow them), but rather focus on producing only those portions (subunits) of the virus that are needed to produce immunity, such as a particular protein in the virus coat. For example, using recombinant technology, the genes for the desired virus subunit may be inserted into another microorganism that grows well, such as yeast. The subunit is then replicated by the host microorganism, harvested, purified, and made into a vaccine containing only the subunit, not whole virus. Another recombinant approach places the genes for the desired virus subunit into another virus (called a vector) that introduces the subunit into the body, but does not itself cause disease. More sophisticated approaches to vaccine production involve making DNA-based vaccines consisting solely of the viral genes. The "Holy Grail" for the prevention of influenza is the so-called universal influenza vaccine, one that could be administered in childhood to protect against whatever variations of seasonal or pandemic flu arise throughout one's lifetime. All U.S.-licensed seasonal and pandemic flu vaccines are made using the whole virus, egg-based approach. As noted earlier, cell-based whole virus influenza vaccines have been licensed in Europe. Recombinant vaccines that have been licensed for use in the United States include those against hepatitis B and human papillomavirus. There has not yet been a DNA-based vaccine licensed for use in humans in the United States or Europe. Each of these approaches to vaccine production, including the production of influenza vaccine, is also applied in licensed or investigational products for veterinary uses in animals. The NIH provides federal leadership for basic biomedical research on promising vaccine technologies. A search of the NIH ClinicalTrials.gov database yielded a number of clinical trials—in progress or completed—on influenza vaccine prototypes developed using recombinant techniques. The trials range from Phase I—the earliest stage of investigation involving small numbers of human subjects—to Phase III trials involving large numbers of subjects. In addition, several Phase I trials of DNA-based influenza vaccines were found. In FY2008, NIH reported spending $204 million on influenza research, including a number of projects specifically involving advanced approaches to influenza vaccine production, and research on other aspects of influenza immunology that are applicable to vaccine development. NIH has also sponsored many clinical trials of vaccines against H1N1 pandemic flu, as well as H5N1 avian and other flu strains, for the purposes of licensing and/or stockpiling these vaccines. Federal leadership for advanced development of emergency medical countermeasures, including pandemic products, is provided by the Biomedical Advanced Research and Development Authority (BARDA), in HHS. Federal investments in the advanced development of flu vaccine technology came principally from FY2006 emergency supplemental funds for pandemic preparedness, and were administered by BARDA. (See the subsequent section " Prior Funding for Pandemic Flu Preparedness .") HHS has published several reports, as required by Congress, detailing the use of these funds. Table 1 presents funding amounts for pandemic vaccine development activities, as reported by HHS in January 2009. The focus of this spending has been on expanding egg-based and cell-based vaccine production capacity, as these approaches were clearly viable to make products that could be licensed for use in the United States. Along with contracts to purchase vaccine from companies developing these products, HHS funds have also been used to construct or retrofit domestic vaccine production facilities. As noted earlier, the national strategic goal for pandemic preparedness was the establishment of sufficient domestic flu vaccine production capacity. To this end, HHS funds were provided to Sanofi Pasteur and Medimmune to expand their domestic facilities for egg-based vaccine production. In addition, HHS has awarded a $487 million contract to Novartis Vaccines and Diagnostics, Inc., to build a facility in North Carolina to make cell-based seasonal and pandemic flu vaccine. In April 2009, before the emergence of the H1N1 pandemic flu strain, BARDA announced an upcoming Request for Proposals (RFP) for advanced development of recombinant influenza vaccine products for both seasonal and pandemic use, which would provide federal funding to advance the commercial development of this technology. In its presolicitation notice, HHS said The timeline for the availability of egg- and cell-based inactivated [i.e., whole virus] pandemic influenza vaccines in the U.S. is estimated at 20-23 weeks post-pandemic onset, which may be towards the end of a first pandemic wave. Recombinant influenza vaccines, on the other hand, may benefit from manufacturing efficiencies, may not be dependent on pandemic influenza virus reference strain availability and/or the production and calibration of potency assay reagents needed for inactivated influenza vaccines. As a result, recombinant influenza vaccines may be available in a shorter time frame of 8 to 12 weeks post-pandemic onset. The effect of vaccination combined with influenza antiviral drugs and community mitigation measures may delay the peak incidence of pandemic influenza disease and reduce mortality and morbidity during a severe pandemic. In response to questions about the RFP above, HHS commented that it intends that successful applicants would pursue approaches applicable to both seasonal and pandemic flu vaccine production. There are obvious advantages to using a tried-and-true approach in an emergency (i.e., basing pandemic flu vaccine production on the approach used to make seasonal flu vaccine). Egg-based seasonal flu vaccine is a safe, inexpensive, and widely accepted product. A possible disadvantage of changing to a different approach is that seasonal flu vaccine could become more costly, at least initially. An HHS official, when asked whether use of cell-based and newer production methods could make seasonal flu vaccine more costly, replied that new technologies were likely to be more expensive initially. Although there has been little public debate about this, an increase in the cost of seasonal flu vaccine could have consequences for public health efforts to expand the utilization of this product. Since FY2002, all states have received HHS funds to prepare their public health and health care systems for public health threats and emergencies. Beginning with FY2004, states were required, as a condition of these funds, to develop plans specifically for the response to a flu pandemic. Subsequently, Congress provided $600 million in FY2006 emergency supplemental appropriations for states to continue their pandemic planning efforts. When the H1N1 flu outbreak emerged, Congress provided an additional $350 million in FY2009 emergency supplemental appropriations for state pandemic response. (See the subsequent section " Emergency Supplemental Appropriations for FY2009 .") Based on an analysis of state pandemic flu plans available as of July 2006, CRS found the plans to be more robust in their discussion of core public health activities such as disease surveillance and laboratory activities, and less robust in aspects of multi-sector preparedness, such as leadership designation, incident management, certain aspects of health care surge planning, and continuity planning for essential services such as food distribution. In January 2009, HHS and DHS published Assessment of States' Operating Plans to Combat Pandemic Influenza: Report to Homeland Security Council (state assessment report), the findings of their comprehensive joint assessment of state pandemic planning through 2008. This assessment echoed the findings of CRS, saying that preparedness was most advanced with respect to objectives that are exclusively or primarily the responsibility of state public health agencies, namely infectious disease surveillance and clinical laboratory operations; distribution of antiviral drugs and vaccines; mass vaccination; and public communications. In contrast, the assessment found that states were having difficulty planning for surges in health care and emergency medical services, and were especially having difficulty planning for continuity of non-health services, such as continuity of state agency operations; coordination of military support to civil authorities; law enforcement continuity; and ensuring the safety of the food supply. Thus far, dedicated federal funding to state and local governments for pandemic preparedness has been provided only through HHS grants. Noting the challenges states face in assuring preparedness in non-health sectors, the state assessment report comments, "The [U.S. Government] has provided guidance and technical assistance for many of these activities but generally has not been in a position to award funds to help States develop them in the context of pandemic influenza preparedness." If the pandemic continues to unfold as it has, producing generally mild to moderate illness, the pandemic's effects on non-health sectors such as transportation and public utilities could be minimal. However, despite the high marks for mass vaccination planning received by most states in the state assessment report, considerable public attention has focused on apparent delays by some states in ordering available vaccine from CDC and promptly distributing it. When the H1N1 outbreak first began in the United States, some affected communities closed schools when students were found to be infected. Legal authority to close schools rests with state or local officials and is highly variable among the states. A CDC-requested study found that school closure is legally possible in most jurisdictions during both routine and emergency situations. The study also indicated that state authority for closure may be vested at various levels of government and in different departments, generally the state or local education agencies or state or local departments of health. When the H1N1 pandemic first emerged in the spring, CDC, in consultation with the U.S. Department of Education, issued guidance with respect to school closures (based on earlier guidance from 2007), recommending that "affected communities with laboratory-confirmed cases of influenza A H1N1 consider adopting school dismissal and childcare closure measures, including closing for up to 14 days depending on the extent and severity of illness." School closures are challenging for all parties involved. Among other things, parents must find alternate arrangements for care of their children, educators must adopt alternate means of delivering their services, and children's education may be compromised. On May 5, CDC officials reissued their guidance regarding school closures, recommending against closures based on individual cases of H1N1 flu. It recommended instead that emphasis be placed on keeping sick students and employees home, and that closings be considered if absenteeism was substantial. As with CDC guidance in general, recommendations regarding school closure are intended to be weighed by local officials in light of local circumstances. In addition to uncertainty about the outbreak's initial severity, there may also have been uncertainty among state and local officials about decision-making protocols. In an assessment of state pandemic flu preparedness conducted by HHS and DHS in 2007 through 2008, planning for student dismissal and school closure was found to be a weakness among the states. More than half of them were graded as having either "many major gaps" or "inadequate preparedness" for this planning task. Outbreaks in schools largely subsided over the summer. Transmission of the H1N1 virus re-emerged in a number of elementary and secondary schools and in colleges and universities as students returned for the fall. The American College Health Association (ACHA) began tracking voluntary reports of pandemic flu activity at colleges and universities. For the week ending November 6, ACHA saw sustained high levels of nationwide reporting of influenza-like illnesses. Reporting was on the decline in many states, however. Congressional committees in both chambers have convened hearings to assess the emergence of the new strain of H1N1 influenza. Hearings are listed in Table 2 . The Secretary of HHS does not have a dedicated source of funds to support the response to public health emergencies such as the current flu pandemic. Funds available to HHS from prior-year appropriations for pandemic flu could have supported vaccine development and modest procurements, but would not have been adequate for procurements and related activities sufficient to support a mass-vaccination campaign. GAO has noted that the National Strategy for Pandemic Influenza: Implementation Plan (2006), which lays out 324 action items for federal agencies to prepare for and respond to a flu pandemic, contains no discussion of the possible costs of these actions, or how they would be financed. Upon the determination of a public health emergency pursuant to Section 319 of the Public Health Service Act, the Secretary of HHS may access a no-year Public Health Emergency Fund. Such a determination was made with respect to the H1N1 flu outbreak on April 26. (See the earlier section " Determination of a Public Health Emergency .") The fund has not received a recent appropriation and does not have a balance, however, so the Secretary is not currently able to use this funding mechanism for the pandemic response. There has not been a Stafford Act declaration for the current flu pandemic, so disaster relief funds administered by the Federal Emergency Management Agency (FEMA) are not available for response efforts. Many relevant activities may not be eligible for Stafford funds, even if they were available. (See the earlier section, " Applicability of the Stafford Act .") The Secretary has authority to use a Covered Countermeasure Process Fund to compensate individuals for harm that results from their use of medical countermeasures, as identified in a declaration issued by the HHS Secretary. A declaration was issued for the use of the antiviral drugs Tamiflu and Relenza for a possible pandemic flu virus in October 2008. As noted earlier, a declaration was issued for the use of H1N1 pandemic vaccines in June, 2009. Compensation could be provided for serious physical injuries or deaths resulting from the use of these products in this situation, including for unapproved uses pursuant to an Emergency Use Authorization. (See " FDA: Emergency Use Authorizations .") In FY2009 emergency supplemental funding for pandemic preparedness ( P.L. 111-32 ), Congress authorized the use of an unspecified amount of the appropriation for the Covered Countermeasure Process Fund, and President Obama has sought to use contingent funds provided under the law for this purpose. In June, the Obama Administration requested $2 billion in FY2009 emergency supplemental appropriations for response to the H1N1 threat, and authority to transfer additional amounts, totaling almost $7 billion, from existing HHS accounts. The Supplemental Appropriations Act, FY2009 ( P.L. 111-32 ), signed on June 24, 2009, provided $1.9 billion in supplemental appropriations immediately, and an additional $5.8 billion contingent upon a presidential request documenting the need for additional funds. Amounts provided are as follows: $1.85 billion to the HHS Public Health and Social Services Emergency Fund (PHSSEF), available until expended, including not less than $200 million to CDC for several specified activities, and not less than $350 million for state and local public health response capacity. Of the $1.3 billion to HHS not specifically designated, the Secretary may transfer funds to other HHS accounts and to other federal agencies. Also, these funds may be used for purchases for the Strategic National Stockpile (SNS), for construction or renovation of privately owned vaccine production facilities, and for the Covered Countermeasure Process Fund (CCPF). An additional contingent emergency appropriation of $5.8 billion to the HHS PHSSEF would become available for obligation 15 days after the President provided a detailed written request to Congress to obligate specific amounts for specific purposes, and only if needed to address the emergency. If such requirements were met, funds could generally be made available and transferred as above, including for purchases for the SNS and the CCPF. However, contingent funds could not be used for construction or renovation of privately owned vaccine production facilities. $50 million to the President for the Global Health and Child Survival account to support global efforts to control the spread of the outbreak. The conference report provided that if WHO were to announce that the current outbreak had progressed to a flu pandemic (i.e., Phase 6), and upon the President's determination and notification to Congress, available funds in four accounts from prior appropriations acts for the Department of State, Foreign Operations, and Related Programs—Global Health and Child Survival; Development Assistance; Economic Support Fund; and Millennium Challenge Corporation—may be used for pandemic response activities. President Obama has twice requested portions of the contingent funding, totaling $4.541 billion, leaving a balance of $1.259 billion that the President may request at a later date. On July 16, the President requested $1.825 billion of the contingent appropriation, to be used for procurement of vaccine adjuvant, immunization campaign planning, FDA regulatory activities, and funding for the CCPF. On September 2, the President requested an additional $2.716 billion of the contingent appropriation, to be used for the Departments of Agriculture, Defense, HHS, State, and Veterans Affairs to support the procurement of vaccine product and supplies, antiviral medications, preparations for a vaccination campaign, and agency preparedness activities. In the fall of 2005, in the aftermath of Hurricane Katrina, and as H5N1 avian flu was spreading across several continents, Congress provided $6.1 billion in FY2006 supplemental appropriations for pandemic planning across several federal departments and agencies. Since then, annual funding has been provided to CDC, FDA, and for other activities in HHS to continue work on vaccine development, stockpiling of countermeasures, and assistance to states. In total, from FY2004 through FY2009, HHS has received almost $13.4 billion for pandemic flu preparedness. (See Table 3 .) The U.S. Departments of Agriculture and the Interior have also received annual funding to monitor avian flu in domestic poultry and wild birds, respectively. The U.S. Agency for International Development (USAID) has received funds to assist other countries in managing avian flu transmission to humans, and preparing for a possible pandemic. In addition to amounts it specifically appropriates, Congress is also interested in how agencies budget for influenza within their existing activities. However, defining such amounts is difficult, for two reasons. First, for many years, domestic public health capacity for infectious disease control has moved away from "categorical" funding and programs (i.e., one disease at a time), and toward the development of flexible capacity that can adapt to new, unanticipated threats. These flexible surveillance systems, laboratory networks, communications platforms, and other capabilities can pivot rapidly to address new threats. But because pandemic planning efforts are tightly woven into the fabric of these flexible capabilities, it is not easy to tease out threads that describe the nation's investment solely for pandemic flu preparedness. Attempt to do so requires making judgments about what is "in" and "out" of scope that are somewhat arbitrary. Second, for similar reasons, it can be difficult to tease apart investments made for pandemic flu, versus seasonal flu, versus avian or swine flu, versus investments in drug and vaccine development in general. Because different agencies use different methods and assumptions to account for their influenza spending, these amounts are not necessarily comparable between agencies, and caution is advised in adding such amounts together as if they were comparable. HHS has tracked its pandemic influenza funding for the past several fiscal years, using comparable criteria from year to year. These amounts are presented in the department's annual budget requests, in sections designated for pandemic influenza, and are presented in Table 3 . In the George W. Bush Administration, pandemic flu preparedness efforts were coordinated by the Homeland Security Council. Numerous federal and other documents that are specific to preparedness and response for a flu pandemic have been published. Selected documents are listed below. These plans are intended to address a pandemic caused by any so-designated flu strain, but they were written when there was significant global concern about H5N1 avian flu. To date, that flu strain has behaved quite differently from the H1N1 pandemic strain. In particular, the H5N1 strain has not shown the ability to transmit efficiently from person to person, but human infections that result directly from contact with infected poultry have generally been very severe, and there has been a high fatality rate. Unless otherwise noted, the U.S. pandemic flu plans below can be found on a government-wide pandemic flu website managed by HHS. The National Strategy for Pandemic Influenza, November 2005, published by the Homeland Security Council, outlines general responsibilities of individuals, industry, state and local governments, and the federal government in preparing for and responding to a pandemic. National Strategy for Pandemic Influenza, Implementation Plan, May 2006, published by the Homeland Security Council, assigns more than 300 preparedness and response tasks to departments and agencies across the federal government; includes measures of progress and timelines for implementation; provides initial guidance for state, local, and tribal entities, businesses, schools and universities, communities, and non-governmental organizations on the development of institutional plans; provides initial preparedness guidance for individuals and families. One- and two-year implementation status reports have also been published. The HHS Pandemic Influenza Plan, November 2005, provides guidance to national, state and local policy makers and health departments, outlining key roles and responsibilities during a pandemic and specifying preparedness needs and opportunities. This plan emphasizes specific preparedness efforts in the public health and health care sectors. The HHS Pandemic Influenza Implementation Plan, Part I, November 2006, discusses department-wide activities: disease surveillance; public health interventions; medical response; vaccines, antiviral drugs, diagnostic tests, and personal protective equipment (PPE); communications; and state and local preparedness. Interim Pre-pandemic Planning Guidance: Community Strategy for Pandemic Influenza Mitigation in the United States–Early Targeted Layered use of Non-Pharmaceutical Interventions, February 2007, published by CDC, guidance for "social distancing" strategies to reduce contact between people, with respect to: closing schools; canceling public gatherings; planning for liberal work leave policies; teleworking strategies; voluntary isolation of cases; and voluntary quarantine of household contacts. Department of Defense Implementation Plan for Pandemic Influenza, August 2006, provides policy and guidance for the following priorities: (1) force health protection and readiness; (2) the continuity of essential functions and services; (3) Defense support to civil authorities (i.e., federal, state, and local governments); (4) effective communications; and (5) support to international partners. VA Pandemic Influenza Plan , March 2006, provides policy and instructions for Department of Veterans Affairs (VA) in protecting its staff and the veterans it serves, maintaining operations, cooperating with other organizations, and communicating with stakeholders. Pandemic Influenza Preparedness, Response, and Recovery Guide for Critical Infrastructure and Key Resources , published by DHS, September 2006, provides business planners with guidance to assure continuity during a pandemic for facilities comprising critical infrastructure sectors (e.g., energy and telecommunications) and key resources (e.g., dams and nuclear power plants). State pandemic plans: All states were required to develop and submit specific plans for pandemic flu preparedness, as a requirement of grants provided by HHS. 2009 H1N1 " Swine Flu ": CRS Experts: CRS Report R40845, 2009 H1N1 "Swine Flu": CRS Experts , by [author name scrubbed]. Current CRS Reports on public health and emergency preparedness in general: http://apps.crs.gov/cli/cli.aspx?PRDS_CLI_ITEM_ID=3276&from=3&fromId=13 Current CR S Reports on specific aspects of the pandemic influenza threat : CRS Report R40560, The 2009 Influenza Pandemic: Selected Legal Issues , coordinated by [author name scrubbed] and [author name scrubbed]. CRS Report RS21414, Mandatory Vaccinations: Precedent and Current Laws , by [author name scrubbed]. CRS Report RL34724, Would an Influenza Pandemic Qualify as a Major Disaster Under the Stafford Act? by [author name scrubbed]. CRS Report R40531, FY2009 Spring Supplemental Appropriations for Overseas Contingency Operations , coordinated by [author name scrubbed] and [author name scrubbed]. CRS Report R40575, Potential Farm Sector Effects of 2009 H1N1 "Swine Flu": Questions and Answers , by [author name scrubbed]. CRS Report R40588, The 2009 Influenza Pandemic: U.S. Responses to Global Human Cases , by [author name scrubbed]. CRS Report R40619, The Role of the Department of Defense During A Flu Pandemic , by [author name scrubbed] and [author name scrubbed]. CRS Report RL33609, Quarantine and Isolation: Selected Legal Issues Relating to Employment , by [author name scrubbed] and [author name scrubbed]. CRS Report RS21507, Project BioShield: Purposes and Authorities , by [author name scrubbed]. CRS Report R40570, Immigration Policies and Issues on Health-Related Grounds for Exclusion , by [author name scrubbed] and [author name scrubbed]. CRS Report RL32724, Mexico-U.S. Relations: Issues for Congress , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report RL33381, The Americans with Disabilities Act (ADA): Allocation of Scarce Medical Resources During a Pandemic , by [author name scrubbed]. CRS Report RS22327, Pandemic Flu and Medical Biodefense Countermeasure Liability Limitation , by [author name scrubbed] and [author name scrubbed]. CRS Report RL31873, Banking and Financial Infrastructure Continuity: Pandemic Flu, Terrorism, and Other Challenges , by [author name scrubbed]. CRS Report RS22264, Federal Employees: Human Resources Management Flexibilities in Emergency Situations , by [author name scrubbed]. Archived CRS Reports on the threat of pandemic influenza: These products generally discuss concerns about a possible human flu pandemic resulting from H5N1 avian influenza, and enhanced federal preparedness efforts during 2005 through 2007. CRS Report RL33145, Pandemic Influenza: Domestic Preparedness Efforts , by [author name scrubbed]. CRS Report RL33219, U.S. and International Responses to the Global Spread of Avian Flu: Issues for Congress , by [author name scrubbed]. CRS Report RS22576, Pandemic Influenza: Appropriations for Public Health Preparedness and Response , by [author name scrubbed]. Information about the current H1N1 pandemic flu situation: http://www.who.int/csr/disease/swineflu/en/index.html (See also the Appendix .) Pandemic Influenza Preparedness and Response: A WHO Guidance Document, (April 2009): http://www.who.int/csr/disease/influenza/pipguidance2009/en/index.html Current phase of flu pandemic alert: http://www.who.int/csr/disease/avian_influenza/phase/en/index.html Pan American Health Organization (PAHO), a regional office of the WHO, H1N1 flu page: http://new.paho.org/hq/index.php?option=com_content&task=blogcategory&id=805&Itemid=569 International Health Regulations (2005): http://www.who.int/topics/international_health_regulations/en/ Government-wide information: http://www.flu.gov/ DHS, "Department Response to H1N1 (Swine) Flu," with links to information in other federal departments and agencies: http://www.dhs.gov/xprepresp/programs/swine-flu.shtm CDC, H1N1 (swine flu) page: http://www.cdc.gov/h1n1flu/ CDC Public Health Law Program, 2009 H1N1 Flu Legal Preparedness, http://www2a.cdc.gov/phlp/H1N1flu.asp FDA, 2009 H1N1 (Swine) Flu Virus, http://www.fda.gov/NewsEvents/PublicHealthFocus/ucm150305.htmCenters for Medicare and Medicaid Services (CMS), H1N1 information page, http://www.cms.hhs.gov/H1N1/ U.S. Department of Education, H1N1 Flu Information, http://www.ed.gov/admins/lead/safety/emergencyplan/pandemic/index.htmlU.S. Department of Agriculture (USDA), H1N1 Flu, http://www.usda.gov/wps/portal/?navid=USDA_H1N1USDA nutrition program policies for pandemic flu, http://www.fns.usda.gov/disasters/pandemic/default.htm Department of Defense Pandemic Influenza Watchboard: http://fhp.osd.mil/aiWatchboard/ HHS Pandemic Planning Updates, addressing monitoring and surveillance, vaccines, antiviral medications, state and local preparedness, and communications, through January 2009: http://www.flu.gov/professional/federal/index.html (Note: much of this information is in the context of planning for the H5N1 avian flu threat.) Canada: Public Health Agency of Canada: http://www.phac-aspc.gc.ca/alert-alerte/swine_200904-eng.php ; Canadian Food Inspection Agency: http://www.inspection.gc.ca/english/anima/disemala/swigri/swigrie.shtml Security and Prosperity Partnership of North America, North American Plan for Avian and Pandemic Influenza, August 2007, http://www.spp-psp.gc.ca/eic/site/spp-psp.nsf/vwapj/pandemic-influenza.pdf/ $FILE/ pandemic-influenza.pdf Center for Infectious Disease Research and Policy (CIDRAP), at the University of Minnesota, frequent updates, including scientific and technical information, http://www.cidrap.umn.edu/cidrap/content/influenza/swineflu/index.htmlPublic Health Law and Policy Program at the Sandra Day O'Connor College of Law, at Arizona State University, Global Legal Triage and the 2009 H1N1 Outbreak (including prior and existing declared emergencies at the federal and state levels), http://www.law.asu.edu/?id=2036 Determination of Influenza Pandemic Phase The World Health Organization is the coordinating authority for health within the United Nations system. It is responsible for providing leadership, guiding a research agenda, setting norms and standards, articulating evidence-based policy options, providing technical support to countries, and monitoring and assessing health trends. WHO does not have enforcement powers. An influenza pandemic occurs when a novel flu strain emerges and spreads across the globe, causing human illnesses. For that to happen, the virus must have the following features: it must be genetically novel so that there is a lack of preexisting immunity; it must be pathogenic (i.e., capable of causing illness in humans); and it must be easily transmitted from person to person. WHO, in consultation with experts in member countries, monitors the spread of influenza among human populations, and has developed a scale to monitor pandemic risk. It consists of five "pre-pandemic" phases with increasing incidence of animal and then human illness and transmission, and a sixth phase that represents a full-blown human pandemic, with sustained viral transmission and outbreaks in most or all regions of the world. Historically, flu pandemics have occurred in multiple waves before subsiding. Table A-1 describes the phases of a flu pandemic, as defined by WHO. As a result of the rapid spread of the new flu strain, WHO raised the pandemic alert level from Phase 3, where it had been for several years because of the threat of H5N1 avian flu, to Phase 4 on April 27, and then to Phase 5 on April 29. Phase 3 meant that a novel flu strain was causing sporadic small clusters of human illness, but was not sufficiently transmissible to sustain community-level outbreaks. Phase 4, by contrast, signaled that human-to-human transmission of the new H1N1 virus was sufficient to sustain community-level outbreaks. According to WHO, raising the alert level to Phase 5 meant that there was sustained community-level transmission in two or more countries within one WHO region, and that a pandemic could be imminent. On June 11, WHO raised the level to Phase 6, declaring that an influenza pandemic, caused by the new H1N1 strain, was underway. According to WHO Director General Dr. Margaret Chan: Spread in several countries can no longer be traced to clearly-defined chains of human-to-human transmission. Further spread is considered inevitable.... The world is now at the start of the 2009 influenza pandemic. We are in the earliest days of the pandemic. The virus is spreading under a close and careful watch. No previous pandemic has been detected so early or watched so closely, in real-time, right at the very beginning. The world can now reap the benefits of investments, over the last five years, in pandemic preparedness. For several years, WHO urged governments, corporations, and other interests to develop pandemic influenza preparedness and response plans. Generally these plans are staged according to WHO pandemic phases. WHO has noted that under the current definitions, pandemic phases do not reflect the severity of illness, but rather the global extent of sustained community-level outbreaks. Some members of the public, however, had come to think of any flu pandemic as a catastrophic incident on the scale of the one that occurred in 1918, or that many feared could result from the deadly H5N1 avian flu if it became transmissible among humans. Some argued that the definition of a pandemic should be rewritten to take severity into account, and that a Phase 6 pandemic designation for the H1N1 flu situation would trigger over-reactions that were more disruptive than the disease. International Health Regulations In 2005, the World Health Assembly adopted revised International Health Regulations (IHR), revising the roles and responsibilities of WHO and member states in the protection of international public health. The IHR(2005) require signatory nations (which include the United States) to notify WHO of all events that may constitute a "Public Health Emergency of International Concern," and to provide relevant information. The IHR(2005) also include provisions regarding designated national points of contact, definitions of core public health capacities, disease control measures such as quarantine and border controls (which are to be no more restrictive than necessary to achieve the desired level of health protection) and others. On April 25, 2009, upon the advice of the Emergency Committee called under the rules of the IHR(2005), the WHO Director-General declared the H1N1 flu outbreak a Public Health Emergency of International Concern, thereby calling upon signatories to provide timely and transparent notification of events to WHO, to collaborate in disease reporting and control, and to adopt effective risk communication strategies to reduce the potential for international disease spread and the unilateral imposition of trade or travel restrictions by other countries. Travel Guidance A number of governments have instituted enhanced passenger screening practices at their borders, and policymakers have debated more extensive prohibitions against the entry of travelers from countries or areas affected by the outbreak. The WHO has consistently advised against movement restrictions as a means to control influenza, citing a lack of evidence of their effectiveness, coupled with their potentially harmful effects on public confidence, local economies, and trade. Food Safety Guidance WHO has published a joint statement with Food and Agriculture Organization of the United Nations (FAO), the World Organization for Animal Health (known by its French acronym, OIE), and the World Trade Organization (WTO), saying: In light of the spread of influenza A(H1N1), and the rising concerns about the possibility of this virus being found in pigs and the safety of pork and pork products, we stress that pork and pork products, handled in accordance with good hygienic practices recommended by the WHO, FAO, Codex Alimentarius Commission and the OIE, will not be a source of infection. To date there is no evidence that the virus is transmitted by food. There is currently therefore no justification in the OIE Terrestrial Animal Health Standards Code for the imposition of trade measures on the importation of pigs or their products. | On June 11, 2009, in response to the global spread of a new strain of H1N1 influenza ("flu"), the World Health Organization (WHO) declared the outbreak to be an influenza pandemic, the first since 1968. The novel "H1N1 swine flu" was first identified in California in late April. Since then, cases have been reported around the world. When the outbreak began, U.S. officials adopted a response posture under the overall coordination of the Secretary of Homeland Security. Among other things, officials established a government-wide informational website (http://www.flu.gov), released antiviral drugs from the national stockpile, developed new diagnostic tests for the H1N1 virus, and published guidance for the clinical management of patients and the management of community and school outbreaks. Several federal emergency management authorities have been invoked for the response to the pandemic, including a presidential declaration of a national emergency, and a declaration by the Secretary of Health and Human Services (HHS) of a public health emergency. Among other things, these authorities have allowed federal officials to make certain unapproved drugs available to patients with severe cases of influenza, and to ease certain requirements on hospitals to aid them in caring for surges in the volume of patients. Federal health officials have purchased millions of doses of H1N1 pandemic flu vaccine, approved through the routine licensing process used for seasonal flu vaccines. A voluntary nationwide vaccination program is underway, largely coordinated by state and local health officials and carried out through public clinics, private health care providers, schools, and others. The Secretary of HHS has implemented waivers of liability and an injury compensation program in the event of unforeseen vaccine safety problems. Allocation schemes were developed to give priority for limited vaccine doses to those in high-risk groups. However, there have been a number of problems associated with shortfalls of actual (versus predicted) vaccine availability, and charges that vaccine would not be available for most of the individuals in designated priority groups until after the peak of pandemic virus transmission had passed. Some Members of Congress and others have questioned the adequacy of federal activities to improve the capacity for and timeliness of flu vaccine production. To address the outbreak, the Obama Administration requested $2 billion in FY2009 emergency supplemental appropriations, and transfer authority for an additional amount of almost $7 billion from existing HHS accounts. On June 26, the President signed P.L. 111-32, the Supplemental Appropriations Act, 2009, which provided $1.9 billion immediately and an additional $5.8 billion contingent upon a presidential request documenting the need for, and proposed use of, additional funds. The President has subsequently asked for most of the contingent amount. A balance of almost $1.3 billion remains available. This report provides a synopsis of key events in the H1N1 pandemic response, followed by information about selected federal emergency management authorities and actions taken by DHS, HHS, and state and local authorities. It then lists congressional hearings held to date; discusses appropriations and funding for pandemic flu preparedness and response activities; summarizes U.S. government pandemic flu planning documents; and lists sources for additional information. An Appendix describes the WHO process to determine the phase of an emerging flu pandemic. |
The devastation and displacement caused by Hurricane Katrina in the Gulf Coast region ofthe United States pose a host of environmental, human resource, and other public policy challenges. Caught in the web of this tragedy and its sweeping dilemmas are a unique subset ofimmigration-related issues. The loss of livelihood, habitat, and life itself has very specificimplications for foreign nationals who lived in the Gulf Coast region. Whether the noncitizen orforeign national is a legal permanent resident (LPR), a nonimmigrant (e.g., temporary resident sucha foreign student, intracompany transferee, or guest worker) or an unauthorized alien (i.e., illegalimmigrant) is a significant additional factor in how federal immigration and public welfare laws areapplied. In this context, the key question is whether Congress should relax any of these lawspertaining to foreign nationals who are victims of Hurricane Katrina . The total number of foreign nationals affected by Hurricane Katrina is not known. Surveydata from the U.S. Census Bureau estimate that over 270,000 foreign-born persons lived in Alabama,Louisiana, and Mississippi in 2004. (1) The Department of Homeland Security (DHS) estimates that34,242 naturalized citizens, 24,087 LPRs, and 71,992 nonimmigrants may be affected by HurricaneKatrina. (2) Jeffrey Passel,a demographer who specializes in unauthorized migration, estimates that at least an additional20,000 to 35,000 unauthorized aliens are victims of Hurricane Katrina. (3) This report focuses on four immigration policy implications of Hurricane Katrina. It openswith a discussion of employment verification and other documentary problems arising for those whohave lost their personal identification documents. It follows with an overview of the rules fornoncitizen eligibility for federal benefits. Issues pertaining to how the loss of life or livelihoodaffects eligibility for immigration visa benefits are discussed next. The report closes withbackground on relief from removal options for Katrina-affected aliens. Legislation addressing thesepolicy areas is discussed in the relevant sections. Many of the victims of Hurricane Katrina lack personal identification documents as a resultof being evacuated from their homes, loss or damage to personal items and records, and ongoingdisplacement in shelters and temporary housing. As a result of the widespread damage anddestruction to government facilities in the area affected by the hurricane, moreover, many victimswill be unable to have personal documents re-issued in the near future. Lack of adequate personalidentification documentation, a problem for all victims, has specific consequences under immigrationlaw, especially when it comes to employment. The Immigration and Nationality Act (INA) requires employers to verify employmenteligibility and establish identity through specified documents presented by the employee -- citizensand foreign nationals alike. Specifically, §274(a)(1)(B) of the INA makes it illegal for an employerto hire any person -- citizen or alien -- without first verifying the person's authorization to work inthe United States. Employers (and recruiters and referrers for a fee) must examine documents andattest that they appear to be genuine and relate to the individual. If a document does not reasonablyappear on its face to be genuine and relate to the person presenting it, the employer may not acceptit. Under INA §274(b), employers may not specify which document(s) the person must present. TheINA and applicable regulations provide for three categories of documents: (1) those that establishboth identity and employment eligibility; (2) those that establish identity only; and (3) those thatestablish work eligibility only. (4) Employers who fail to properly comply as required by law are subject to sanctions. Specifically, employers who fail to complete, retain, and/or present the proper form (known as theI-9) for inspection may be subject to a civil penalty for violations ranging from $110-$1,100 peremployee. For a violation of hiring unauthorized aliens, an employer can also face: $275-$2,200fine for each unauthorized individual; $2,200-$5,500 for each employee if the employer haspreviously been in violation; and, $3,300-$11,000 for each individual if the employer was subjectto more than one cease and desist order. (5) On September 6, 2005, DHS, the federal department responsible for enforcing theseprovisions of law, issued a statement that it would not bring sanction actions against employers forhiring individuals evacuated or displaced as a result of Hurricane Katrina. ... the Department of Homeland Security will refrainfrom initiating employer sanction enforcement actions for the next 45 days for civil violations, underSection 274A of the Immigration and Nationality Act, with regard to individuals who are currentlyunable to provide identity and eligibility documents as a result of the hurricane. Employers will stillneed to complete the Employment Eligibility Verification (I-9) Form as much as possible but shouldnote at this time that the documentation normally required is not available due to the eventsinvolving Hurricane Katrina. At the end of 45 days, the Department of Homeland Security willreview this policy and make further recommendations. (6) Given that the individuals affected by Hurricane Katrina are now scattered across the UnitedStates, this moratorium on sanctioning employers may have broad implications and is not withoutits critics. Representative Lamar Smith, for example, is quoted as saying: "Hurricane Katrina hascaused a situation unlike any we have ever had to endure, but that does not mean that the Departmentof Homeland Security has the authority to ignore important laws." Representative Smith, who sitson the House Committee on the Judiciary Subcommittee on Immigration, Border Security andClaims, continued, "the end result may be worthwhile, but that does not mean that federal agenciescan disregard statutes put in place to protect American jobs." (7) U.S. Citizenship and Immigration Services (USCIS) announced that the records in its NewOrleans office were not damaged and that field offices assisting hurricane victims in replacingofficial documentation. USCIS stated that it will be verifying identity and immigration status beforere-issuing any immigration related document and will be utilizing its electronic file data to performidentity verification where possible. (8) On September 21, 2005, the House of Representatives passed under suspension of the rules, H.R. 3827 , the Immigration Relief for Hurricane Katrina Victims Act of 2005. Amongother provisions, H.R. 3827 would amend the INA to authorize DHS to waive for not more than 90days employer attestation or verification requirements due to disaster-caused document loss (duringa major disaster-declaration period). The House-passed bill also would authorize DHS to replace orprovide temporary identity and employment authorization documents lost, stolen, or destroyed asa consequence of Hurricane Katrina. Lack of sufficient documentation to confirm eligibility for federal programs and assistanceis a core issue for all victims, not merely those who are noncitizens. The eligibility of noncitizensfor public assistance programs, moreover, is based on a complex set of rules that are determinedlargely by the type of noncitizen in question and the nature of services being offered. (9) The Personal Responsibilityand Work Opportunity Reconciliation Act of 1996 ( P.L. 104-193 ) is the key statute that spells outthe eligibility rules for noncitizens seeking federal assistance. As legislation to ease the federaleligibility rules for public assistance for Hurricane Katrina victims generally is under consideration,the question of whether to ease the specific rules for noncitizens has arisen (S. 1695). (10) Under current law, noncitizens' eligibility for the major federal means-tested benefitprograms largely depends on their immigration status and whether they arrived in the United States(or were on a program's rolls) before August 22, 1996, the enactment date of the PersonalResponsibility and Work Opportunity Reconciliation Act of 1996 ( P.L. 104-193 ). The basic rulesare as follows: Refugees and asylees are eligible for SSI benefits and Medicaid for seven yearsafter arrival, and for five years under TANF. (11) After this term, they generally are ineligible for SSI, but may beeligible, at state option, for Medicaid and TANF. LPRs with a substantial work history -- generally 10 years (40 quarters) ofwork documented by Social Security or other employment records -- or a military connection (activeduty military personnel, veterans, and their families) are eligible for the full range ofprograms. All aliens who have resided in the United States for five or more years as"qualified aliens" -- i.e., LPRs, refugees/asylees, and other non-temporary legal residents (such asCuban/Haitian entrants) are eligible for food stamps. LPRs receiving SSI as of August 22, 1996, continue to beeligible. Medicaid coverage is required for all otherwise qualified SSI recipients (theymust meet SSI noncitizen eligibility tests). Disabled LPRs who were legally resident as of August 22, 1996, are eligiblefor SSI. LPRs receiving government disability payments, so long as they pass anynoncitizen eligibility test established by the disability program (e.g., SSI recipients would have tomeet SSI noncitizen requirements in order to get food stamps) are eligible for food stamps. (12) LPRs who were elderly (65+) and legally resident as of August 22, 1996, areeligible for food stamps. LPRs who are children (under 18) are eligible for foodstamps. LPRs entering after August 22, 1996, are barred from TANF and Medicaid forfive years, after which their coverage becomes a state option. (13) For SSI, the five-year barfor new entrants is irrelevant because they generally are denied eligibility (without a timelimit). Several bills that would waive the categorical eligible requirements for various federalprograms in the case of Hurricane Katrina victims have been introduced, but most are silent on theissue of noncitizens. On September 13, however, legislation to provide the Secretary of Agriculturewith additional authority and funding to provide emergency relief to victims of Hurricane Katrina( S. 1695 ) was introduced, and, among other provisions, this bill would treat legalimmigrants in the United States who are victims of Hurricane Katrina as refugees for the purposesof food stamps. (14) The PRWOR of 1996 ( P.L. 104-193 ) also denies most federal benefits, regardless of whetherthey are means tested, to unauthorized aliens (often referred to as illegal aliens). The class ofbenefits denied is broad and covers: (1) grants, contracts, loans, and licenses; and (2) retirement,welfare, health, disability, housing, food, unemployment, postsecondary education, and similarbenefits. So defined, this bar covers many programs whose enabling statutes do not individuallymake citizenship or immigration status a criterion for participation. Thus, programs that previouslywere not individually restricted -- the earned income tax credit, social services block grants, andmigrant health centers, for example -- became unavailable to unauthorized aliens, unless they fallwithin the act's limited exceptions. These programmatic exceptions include treatment under Medicaid for emergency medical conditions (other than thoserelated to an organ transplant); (15) short-term, in-kind emergency disaster relief; (16) immunizations against immunizable diseases and testing for and treatment ofsymptoms of communicable diseases; services or assistance (such as soup kitchens, crisis counseling andintervention, and short-term shelters) designated by the Attorney General as: (i) delivering in-kindservices at the community level; (ii) providing assistance without individual determinations of each recipient's needs; and (iii) being necessary for the protection of life and safety; (17) and to the extent that an alien was receiving assistance on the date of enactment,programs administered by the Secretary of Housing and Urban Development, programs under TitleV of the Housing Act of 1949, and assistance under Section 306C of the Consolidated Farm andRural Development Act. (18) P.L. 104-193 also permits unauthorized aliens to receive Old Age, Survivors, and DisabilityInsurance benefits under Title II of the Social Security Act (SSA), if the benefits are protected by thattitle or by treaty or are paid under applications made before August 22, 1996. (19) Separately, the P.L.104-193 states that individuals who are eligible for free public education benefits under state andlocal law shall remain eligible to receive school lunch and school breakfast benefits. (The act itselfdoes not address a state's obligation to grant all aliens equal access to education under the SupremeCourt's decision in Plyler v. Doe , 457 U.S. 202 (1982).) P.L. 104-193 expressly bars unauthorizedaliens from most state and locally funded benefits. The restrictions on these benefits parallel therestrictions on federal benefits. As noted in the above discussion, noncitizens -- regardless of their immigration status -- arenot barred from short-term, in-kind emergency disaster relief and services or assistance that deliverin-kind services at the community level, provide assistance without individual determinations of eachrecipient's needs, and are necessary for the protection of life and safety. (20) Moreover, the Robert T.Stafford Disaster Relief and Emergency Assistance Act, (21) the authority under which the Federal Emergency ManagementAgency (FEMA) conducts disaster assistance efforts, requires nondiscrimination and equitabletreatment in disaster assistance: The President shall issue, and may alter and amend,such regulations as may be necessary for the guidance of personnel carrying out Federal assistancefunctions at the site of a major disaster or emergency. Such regulations shall include provisions forinsuring that the distribution of supplies, the processing of applications, and other relief andassistance activities shall be accomplished in an equitable and impartial manner, withoutdiscrimination on the grounds of race, color, religion, nationality, sex, age, or economic status. (22) FEMA assistance provided under the Stafford Act includes (but is not limited to) grants forimmediate temporary shelter, cash grants for uninsured emergency personal needs, temporaryhousing assistance, home repair grants, unemployment assistance due to the disaster, emergency foodsupplies, legal aid for low-income individuals, and crisis counseling. (23) Media accounts of aliens who are fearful of seeking emergency assistance followingHurricane Katrina infer that the reported reluctance is due more to the risk of deportation thanrestricted access to benefits. "We want to provide food, water, shelter and medical supplies toeveryone," stated DHS spokesperson Joanna Gonzalez. She further assured, "No one should beafraid to accept our offers to provide safety." According to Gonzalez, rescuers had not been askingpeople whether they are in the country legally when they are rescuing them. DHS initially did notissue a statement clarifying whether information that FEMA gathers on unauthorized aliens wouldbe shared with law enforcement agencies, most notably the DHS Immigration and CustomsEnforcement (ICE) bureau. (24) Subsequently, Gonzalez explained, "... as we move forward withthe response, we can't turn a blind eye to the law." (25) Immigration admissions are subject to a complex set of numerical limits and preferencecategories that give priority for admission on the basis of family relationships, needed skills, andgeographic diversity. There are very few immigration avenues based on self petitioning; mostrequire that aliens have a family member or employer who is eligible, able, and willing to sponsorthem. The loss of life, devastation of businesses, or depletion of personal assets directly affects visaqualifications for otherwise eligible aliens who are victims of Hurricane Katrina or the family ofvictims. It also affects nonimmigrants whose purposes for the temporary visas are disrupted by thehurricane and its aftermath. The largest number of immigrants is admitted because of a family relationship to a U.S.citizen or LPR. Specifically the family relationships are: immediate relatives of U.S. citizens; (26) the spouses and childrenof LPRs; the adult children of U.S. citizens; and, the siblings of adult U.S. citizens. (27) As of July 2005, mostrelatives of U.S. citizens and LPRs were waiting in backlogs for a visa to become available, with thebrothers and sisters of U.S. citizens waiting almost 12 years. (28) Married adult sons anddaughters of U.S. citizens who filed petitions seven years ago (February 1, 1998) were beingprocessed for visas in July. Prospective family-sponsored immigrants from the Philippines have themost substantial waiting times before a visa is scheduled to become available to them; consularofficers are now considering the petitions of the brothers and sisters of U.S. citizens from thePhilippines who filed 22 years ago. If the person in the United States who is petitioning for therelative dies while the alien is waiting for the visa, the prospective LPR is no longer eligible for theLPR visa. In terms of most employment-based LPRs, employers hiring prospective LPRs to work forthem petition with USCIS on behalf of the alien and submit applications with the Employment andTraining Administration in Department of Labor (DOL) to certify employment of the worker. Theprospective LPR must demonstrate that he or she meets the qualifications for the particular job aswell as the INA preference category. If DOL determines that a labor shortage exists in theoccupation for which the petition is filed, labor certification will be issued. (29) If the petitioning employerno longer can employ the worker, the prospective LPR is no longer eligible for an immigrant visa. The "Immigration Relief for Hurricane Katrina Victims Act of 2005" ( H.R. 3827 ) was introduced by the Hon. James Sensenbrenner, chairman of the House Committee on theJudiciary, and Hon. John Conyers, the ranking member of the House Committee on the Judiciary onSeptember 20,2005 and passed the House under suspension of the rules on September 21, 2005. Thisbill is comparable to the provisions in the USA PATRIOT Act ( P.L. 107-56 ) that providedimmigration relief for family members of those killed by the September 11, 2001 terrorist attacks H.R. 3827 would authorize DHS to provide special immigration status to an alien beneficiary of an immigration petition, nonimmigrant fiance or fianceeK-visa, or labor certification application filed on or before August 29, 2005 (Hurricane Katrina) ifthe petitioner, applicant, or beneficiary died, was disabled, or lost employment due to the damageor destruction of his or her workplace; an alien who as of such date was the spouse or child of such alien and wasaccompanying or following to join such alien by August 29, 2007; and an alien who is the grandparent of a child whose parents died as a consequenceof Hurricane Katrina, if at least one of the parents on August 29, 2005, was a U.S. citizen, national,or legal permanent resident. H.R. 3827 also would automatically extend legal nonimmigrant visa status in the UnitedStates for some nonimmigrant visa holders. This provision would cover those aliens who weredisabled due to Hurricane Katrina-related injury, or spouses and children of an alien who died or wasdisabled in Hurricane Katrina. In addition, H.R. 3827 would provide that an alien who, as of August 29, 2005,was the spouse or child of a refugee, asylee, or employment-based immigrant who died as aconsequence of Hurricane Katrina would have his or her respective refugee, asylee, or statusadjustment claim determined as if the death had not occurred. In these instances, the bill wouldwaive the public charge inadmissibility grounds. Similarly, the USA PATRIOT Act contained provisions designed to insure that certain aliensdid not lose immigration benefits due to circumstances resulting from the September 11, 2001terrorist attacks against the United States. The act granted immigration benefits to some survivingspouses, children, and in some cases, parents, of U.S. citizens or LPRs killed or disabled onSeptember 11, 2001. More specifically under §421 of the Patriot Act, a surviving spouse, child, orfiancé regained the chance to immigrate by self-petitioning for him or herself. The act also enableda grandparent of a child orphaned by the events of September 11 to self-petition, if the alien was thegrandparent of a child, both of whose parents died in the terrorist attacks. In addition, §421 of the Patriot Act allowed prospective employment-based LPRs who werebeneficiaries of approved labor certifications that were revoked due to the disabling of the principalalien or the loss of his/her employment due to physical damage caused by the terrorist attacks ofSeptember 11 to pursue their visa petition. It also extended that opportunity to surviving spousesor children of aliens killed in the attacks who were employment-based LPR or who hademployment-based petitions pending on September 10, 2001. Finally, §422 of the Patriot Act automatically extended legal nonimmigrant visa status in theUnited States for some nonimmigrant visa holders. This provision covers those aliens who weredisabled in the terrorist attacks of September 11, 2001, or spouses and children of an alien who diedor was disabled in those attacks. The grounds of inadmissibility are an important basis for denying foreign nationals admissionto the United States, and one of these grounds bars the admission of aliens who are considered likelyto become a public charge (e.g., indigent). (30) All aliens seeking LPR visas who are family-based immigrantsas well as employment-based immigrants who are sponsored by a relative must have bindingaffidavits of support signed by U.S. sponsors in order to show that they will not become publiccharges. (31) To qualifyas a sponsor, the individual must be a U.S. citizen or legal permanent resident who is at least 18years old, domiciled in the United States, and able to support both the sponsor's family and the alien'simmigrating family members at an annual income level equal to at least 125% of the federal povertyguideline. (32) Theaffidavit of support is a legally binding contract enforceable against the affiant (i.e., sponsor) if theimmigrant collects any means-tested benefit. (33) At issue is whether victims of Hurricane Katrina will be considered public charges in thecontext of admissibility for LPR visas if they or their sponsors cannot now support their family atan annual income level equal to at least 125% of the federal poverty guideline. (34) In 1999, the formerImmigration and Naturalization Service (INS) proposed a regulation that defined "public charge" tomean an individual who has become or who is likely to become "primarily dependent on thegovernment for subsistence, as demonstrated by either the receipt of public cash assistance forincome maintenance or institutionalization for long-term care at government expense." (35) At that same time, the INS also issued field guidance to alleviate "considerable publicconfusion about the relationship between the receipt of federal, state, and local public benefits" and"public charge" determinations in immigration law. (36) Among other policy pronouncements, this 1999 guidanceaddresses the following concerns: use of non-cash benefits by an immigrant (other than institutionalization forlong-term care at government expense) may not be considered during public charge determinations,nor may cash benefits be considered unless they are for purposes of incomemaintenance; use of cash benefits for income maintenance by an immigrant's family membersis not attributed to the immigrant when determining if the immigrant is likely to become a publiccharge unless the family relies on the benefits as its sole means of support;and an immigrant's use of cash public assistance for income maintenance orinstitutionalization for long-term care at government expense may be considered during publiccharge determinations. (37) Final regulations on this matter have not been promulgated. At various times in the past, the Attorney General has provided, under certain conditions,discretionary relief from deportation so that aliens who have not been legally admitted to the UnitedStates or whose temporary visa has expired nonetheless may remain in this country temporarily. Thestatutory authority cited for these discretionary procedures has generally been that portion ofimmigration law that confers on the Attorney General the authority for general enforcement and thesection of the law covering the authority for voluntary departure. (38) The Attorney General has provided blanket relief by means of the suspension of enforcementof the immigration laws against a particular group of individuals. In addition to TemporaryProtected Status (TPS) which may be provided by the Secretary of DHS, (39) the two most commondiscretionary procedures to provide relief from deportation have been deferred departure or deferredenforced departure (DED) and extended voluntary departure (EVD). Unlike TPS, aliens who benefitfrom EVD or DED do not necessarily register for the status with USCIS, but they trigger theprotection when they are identified for deportation. If, however, they wish to be employed in theUnited States, they must apply for a work authorization from USCIS. In 1992, the Administration of George H.W. Bush granted DED to about 80,000 Chinesefollowing the June 1989 Tiananmen Square massacre, and the Chinese retained DED throughJanuary 1994. The George H.W. Bush Administration also granted DED to what was then anestimated 190,000 Salvadorans through December 1994. On December 23, 1997, President WilliamClinton instructed the Attorney General to grant DED to the Haitians for one year. (40) Following the September 11, 2001 terrorist attacks, INS issued a press release announcingthat family members of victims of the terrorist attacks whose own immigration status was dependenton the victim's immigration status should not be concerned about facing immediate removal fromthe United States. The then-Commissioner James Ziglar stated: "The INS will exercise its discretionin a compassionate way toward families of victims during this time of mourning and readjustment. On September 19, we began to advise our offices to exercise compassionate discretion in thesecircumstances." (41) Some, including a group of Democratic Senators, have requested that DHS Secretary MichaelChertoff issue a formal statement reassuring immigrant victims of Hurricanes Rita and Katrina thatthey can seek help from relief agencies without fear of deportation or being turned over toimmigration authorities. (42) Meanwhile, it appears that some foreign nationals who were adversely affected by HurricaneKatrina are beginning to depart the United States voluntarily. Mexican consular officials in theUnited States, for example, are reportedly helping to repatriate Mexicans when the person who hasbeen displaced by the hurricane requests it. (43) Initially it was unclear whether ICE would initiate forciblerepatriations targeting unauthorized aliens who were victims of Hurricane Katrina. (44) More recently there havebeen reports, however, of unauthorized aliens who were victims of Hurricane Katrina being arrested,detained, and ordered deported. (45) | The devastation and displacement caused by Hurricane Katrina in the Gulf Coast region ofthe United States has very specific implications for foreign nationals who lived in the region. Whether the foreign national is a legal permanent resident (LPR), a nonimmigrant (e.g., temporaryresident such a foreign student, intracompany transferee, or guest worker) or an unauthorized alien(i.e., illegal immigrant) is a significant additional factor in how federal laws and policies are applied. In this context, the key question is whether Congress should relax any of these laws pertaining toforeign nationals who are victims of Hurricane Katrina . Many of the victims of Hurricane Katrina lack personal identification documents as a resultof being evacuated from their homes, loss or damage to personal items and records, and ongoingdisplacement in shelters and temporary housing. As a result of the widespread damage anddestruction to government facilities in the area affected by the hurricane, moreover, many victimswill be unable to have personal documents re-issued in the near future. Lack of adequate personalidentification documentation, a problem for all victims, has specific consequences under immigrationlaw, especially when it comes to employment and eligibility for programs and assistance. Noncitizens -- regardless of their immigration status -- are not barred from short-term,in-kind emergency disaster relief and services, or from assistance that delivers in-kind services atthe community level, provides assistance without individual determinations of each recipient's needs,and is necessary for the protection of life and safety. As legislation to ease the eligibility rules ofmajor federal programs for Hurricane Katrina victims generally is under consideration, the questionof whether to ease the specific rules for immigrants has arisen ( S. 1695 ). Most avenues for immigration require that aliens have a family member or employer who iseligible, able, and willing to sponsor them. There are very few immigration opportunities based onself petitioning. The loss of life, devastation of businesses, or depletion of personal assets directlyaffects visa qualifications for otherwise eligible aliens who are victims of Hurricane Katrina or thefamily of victims. It also affects nonimmigrants whose purposes for the temporary visas aredisrupted by the hurricane and its aftermath. Legislation comparable to that enacted for survivingfamily of victims of the September 11, 2001 terrorist attacks has passed the House ( H.R. 3827 ). Finally, at various times in the past, the government has given discretionary relief fromdeportation so that aliens who have not been legally admitted to the United States or whosetemporary visas have expired nonetheless may remain in this country temporarily. Following theSeptember 11, 2001 terrorist attacks, for example, family members of victims whose ownimmigration status was dependent on the victim's immigration status were assured that they shouldnot be concerned about facing immediate removal from the United States. This report will beupdated. |
As a basis for understanding the reallocation of Representatives among the states based on the 2010 Census, it may prove helpful to examine the current House of Representatives apportionment formula. In addition, some members of the statistical community have, in the recent past, urged Congress to consider changing the current apportionment formula. Consequently, an examination of other methods that could be used to apportion the seats in the House of Representatives may contribute to a deeper understanding of the apportionment process. In 1991, the reapportionment of the House of Representatives was nearly overturned because the current "equal proportions" formula for the House apportionment was held to be unconstitutional by a three-judge panel of a federal district court. The court concluded that, By complacently relying, for over fifty years, on an apportionment method which does not even consider absolute population variances between districts, Congress has ignored the goal of equal representation for equal numbers of people. The court finds that unjustified and avoidable population differences between districts exist under the present apportionment, and ... [declares] section 2a of Title 2, United States Code unconstitutional and void. The three-judge panel's decision came almost on the 50 th anniversary of the current formula's enactment. The government appealed the panel's decision to the Supreme Court, where Montana argued that the equal proportions formula violated the Constitution because it "does not achieve the greatest possible equality in number of individuals per Representative." This reasoning did not prevail, because, as Justice Stevens wrote in his opinion for a unanimous court, absolute and relative differences in district sizes are identical when considering deviations in district populations within states, but they are different when comparing district populations among states. Justice Stevens noted, however, that "although common sense" supports a test requiring a "good faith effort to achieve precise mathematical equality within each State ... the constraints imposed by Article I, §2, itself make that goal illusory for the nation as a whole." He concluded "that Congress had ample power to enact the statutory procedure in 1941 and to apply the method of equal proportions after the 1990 census." The year 1991 was a banner year for court challenges to the apportionment process. At the same time the Montana case was being argued, another case was being litigated by Massachusetts. The Bay State lost a seat to Washington because of the inclusion of 978,819 federal employees stationed overseas in the state populations used to determine reapportionment. The court ruled that Massachusetts could not challenge the President's decision to include the overseas federal employees in the apportionment counts, in part because the President is not subject to the terms of the Administrative Procedure Act. In 2001, the Census Bureau's decision to again include the overseas federal employees in the population used to reapportion the House produced a new challenge to the apportionment population. Utah argued that it lost a congressional seat to North Carolina because of the Bureau's decision to include overseas federal employees in the apportionment count, but not other citizens living abroad. Utah said that Mormon missionaries were absent from the state because they were on assignment: a status similar to federal employees stationed overseas. Thus, the state argued, the Census Bureau should have included the missionaries in Utah's apportionment count. The state further argued that, unlike other U.S. citizens living overseas, missionaries could be accurately reallocated to their home states because the Mormon Church has excellent administrative records. Utah's complaint was dismissed by a three-judge federal court on April 17, 2001. The Supreme Court appears to have settled the issue about Congress's discretion to choose a method to apportion the House, and has granted broad discretion to the President in determining who should be included in the population used to allocate seats. What, if any, challenges to the apportionment formula and process the country will face after the 2010 Census and apportionment remain to be seen. Although modern Congresses have rarely considered the issue of the formula used in the calculations, this report describes apportionment options from which Congress could choose and the criteria that each method satisfies. One of the fundamental issues before the framers at the constitutional convention in 1787 was the allocation of representation in Congress between the smaller and larger states. The solution ultimately adopted, known as the Great (or Connecticut) Compromise, resolved the controversy by creating a bicameral Congress with states represented equally in the Senate, but in proportion to population in the House. The Constitution provided the first apportionment: 65 Representatives were allocated to the states based on the framers' estimates of how seats might be apportioned following a census. House apportionments thereafter were to be based on Article 1, section 2, as modified by clause 2 of the Fourteenth Amendment: Amendment XIV, section 2. Representatives shall be apportioned among the several States according to their respective numbers.... Article 1, section 2. The number of Representatives shall not exceed one for every thirty Thousand, but each State shall have at least one Representative.... The constitutional mandate that Representatives would be apportioned according to population did not describe how Congress was to distribute fractional entitlements to Representatives. Clearly there would be fractions because districts could not cross state lines and the states' populations were unlikely to be evenly divisible. From its beginning in 1789, Congress was faced with questions about how to apportion the House of Representatives. The controversy continued until 1941, with the enactment of the Hill ("equal proportions") method. During congressional debates on apportionment, the major issues were how populous a congressional district ought to be (later recast as how large the House ought to be), and how fractional entitlements to Representatives should be treated. The matter of the permanent House size has received little attention since it was last increased to 435 after the 1910 Census. The Montana legal challenge added a new perspective to the picture—determining which method comes closest to meeting the goal of "one person, one vote." The "one person, one vote" concept was established through a series of Supreme Court decisions beginning in the 1960s. The court ruled in 1962 that state legislative districts must be approximately equal in population ( Baker v. Carr , 369 U.S. 186). This ruling was extended to the U.S. House of Representatives in 1964 ( Wesberry v. Sanders , 376 U.S. 1). Thus far, the "one person, one vote" concept has only been applied within states. States must be able to justify any deviations from absolute numerical equality for their congressional districts in order to comply with a 1983 Supreme Court decision— Karcher v. Daggett (462 U.S. 725). The population distribution among states in the 2010 Census, combined with a House size of 435, and the requirement that districts not cross state lines, means that there is a wide disparity in district sizes—from 527,624 (for Rhode Island's two congressional districts) to 994,416 (for Montana's single district) after the 2010 Census. This interstate population disparity among districts in 2010 contrasts with the intrastate variation experienced in the redistricting process. Thirty of the 43 states that had two or more districts in 2012 drew districts with a population difference between their largest and smallest districts of fewer than 10 and, of these, 26 states had a difference between their largest and smallest congressional district, with respect to population, of one or less. Only three states varied by more than 1,000 persons. Given a fixed-size House and an increasing population, there will inevitably be population deviations in district sizes among states. What should be the goal of an apportionment method? Although Daniel Webster was a proponent of a particular formula (the major fractions method), he succinctly defined the apportionment problem during debate on an apportionment bill in 1832 (4 Stat. 516). Webster said that, The Constitution, therefore, must be understood, not as enjoining an absolute relative equality, because that would be demanding an impossibility, but as requiring of Congress to make the apportionment of Representatives among the several states according to their respective numbers, as near as may be. That which cannot be done perfectly must be done in a manner as near perfection as can be. Which apportionment method is the "manner as near perfection as can be"? Although there are potentially thousands of different ways in which the House could be apportioned, six methods are most often mentioned as possibilities. These are the methods of Hamilton-Vinton, "largest fractional remainders"; of Adams, "smallest divisors"; of Dean, "harmonic mean"; of Hill, "equal proportions"; of Webster, "major fractions"; and of Jefferson, "largest divisors." Since 1941, seats in the House of Representatives have been apportioned according to the method of equal proportions (Hill)(see below, in " Rounding Methods "). However, from 1790 to the present, alternative methods for apportioning seats have been used or seriously considered. Six such methods stand out. One, the Hamilton-Vinton method, involves ranking fractional remainders. The others (the methods of Adams, Dean, Hill, Webster, and Jefferson) involve rounding fractional remainders. Why is there a controversy? Why not apportion the House the intuitive way by dividing each state's population by the national "ideal size" district (710,767 in 2010) and give each state its "quota" (rounding up at fractional remainders of .5 and above, and down for remainders less than .5)? The problem with this proposal is that the House size would not always be 435 seats. In some decades, the House might include 435 seats; in others, it might be either under or over the legal limit. In 2012, this method would have resulted in a 433-seat House (433 in 2002, 438 in 1992). One solution to this problem of too few or too many seats would be to divide each state's population by the national "ideal" size district, but instead of rounding at the .5 point, allot each state initially the whole number of seats in its quota (except that states entitled to less than one seat would receive one regardless because of constitutional requirements). Next, rank the fractional remainders of the quotas in order from largest to smallest. Finally, assign seats in rank order until 435 are allocated (see Table 1 ). If this system were used in 2012, there would be no difference in the seat distribution relative to the current method (i.e., the method of equal proportions-Hill). This apportionment formula, which is associated with Alexander Hamilton, was proposed in Congress's first effort to enact an apportionment of the House. The bill was vetoed by President Washington—his first exercise of this power. This procedure, which might be described as the largest fractional remainders method, was used by Congress from 1851 to 1901; but it was never strictly followed because changes were made in the apportionments that were not consistent with the method. It has generally been known as the Vinton method (for Representative Samuel Vinton (Ohio), its chief proponent after the 1850 Census). Assuming a fixed House size, the Hamilton-Vinton method can be described as follows: Hamilton-Vinton Divide the apportionment population by the size of the House to obtain the "ideal congressional district size" to be used as a divisor. Divide each state's population by the ideal district size to obtain its quota. Award each state the whole number obtained in these quotas. (If a state receives less than one Representative, it automatically receives one because of the constitutional requirement.) If the number of Representatives assigned using the whole numbers is less than the House total, rank the fractional remainders of the states' quotas and award seats in rank order from highest to lowest until the House size is reached. The Hamilton-Vinton method has simplicity in its favor, but its downfall was the "Alabama paradox." Although the phenomenon had been observed previously, the "paradox" became an issue after the 1880 census when C. W. Seaton, chief clerk of the Census Office, wrote Congress on October 25, 1881, stating, While making these calculations I met with the so-called "Alabama" paradox where Alabama was allotted 8 Representatives out of a total of 299, receiving but 7 when the total became 300. Alabama's loss of its eighth seat when the House size was increased resulted from the vagaries of fractional remainders. With 299 seats, Alabama's quota was 7.646 seats. It was allocated eight seats based on this quota, but it was on the dividing point. When a House size of 300 was used, Alabama's quota increased to 7.671, but Illinois and Texas now had larger fractional remainders than Alabama. Accordingly, each received an additional seat in the allotment of fractional remainders, but since the House had increased in size by only one seat, Alabama lost the seat it had received in the allotment by fractional remainders for 299 seats. This property of the Hamilton-Vinton method eventually led to a change in the formula in 1911. One could argue that the "Alabama paradox" should not be an important consideration in apportionments, since the House size was fixed in size at 435, but the Hamilton-Vinton method is subject to other anomalies. Hamilton-Vinton is also subject to the "population paradox" and the "new states paradox ." The population paradox occurs when a state that grows at a greater percentage rate than another has to give up a seat to the slower growing state. The new states paradox works in much the same way—at the next apportionment after a new state enters the Union, any increase in House size caused by the additional seats for the new state may result in seat shifts among states that otherwise would not have happened. Finding a formula that avoided the paradoxes was a goal when Congress adopted a rounding, rather than a ranking, method when the apportionment law was changed in 1911. Table 1 illustrates how a Hamilton-Vinton apportionment would be done by ranking the fractional remainders of the state's quotas in order from largest to smallest and compares it with simple rounding. In 2011, Minnesota's and Rhode Island's fractional remainders of less than 0.5 would be rounded up by the Hamilton-Vinton method in order for the House to have totaled 435 Representatives. The kinds of calculations required by the Hamilton-Vinton method are paralleled, in their essentials, in all the alternative methods that are most frequently discussed—but fractional remainders are rounded instead of ranked. First, the total apportionment population (the residential population of the 50 states plus the overseas military and federal employees and their dependents as determined by the census) is divided by 435, or the size of the House. This calculation yields the national "ideal" district size. Second, the "ideal" district size is used as a common divisor for the population of each state, yielding what are called the states' quotas of Representatives. Because the quotas still contain fractional remainders, each method then obtains its final apportionment by rounding its allotments either up or down to the nearest whole number according to certain rules. The operational difference between the methods lies in how each defines the rounding point for the fractional remainders in the allotments—that is, the point at which the fractions rounded down are separated from those rounded up. Each of the rounding methods defines its rounding point in terms of some mathematical quantity. Above this specified figure, all fractional remainders are automatically rounded up; those below are rounded down. For a given common divisor, therefore, each rounding method yields a set number of seats. If using national "ideal" district size as the common divisor results in 435 seats being allocated, no further adjustment of the divisor is necessary. But if too many or too few seats are apportioned, the common divisor (i.e., the "ideal congressional district size") must be adjusted until a value is found that yields the desired number of seats. (These methods will, as a result, generate allocations before rounding that differ from the states' quotas.) If too many seats are apportioned, a larger divisor is tried (the divisor slides up); if too few, a smaller divisor (it slides down). The divisor finally used is that which apportions a number of seats equal to the desired size of the House. The rounding methods most often mentioned (although there could be many more) are Webster ("major fractions"); Hill ("equal proportions"—the current method); Dean ("harmonic mean"); Adams ("smallest divisors"); and Jefferson ("greatest divisors"). Under any of these methods, the Census Bureau would construct a priority list of claims to representation in the House. The key difference among these methods is in the rule by which the rounding point is set—that is, the rule that determines what fractional remainders result in a state being rounded up, rather than down. In the Adams, Webster, and Jefferson methods, the rounding points used are the same for a state of any size. In the Dean and Hill methods, on the other hand, the rounding point varies with the number of seats assigned to the state; it rises as the state's population increases. With these two methods, in other words, smaller (less populous) states will have their apportionments rounded up to yield an extra seat for smaller fractional remainders than will larger states. This property, arguably, provides the intuitive basis for challenging the Dean and Hill methods as favoring small (less populous) states at the expense of the large (more populous) states. These differences among the rounding methods are illustrated in Figure 1 . The "black dots" in Figure 1 indicate the points that a state's fractional remainder must exceed for it to receive a second seat, and to receive a 21 st seat. Figure 1 visually illustrates that the only rounding points that change their relative positions are those for Dean and Hill. Using the rounding points for a second seat as the example, the Adams method awards a second seat for any fractional remainder above one. Dean awards the second seat for any fractional remainder above 1.33 (the harmonic mean between 1 and 2). Similarly, Hill gives a second seat for every fraction exceeding 1.41 (the geometric mean between 1 and 2), Webster, 1.5 (the arithmetic mean between 1 and 2), and Jefferson does not give a second seat until its integer value of a state's quotient equals or exceeds two. The easiest rounding method to describe is the Webster ("major fractions") method which allocates seats by rounding up to the next seat when a state has a remainder of .5 and above. In other words, it rounds fractions to the lower or next higher whole number at the arithmetic mean, which is the midpoint between numbers. For example, between 1 and 2 the arithmetic mean is 1.5; between 2 and 3, the arithmetic mean is 2.5, etc. The Webster method (which was used in 1840, 1910, and 1930) can be defined in the following manner for a 435-seat House: Webster Find a number so that when it is divided into each state's population and resulting quotients are rounded at the arithmetic mean, the total number of seats will sum to 435. (In all cases where a state would be entitled to less than one seat, it receives one anyway because of the constitutional entitlement.) The only operational difference between a Webster and a Hill apportionment (equal proportions—the method in use since 1941), is where the rounding occurs. Rather than rounding at the arithmetic mean between the next lower and the next higher whole number, Hill rounds at the geometric mean . The geometric mean is the square root of the multiplication of two numbers. The Hill rounding point between 1 and 2, for example, is 1.41 (the square root of 2), rather than 1.5. The rounding point between 20 and 21 is the square root of 420, or 20.494. The Hill method can be defined in the following manner for a 435-seat House: Hill Find a number so that when it is divided into each state's population and resulting quotients are rounded at the geometric mean, the total number of seats will sum to 435. (In all cases where a state would be entitled to less than one seat, it receives one anyway because of the constitutional entitlement.) The Dean Method (advocated by Montana in 1991) rounds at a different point—the harmonic mean between consecutive numbers. The harmonic mean is obtained by multiplying the product of two numbers by 2, and then dividing that product by the sum of the two numbers. The Dean rounding point between 1 and 2, for example, is 1.33, rather than 1.5. The rounding point between 20 and 21 is 20.488. The Dean method (which has never been used) can be defined in the following manner for a 435-seat House: Dean Find a number so that when it is divided into each state's population and resulting quotients are rounded at the harmonic mean, the total number of seats will sum to 435. (In all cases where a state would be entitled to less than one seat, it receives one anyway because of the constitutional entitlement.) The Adams method ("smallest divisors") rounds up to the next seat for any fractional remainder. The rounding point between 1 and 2, for example, would be any fraction exceeding 1 with similar rounding points for all other integers. The Adams method (which has never been used, but was also advocated by Montana) may be defined in the following manner for a 435-seat House: Adams Find a number so that when it is divided into each state's population and resulting quotients that include fractions is rounded up, the total number of seats will sum to 435. (In all cases where a state would be entitled to less than one seat, it receives one anyway because of the constitutional entitlement.) The Jefferson method ("largest divisors") rounds down any fractional remainder. In order to receive 2 seats, for example, a state would need 2 in its quotient, but it would not get 3 seats until it had 3 in its quotient. The Jefferson method (used from 1790 to 1830) can be defined in the following manner for a 435-seat House: Jefferson Find a number so that when it is divided into each state's population and resulting quotients that include fractions is rounded down, the total number of seats will sum to 435. (In all cases where a state would be entitled to less than one seat, it receives one anyway because of the constitutional requirement.) What would have happened in 2011 if any of the alternative formulas discussed in this report had been adopted? Using the actual 2010 state apportionment population figures provided by the U.S. Census Bureau, Table 2 and Table 3 , below display the results of applying the various formulas. As compared to the actual apportionment of seats using the Hill method (equal proportions) currently mandated by law, the Dean method, advocated by Montana in 1991, would have resulted (not surprisingly) in Montana regaining its second seat that it lost in 1991, and California losing a seat in 2011. The Webster method would have cost Rhode Island a seat and would have given an additional seat to North Carolina relative to the actual apportionment using the Hill method. The Hamilton-Vinton method would have resulted in a seat distribution that was no different from that produced by using the current (Hill) method. The Adams method in 2011 would have reassigned 18 seats among 15 states (see Table 2 ) relative to the current (Hill) method. The Jefferson method would have reassigned 16 seats among 15 states (see Table 2 ) relative to the current (Hill) method. Table 2 and Table 3 below, present seat allocations based on the actual 2010 apportionment population for the six methods discussed in this report. Table 2 is arranged in alphabetical order. Table 3 is arranged by total state population, rank-ordered from the most populous state (California) to the least (Wyoming). Allocations that differ from the current method are bolded and italicized, as well as followed by an asterisk in both tables. Table 3 facilitates the evaluation of apportionment methods by looking at their impact according to the population size of the states. For example, it becomes fairly clear from an examination of the beginning and end of the distributions shown in Table 3 that the Adams method would have taken from the more populous states and would have given to the lesser populated states relative to the current method. On the other hand, it is clear that the Jefferson method would do the opposite relative to the current method. All the apportionment methods described above arguably have properties that recommend them. Each is the best formula to satisfy certain mathematical measures of fairness, and the proponents of some of them argue that their favorite meets other goals as well. For example, the major issue raised in the Montana case was, which formula best approximated the "one person, one vote" principle? The apportionment concerns identified in the Massachusetts case not only raised "one person, one vote" issues, but also suggested that the Hill method discriminates against more populous states. It is not immediately apparent which of the methods described above is the "fairest" or "most equitable" in the sense of meeting the "one person, one vote" standard. As already noted, no apportionment formula can equalize districts precisely, given the constraints of (1) a fixed size House; (2) a minimum seat allocation of one; and (3) the requirement that districts not cross state lines. The practical question to be answered, therefore, is not how inequality can be eliminated, but how it can be minimized. This question too, however, has no clearly definitive answer, for there is no single established criterion by which to determine the equality or fairness of a method of apportionment. In a report to Congress in 1929, the National Academy of Sciences (NAS) defined a series of possible criteria for comparing how well various apportionment formulas achieve equity among states. This report predates the Supreme Court's enunciation of the "one person, one vote" principle by more than 30 years, but if Congress decided to reevaluate its 1941 choice to adopt the Hill method, it could use one of the NAS criteria of equity as a measure of how well an apportionment formula fulfills that principle. Although the following are somewhat simplified restatements of the NAS criteria, they succinctly present the question before Congress if it chooses to take up this matter. Which of these measures best approximates the one person, one vote concept? The method that minimizes the difference between the largest average district size in the country and the smallest? This criterion leads to the Dean method. The method that minimizes the difference in each person's individual share of his or her Representative by subtracting the smallest such share for a state from the largest share? This criterion leads to the Webster method. The method that minimizes the difference in average district sizes, or in individual shares of a Representative, when those differences are expressed as percentages? These criteria both lead to the Hill method. The method that minimizes the absolute representational surplus among states? This criterion leads to the Adams method. The method that minimizes the absolute representational deficiency among states? This criterion leads to the Jefferson method. In the absence of further information, it is not apparent which criterion (if any) best encompasses the principle of "one person, one vote." Although the NAS report endorsed as its preferred method of apportionment the one currently in use—the Hill method—the report arguably does not make a clear-cut or conclusive case for one method of apportionment as fairest or most equitable. Are there other factors that might provide additional guidance in making such an evaluation? The remaining sections of this report examine three additional possibilities put forward by statisticians: (1) mathematical tests different from those examined in the NAS report; (2) standards of fairness derived from the concept of states' representational "quotas"; and (3) the principles of the constitutional "great compromise" between large and small states that resulted in the establishment of a bicameral Congress. As the discussion of the NAS report showed, the NAS tested each of its criteria for evaluating apportionment methods by its effect on pairs of states. (The descriptions of the NAS tests above stated them in terms of the highest and lowest states for each measure, but, in fact, comparisons between all pairs of states were used.) These pair-wise tests, however, are not the only means by which different methods of apportionment can be tested against various criteria of fairness. For example, it is indisputable that, as the state of Montana contended in 1992, the Dean method minimizes absolute differences in state average district populations in the pair-wise test. One of the federal government's counter arguments, however, was that the Dean method does not minimize such differences when all states are considered simultaneously. The federal government proposed the variance as a means of testing apportionment formulas against various criteria of fairness. The variance of a set of numbers is the sum of the squares of the deviations of the individual values from the mean or average. This measure is a useful way of summarizing the degree to which individual values in a list vary from the average (mean) of all the values in the list. High variances indicate that the values vary greatly; low variances mean the values are similar. If all values in the lists are identical, the variance is zero. According to this test, in other words, the smaller the variance is, the more equitable the method of apportionment. If the variance for a Dean apportionment is compared to that of a Hill apportionment in 2010 (using the difference between district sizes as the criterion), the apportionment variance under Hill's method is smaller than that under Dean's (see Table 4 ). In fact, using average district size as the criterion and variance as the test, the variance under both the Hill method and the Hamilton-Vinton method are the smallest of any of the apportionment methods discussed in this report. Variances can be calculated, however, not only for differences in average district size, but for each of the criteria of fairness used in pair-wise tests in the 1929 NAS report. As with those pair-wise tests, different apportionment methods are evaluated as most equitable, depending on which measure the variance is calculated. For example, if the criterion used for comparison is the individual share of a Representative, the Webster method proves most effective in minimizing inequality, as measured by variance. The federal government in the Massachusetts case also presented another argument to challenge the basis for both the Montana and Massachusetts claims that the Hill method is unconstitutional. It contended that percent difference calculations are fairer than absolute differences, because absolute differences are not influenced by whether they are positive or negative in direction. Tests other than pair- wise comparisons and variance can also be applied. For example, Table 4 , using 2010 Census apportionment population values, reports figures for each method using the sum of the absolute values (rather than the squares) of the differences between national averages and state figures. Using this test for state differences from the national "ideal" both for district sizes and for shares of a Representative, the Hill and Hamilton-Vinton method produce the smallest national totals for deviations from the average district size. The Webster method, on the other hand, minimizes the deviations for shares of a Representative. These examples, in which different methods best satisfy differing tests of a variety of criteria for evaluation, serve to illustrate further the point made earlier, that no single method of apportionment need be unambiguously the most equitable by all measures. Each apportionment method discussed in this report has a "rational" basis, and for each, there is at least one test according to which it is the most equitable. The question of how the concept of fairness can best be defined, in the context of evaluating an apportionment formula, remains open. Another approach to this question begins from the observation that, if representation were to be apportioned among the states truly according to population, the fractional remainders would be treated as fractions rather than rounded. Each state would be assigned its exact quota of seats, derived by dividing the national "ideal" size district into the state's apportionment population. There would be no "fractional Representatives," just fractional votes based on the states' quotas. Congress could weight each Representative's vote to account for how much his or her constituents were either over or under represented in the House. In this way, the states' exact quotas would be represented, but each Representative's vote would count differently. (This might be an easier solution than trying to apportion seats so they crossed state lines, but it would, however, raise other problems relating to potential inequalities of influence among individual Representatives. ) If this "quota representation" defines absolute fairness, then the concept of the quota, rather than some statistical test, can be used as the basis of a simple concept for judging the relative fairness of apportionment methods: a method should never make a seat allocation that differs from a state's exact quota by more than one seat. Unfortunately, this concept is complicated in its application by the constitutional requirement that each state must get one seat regardless of population size. Hence, some modification of the quota concept is needed to account for this requirement. One solution is the concept of "fair share," which accounts for entitlements to less than one seat by eliminating them from the calculation of quota. After all, if the Constitution awards a seat for a fraction of less than one, then, by definition, that is the state's fair share of seats. To illustrate, consider a hypothetical country with four states having populations 580, 268, 102, and 50 (thousand) and a House of 10 seats to apportion. Then the quotas are 5.80, 2.68, 1.02 and .50. But if each state is entitled to at least one whole seat, then the fair share of the smallest state is 1 exactly. This leaves 9 seats to be divided among the rest. Their quotas of 9 seats are 5.49, 2.54, and .97. Now the last of these is entitled to 1 seat, so its fair share is 1 exactly, leaving 8 seats for the rest. Their quotas of 8 are 5.47 and 2.53. Since these are both greater than 1, they represent the exact fractional representation that these two states are entitled to; i.e. they are the fair shares . Having accounted for the definitional problem of the constitutional minimum of one seat, the revised measure is not the exact quota, but the states' fair shares. Which method meets the goal of not deviating by more than one seat from a state's fair share? No rounding method meets this test under all circumstances. Of the methods described in this report, only the Hamilton-Vinton method always stays within one seat of a state's fair share. Some rounding methods are better than others in this respect. Both the Adams and Jefferson methods nearly always produce examples of states that get more than one seat above or below their fair shares. Through experimentation we learn that the Dean method tends to violate this concept approximately one percent of the time, while Webster and Hill violate it much less than one percent of the time. The framers of the Constitution (as noted earlier) created a bicameral Congress in which representation for the states was equal in the Senate and apportioned by population in the House. In the House, the principal means of apportionment is by population, but each state is entitled to one Representative regardless of its population level. Given historians' understanding that the "great compromise" was struck, in part, in order to balance the interests of the smaller states with those of the larger ones, how well do the various methods of apportionment contribute to this end? If it is posited that the combination of factors favoring the influence of small states encompassed in the great compromise (equal representation in the Senate, and a one seat minimum in the House) unduly advantages the small states, then compensatory influence could be provided to the large states in an apportionment formula. This approach would suggest the adoption of the Jefferson method because it significantly favors large states. If it is posited that the influence of the small states is overshadowed by the larger ones (perhaps because the dynamics of the electoral college focus the attention of presidential candidates on larger states, or the increasing number of one-Representative states—from five to seven since 1910), there are several methods that could reduce the perceived imbalance. The Adams method favors small states in the extreme, Dean much less so, and Hill to a small degree. If it is posited that an apportionment method should be neutral in its application to the states, two methods may meet this requirement. Both the Webster and Hamilton-Vinton methods are considered to have these properties. If Congress decides to revisit the matter of the apportionment formula, this report illustrates that there could be many alternative criteria from which it can choose as a basis for decision. Among the competing mathematical tests are the pair-wise measures proposed by the National Academy of Sciences in 1929. The federal government proposed the statistical test of variance as an appropriate means of computing a total for all the districts in the country in the 1992 litigation on this matter. The plaintiffs in Massachusetts argued that the variance can be computed for different criteria than those proposed by the federal government—with different variance measures leading to different methods. The contention that one method or another best implements the "great compromise" is open to much discussion. All of the competing points suggest that Congress would be faced with difficult choices if it decided to take this issue up prior to the 2020 Census. Which of the mathematical tests discussed in this report best approximates the constitutional requirement that Representatives be apportioned among the states according to their respective number is, arguably, a matter of judgment—rather than an indisputable mathematical test. | As a basis for understanding the reallocation of Representatives among the states based on the 2010 Census, it may prove helpful to examine the current House of Representatives apportionment formula. In addition, some members of the statistical community have, in the recent past, urged Congress to consider changing the current apportionment formula. Consequently, an examination of other methods that could be used to apportion the seats in the House of Representatives may contribute to a deeper understanding of the apportionment process. Seats in the House of Representatives are allocated by a formula known as the method of equal proportions or the "Hill" method. If Congress decided to change it, there are at least five alternatives it might consider. Four of these are based on rounding fractions and one, on ranking fractions. The current apportionment system (codified in 2 U.S.C. 2a) also is based on rounding fractions. The Hamilton-Vinton method, used to apportion the House of Representatives from 1851-1901, is based on ranking fractions. First, the total population of the 50 states is divided by 435 (the House size) in order to find the national "ideal sized" district. Next, this number is divided into each state's population, producing the state's "quota" of seats. Each state is then awarded the whole number in its quota (but at least one). If fewer than 435 seats have been assigned by this process, the fractional remainders of the 50 states are rank-ordered from largest to smallest, and seats are assigned in this manner until 435 are allocated. The rounding methods, including the Hill method currently in use, allocate seats among the states differently, but operationally the methods only differ by where rounding occurs in seat assignments. Three of these methods—Adams, Webster, and Jefferson—have fixed rounding points. Two others—Dean and Hill—use varying rounding points that rise as the number of seats assigned to a state grows larger. The methods can be defined in the same way (after substituting the appropriate rounding principle in parentheses). The rounding point for Adams is (up for all fractions); for Dean (at the harmonic mean); for Hill (at the geometric mean); for Webster (at the arithmetic mean, which is 0.5 for successive numbers); and for Jefferson (down for all fractions). Substitute these phrases in the general definition below for the rounding methods: Find a number so that when it is divided into each state's population and resulting quotients are rounded (substitute appropriate phrase), the total number of seats will sum to 435. (In all cases where a state would be entitled to less than one seat, it receives one anyway because of the constitutional requirement.) Fundamental to choosing an apportionment method is a determination of fairness. Each apportionment method discussed in this report has a "rational" basis, and for each, there is at least one test according to which it is the most equitable. The question of how the concept of fairness can best be defined, in the context of evaluating an apportionment formula, remains open. Which of the mathematical tests discussed in this report best approximates the constitutional requirement that Representatives be apportioned among the states according to their respective numbers is, arguably, a matter of judgment, rather than an indisputable mathematical test. |
On November 4, 2002, United States Trade Representative (USTR) Robert B. Zoellick notified Congress of the Administration's intention to launch negotiations for a free trade agreement (FTA) with the Southern African Customs Union (SACU), comprised of Botswana, Namibia, Lesotho, South Africa, and Swaziland. This agreement would be the first U.S. FTA with a Sub-Saharan African country. The first round of negotiations for the SACU FTA began on June 3, 2003, in Johannesburg, South Africa. The negotiations were initially scheduled to conclude by December 2004, but the deadline was pushed to the end of 2006 after negotiations stalled in late 2004 and resumed in late 2005. The talks continued to move at a slow pace until April 2006, when U.S. and SACU officials decided to suspend negotiations and instead begin a longer term joint work program. On July 16, 2008, USTR Susan Schwab signed a Trade, Investment and Development Cooperation Agreement (TIDCA) with trade ministers from SACU. Several possible rationales exist for the negotiation of an FTA with SACU. One impetus derives from Sec. 116 of the African Growth and Opportunity Act (AGOA) (Title I, P.L. 106 - 200 ), in which Congress declared its sense that FTAs should be negotiated with sub-Saharan African countries to serve as a catalyst for trade and for U.S. private sector investment in the region. Such trade and investment could fuel economic growth in Southern Africa, by creating new jobs and wealth. SACU member countries have achieved the most robust export growth under AGOA, and an FTA may expand their access to the U.S. market. An FTA may also encourage the continued economic liberalization of the SACU members, and it could move SACU beyond one-way preferential access to full trade partnership with the United States. Finally, although SACU is a customs union, its members' investment and regulatory regimes are not fully harmonized. A comprehensive FTA with the United States could force SACU to achieve greater harmonization. A potential U.S.-SACU FTA is of interest to Congress because: (1) Congress will need to consider ratifying any agreement signed by the parties; (2) provisions of an FTA may adversely affect U.S. business in import-competing industries, and may affect employment in those industries; and (3) an FTA may increase the effectiveness of AGOA and bolster its implementation. On January 9, 2003, a bipartisan group of 41 Representatives wrote to Ambassador Zoellick to support the beginning of FTA negotiations with SACU. The U.S. business community has also shown interest in a U.S.-SACU FTA. The U.S.-South African Business Council, an affiliate of the National Foreign Trade Council, announced the creation of an FTA advocacy coalition in December 2002. The Corporate Council on Africa, a U.S. organization dedicated to enhancing trade and investment ties with Africa, also supports the negotiations. For these business groups, a primary benefit of an FTA with SACU would be to counteract the free trade agreement between the European Union and South Africa, which has given a price advantage to European firms. The FTA could also provide an opportunity to address the constraints on U.S. exports to SACU countries, such as relatively high tariffs, import restrictions, insufficient copyright protection, and service sector barriers. Some U.S. businesses have reportedly expressed skepticism about an FTA with SACU, citing concerns over corruption and inadequate transparency in government procurement, particularly in South Africa. On December 16, 2002, the interagency Trade Policy Staff Committee, which is chaired by the USTR, held a hearing to receive public comment on negotiating positions for the proposed agreement. Several groups representing retailers, food distributors, and metal importers supported the reduction of U.S. tariffs on SACU goods that an FTA would bring. Others representing service industries and recycled clothing favored negotiations to remove tariff and non-tariff barriers in the SACU market. Yet other groups opposed the additional opening of U.S. markets to SACU goods or sought exemptions for their products. They included the growers and processors of California peaches and apricots, the American Sugar Alliance, rubber footwear manufacturers, and producers of silicon metal and manganese aluminum bricks. Some U.S. civil society organizations are concerned that a SACU FTA could have negative consequences for poor Southern Africans, citing potential adjustment costs for import-competing farmers, poor enforcement of labor rights, privatization of utilities, and increased restrictions on importing generic drugs to treat HIV/AIDS. The South African Customs Union consists of Botswana, Lesotho, Namibia, South Africa, and Swaziland: five contiguous states with a population of 51.9 million people encompassing 1.7 million square miles on the southern tip of the African continent. Although this figure represents less than 1% of the population of sub-Saharan Africa, SACU accounts for one-half of the subcontinent's gross domestic product (GDP). Wide differences exist among the economies of SACU. While South Africa has developed a significant manufacturing and industrial capacity, the other countries remain dependent on agriculture and mineral extraction. The grouping is dominated by South Africa, which accounts for 87% of the population, and 93% of the GDP of the customs area. SACU member states had combined real GDP of about $158 billion in 2005. SACU is the United States' second largest trading partner in Africa behind Nigeria whose exports are almost exclusively petroleum products. Overall, SACU is the 33 rd largest trading partner of the United States. Merchandise imports from SACU totaled $10.0 billion in 2007, a 33% increase from 2005 and a 169% increase from 1997. They were composed of minerals such as platinum and diamonds, apparel, vehicles, and automotive parts. Major U.S. exports to the region include aircraft, automobiles, computers, medical instruments and construction and agricultural equipment. The 2007 merchandise trade deficit with SACU was $4.4 billion. The United States ran a services trade surplus with South Africa (the only member of SACU for which service data are available) with exports of $1.6 billion and imports of $1.1 billion in 2006. Services trade between the United States and South Africa has increased steadily over the last decade, with both imports and exports doubling since 1996. The stock of U.S. foreign direct investment in South Africa totaled $3.8 billion in 2006 and was centered around manufacturing, chemicals and services. The stock of South African investment in the U.S. stood at $652 million in 2006. FTA negotiations with SACU may result in the first U.S. trade agreement with an existing customs union. SACU is the world's oldest customs union; it originated as a customs agreement between the territories of South Africa in 1889. The arrangement was formalized through the Customs Agreement of 1910 and was renegotiated in 1969. In 1994, the member states agreed to renegotiate the treaty in light of the political and economic changes implicit from the end of the apartheid regime. The renegotiated agreement was signed on October 21, 2002 in Gaborone, Botswana, and it is now being implemented. Some observers are concerned that further integration of the customs union may be threatened by individual member countries signing economic partnership agreements (EPAs) with the European Union (EU), because these agreements would include policies that SACU has yet to harmonize, such as rules of origin and customs procedures. Some observers believe that SACU should only negotiate these policies as a group to avoid roadblocks to harmonization. The 2002 Agreement provides for greater institutional equality of the member states and effectively redistributes tariff revenue within the member states. Its three key policy provisions are: the free movement of goods within SACU; a common external tariff; and a common revenue pool. It also provides more institutional clout to Botswana, Lesotho, Namibia, and Swaziland (BLNS) in decision-making by creating a policymaking Council of Ministers. The agreement enhances the existing Customs Union Commission, and it creates a permanent Secretariat based in Windhoek, Namibia. The Agreement renegotiated the formula for disbursement of the common revenue pool, which accounts for a large portion of government revenue in the BLNS countries. BLNS disbursements were specified under the old formula, but under the new formula they are variable and based on shares of intra-SACU trade. Both formulas result in a redistribution of SACU tariff revenues from South Africa to BLNS, but the new formula has its basis in some measure of economic activity. Recent estimates indicate SACU payments accounted for 49% of government revenue in Lesotho, 69% in Swaziland, 25% in Namibia, 12% in Botswana, and 3% in South Africa in 2005. A 2003 WTO Trade Policy Review of SACU member states examined the tariff structure and trade posture of the customs union. It noted that the South African tariff structure, which was still the basis for the SACU tariff, was relatively complex, consisting of specific, ad valorem , mixed compound and formula duties. However, the South African government has embarked on a tariff rationalization process to simplify the tariff schedule, to convert tariff lines to ad valorem rates, and to remove tariffs on items not produced in the SACU. According to the USTR, the complexity of the tariff regime has made it necessary for some U.S. firms to employ facilitators to export to South Africa. The WTO found applied MFN tariffs averaged 11.8% in manufacturing, 5.5% in agriculture, and 0.7% in mining and quarrying. These average tariffs represent a reduction from the previous WTO review in 1998, when MFN tariffs averaged 16%, 5.6%, and 1.4%, respectively. However, tariffs are often bound much higher, with some bindings as high as 400%. After nearly three years of slow-moving and stalled negotiations, U.S. and SACU trade officials called off the FTA negotiations in April 2006 in favor of a longer term trade and investment work plan. On July 16, 2008, they signed a Trade, Investment and Development Cooperation Agreement (TIDCA), which is the first of its kind. The TIDCA is reportedly a formal mechanism for the United States and SACU to negotiate interim trade-related agreements which may serve as the building blocks for a future FTA. The agreement will also allow the two parties to work on key issues in their trade, such as trade facilitation, technical barriers, investment promotion, and sanitary and phytosanitary standards. Observers have cited several possible reasons for the halt in FTA negotiations. First, the United States and SACU did not agree on the scope of the negotiations. Per their mandate from Congress to pursue comprehensive FTAs, U.S. negotiators attempted to proceed with negotiations including intellectual property rights, government procurement, investment, and services provisions. However, SACU officials reportedly argued for these provisions to be excluded from the negotiations. They called for making market access commitments first, and then negotiating the other areas. Now that Congress has extended the AGOA benefits to 2015 through the AGOA Acceleration Act of 2004 ( P.L. 108 - 274 ), there may be less incentive for SACU countries to complete an FTA with the United States. Also, the United States and SACU reportedly held different views on how to include certain industrial sectors in the negotiations. The United States preferred what is called a negative list, where all industries are negotiable unless specifically excluded. Meanwhile, SACU preferred a positive list, where the industries to be included in the negotiations are specified in advance, and additional industries may be included in the agreement over time. Finally, the United States and SACU differed on issues concerning labor rights and environmental regulations. Some observers have speculated that South Africa may be leery of negotiating issues that are included in the current WTO negotiations, so as not to influence their positions in the WTO. Former USTR Robert Zoellick has stated that the United States recognizes that SACU is still an emerging entity. It has not developed harmonized policies on many of the issues that would be included in an FTA, which may add to the challenges of negotiating an FTA. | Negotiations to launch a free trade agreement (FTA) between the United States and the five members of the Southern African Customs Union (SACU) (Botswana, Lesotho, Namibia, South Africa, and Swaziland) began on June 3, 2003. In April 2006, negotiators suspended FTA negotiations, launching a new work program on intensifying the trade and investment relationship with an FTA as a long term goal. A potential FTA would eliminate tariffs over time, reduce or eliminate non-tariff barriers, liberalize service trade, protect intellectual property rights, and provide technical assistance to help SACU nations achieve the goals of the agreement. This potential agreement would be subject to congressional approval. This report will be updated as negotiations progress. |
On January 17, 2014, the President signed into law the Consolidated Appropriations Act, 2014 ( H.R. 3547 / P.L. 113-76 ), which provides full-year funding for FY2014, including the foreign affairs budget. Tables in Appendix A and Appendix B have been updated to show a comparison of the enacted FY2014 appropriations law with FY2013 post-rescission funding levels, the President's FY2014 request, and House- and Senate-recommended levels. On October 16, 2013, after 16 days of a government shutdown resulting from an appropriations lapse, Congress passed the Continuing Appropriations Act, 2014 ( H.R. 2775 ); the President signed it into law ( P.L. 113-46 ) on October 17, 2013. ( Appendix C provides information on the impact of government shutdown on the Department of State and Foreign Aid.) The continuing resolution (CR) continued FY2013 funding levels, including previous sequestration and rescission reductions, until January 15, 2014. H.J.Res. 106 ( P.L. 113-73 ), approved by the House and Senate on January 15, extended the CR through January 18, allowing extra time for legislative consideration of an omnibus appropriation bill. The Administration's FY2014 request of $51.84 billion for State, Foreign Operations, and Related Programs represented about 1.4% of the total budget request for FY2014. It was 5.3% less than the FY2013 request and about 2% less than the FY2013 post-sequester funding estimate. (Unless otherwise noted, all of the FY2013 funding levels in this report reflect estimated funding levels after both sequestration and across-the-board rescissions are applied.) The Consolidated Appropriations Act, FY2014, provides total funding of $49.16 billion for State, Foreign Operations, and Related Programs, a 7% reduction when compared with FY2013 estimates and 5.2% less than the President's FY2014 request. The total enacted amount includes $42.64 billion in core funds (for ongoing expenditures) and $6.52 billion in Overseas Contingency Operations (OCO) funds for temporary, extraordinary expenditures in frontline states of Iraq, Afghanistan, and Pakistan, as well as other congressional priorities. The State Department and related agencies request of $16.88 billion (including the mandatory Foreign Service Retirement and Disability Fund) represented a decline of 5.5% from the estimated FY2013 funding level of $17.86 billion. For FY2014, Congress enacted a $15.86 billion in total funding for the State Department and related agencies, representing a decline of 11.2% from the FY2013 estimated level and 6% below the President's FY2014 request. Within State-Foreign Operations, about $34.95 billion was requested for foreign operations accounts, which was a 0.2% decrease from the FY2013 estimated funding of $35.02 billion. The FY2014 foreign operations request had sought to include funding for Food for Peace programs that traditionally are funded through the Department of Agriculture appropriation. As a result, the FY2014 request for Agriculture programs within the 150 budget would have decreased dramatically from the FY2013 post-sequestration funding of $1.54 billion to $185 million. The FY2014-enacted foreign operations budget totals $33.72 billion, 3.7% below the FY2013 estimated funding and 3.5% below the President's FY2014 request. Congress did not agree to fund the Food for Peace program within the State-Foreign Operations appropriations. Since FY2012, the Administration's international affairs budget has distinguished between what it has interchangeably called "core," "base," or "enduring" funding, and funding to support "overseas contingency operations" (OCO), described in budget documents as "extraordinary, but temporary, costs of the Department of State and USAID in Iraq, Afghanistan, and Pakistan." Congress has adopted this approach, but has defined OCO more broadly. In each of the last three years, Congress has appropriated more OCO funding than requested, and for a broader range of countries and activities. For example, within the international affairs budget in FY2012, the Obama Administration requested $8.7 billion for OCO, and Congress enacted $11.2 billion. In FY2013, the Administration requested $8.2 billion for OCO, but Congress enacted $11.9 billion. The FY2014 request continues this pattern. Of the total funding requested for State-Foreign Operations in FY2014, $3.8 billion was designated as OCO, while Congress appropriated $6.5 billion (net rescissions of $426 million). On July 25, 2013, the Senate Appropriations Committee passed its FY2014 State-Foreign Operations spending bill, S. 1372 . The House Appropriations Committee approved H.R. 2855 , a State-Foreign Operations appropriations bill for FY2014, on July 30, 2013. The House bill included $40.78 billion in spending, net of rescissions, or about 21.3% below the FY2014 request and 22.9% below the FY2013 funding estimate. The Senate bill totaled $49.49 billion, which was 4.5% less than requested and 6.4% less than FY2013 funding (see Table 1 below). On January 13, 2014, after extensive negotiations, appropriations leaders reached a spending agreement and introduced a Consolidated Appropriations Act, 2014 (an amendment to H.R. 3547 ). The conferenced bill was approved by the House on January 15 and by the Senate the next day. The President signed it into law ( P.L. 113-76 ) on January 17, 2014. The Consolidated Appropriations Act, 2014 ( P.L. 113-76 ), total funding of $49.16 billion for State Department, Foreign Operations and Related Programs is less than 1% below the Senate-proposed FY2014 level of $49.49 billion, but is 20.5% above the House-proposed total of $40.78 billion. For State Department operations and related programs, the enacted funding level of $15.86 billion is 3.6% below the Senate-proposed level of $16.46 billion, but 7.3% greater than the House-proposed total of $14.78 billion. The foreign operations FY2014-enacted funding level of $33.72 billion is 1.7% below Senate-proposed level of $34.29 billion and 26% above the House-proposed level of $26.77 billion. Congress designated a total of $6.9 billion (before rescissions) for OCO funds, of which $1.8 billion is for State operations and related programs and $5.1 billion is for foreign operations (see Figure 1 below). Account level data for each proposal are available in Appendix A . The steepest cuts in the House bill would have been applied to the foreign operations accounts (-23.4% from the request and -23.6% from the FY2013 estimate), though State Department accounts also would have been reduced significantly (-12.4% from the request and -17.2% from the FY2013 estimate). The Senate bill, in contrast, proposed relatively minimal reductions to foreign operations accounts (-1.9% from the request and -2.1% from the FY2013 estimate), but somewhat larger cuts for the State Department and related programs (-2.5% from the request and -7.8% from FY2013). Both the House and Senate bills designated about $6.5 billion as OCO funding, or 71% more than the $3.8 billion requested as OCO for FY2014. The Department of State and Related Agency accounts include funding for the personnel, operations, and programs of the Department of State; U.S. participation in international organizations, such as the United Nations, as well as small commissions such as the International Boundary and Water Commission between the United States and Mexico; U.S. government, non-military-international broadcasting; and several U.S. non-governmental agencies whose purposes also help promote U.S. interests abroad, and other U.S. commissions and interparliamentary groups more directly related to U.S. foreign policy initiatives, such as the U.S. Commission on International Religious Freedom. Funds for embassy construction, leasing or purchasing land for embassies, and embassy security activities are also included. Within State Department operations, two subaccounts contain the bulk of the overall embassy security funding: Worldwide Security Protection (WSP) within the Diplomatic and Consular Programs (D&CP) account and Worldwide Security Upgrades (WSU) within the Embassy Security, Construction and Maintenance (ESCM) account. WSP provides funding for salaries, maintenance, and software for embassy protection, whereas WSU provides funds for the brick-and-mortar type of security, as well as for construction of secure new compounds. The Administration's FY2014 request sought $16.88 billion for the State Department and Related Agency accounts, a significant decrease from FY2013 levels that was largely attributable to a large reduction in requested OCO Iraq operations funds, as the U.S. presence and footprint in that country were reduced. The Consolidated Appropriations Act of 2014 aligns with the request in that it generally provides a boost for the topline "enduring" or non-emergency operating accounts of the Department of State, while reducing emergency (OCO) funding significantly from FY2013 levels as U.S. presence in the frontline states of Iraq, Afghanistan, and Pakistan continues to be reduced. For example, Diplomatic and Consular Programs (D&CP—the department's operating account) sees an overall reduction of 17.2% from FY2013 levels and 5.7% less than the Administration requested. However, the act provides 1.9% more in base (or enduring) D&CP appropriations than in FY2013 (see Table 2 below). The dangers to U.S. diplomats abroad were underscored by a number of attacks on U.S. facilities and personnel in recent years. These include the death of the U.S. Ambassador and three other U.S. personnel in an attack in Benghazi, Libya, on September 11, 2012; attacks on U.S. embassies in Egypt, Sudan, Tunisia, and Yemen, on the same day; the bombing of U.S. Embassy Ankara on February 1, 2012; and the death of U.S. Foreign Service Officer Anne Smedinghoff in Afghanistan on April 6, 2013. As a result, funding for the protection of U.S. government employees and facilities abroad has drawn particular scrutiny. In its report on the Benghazi attack, the State Department's Accountability Review Board urged State to work with Congress to increase resources for diplomatic security and allow for more flexibility in the application of those resources. In December 2012, the Secretary of State presented an Increased Security Proposal to Congress, which requested authority to transfer $1.3 billion in OCO funds previously appropriated for Iraq operations towards diplomatic security needs. Of that, $553 million would be for additional Marine security guards worldwide, $130 million for 151 new diplomatic security personnel, and $736 million for improved security at overseas facilities. While the transfer authority was not provided by the 112 th Congress, Section 1707 of the Consolidated and Further Continuing Appropriations Act of 2013 ( H.R. 933 , P.L. 113-6 ) provided additional funding for diplomatic security ($918 million for WSP, to remain available until expended; and $1.3 billion for ESCM), while rescinding $1.1 billion in unobligated balances from FY2012 OCO funds. The Administration's FY2014 request sought to sustain the initiatives launched under the FY2013 Increased Security Proposal, including expansion of the Bureau of Diplomatic Security and further growth in the number of Marine Security Guard detachments deployed to diplomatic facilities. The request sought $2.2 billion for construction of new secure diplomatic facilities, a combination of enduring funding, OCO funding, and other agency contributions. The request for ESCM of $2.65 billion (including OCO), the State Department's second-largest administrative account, was 6% less than the FY2013 post-sequester estimate, but a 60.6% increase from the FY2012 actual level. Within this account, WSU funding would have decreased 15% from the FY2013 post-sequester estimate to $1.61 billion, but 108% above the FY2012 funding level, while Ongoing Operations would increase by 18%. WSP funds, under D&CP, would have decreased by 3% from FY2013, to $2.18 billion. The Consolidated Appropriations Act, 2014 exceeds the Administration's request for ESCM of $2.4 billion by $25 million in OCO funds, to be used to harden high-risk posts. Of the total enacted ESCM funding of $2.67 billion, $1.6 billion is for WSU. P.L. 113-76 also provides a total of $2.77 billion for Worldwide Security Protection (of which $900.3 million are OCO funds), specifying that the $585 million above the requested amount should be applied to the normalization of Iraq operations. When compared with FY2013 levels, however, the ESCM account shows a reduction of 5.1% (or approximately $145 million). WSP funds would grow by $517 million or 23% over FY2013 levels. Many observers suggest that the Department of State chronically faces significant personnel shortfalls, a situation worsened in recent years by a growing number of overseas positions to fill. The ranks of mid-level Foreign Service officers (FSOs) are particularly thin, forcing junior personnel to serve in assignments meant for personnel of higher rank. In the past few years, to address this deficiency as well as the need to better train its employees, the State Department increased hiring under its Diplomacy 3.0 initiative, growing the FS by approximately 18%; however, hiring slowed significantly in FY2011-FY2012 due to budget constraints. The Administration's FY2014 request sought to grow its Human Resources account (under Diplomatic & Consular Programs) to a total of $2.60 billion. While it planned 186 new positions altogether for FY2014, 151 of these were to be funded by consular fees and devoted to meeting increasing visa demand. The remaining 35 new positions (30 Foreign Service, 5 Civil Service) for which State sought appropriated funding were to be focused on the "re-balance" to Asia and to staffing the Secretary's Office of the Coordinator for Cyber Issues. As a point of comparison, the State Department had requested appropriations for 121 new positions in its FY2013 request and for 133 in its FY2012 request. Among its additional initiatives to address workforce needs, the department sought $81.4 million in FY2014 funding to provide an overseas comparability pay (OCP) adjustment intended to bring the base pay of Foreign Service personnel posted overseas to levels comparable to their Foreign Service colleagues serving in Washington, DC, who receive locality pay. OCP advocates argue that the discrepancy affects morale and retention of FSOs and acts as a financial disincentive to serve overseas, including by its cumulative impact on retirement pay. The requested funding would have provided a third and final tranche of the OCP adjustment; two-thirds of the gap was addressed through prior year funding. The department's similar FY2013 request for the OCP adjustment was not supported by Congress. The 2014 Consolidated Appropriations Act provides $2.36 billion for the Human Resources account, or 9.2% less than was requested. The act explicitly does not fund the new positions requested by the department, directing the Secretary instead to reassign vacant or lower-priority positions to meet these higher priorities (and signaling a willingness to consider requests by the Secretary to redirect funds for additional positions). The act also prohibits implementation of the third phase of OCP, while allowing previous OCP adjustments to continue. The Administration's FY2014 budget request envisioned sharply reduced State Operations resources for the frontline states of Iraq, Afghanistan, and Pakistan. In Iraq, the Department of State became the lead agency for all U.S. programs after the departure of U.S. military forces in late 2011. An initially ambitious presence was rapidly drawn down since then; the request indicated intent to further reduce the State Department's footprint and hand over additional sites to the Iraqi government. Including foreign assistance, the Administration requested $1.18 billion for its activities in Iraq, including $650 million in Ongoing Operations OCO funding. The request sought $2.4 billion less than the FY2012 actual level. The U.S. presence in Afghanistan is also rapidly evolving as the international combat mission is slated to end in 2014. The President's overall budget request for Afghanistan was $3.1 billion, including $2.2 billion in assistance and $900 million to support decreasing numbers of civilian personnel under the State Department presence. Ongoing operations OCO funding under the request would have decreased by $710 million from FY2012 levels. Funds requested for Pakistan, including foreign assistance, totaled $1.3 billion. OCO funding for Ongoing Operations ($0.04 billion) would have decreased by 61% compared to FY2012 funding. The Consolidated Appropriations Act of 2014 provides $491 million in D&CP/OCO funding for ongoing operations for the three frontline states of Afghanistan, Pakistan, and Iraq. When combined with $419 million in unobligated FY2013D &CP appropriations, appropriators judge that the total of nearly $910 million should be sufficient to meet operational costs in these countries. The combined total operational funding represents 43% less than what the Administration requested. The act also rescinds $427 million in prior year unobligated D&CP balances from the frontline states' accounts due to reduced diplomatic and development footprints in there. In the fall of 2011, the Obama Administration announced its intent to expand and intensify the already significant U.S. role in the Asia-Pacific, particularly in Southeast and South Asia. Goals underpinning this "rebalancing"—or "pivot"—to Asia include tapping into the economic dynamism of the region and influencing the development of the Asia-Pacific's norms and rules, particularly as China's regional influence grows. To this end, the Administration has, among other actions, announced new military deployments to and partnerships with Australia, Singapore, and the Philippines; joined the East Asia Summit; and secured progress in negotiations with 10 other nations to form a Trans-Pacific Strategic Economic Partnership (TPP) free trade agreement. With some critics suggesting that the "rebalancing" has, to date, been overly focused on military deployments and initiatives, the FY2014 request emphasized the State Department's role in resourcing the re-balancing to Asia. In addition to a 7% increase in foreign assistance to the region, compared to FY2012, the department sought 29 new positions (of which 22 were to be Foreign Service) with the intention of deploying additional Economic and Political/Military officers at key posts across Asia. The request sought $420 million for operations in support of initiatives such as new facilities in China, Laos, Papua New Guinea, and Burma. As noted above, the 2014 Consolidated Appropriations Act does not fund the new positions requested by the Administration for FY2014, including those for the Asia rebalance. The act directs the Secretary instead to seek to reassign vacant or lower-priority positions to meet these higher priorities. The act further calls for the Secretary to submit, on behalf of the interagency, an "integrated, multi-year planning and budget strategy for a rebalancing of United States policy in Asia that links United States interest in the region with the necessary resources and personnel required for implementation, management, and oversight of such strategy." The Foreign Operations budget funds most traditional foreign aid programs, including bilateral economic aid, multilateral aid, security assistance, and export promotion programs. It has not traditionally funded food aid. Funding for U.S. Agency for International Development (USAID) operations is also part of the foreign operations budget. The FY2014 request of $34.95 billion for these programs was almost level with the FY2013 estimated funding. However, this total included funding for food aid programs that are not currently funded through foreign operations accounts. The FY2014 request for total foreign assistance, including both foreign operations and food aid accounts, was about 4% below the FY2013 estimate. Congress did not accept the proposed food aid changes and enacted an FY2014 foreign operations appropriation of $33.72 billion, a 3.7% cut from the FY2013 funding level. Breaking the request down by appropriations title shows proposed shifts in foreign assistance programming, and congressional response, at the broad level ( Table 3 ): Bilateral Economic Assistance, including funding for independent agencies, made up about 64.5% of the FY2014 foreign assistance request, and would have increased such assistance by about 3% over FY2013 estimates. Much of the proposed growth could be attributed to changes in food aid funding and a proposed new $580 million Middle East North Africa Incentive Fund (MENA IF). The FY2014 appropriation provides $22.08 billion for bilateral economic assistance, just slightly below FY2013 funding, and does not include a MENA IF or adopt proposed changes in food aid. Security assistance accounted for about 24% of the proposed foreign aid budget, representing a 6% cut from the FY2013 post-sequester estimate. Almost every security assistance account would have been reduced compared to FY2013 estimates. However, total enduring security assistance funds would have increased 11% from FY2013, while OCO funds would have decreased by 60%, reflecting an Administration effort to shift security assistance away from OCO for frontline states and into enduring activities. The FY2014-enacted appropriation provides a total of $8.51 billion for security assistance, slightly less than the request, but with 34% more funding than the request designated as OCO. Multilateral aid made up about 9% of the foreign aid budget request, and would have increased by about 11% over FY2013-estimated levels. Congress enacted a much smaller increase for FY2014, about 3% over FY2013, for a total of $2.96 billion. Many of the top 10 recipients of foreign assistance would have been the same under the FY2014 request as in FY2013 ( Table 4 ). The top recipient list is dominated by strategic allies in the Middle East and Southeast Asia, as well as top global health program recipients in Africa. Under the request, Israel would have continued to be the top U.S. aid recipient, at $3.1 billion, a $157 million increase over FY2013 funding. Afghanistan would have again ranked second among recipients, though with a slightly smaller allocation compared to FY2013. Egypt and Pakistan would both continue to be top recipients of security assistance, though aid disbursements may be impacted by restrictions related to the current events. Together, the top 10 recipients would account for about 37% of total bilateral economic and security assistance funds in both FY2013 and the FY2014 budget proposal. Full country allocations for the FY2014-enacted appropriation are not yet available, but some account allocations are specified in the FY2014 explanatory statement. For example, Congress designated $3.1 billion of FY2014 Foreign Military Financing (FMF) funding for Israel. Political transitions and unrest in the Middle East and North Africa may have significant implications for U.S. national security goals, including protecting global oil supplies, enhancing intelligence/military cooperation, ensuring military access and force projection, and promoting Arab-Israeli peace. The rise of new leaders in the region represents both risks and opportunities, as the Administration and lawmakers consider how to respond in a manner that best promotes U.S. strategic interests and democratic values. For FY2013, the Administration had requested an appropriation of $770 million (of which $700 million was new funding) to create a new Middle East North Africa Incentive Fund (MENA IF) that would provide flexible resources to meet diverse and rapidly evolving needs in the region. Congress neither authorized nor appropriated any MENA IF funding in the FY2013 continuing resolutions. In the 112 th Congress, House and Senate Foreign Operations Appropriations bills differed over MENA IF. A Senate bill ( S. 3241 ) would have funded it at $1 billion for MENA IF, while a corresponding House measure ( H.R. 5857 ) would not fund it at all, proposing instead $200 million for Middle East response spending. Some lawmakers expressed significant reservations about the broad spending authorities sought by the Administration's MENA-IF proposal as well as assisting some entities that would have been likely candidates for MENA IF assistance. For FY2014, the Administration again requested funding for a MENA IF. The request called for $580 million, of which $105 million would be for the existing Middle East Partnership Initiative and USAID Middle East Regional Office. The Administration request did not specify how the funds would be allocated, but explained that they would be used to support interventions such as "support to Syrian opposition, humanitarian assistance, Enterprise Funds, and loan guarantees" that are already being funded in the region through reallocations of existing funds, "at great opportunity cost." The MENA IF, the Administration asserted, would increase flexibility and transparency with respect to these activities, and "begin to address the imbalance between our security and economic assistance in the region." The FY2014 House bill provided no funds for a MENA IF account, but noted that OCO funds may be used for stabilization and response efforts in the MENA region, in addition to Iraq, Pakistan, and Afghanistan. The Senate legislation did not include a MENA IF account either, but recommended $575 billion for a Complex Foreign Crisis Fund (a modified version of the existing Complex Crisis Fund), which incorporated some of the authorities requested for a MENA IF. P.L. 113-76 , the FY2014 appropriations legislation, does not include funding for a MENA IF account or additional funding or authorities for the Complex Crisis Fund for MENA response. The explanatory statement accompanying the bill, however, notes that OCO funds may be used for stabilization and response efforts in the Middle East and North Africa. As described earlier, since FY2012, the Administration's international affairs budget has distinguished between what it has interchangeably called "core," "base," or "enduring," funding and funding to support "overseas contingency operations" (OCO), described in budget documents as "extraordinary, but temporary, costs of the Department of State and USAID in Iraq, Afghanistan, and Pakistan." In FY2012, Congress increased foreign operations funds designated as OCO by 52% over the requested level, including funds for Somalia, Yemen, and Kenya. The FY2013 full-year CR included unrequested OCO funds for disaster assistance and migration and refugees assistance, without language restricting it by country. Nearly half of FY2013 OCO funding for foreign operations was allocated for activities outside of Iraq, Afghanistan, and Pakistan. For FY2014, the Administration continued with its narrower approach for the use of OCO, requesting $2.31 billion in foreign operations OCO funds, almost all for Iraq, Afghanistan, and Pakistan. This represented a 68% decline from the FY2013 estimated OCO funding of $7.33 billion. In P.L. 113-76 , Congress designated $5.13 billion in FY2014 foreign operations funds as OCO, which is more than double the amount requested by the Administration but about 30% below FY2013 OCO funding. In keeping with its broader interpretation of OCO, Congress noted that the funds could be used for "contingency operations in Afghanistan, Pakistan and Iraq; stabilization and response efforts, including in the Middle East and North Africa; and other programs that address counterterrorism, counterinsurgency, and humanitarian crisis." Although country allocations for FY2014 are not yet available, the scaled down diplomatic and development presence in Iraq and Afghanistan suggests that, as in FY2013, OCO funding will be used in FY2014 to support a broad range of humanitarian and security assistance activities in the Middle East, Africa, and Central Asia. Table 5 compares requested and enacted foreign operations OCO for FY2012, FY2013, and FY2014. The International Affairs budget has supported international food assistance for decades, primarily through the Food for Peace (donated U.S. agricultural commodities) and Food for Education (school feeding and maternal, infant, and child nutrition) programs. Unlike most foreign assistance, these programs have been authorized in farm bills and received funding through the Agriculture appropriations. In recent years, appropriations to these two programs totaled more than $1.5 billion annually. Development professionals have long raised concerns about the efficiency and effectiveness of U.S. food assistance, which is subject to several restrictions. With some exceptions, Food for Peace commodities must be bought from U.S. producers and shipped on U.S. vessels. In recent years, the U.S. Department of Agriculture operated a pilot project to evaluate local and regional procurement of food aid commodities, while USAID carried out cash-based food security assistance (local and regional purchase, cash vouchers, cash transfers) through the International Disaster Assistance program (up to $300 million). While most U.S. food aid is used to provide emergency humanitarian relief, some food aid commodities are provided to U.S. nongovernmental organizations to be sold ("monetized") on local or regional markets and the proceeds used for development programs related to hunger and nutrition. Critics contend that U.S. procurement and shipping requirements, together with monetization practices, make food aid highly inefficient and ineffective. In the FY2014 budget, the Administration requested $1.82 billion for international food aid in three accounts. Under the food aid reform, the Administration proposed to shift $1.1 billion of Food for Peace funds to the International Disaster and Famine Assistance account for emergency food response. As proposed, 55% of this funding, about $600 million, would still have been used in FY2014 to procure and ship U.S. produced commodities. Together with $300 million of International Disaster and Famine Assistance (IDA) funds for cash-based food security programs, total emergency food aid would have been $1.4 billion in FY2014. The Administration's budget also proposed to shift $250 million to the Development Assistance (DA) account for a Community Development and Resilience Fund (CDRF). Feed the Future funding of $80 million would have been used to augment the CRDF, making its total $330 million. The CDRF would have effectively replaced the current $400 million "safe box" for nonemergency development food aid provided in the 2008 farm bill. Presumably, U.S. nongovernmental organizations (NGOs) that currently carry out food aid programs would have participated in these CDRF programs. The Administration maintained that by removing cost inefficiencies of the Food for Peace program, such as monetization, the same level of nonemergency program activity would be supported and more people would be reached. Finally, the Administration's FY2014 budget proposed to create a new Emergency Food Assistance Contingency Fund ($75 million) to provide emergency food assistance for unexpected and urgent food needs. In the FY2014 appropriation, Congress rejected the proposed reforms to food aid funding and implementation practices. P.L. 113-76 continues to fund food aid through the traditional accounts in the agriculture appropriation, providing $1.466 billion for the Food for Peace, Title II program and $185.13 million for the McGovern-Dole Food for Education program, a 7.5% increase, in total, over the FY2013 funding. Humanitarian assistance is intended to save lives and meet basic human needs in the wake of natural disasters and conflicts. In FY2012, humanitarian assistance funding in the foreign operations accounts totaled $4.56 billion. The FY2013 full-year continuing resolution increased funding over the FY2012 level for two key humanitarian assistance accounts. International Disaster & Famine Assistance (IDA) increased from $1.10 billion to an estimated $1.55 billion (post-sequester estimate), with the increased funds designated as OCO. The Migration and Refugee Assistance (MRA) account increased from $1.98 billion to $2.70 billion (post-sequester estimate), also with OCO funds. In addition, the Administration transferred $200 million of previously appropriated OCO funds in the Pakistan Counterinsurgency Capability Fund to the MRA account ($100 million) and IDA account ($120 million) to respond to the crisis in Syria. The Administration's FY2014 foreign operations budget included $4.13 billion for humanitarian assistance accounts, including $1.76 billion for MRA, $2.05 billion for IDA, $250 million for Emergency Refugee and Migration Assistance (of which $200 million was specifically for Syria), and $75 million for a new Emergency Food Assistance Contingency Fund (EFACF). Of the IDA funds, $629 million were allocated to USAID's Office of Foreign Disaster Assistance to respond to natural disaster, civil strife, food security, and displaced populations. The remaining $1.42 billion was designated for Food for Peace activities currently funded through the Agriculture appropriation (see Food Aid above). In total, the humanitarian assistance request was about 27% below the FY2013 post-sequester estimate, due in part to $250 million in food aid being moved to the Development Assistance account. The FY2014 appropriation, P.L. 113-76 , provides $1.80 billion for IDA, $3.06 billion for MRA, and $50 million for ERMA. As discussed above, the legislation did not adopt proposed reforms to food aid programs, provided no funding for the proposed EFACF, and continued to appropriate food assistance through agriculture accounts. In total, the foreign operations accounts included $4.91 billion in humanitarian assistance, a nearly 15% increase over FY2013 funding and almost 19% more than the Administration requested. The explanatory statement describes the increase as intended to address acute humanitarian needs related to Syrian refugees in Jordan, Turkey, and Lebanon. The Obama Administration introduced three major foreign assistance initiatives in 2009 and 2010—the Global Health Initiative, the Food Security Initiative (Feed the Future), and the Global Climate Change Initiative—which continued to be priorities in the FY2014 budget request. Global Health Initiative. The request included $8.315 billion for global health programs, a 3% increase over the FY2013 post-sequester estimate. The FY2014 appropriation includes $8.439 billion in the global health account, a 4.7% increase over FY2013 funding and $1.5% more than the FY2014 request. The sub-allocations outlined in the explanatory statement are similar to those in the request for the largest programs, such as HIV/AIDS, malaria, and maternal and child health, but differ notably for a few priorities: tuberculosis (+24%), neglected tropical disease (+18%), and nutrition (+21%). Food Security Initiative. Feed the Future (FtF) is the Administration's food security initiative, designed to support long-term country-led agricultural growth and nutrition plans. For FY2014, the Administration requested a total of $1.191 billion for Feed the Future across several appropriations account, a 9% increase over the FY2012 funding. (FY2013 data are not yet available.) Increased funding would be channeled to economic resilience activities in regions of Africa facing chronic food insecurity. A general provision in the FY2014 appropriations legislation provides that "not less than" $1.1 billion appropriated through bilateral economic assistance accounts should be used for food security and agricultural development activities. Global Climate Change Initiative (GCCI). The GCCI would have decreased 2% from FY2012 funding (FY2013 data are not yet available), including a $100 million transfer from ESF, under the Administration's FY2014 request of $837 million. Within that total, bilateral clean energy funding would have increased by 7% and adaptation programs by 1%, while sustainable landscapes funding would have been reduced by 10%. Total U.S. contributions to World Bank climate accounts would have decreased by 6% if the $100 million ESF transfer to these funds is calculated into the FY2012 funding total. The FY2014 appropriation for GCCI programs is unclear, as the funding directives within the ESF and DA accounts, through which the majority of GCCI funding flows, do not mention climate activities. Appendix A. State-Foreign Operations Appropriations, by Account Appendix B. International Affairs (150) Function Account, FY2012-FY2014 Appendix C. Government Shutdown Effects on the Department of State and Foreign Aid FY2014 began on October 1, 2013, with a partial government shutdown because Congress had not passed any appropriations bills for FY2014 and could not agree to differing House and Senate terms for a continuing resolution (CR) to keep the government funded. State operations and foreign assistance programs generally continued to operate because of two-year funding for the Department of State's Diplomatic and Consular Programs account that funds salaries and expenses and the U.S. Agency for International Development's (USAID's) Operating Expenses account. In addition to residual FY2013 and prior year money, trust funds, fees, permanent appropriations, and the Working Capital Fund remained available. In contrast, the Office of Inspector General, the International Boundary and Water Commission, and reportedly the American Sections of the International Joint Commission and International Boundary Commission operate on single-year appropriations and did shut down until the CR became law. Since the majority of foreign aid programs operate with multi-year or no-year funding, most foreign aid continued to flow. Activities within these programs, however, were limited by prohibitions on new grants and cooperative agreements as well as restrictions on travel, training, and representational events, among other things. These applied to programs such as State's global health activities, migration and refugee assistance, and democracy promotion funds. A few foreign aid programs operate with single-year appropriations but, according to Department of State officials, were able to operate on FY2013 money. U.S. security assistance programs, including International Military Education and Training (IMET), Foreign Military Financing (FMF), and Peacekeeping Operations (PKO), with small exceptions, were funded only through FY2013. If there had been another significant gap in FY2014 funding, more immediate impacts might have been felt by the recipients of these programs, such as Israel, as might U.S. support to the peacekeeping mission in the Sinai, according to the Department of State. Multilateral assistance within the International Organizations and Programs (IO&P) account also typically is funded with one-year appropriations. A lack of FY2014 funding for this account could have delayed U.S. voluntary contributions to such international entities as the U.N. Children's Fund (UNICEF) and the U.N. Development Program (UNDP). If there had been another government shutdown and the balance of FY2013 funding were insufficient, these programs funded entirely through single-year appropriations would have shut down until a new appropriation was enacted or unless they were deemed by the relevant Chief of Mission to be necessary for the safety of human life or protection of government property or for the "conduct of foreign affairs essential to national security." A delay in FY2014 funding could have affected recipients of these programs immediately. If another shutdown had occurred in FY2014 and funds lapsed, both the Department of State and USAID might have instituted procedures to cease operations other than "excepted" functions—those essential to national security, including the conduct of foreign affairs. Among other restrictions, a hiring freeze would have remained in place and new security investigations would have been suspended. The Foreign Service Institute would have closed and training would not have been authorized. In addition, the department would have restricted a number of allowances, including representation allowances (reimbursement for expenses while on official commission overseas), education allowances, and educational travel, unless the travel was necessary for human safety. In addition to those, unpaid allowances for non-excepted positions could also have included include post differential (such as hardship posts) and danger pay, according to the department. | On April 10, 2013, the Obama Administration submitted to Congress its budget request for FY2014. The request for State, Foreign Operations, and Related Programs totaled $51.84 billion, which was about 2% below the FY2013 post-sequester estimated funding level of $52.88 billion. Within the request, $3.81 billion was designated as Overseas Contingency Operations (OCO) funding, which was 68% below FY2013-estimated OCO funding of $11.92 billion. Of the total request, $16.88 billion was for State Department Operations and related agencies, a 5.8% decline from the FY2013 funding estimate of $17.86 billion. About $34.95 billion was for Foreign Operations, a 0.2% decrease from the FY2013 estimate of $35.02 billion. After enacting appropriations for FY2014 with continuing resolutions in late 2013-early 2014, Congress completed action on, and the President signed, the Consolidated Appropriations Act (H.R. 3547/P.L. 113-76) in mid-January 2014. This report provides a brief overview of the FY2014 State Department, Foreign Operations and Related Programs funding request, as well as top-line analysis of House and Senate State-Foreign Operations appropriations proposals, enacted continuing resolutions, and the Consolidated Appropriations Act, 2014 (P.L. 113-76). It does not provide information or analysis on specific provisions in the House and Senate legislation. Tables in Appendix A and Appendix B provide side-by-side account-level funding data for FY2013, the FY2014 request, House- and Senate-proposed totals, and the enacted FY2014 funding levels in the Consolidated Appropriations Act (H.R. 3547/P.L. 113-76). The FY2013 funding data used as a point of comparison throughout this report represent post-sequestration estimates provided by the Department of State and reflect across-the-board rescissions. |
In his 2013 State of the Union speech, President Obama stated that "our first priority is making America a magnet for new jobs and manufacturing." The President was signaling that a revitalized manufacturing sector was a key element of his strategy for promoting faster U.S. economic growth. Recent calls to use government policy to revive the U.S. manufacturing sector, particularly the companies involved in developing and making advanced technology products, have re-kindled a debate among lawmakers, economists, and other analysts over the desired economic role of manufacturing and the proper role of the federal government in the sector's performance. In the current policy debate, differences of opinion have emerged that evoke the conflicting views that characterized the domestic debate over industrial policy in the late 1970s and early 1980s. Back then, proponents of government policies to promote the competitiveness of U.S.-based manufacturing companies argued that such support was warranted for two reasons. First, manufacturing contributed more to the performance and growth of the U.S. economy than any other sector. Second, the competitive gains made by foreign companies in a range of industrial markets in the 1970s and early 1980s were partly due to government support in their countries of origin. But some saw little or no merit in that argument. In their view, what mattered most for future growth in jobs, real wages, and output was not government support for so-called strategic industries but public investments in the main forces propelling rises in the standard of living in the long run: worker skills, education, research and development (R&D), and the economic infrastructure. These critics said that industrial policies were unlikely to succeed because civil servants in general were no match for businessmen in identifying the new technologies that had a significant potential to generate large numbers of well-paying jobs in coming years. The question of what role federal policy should play, if any, in reviving manufacturing has re-emerged as a policy issue in the 114 th Congress, especially in the context of proposals to reform the federal income tax. Some critics of the current federal income tax contend that existing tax benefits for manufacturing underscore a critical problem with the system: that it is laden with special benefits that unevenly reduce effective tax rates and have the same budgetary effects as federal spending, except that the benefits are not subject to the scrutiny and oversight built into the congressional appropriations and authorization processes. This report examines the provisions in current federal tax law that benefit most or many manufacturing firms. More specifically, it identifies and describes those provisions and discusses the main arguments for and against targeted federal support (tax and non-tax) for the manufacturing sector. To set the stage for these topics, the report begins with brief overviews of the economic contributions of the sector and existing federal non-tax support for manufacturing. The report will be updated as warranted by changes in federal tax law. According to the North American Industrial Classification System (NAICS), the manufacturing sector consists of establishments that are primarily engaged in the transformation of materials, substances, or components into products. Establishments in this case are the factories, plants, or mills that use power-driven machines and equipment to effect this transformation. But they also include individuals who transform materials, substances, and components into products by hand in their homes, as well as the multitude of small businesses that sell directly to the public items they make on their premises. In general, the products made in manufacturing establishments are finished or semi-finished. The former are ready for consumption or final use, while the latter serve as inputs for the production of finished products. In the U.S. national income accounts, manufacturing is broken down into a series of sub-sectors (or industries) that reflects the links among companies as a result of the production process. Basically, the output of some manufacturing companies becomes the inputs of others and vice versa. For example, makers of machine tools buy needed materials and components directly from producers of these items, and in some cases, the latter purchase machine tools from the former so they can produce those materials and components. Nonetheless, the economic boundaries between manufacturing and other sectors sometimes are not clearly drawn, or even confusing. For example, the bottling and processing of milk and spring-fed water are regarded as manufacturing activities under the NAICS, although they involve no transformation of materials or components into a new product. On the other hand, the erection of an office building (including any fabrication performed at construction sites) is considered a construction activity, even though the final product is the result of a substantial transformative process. Manufacturing's role in the U.S. economy has changed considerably since 1960. Back then, it accounted for 27% of real gross domestic product (GDP), 31% of non-agricultural employment, more than 20% of domestic non-residential fixed investment, nearly 99% of business investment in research and development (R&D), and 62% of exports. Since the 1970s, however, the manufacturing sector's economic contributions have declined sharply. The extent of this decline can be seen in Figure 1 . Basically, it tracks the manufacturing sector's share of non-agricultural employment, gross domestic product (GDP), business investment in research and development (R&D), exports, and domestic investment in capital assets between 1960 and 2010. Relative to 1960, manufacturing's share of exports in 2010 was 17% lower; its share of business R&D investment 29% lower; and its contribution to non-agricultural employment 71% lower. Except for non-agricultural employment, manufacturing's share shrank because the contributions of other sectors rose faster than those of manufacturing. In the case of employment, manufacturing's share declined because it lost workers while combined employment in other sectors grew, except during recessions of course. Every indicator in Figure 1 trended downward except one: employee wages and salaries. Labor compensation per employee in manufacturing was somewhat larger in 1960 than it was in most other sectors. That gap grew steadily until the mid-1990s; by 2010, it was 7% smaller than in 1995, but nearly 18% larger than in 1960. Still, wages and benefits were consistently higher in manufacturing than they were in several other sectors (e.g., construction, mining, transportation, and utilities) from 1960 to 2010. Several trends related to the ones shown in Figure 1 are worth noting. First, among all sectors, manufacturing held the largest share of GDP (measured in current dollars) until 1986, when the government sector's share surpassed it. Several other sectors have risen in importance since then, and in 2010, government, finance, insurance, real estate, rental and leasing; and professional and business services each had larger shares than manufacturing. Second, manufacturing had the largest share of non-agricultural employment among all sectors until 1989, when employment in the government sector topped employment in manufacturing. Since then, retail trade, professional and business services, education, health services, and leisure and hospitality have joined government as larger sources of employment than manufacturing. Third, although payroll employment in manufacturing has fallen gradually since 1979, when it reached an all-time peak of 17.985 million, the sector's value added (in current dollars), which measures its contribution to GDP, grew by a factor of 11.9 from 1960 to 2013, when it reached an all-time peak of $1.8 trillion. The divergent trends in manufacturing's contribution to GDP and its employment reflect the relatively robust labor productivity growth in recent decades within the manufacturing sector. From 1990 to 2000, output per hour of labor in manufacturing rose at an average annual rate of 4.3%, compared to a rate of 2.2% in all non-farm businesses. The gap narrowed from 2000 to 2007, when the rate of growth for manufacturing fell to 3.7%, while the rate for the non-farm business sector rose to 2.6%. There was little difference between the two growth rates between 2007 and 2013: labor productivity grew at an average annual rate of 1.6% in manufacturing and 1.5% in non-farm businesses. Figure 1 also does not address the diverse outcomes among manufacturing industries from 1960 to 2010. Depending on how finely the manufacturing sector is sub-divided, many different industries can be identified and analyzed. Under the NAICS, which federal agencies use to organize and report industry data, manufacturing encompasses durable goods and non-durable goods industries, and each group, in turn, is divided into 10 major industries. The performance of these 20 industries can be evaluated using some of the same indicators of economic importance. A comparison of the change in full-time-equivalent (FTE) employment and real value added from 1998 to 2013 for major manufacturing industries reveals that their performance was remarkably uneven. Some grew or declined in importance more than others. As the figures in Table 1 show, FTE employment fell over the period in each of the industries, but the extent of the decrease ranged from -7.2% for food, beverages, and tobacco products to -75.9% for apparel, leather, and similar products. The range was even greater for real value added. Of the 20 industries, real value added decreased for eight of them and increased for the other 12 between 1998 and 2013. The decreases ranged from -7.0% for plastics and rubber products to -50.2% for apparel, leather, and similar products, while the increases extended from 1.5% for printing and related support activities to 561.2% for computers and electronic products. Rising foreign competition, offshoring, and the growth of the information economy were among the key forces driving these changes. Federal support for manufacturing encompasses a number of tax and non-tax subsidies. The tax benefits are discussed in the following section, while this section describes the other kinds of assistance. Several federal programs assist manufacturing firms of all sizes outside the federal tax code. The assistance mostly focuses on workforce training, export promotion, business counseling, and technology development. Foremost among the programs are the Department of Commerce's (DOC) National Institute of Standard's (NIST) Hollings Manufacturing Extension Partnership program (MEP), which was established in 1988 and provides technical assistance to small and medium-sized manufacturers to help them become more competitive and productive, and the Advanced Manufacturing Partnership (AMP), which was launched in June 2011 and uses federal funds to leverage the creation of partnerships among businesses, universities, and federal, regional, and state government agencies for the purpose of developing and encouraging the use of advanced manufacturing technologies. A variety of other programs with smaller budgets at DOC, the Department of Energy (DOE), the Department of Defense (DOD), and the National Science Foundation (NSF) also support manufacturing, mainly by fostering the development of new manufacturing technologies tailored to the missions of those agencies. There is no readily available estimate of the total amount of federal spending on non-defense programs to support the manufacturing sector. Generating such an estimate is difficult in part because the support is delivered through direct and indirect channels. Direct support comes in the form of programs that target most or all of their resources to manufacturing firms. A case in point is the MEP, which provides technical assistance to small and medium-sized manufacturing firms only. As a result, it is relatively easy to determine the amounts budgeted or spent through the program. But such is not the case with all the federal programs that indirectly support manufacturing. The main difficulty lies in accounting for the dollar value of such support, which can be defined as federal industrial assistance that is not targeted at manufacturing but nonetheless benefits a significant number of manufacturers. No such problem arises in the case of the research tax credit under section 41 of the federal tax code. Although it is not limited to manufacturing firms, they are by far the biggest users of the credit among all sectors. Data on claims for the credit by industry and sector are available through the IRS website. But a similar breakdown does not exist among the programs administered by the Small Business Administration (SBA). While many small manufacturers have benefited from those programs over the years, it is unclear to what extent. Still, lawmakers might find it useful to have an accurate and detailed breakdown of non-tax federal support for manufacturing that has nothing to do with national defense. The bulk of direct federal non-tax support for manufacturing appears to consist of funding for research and development (R&D). According to the most recent figures on industry spending on R&D issued by the NSF's National Center for Science and Engineering Statistics, the federal government funded an annual average of $24.4 billion of the defense and non-defense R&D performed by U.S. manufacturing companies in 2011 and 2012. Moreover, President Obama's FY2016 budget request for federal R&D calls for $2.4 billion for R&D targeted at advanced manufacturing technology; this support that would be delivered through programs at NSF, DOE, DOD, DOC, and other federal agencies. If enacted, MEP would receive $130 million and $15 million would go to fund the activities of advanced manufacturing technology consortia. The proposal includes funding to continue the construction of a national network of 45 manufacturing innovation institutes over 10 years. Nine institutes have been funded so far, and the proposal calls for spending $150 million in FY2016 to establish another seven such institutes. Each focuses on developing and commercializing different manufacturing technologies with broad applications through the collaborative efforts of local companies, universities, and technical institutes, and federal agencies. Before examining current federal tax assistance for manufacturing in detail, it is useful first to explain what a tax preference is. Such a preference (which many also refer to as a tax break, tax benefit, or tax expenditure) is a provision in the federal tax code that grants special tax relief to eligible individual or business taxpayers. The tax relief is mainly intended to promote certain policy goals. For instance, the tax credit under section 41 for increasing research expenditures seeks to increase U.S. investment in innovation, a crucial source of long-term economic growth and a key element in the competitiveness of U.S. businesses that compete with foreign companies in domestic and foreign markets. In some cases, however, the tax relief is intended to help struggling businesses improve their financial condition. Regardless of intent, the tax reduction from the preferences is considered special because it represents a departure from what the Congressional Budget and Impoundment Control Act of 1974 ( P.L. 93-344 ) calls "normal income tax law." Tax preferences can take any of the following forms: (1) exclusions, exemptions, or deductions, which reduce an eligible taxpayer's taxable income; (2) preferential tax rates, which apply lower rates to some or all of an eligible taxpayer's taxable income; (3) credits, which reduce an eligible taxpayer's tax liability; and (4) tax deferrals, which postpone the recognition of income for tax purposes or accelerate the recognition of expenses that normally should be deducted in future years. All things being equal, tax preferences also reduce the tax revenue flowing into the U.S. Treasury. For any tax preference, that revenue stream would be larger if the preference did not exist. As a consequence, budget experts tend to view tax preferences as federal spending through the tax code. This explains why tax preferences are also known as tax expenditures. Some contend that permanent tax preferences operate in the same way as entitlement programs do: in both cases, benefits are distributed or paid to qualified persons or corporations with no time limit. The federal tax code contains numerous provisions granting preferential treatment to companies in a range of industries. In recent years, congressional oversight of business tax benefits generally has been limited to periodic legislation to extend certain temporary benefits that have expired or are about to expire. Permanent business tax benefits, by contrast, have received less attention. Table 2 shows the tax preferences from which manufacturing companies derive the most benefit. The figures apply to corporate and non-corporate businesses. Since not every tax preference is designed to benefit manufacturing firms only, two methods are used to identify the most beneficial preferences. One is the share of the total amount of claims for a tax preference accounted for by manufacturing firms. The other is the design of a preference and the extent to which manufacturing firms as a whole would be likely to benefit from it, given their lines of business. Of the tax preferences listed in Table 2 , only one arguably is designed to benefit the manufacturing sector more than others: the deduction for "domestic production activities" income under Section 199 of the federal tax code. While companies in several other industries benefit to varying degrees from the deduction and the other preferences shown in the table, it is likely that they do not benefit to the same extent as do firms primarily engaged in manufacturing activities. Several of the tax preferences are intended to stimulate increased investment in qualified research (Sections 174 and 41) and in equipment and software (Sections 168 and 179). They do so by reducing the cost of capital and boosting cash flow for firms undertaking such investments. Tax subsidies for investment in research are justified on the grounds that they seek to correct a market failure associated with R&D investment. In theory, companies are assumed to invest too little in research and development (R&D) relative to its social returns, because they cannot capture all the returns. But a similar rationale may not apply to tax subsidies for capital investment. Economists have found no evidence indicating that investment in capital assets like factories and equipment is subject to a similar market failure; rather, firms generally appear to capture most of the returns. Governments typically have adopted investment tax subsidies as a countercyclical measure during economic downturns. The federal government did so in response to the Great Recession of 2007 to 2009 by extending and increasing the bonus depreciation allowance under Section 168(k) and enhancing the expensing allowance under Section 179. With one exception, the other tax preferences shown in the table encourage the following activities: increased domestic investment and expansion by manufacturing firms (Section 199); a larger flow of equity capital to small, young manufacturing firms (Section 1202); greater cash flow among manufacturing firms of all employment sizes (Sections 491, 492, and 168(k)(4)); and increased U.S. exports of manufactured products (Sections 861, 862, 863, and 865). The exception is the first preference in the table: the deferral of the active income of controlled foreign corporations (CFCs) under Section 11(b). It is the only tax provision from which U.S.-based manufacturing firms derive significant benefits that encourages them to invest outside the United States, especially in countries with lower tax rates than the United States. A CFC is a foreign corporation in which U.S. shareholders own 50% or more of its total voting power or the total value of its stock on any day of a tax year. The federal government taxes U.S.-chartered corporations on their worldwide income. Section 11(b) permits U.S.-based corporations with CFCs to postpone indefinitely U.S. taxation of their subsidiaries' earnings while the earnings remain in the control of the CFCs and are reinvested abroad. A U.S. parent corporation pays federal tax on its subsidiaries' earnings only when they are repatriated as intra-firm dividends or certain other kinds of income. That tax is reduced by a U.S. credit for any income taxes the subsidiaries paid to the host countries on the same earnings; the credit is intended to avoid the double taxation of foreign-source income under the federal tax code. The option for deferral and the availability of the foreign tax credit give U.S. firms an incentive to establish operations with their own profit centers in countries with relatively low tax rates. While any U.S.-chartered corporation with one or more CFCs can benefit from deferral, there is evidence that corporations engaged primarily in manufacturing have been major beneficiaries. A case in point is the corporate response to a temporary reduction in the U.S. tax rates for repatriated earnings under the American Jobs Creation Act of 2004 ( P.L. 108-357 ). The act allowed U.S. corporations to take a one-time deduction equal to 85% of any increase in their repatriated foreign-source income in either their first tax year beginning on or after the date of enactment or their last tax year beginning before that date. For companies subject to a corporate income tax rate of 35%, the deduction lowered the effective rate on the repatriated income to 5.25%. Credits for foreign taxes paid on the repatriated earnings were reduced by the same amount. To claim the deduction, companies had to establish a domestic investment plan for the repatriated funds. In addition, the deduction was limited to the greater of $500 million or the amount of earnings shown on a firm's books permanently invested outside the United States as of June 30, 2003. According to the House and Senate conference report on the act, the temporary tax reduction was intended to stimulate increased business investment and hiring and would not be extended or enacted again anytime soon. In a 2008 report on the one-time dividends received deduction, the Internal Revenue Service (IRS) noted that manufacturing corporations filed 55% of the returns for the 2004 to 2006 tax years claiming the deduction and accounted for 81% of all qualifying dividends. Nearly half of all qualifying dividends were repatriated by firms in the pharmaceutical, electronic, and computer industries. The current debate over whether to expand federal support for manufacturing is reminiscent of the lively (and at times acrimonious) debate over industrial policy that influenced the formulation and implementation of U.S. economic policy in the 1980s. In both cases, a primary concern was and is the short- and long-term economic consequences of a sustained decline in the domestic manufacturing base driven largely by increasing foreign competition in key global markets, particularly those for advanced technology products. Proposals to enhance federal support for manufacturing raise a number of policy issues. One is the economic rationale for such support. If such support can be justified on economic grounds, then the case for retaining or enhancing existing support becomes harder to refute, dismiss, or ignore. The question of whether federal assistance for manufacturing is justified on economic grounds also has noteworthy implications for the debate in the 114 th Congress over reforming the federal tax code. Several proposals to expand federal support for manufacturing have been introduced, a few of which include new or expanded targeted tax incentives. In effect, these incentives would increase the after-tax rate of return on investments by manufacturing companies, relative to the after-tax rate of return on investments by non-manufacturing companies, other things being equal. While the relative rates of return on business investments is only one of the forces shaping the domestic allocation of economic resources, it could divert to manufacturing businesses some of the capital that otherwise would flow into non-manufacturing businesses. Such an outcome would appear to run counter to some of the commonly held general aims of tax reform proponents. These include a revenue-neutral simplification of the federal income tax through a reduction or repeal of certain individual and business tax preferences in exchange for tax rate cuts, and the elimination of tax preferences that distort the allocation of resources in the U.S. economy in ways that hamper its growth. Current or proposed tax-based support for manufacturing raises the question of how Congress could reconcile such support with those aims. Such a task may be easier if there is an economic justification for targeted federal subsidies for manufacturing industries. Proponents of targeted government assistance for manufacturing offer several arguments to justify it. The arguments are largely based on the sector's current and historical contributions to the U.S. economy. More specifically, they focus on the importance of manufactured products to U.S. exports, the wages and benefits available in the manufacturing sector, the role of manufacturing in technological innovation, the links between manufacturing and other sectors, and actions taken by other countries to support manufacturing. Each is examined below. The case for greater federal aid for manufacturing rests in part on a view held by a number of economists that the United States would be better off relying less on consumption and imports financed by foreign borrowing to grow its economy and relying more on domestic production of goods and exports. Manufactured products (mainly chemicals, transportation equipment, computers and other electronic products, and machinery) accounted for 49% of all U.S. exports and 68% of all U.S imports in the first four months of 2015. Proponents of more federal support for manufacturing maintain that these figures demonstrate that manufacturing has to play a leading role in any credible plan for reducing the U.S. trade deficit. In their view, the federal government should launch renewed efforts to dismantle the remaining barriers in key countries to the export of U.S. manufactured products and persuade major exporting nations like China to adopt more flexible exchange rate regimes. They also call for the adoption of federal initiatives to bolster the competitiveness of U.S. manufacturers through subsidized investments in workforce development, new production facilities, and R&D. Proponents also point to the wages and benefits provided by manufacturing firms as another reason why targeted government support for manufacturing industries is warranted. This is because the compensation paid workers in manufacturing is larger, on average, than the labor compensation provided in other non-agricultural industries (see Figure 1 ) , though the gap has been shrinking over time. Estimates of the size of the pay gap vary. For instance, between 2005 and 2010, according to data from the Bureau of Labor Statistics, average weekly earnings in manufacturing were 21% greater than average weekly earnings in all private non-agricultural industries. By contrast, according to a recent study by Mark Price of the Keystone Research Center, manufacturing workers earned 8.4% more each week than non-manufacturing workers from 2008 to 2010. There is evidence that this gap is even larger for manufacturing firms that have relatively high ratios of exports to total production. Not all non-manufacturing industries pay less than the average wage in manufacturing. But the ones that do pay more, according to Price's research findings, such as mining, utilities, telecommunications, finance, insurance, professional and technical services, hospitals, and public administration, accounted for only 21% of total non-manufacturing workers. Price also found that low-wage workers benefitted the most from manufacturing jobs and high-wage workers benefitted the least, suggesting that manufacturing has the potential to lower wage gaps among workers. Moreover, proponents note that manufacturing jobs are more likely to provide fringe benefits than non-manufacturing jobs, and that a higher share of manufacturing workers (48%) have no formal education beyond a high-school diploma than non-manufacturing workers (37%) do. Consequently, say proponents, added federal support for manufacturing could open up more middle-income job opportunities and lower income inequality within the domestic workforce. Proponents cite the myriad links between manufacturing and technological innovation as yet another reason why federal policy should offer special support for manufacturing firms. According to data from the National Science Foundation (NSF), in 2012, manufacturing firms as a whole performed 69% of the business R&D conducted in the United States and employed 60% of the workers involved in domestic business R&D. Since technological innovation serves as the principal engine of long-term growth in both productivity and the economy, proponents maintain that the federal government should adopt policies that encourage manufacturers to conduct more of their R&D in the United States. According to NSF data, U.S.-based multinational manufacturing companies conducted an estimated 76% of their worldwide R&D in the United States in 2011, the most recent year for which figures are available. But this share may have declined since then, as some of these companies have transferred part of their R&D operations to Asia to take advantage of markets with strong growth potential, plentiful supplies of well-educated and well-trained researchers and engineers willing to work at salaries below average U.S. salaries for comparable work, and generous government subsidies. Proponents say the manufacturing sector makes a "disproportionately large" contribution to the development and production of goods and services with clear environmental benefits. A 2012 report by the Brookings Institution estimated that 26% of the 2.7 million jobs in the "clean economy" are in the manufacturing sector, even though those jobs represented only 9% of private-sector jobs. Proponents also note that numerous green technologies and products are made by manufacturing firms, including electric vehicles, water-efficient products, energy-efficient appliances, and environmentally friendly chemical products. In their view, these contributions suggest that a competitive, growing manufacturing sector is needed to provide the United States with the workforce skills, engineering talent, and innovative capabilities required to meet the twin technological challenges of producing more clean energy and reducing the use of energy derived from fossil fuels. Proponents argue that special federal assistance for domestic development and production of new and advanced green technologies is critical to the achievement of these goals. Backers of targeted government assistance for manufacturing industries also cite the role they play in the growth of other industries as another justification for this assistance. This role has two critical aspects. One is the impact of manufacturing output on the collective output of other sectors, or what is known as the multiplier effect of the demand for manufactured products. Proponents point out that there is evidence that the manufacturing sector exerts a stronger pull on overall output than any other sector. One measure of this pull is a sector's backward linkage in the input-output structure of an economy. This linkage refers to the impact on the output of supplying sectors such as raw materials, services, construction, and energy of the level of output in another sector. As a sector's backward linkages expand, at least in the short run, its influence on overall output grows as well. According to an analysis by the Manufacturing Institute of input-output data 2012 for all sectors in 2012 from the U.S. Bureau of Economic Analysis, $1.00 of final demand for manufactured products led to $1.33 in output from all other sectors combined. Agriculture, forestry, hunting, and fishing: had the second largest backward linkage: $1.00 in final demand resulted in $1.11 in output from all other sectors. The second aspect concerns the contribution of manufacturing firms to the domestic climate for industrial innovation in general, and to the growth and competitiveness of certain non-manufacturing industries in particular. Proponents maintain that product innovations in manufacturing have had a major impact on the growth prospects for firms that use those innovations in a variety of non-manufacturing industries. A case in point is the productivity gains and other benefits in industries that invest in information technologies. Furthermore, say proponents, manufacturing creates and supports numerous well-paying jobs in product and process engineering, design, operations and maintenance, transportation, testing, R&D, payroll, accounting, and legal work. In their view, the loss of domestic manufacturing jobs and production through offshoring and plant closures diminishes the domestic ability to innovate, stunting the ability of the U.S. economy to generate new well-paying jobs in a range of sectors. Thus, according to proponents, targeted government support (particularly in the form of private-public partnerships focused on technology development) is needed to ensure that the United States sustains and grows this ability through the creation of "industrial commons", which are geographically based hubs where complementary manufacturing, engineering, and R&D activities coalesce to allow participating firms to develop new technologies and bring them to the market. Yet another argument made in support of federal policies to assist manufacturing is that other countries do so, some with notable success. According to some proponents, the exemplar is Germany. In their view, the federal government would achieve better results with its targeted assistance for manufacturing if it were to emulate German policy toward manufacturing. Compared to the United States, Germany has achieved superior outcomes in manufacturing in recent years, as exemplified by higher wages, a slower rate of job loss, and large trade surpluses. Some attribute these results in part to public policies that have fostered the emergence and growth of German R&D networks. Among other things, these networks have aided the growth and competitiveness of the manufacturing sector by supporting a system of continuous vocational training tied to industry needs, promoting stable access to finance for small and mid-sized German companies, and encouraging the rise of collaborative systems involving unions and companies for making important decisions on issues not subject to collective bargaining. Proponents of greater federal support for manufacturing point to the German example as proof that public policy can address the basic challenges facing the manufacturing sector in ways that help a country accomplish key policy objectives such as relatively high wages, increased technological innovation, larger trade surpluses, improved environmental protection, and greater energy conservation. A 2013 report by the Government Accountability Office (GAO) examined the support for the manufacturing sector offered by the national governments in Germany, as well as three other developed countries: South Korea, Japan, and Canada. The report found that these countries provided a varied mix of programs to support manufacturing industries; it also found that there were some significant differences between those efforts and the support provided by the federal government. A common thread in all the programs (including those of the United States) was an emphasis on targeted support for innovation among small- and medium-sized manufacturing firms (SMFs). South Korea supported its manufacturers through funding for a variety of national research institutes (including one focused on telecommunications and information technology), clean energy technology development, and a national network of "technoparks," which operated as regional innovation centers where companies (especially SMFs) could collaborate with researchers from the national research institutes and universities and local governments in the commercial development of new technologies. The Japanese government took a number of steps from 2007 to 2012 to foster the formation and growth of SMFs, mainly through the creation of collaborative research centers involving larger businesses, universities, industry associations, financial institutions, research institutes, and government agencies. These steps included the adoption of the following initiatives: Innovation 25 in 2007; Industrial Cluster Project in 2011; and Rebirth of Japan strategies in 2011 and 2012. Among the efforts tied to the Rebirth of Japan strategies were increased public and private investment in alternative energy R&D projects such as clean-energy motor vehicles and improved battery performance for electric cars, and increased government support for technological innovation by SMFs through the creation of a national network of Public Industrial Technology Research Institutes. And as of 2012, Canada relied on several initiatives to foster the growth of SMFs seeking to develop and commercialize new products and processes. One was the Canadian Innovation Commercialization Program, which helped SMFs take advantage of government procurement programs for leading-edge products, services, and technologies. A second initiative was the Industrial Research Assistance Program, which consisted of a national network of technical advisors who worked directly with SMFs to promote the commercialization of their new goods and services. Canadian manufactures also benefited from a tax credit for qualified investment in R&D (known as the Scientific and Experimental Development tax credit) and a government-funded program (known as the Venture Capital Action Plan) to encourage private investment in startup firms and to facilitate the creation of private venture capital funds. Proponents seem divided on the question of which firms should be eligible for government assistance for manufacturing. This is a significant issue for public policy because the sector consists of firms of different sizes and geographic reach in a range of industries that vary considerably in the products they make and the markets they serve. Under the NAICS, manufacturing embraces products as basic as bottled water and as sophisticated as nanotechnology. Some proponents argue that federal policy toward manufacturing should take into account differences in financial condition and external economic benefits among industries involved in goods production in deciding which firms, technologies, or industries to support. Such an approach, in their view, would provide lawmakers with a clearer picture of the need for policies to encourage the migration of workers from declining to growing industries, remedy market failures that permit relatively inefficient firms to remain in business, and help small and medium firms to raise their productivity. To assist manufacturing firms that are unlikely to improve their competitiveness, say proponents, would be a waste of taxpayer money. Others contend that the federal policy should target its assistance to bolster the "ability of enterprises to develop and manufacture high-technology products in America." Some call for a shift in government policy toward manufacturing so that special assistance is directed to small companies only. In their view, such a focus makes sense for two reasons. First, proponents of this limited approach point to evidence that young startup firms serve as "key drivers of employment and technology growth" but lag behind large firms in adopting "new technologies that would make them more productive." Second, they argue that small and medium firms face special difficulties in gaining needed public information and advisory services, but that they play "critical roles" in supporting the competitiveness of large U.S. manufacturers. In spite of what appears to be a bipartisan consensus in favor of greater federal support for manufacturing, not everyone agrees that such assistance is warranted on economic grounds. Critics offer several reasons for their opposition to targeted government support for manufacturing. They can be summarized as follows: (1) the lack of any market failures linked to the performance of the manufacturing sector, (2) a sustained decease in the contributions of the manufacturing sector to job creation and GDP over the past 50 years, and (3) the untapped potential for growth in U.S. exports of services in which the United States may have a comparative advantage. Additional details on each are given below. Critics say the main reason why government assistance for manufacturing cannot be justified on economic grounds is that the performance of the sector is not distorted by a market failure. In general, a market failure is a condition or set of circumstances that prevents or hampers the emergence of an efficient allocation of resources within a particular market, such as the market for health insurance or passenger cars. Most economists would agree that when markets fail to generate efficient outcomes, government intervention is required to remedy the problem. For instance, if competition in a market is dominated by a few companies, antitrust laws can be used to lessen the welfare losses by curtailing the sellers' market power. The primary market failures involve public goods, externalities (positive and negative), a lack of competition, the absence of a market, incomplete and asymmetric information, and the principal-agent dilemma. This basic principle of economic analysis implies that government support for an industry is warranted only if a market failure is producing inefficient resource allocations within the industry. An example of such a distortion is sub-optimal investment in R&D or capital assets like buildings and equipment. Some say that manufacturing is prone to market failures resulting from three activities that are characteristic of manufacturing: R&D investment, clustering of firms in the same geographic area, and the process of learning by doing. But critics disagree with this assessment on the grounds that there is no clear evidence that these activities engender market failures that are unique to manufacturing. One market failure some associate with manufacturing is inefficient levels of R&D investment. This linkage is not surprising, since the sector accounts for over two-thirds of the domestic R&D performed by companies, and companies are thought to invest too little in R&D because of their inability to capture all the returns from those investments. The returns captured by entities other than the innovator (i.e., other companies and consumers) represent the positive externalities or spillovers from R&D investments. Though there is reason to believe that manufacturing is affected by this market failure more than other sectors, the problem is bound to arise in any sector where companies invest in R&D. Numerous non-manufacturing firms, such as those involved in software development and Internet access (e.g., Microsoft and Google), invest substantial amounts in R&D and thus may be as likely as any manufacturing firm to underinvest in R&D relative to its overall social benefits. In the view of critics, the appropriate policy response to the positive externalities associated with R&D investment is to offer a subsidy intended to boost such investment that is available to companies in all lines of business. Current federal policy does this by funding research that most companies are loath or unwilling to undertake on their own (mainly basic research) and by providing tax subsidies for private-sector spending on qualified research. Some have argued that manufacturing is particularly vulnerable to a market failure associated with industry clustering. This clustering occurs when a number of businesses from the same industry set up shop in the same location. There is evidence that clusters of manufacturing firms can be more productive and innovative than similar firms operating in isolation from one another. As a result, when a company builds a plant in an area where a clustering exists, some of the returns on that investment may accrue to other firms in the cluster. Leakages like this are identical in effect to the positive externalities from R&D investments. Without a government subsidy, companies would invest too little in joining clusters, relative to their economic benefits. But critics say that the studies that have been done on the economic benefits of clustering have yet to find evidence of such effects on a large scale. They also point out that the external benefits from clustering should arise in not only in manufacturing but in any industry where clustering occurs on a significant scale, such as software, insurance, and entertainment. Critics also cite "learning by doing" as another example of an alleged market failure in manufacturing that has little or no merit. They note there is no evidence that the process, which encompasses the time, analysis, and adjustments required to make a new production process work efficiently, prevents companies developing new production methods from capturing the returns from those investments. If this were not the case, then one could argue that government assistance would be needed to ensure that firms invest in process innovations in optimal or near-optimal amounts. But such is not the case, say critics. To substantiate this point, they cite a recent study of the U.S. semiconductor industry that found that, while learning by doing represented a substantial share of the cost of investing in new production methods, most of the rewards went to the companies making the initial investments. Not even the external benefits associated with national defense spending justify targeted government assistance for manufacturers, in the view of critics. They contend that not all manufacturing firms are equally affected by a war effort. Moreover, according to critics, there is no reason to believe that the existing U.S. production base for defense goods, supplemented by military supply arrangements with allies, would be incapable of providing adequate supplies of weapons and other needed materials during a war. A second argument against special assistance for manufacturing concerns job creation. Some critics say it would be misguided in light of recent history for the federal government to target assistance at manufacturing in the expectation that doing so would be likely to spark large employment gains over time. Domestic employment in the sector has been gradually shrinking (with a few temporary upturns) since 1979 and now accounts for almost 9% of U.S. non-farm employment. In the view of critics, many of the factory jobs that were lost over the past three decades are not coming back. They cite several reasons why a return of such jobs on a massive scale is unlikely. First, many of the jobs involved skills that were readily available in places like China and Mexico. Second, even if every U.S. multinational company were to stop outsourcing production and no imports of manufactured products were allowed in the United States, domestic manufacturing employment would probably continue to fall relative to other sectors. This is because Americans have been spending less of their disposable income on goods and more on services since the late 1970s, a trend that is unlikely to change anytime soon. Service industries now account for 44% of U.S. non-farm payroll jobs. Critics also note that the main cause of the mostly sluggish U.S. job growth since the end of the Great Recession in June 2009 has been a slow recovery in aggregate demand here and in other major countries. Thus, in their view, increasing assistance to manufacturing firms, especially SMFs, would do little to boost job creation in the short run, since the assistance would have virtually no effect on the overall demand for goods and services made in the United States. Critics also say the U.S. economy would benefit more in the short run from government efforts to dismantle foreign barriers to U.S. exports of services than from new programs to bolster the competitiveness of U.S. manufacturers, especially SMFs. They say the United States has a larger comparative advantage in highly skilled services such as engineering, law, finance, and architecture than it does in products made with the use of low-skilled workers (e.g., apparel, wood products, processed foods). In addition, critics note that although the United States is the leading exporter of services in the world, there is considerable untapped potential for expanding U.S. service exports. Current exports come from a small percentage of U.S. companies, and there has been an upsurge in infrastructure development in faster-growing economies like China, India, and Brazil in the past decade. According to an estimate by economist J. Bradford Jensen, the United States could more than double its service exports if existing foreign barriers were removed, creating an additional $800 billion in tradable business services like law and engineering. Such an increase would support or create nearly three million U.S. jobs, according to Jensen, and those jobs would be likely to pay higher wages than manufacturing jobs, on average. In light of such possible gains, critics argue that the federal government should focus more on pressing other governments to open up their service markets to U.S. companies than on promoting exports by domestic manufacturers with no foreign subsidiaries. The debate over whether manufacturing industries should receive federal assistance raises several issues that Congress may wish to take into consideration as it examines options for reforming the federal income tax or laying a foundation for future robust economic growth. Each issue has implications for federal policy toward manufacturing. The evidence cited by both sides in the debate to support their arguments suggests there is no clear economic rationale for providing federal support for the manufacturing sector as a whole. Goods production as an economic activity seems free of any obvious market failures. Some proponents point to manufacturing's major contributions to technological innovation and the positive external benefits associated with R&D investment as evidence that the sector is subject to a market failure. But such an argument is difficult to reconcile with the fact that the positive externalities associated with R&D are not limited to manufacturing but extend, at least in theory, to all companies that invest in R&D. Federal tax policy has recognized this economic reality for nearly 60 years. In 1954, Congress passed a sweeping revision of the federal tax code that included a permanent expensing allowance for qualified research expenditures. In 1981, Congress added a temporary research tax credit to the tax code. Both provisions remain in effect, though the credit has been modified significantly several times and extended 16 times. Since eligibility for these tax subsidies depends critically on the nature of the research a firm finances and the nature of its research expenditures, and not on the industry in which a firm is classified, the subsidies have the potential to stimulate increased investment in innovative activity across all sectors, not just in manufacturing. The debate also suggests that increased federal aid for manufacturing on the whole would be unlikely to spark a significant rise in the domestic rate of job creation. The sector's contribution to overall employment has been declining for more than three decades and now stands at just under 9% of U.S. non-farm employment. In an economy marked by uneven and relatively weak job growth more than six years after the end of the 2007-09 recession, it can be argued that increased federal assistance for manufacturing would do less to spur faster job growth in the short run than policy measures that deliver a greater stimulus to aggregate demand, such as increased federal spending on the rebuilding and expansion of the U.S. transportation network. Another issue raised by the arguments for and against targeted federal support for manufacturing concerns the importance for the domestic climate for technological innovation of the undertaking of production and R&D in the same location. Proponents of a greater federal role in revitalizing the domestic manufacturing base say that the future growth potential of the U.S. economy hinges in part on finding ways to convince more manufacturing firms to perform a substantial share of their R&D and production in the United States. A critical consideration here is the impact on the competitiveness of companies that invest heavily in R&D of separating innovation activities and production in different countries (or perhaps in different companies). Proponents contend that such a separation makes it harder for a company to take full advantage of the commercial benefits from implementing new technologies. But the evidence is not conclusive either way. Thus, Congress may want to look into the extent to which the economic returns from innovation depend on domestic production capabilities tied to the domestic development of new products and processes. The debate also leaves the distinct impression that policy initiatives to bolster the international competitiveness of U.S. manufacturers would have similar benefits for other sectors, and thus should not be limited to manufacturing. Some proponents of a greater federal assistance for manufacturing say federal policy should focus on four objectives: increased R&D support, greater investment in worker training, improved access to investment capital, and the creation of new collaborative mechanisms for creating and sharing productivity improvements and other innovations among smaller firms. Yet there is no obvious reason why most firms in other industries would not benefit from them as well. Rather than focusing on manufacturing as the primary pathway to growing the U.S. economy, Congress might consider policy options for providing more R&D support, improving worker training to reduce mismatches between employer skill needs and the skill sets of workers, expanding access to credit for small- and medium-sized companies, and encouraging the growth of industry-specific networks that could offer a range of collaborative services for the mutual benefit of individual firms that would apply to all industries. Finally, though this issue is not the primary focus of the arguments addressed here, Congress may wish to examine the advantages and disadvantages of using tax incentives as a primary tool for achieving any policy objectives it may establish for manufacturing industries. Permanent tax incentives require no annual appropriations or other congressional action to have their intended effect. They operate like hidden entitlements that can produce sizable revenue losses, impose significant compliance burdens on companies, and generate additional enforcement costs for the IRS. By contrast, policy initiatives based on spending can be more transparent and amenable to congressional oversight. The comparative advantages of spending programs (including credit guarantees) and of tax incentives aimed at a specific industry like manufacturing might receive greater scrutiny as Congress considers options for tax reform in the coming months. Some options would seek to achieve revenue neutrality by lowering business income tax rates and expanding the business tax base by reducing or repealing certain business tax incentives. | Fueled in part by certain policy initiatives advocated by President Obama, a lively debate over whether additional federal assistance should be provided for manufacturing is taking place among some analysts and lawmakers. Several issues are central to the debate: (1) the contributions of manufacturing to the performance and growth of the U.S. economy, (2) whether the federal government should do more to promote the growth of the sector, and (3) if so, what measures would be likely to have the intended effect? The federal government supports manufacturing in a variety of ways. This report focuses on the support provided through the federal tax code. Current federal tax law contains nine provisions with the potential to provide significant tax relief to firms primarily engaged in manufacturing. A few are targeted at manufacturing, while the others offer more benefits for manufacturers than for firms in most other sectors. The most important provisions, ranked on the basis of estimated foregone revenue, are the deferral of the active income of controlled foreign subsidiaries of U.S.-based corporations, the research tax credit, the expensing of outlays for research and experimentation, and accelerated depreciation for a variety of capital assets. A number of proposals are being considered in the 114th Congress to expand federal tax benefits for the manufacturing sector. Some of the bills would create new tax incentives intended to increase domestic investment and job growth in manufacturing. Their prospects for passage have become intertwined with the growing debate in Congress over reforming the federal tax code. Most proponents of tax reform favor an approach that would combine a broadening of the income tax base (e.g., by eliminating certain business tax incentives) with a lowering of corporate and individual tax rates, in a revenue-neutral fashion. Such an approach could have a significant effect on the taxes paid by many manufacturing companies. Proponents of boosting federal assistance for manufacturing say the added support would benefit the U.S. economy in several important ways. In their view, a revitalized manufacturing sector might enable the United States to derive more of its economic growth from exports and domestic production than it has in the past two decades or so. Proponents also contend that average domestic wages would be likely to rise in response to growing manufacturing output, as manufacturing jobs historically have paid higher wages and benefits, on average, than have non-manufacturing jobs. In addition, according to proponents, a growing manufacturing sector would help lay a foundation for future U.S. economic growth, since manufacturing industries perform the vast share of private-sector research and development (R&D), which fuels the innovation that serves as a primary engine of economic growth. Finally, proponents argue that the United States would lose its long-standing leadership in advanced manufacturing technologies in the absence of increased federal support for manufacturing R&D and worker training. Critics of greater federal assistance for manufacturing maintain that there is no economic justification for additional support. In their view, in the absence of a market failure linked to goods production in general, government aid for manufacturing should be decreased or eliminated, not increased. Critics also say that promoting job growth in manufacturing would do little to create the millions of jobs needed to bring domestic full-time employment back to the levels that prevailed on the eve of the severe recession from 2007 to 2009. And, say critics, U.S. gross domestic product and employment would receive a greater boost from federal initiatives to dismantle foreign barriers to expanding exports of services than from targeted assistance aimed at boosting the competitiveness of U.S. manufacturing companies. |
RS21213 -- Colombia: Summary and Tables on U.S. Assistance, FY1989-FY2004 Updated May 19, 2003 While the United States has been providing counternarcotics (CN) assistance to Colombia at least as far back as the mid-1970s, former President George H.W. Bushdramatically increased CN aid to Colombia through his 1989 "Andean Initiative." Grant aid to Colombia hadincreased gradually, albeit not evenly, through the1980s, as Colombia evolved from a major supplier of marijuana to the United States, to nearly the sole supplier ofcocaine. By the end of the 1980s, with coca leafcultivation and cocaine production rising in the Andean region, and Colombia suffering increased political violencefrom the Medellin drug-trafficking cartel, theformer Bush Administration established its new CN program. Under this region-wide initiative, the United Statessubstantially increased State Department supportfor Colombian CN efforts, and provided Colombian security forces, primarily the police, with equipment throughforeign military financing grants and DODequipment drawdowns. As part of the effort to bring military resources to bear on the "war against drugs," in 1991,Congress enacted "Section 1004" of the 1991National Defense Authorization Act (NDAA) ( P.L.101-510 ). This provides the DOD with authority to providetransportation, reconnaissance, training, intelligence,and base support when requested by foreign law enforcement agencies for CN purposes. Funding for Colombia dropped in the first two years of the Clinton Administration budgets. It began to increase in FY1997, with increased attention to eradicationefforts. Until FY1998, however, the numbers fell short of the Bush years. (1) In 1998, Congress established a new authority, Section 1033 of the1998NDAA ( P.L.105-85 ), for the U.S. military to provide non-lethal equipment, and to maintain and repair counter-drug equipment. Table 2 details funding for the eleven yearsfrom FY1989 - FY1999, which totals $1,066.7 million (i.e., $1.07 billion). The 1998 election of a new Colombian president, Andres Pastrana, led to a reevaluation of U.S. policy and greater cooperation. During Pastrana's October 1998state visit, President Clinton announced that the United State would provide nearly three times more assistance toColombia during FY1999 than it had the previousyear. Much of this, however, was the $173.2 million in congressionally-mandated supplemental appropriationsfunding ( P.L. 105-277 ) for helicopter and aircraft upgrades, radar, andpolice assistance that the Administration had not requested. In FY2000, the funding again rose substantially withthe "Plan Colombia" legislation. In July 2000, Congress approved the Clinton Administration's request for $1.3 billion in FY2000 State Department and DOD emergency supplemental appropriations ( P.L. 106-246 ) forthe region-wide "Plan Colombia," of which $860.3 was earmarked for Colombia. Nearly half of the Colombiafunding was dedicated to the "Push into Southern Colombia" program toset up and train two new Colombian Army Counternarcotics battalions (CACBs), which combined with an existingone set up earlier by the United States to form a brigade of some2,700. The brigade assists the Colombian National Police (CNP) in the fumigation of illicit narcotics crops and thedismantling of laboratories, beginning with coca fumigation in thesouthern provinces of Putumayo and Caquetá, where coca cultivation was spreading rapidly. Congress alsoprovided substantial assistance for economic development, displacedpersons, human rights monitors, and administration of justice and other governance programs, all intended to helpColombia counter the many threats to its stability and integrity fromthe trafficking of illegal narcotics. With its FY2002 budget request, the Bush Administration expanded the scope of Clinton's "Plan Colombia" policy through its Andean Regional Initiative (ARI), with continuing highlevels of support for existing "Plan Colombia" programs in Colombia, and increased assistance to states borderingor close to Colombia. Congress provided $380.5 million, nearly all ofthe Administration's requested $399 million, for Colombia in State Department counternarcotics funding in theFY2002 foreign operations appropriations ( P.L. 107-115 ). (2) As inprevious years, the appropriations bill included human rights and other conditions, and a cap on the numberdeployed of military personnel and of private contractors who are U.S.citizens. In February 2002, through requests for FY2002 emergency supplemental appropriations and FY2003 regular appropriations, the Bush Administration sought authority and funding toexpand the scope of military assistance. In both requests, it asked for foreign military financing (FMF) funds to trainand equip Colombian soldiers to defend oil pipelines and otherinfrastructure from attacks by leftist guerrillas, in addition to funding for Plan Colombia programs. Thesupplemental request also sought funding to train Colombian security forces inanti-kidnapping techniques. In addition, the supplemental submission proposed to broaden the authorities of theDefense and State Departments to use FY2002 and FY2003 assistanceand unexpended Plan Colombia ( P.L. 106-246 ) aid to support the Colombian government's "unified campaignagainst narcotics trafficking, terrorist activities, and other threats to itsnational security." In the month before Colombia's new president, Alvaro Uribe, took office in August 2002, Congress provided almost all of the requested supplemental funding and expanded the scopeof military assistance permitted with those and previous-fiscal year funds. With the FY2002 supplementalappropriations (Section 305, P.L. 107-206 ), Congress provided authority forthe Administration to use counternarcotics and other funds to support Colombia's "unified campaign" againstnarcotics trafficking and against activities by organizations designated asterrorist organizations, naming specifically the two major leftist guerrilla groups, the Revolutionary Armed Forcesof Colombia and the National Liberation Army, and the rightist UnitedSelf-Defense Forces of Colombia, as well as in emergency circumstances. Congress, however, did not provideexpanded authority for activities involving any other national securitythreats. Congress extended the authority for State Department FY2003 funding in the omnibus FY2003appropriations bill ( P.L. 108-7 , under the heading "Andean CounterdrugInitiative"), passed in February 2003, which included annual State Department appropriations, and for DOD fundingin the FY2003 defense appropriations bill (Section 8145, P.L.107-248 ). Congress approved just $5 million shy of the $537 million the Bush Administration requested in CN($433.2 million) and FMF ($93 million) funding. In the FY2003supplemental appropriations ( P.L. 108-11 ), Congress included $105 million for Colombia: $34 million in StateDepartment CN funding, $34 million in DOD CN funding, and $37.1million in FMF funding. Both bills condition aid on the observance of human rights and environmental and otherrestrictions. For FY2004, the Bush Administration has requested $573 million for Colombia, including $463 million in Andean Counterdrug Initiative (ACI) funds, and $110 million in ForeignMilitary Financing. It has also requested military funding for Colombia that, for the first time since Plan Colombiawas adopted, is not requested for a very specific purpose. TheAdministration request states that FMF for Colombia is intended "to support counter-terrorism operations andprotect key infrastructure such as the oil pipeline." Table 1 shows aid to Colombia from FY2000 through FY2003 and the FY2004 request. Table 2 shows aid from FY1989-FY1999. (For more information, see CRS Report RL30541 , CRS Report RL31016 , and CRS Report RL31383(pdf) .) Tables 1 and 2 include direct U.S. foreign assistance (i.e., the categories usually counted as U.S. foreign aid, which are in italics ) as well as the costs of goods and services provided toColombia from other U.S. government programs supporting CN efforts there. These figures were taken frompublically-available documents or provided directly by the Departments ofState and Defense. The United States also provides a small amount of DOD Excess Defense Articles (EDA) toColombia. These charts provide as comprehensive a picture as possible of U.S. assistance to Colombia, but there are limitations. For instance, some funds are spent in Colombia on counternarcoticsand other activities that are considered part of U.S. programs: for instance, the Drug Enforcement Administration(DEA) spends its own funds on joint operations in Colombia. Otherfunds are provided through regional programs of USAID and other programs which are not counted as assistanceon a country-by-country basis. No attempt was made to estimate suchfunds. Also, there are inconsistencies among various sources. Because of these and other constraints on gatheringdata, the amount of assistance provided to Colombia may be largerthan the amounts cited in these tables. Table 1. U.S. Assistance to Colombia FY2000-FY2004 (Obligations andauthorizations, $ millions) Notes: NA = Not Available. Figures on State Department INC (International Narcotics Control), ACI (Andean Counterdrug Initiative), USAID, FMF, and IMETfunding from StateDepartment Congressional Presentations, budget justification documents, and allocation information provided bythe Department of State. Figures on INC Air Wing (FY2000-FY2004)provided by the State Department: figures provided May 5, 2003. (INC Air Wing funding supports the sprayeradication efforts. FY2000 figure includes $5.5 million in support of theColombian Army.) Figures on DOD 1004, 1004/124, and 1033 funding provided April 11, 2002, for FY2000-2002;and April 18, 2003, for FY2003 and FY2004. Both INC Air Wingand DOD funding are taken from regional accounts, therefore the FY2003 and FY2004 allocations are estimates,and can be shifted to respond to developing needs in other areas. a FY2000 and thereafter, non-DOD Plan Colombia funds are all assigned to the State Department INC (FY2000 and FY2001) or ACI (FY2002 and thereafter) account; the StateDepartment transfers them to the other agencies carrying out programs in Colombia with those funds. These includethe Department of Justice and USAID. The USAID FY2000 andFY2001 figures are Economic Support Funds (ESF). These USAID figures do not include funds provided to USAIDfrom the INC account. Table 2. U.S. Aid to Colombia FY1989-FY1999 (Obligations and Authorizations, $ millions) Sources: Data is drawn from a number of sources, not all of which are consistent. These include: various editions of the U.S. Overseas Loans and Grants and Assistance fromInternational Organizations "Green Book," prepared by the US AID budget office; various editions of the ForeignMilitary Sales, Foreign Military Construction Sales, and MilitaryAssistance Facts book, prepared by the Department of Defense Security Cooperation Agency; information provideddirectly by the departments of State and Defense that are notrecorded in these publications; and by the General Accounting Office (GAO) for 1996-1998. (See GAO-01-26)Where contradictions existed, GAO data was preferred. Because of apossible lack of data or inaccuracies, some yearly totals may be understated or overstated, particularly prior toFY1997. a In these years, there was assistance in this category of less than $50,000. b Although it is likely that Section 1004 assistance was provided to Colombia as far back asFY1992, there is no public breakdown of such assistance until FY1997. That is the first yearin which DOD provided a publicly-available breakdown by country and authority for funding from its centralcounternarcotics account. c Not included in totals. | Over the past 15 years, from FY1989-FY2003, the United States has providedColombia with over $3.6 billion inassistance, most of it directed to counternarcotics or related efforts. During the first 11 fiscal years(FY1989-FY1999), when assistance totaled just over $1 billion,the annual levels were considerably lower than during the past three fiscal years and the current fiscal year. FromFY2000-FY2003, assistance totals about $2,556billion. The Clinton Administration increased assistance in FY2000 to fund its "Plan Colombia" programs tocounter the spread of coca cultivation in southernColombia. The Bush Administration has continued "Plan Colombia" programs through its Andean Regional Initiative(ARI), which also provides increased funding forColombia's neighbors. In FY2002, President Bush also sought authority to expand the circumstances under whichfunding for the Colombian security forces can beused. As approved by Congress in 2002 and 2003, funding for FY2003 and previous years can be used forcounternarcotics and anti-terrorist purposes. For FY2004, the Bush Administration has requested $573 million in State Department Andean CounterdrugInitiative and Foreign Military Financing funds, andestimates it will spend some $45 million in Colombia from the central State Department Air Wing account. TheDepartment of Defense (DOD) estimates that itwill spend almost $119 million for Colombia from its central counternarcotics account. |
On March 16, 2010, the Federal Communications Commission (FCC) released Connecting America: The National Broadband Plan . Mandated by the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ), the FCC's National Broadband Plan (NBP) is a 360-page document composed of 17 chapters containing over 200 specific recommendations directed to the FCC, the Executive Branch (both to individual agencies and to the Administration as a whole), Congress, and nonfederal and nongovernmental entities. The ARRA mandated that the NBP should "seek to ensure that all people of the United States have access to broadband capability." Accordingly, the NBP identified significant gaps in broadband availability and adoption in the United States, and in order to address those gaps and other challenges, the NBP set six specific goals to be achieved by the year 2020. These goals are as follows: Goal No. 1: At least 100 million U.S. homes should have affordable access to actual download speeds of at least 100 megabits per second and actual upload speeds of at least 50 megabits per second. Goal No. 2: The United States should lead the world in mobile innovation, with the fastest and most extensive wireless networks of any nation. Goal No. 3: Every American should have affordable access to robust broadband service, and the means and skills to subscribe if they so choose. Goal No. 4: Every American community should have affordable access to at least 1 gigabit per second broadband service to anchor institutions such as schools, hospitals, and government buildings. Goal No. 5: To ensure the safety of the American people, every first responder should have access to a nationwide, wireless, interoperable broadband public safety network. Goal No. 6: To ensure that America leads in the clean energy economy, every American should be able to use broadband to track and manage their real-time energy consumption. This report does not address the appropriateness of those goals or the ongoing debate over the best ways to reach those goals. Rather, this report—with three years having passed since release of the NBP—looks at each of these goals and examines available data and activities which might indicate the nation's progress towards meeting them. Currently, the 113 th Congress and the FCC are initiating, developing, and/or overseeing a number of telecommunications policies and programs including universal service reform and a number of spectrum and wireless policy initiatives. Given that those policies and programs are intended to help the nation reach many of the goals set by the NBP, the extent to which the NBP goals are met will likely be a part of the ongoing debate over many of these issues. Goal No. 1: At least 100 million U.S. homes should have affordable access to actual download speeds of at least 100 megabits per second and actual upload speeds of at least 50 megabits per second. Popularly referred to as "100 squared" (100 Mbps in 100 million households), this goal would offer next-generation broadband to about 75% of all U.S. households. Typically, the higher the speeds offered, the more costly the deployment and the higher the prices to consumers. Deployments of 100 Mbps are more likely in densely populated urban and suburban areas than in rural areas. Currently, capabilities in the range of 100 Mbps/50 Mbps are offered by fiber and a next generation cable technology called DOCSIS 3.0. According to the most recent National Broadband Map data (released February 2013, data current as of June 2012), 63 m illion households are in areas with advertised download speeds greater than 100 Mbps. The same data show that 1 3 million households have advertised upload speeds greater than 50 Mbps. The goal also calls for "affordable access." According to the New America Foundation, "it costs between $100 and $300 per month to get a connection speed of over 100 Mbps in most U.S. cities—if such high speeds are even available at all." Similarly, the Information Technology & Information Foundation (ITIF) cites FCC international data indicating an average price in the U.S. of $199.99 per month for 100 Mbps or more. According to ITIF, the high price "reflects the fact that the service tier above 100 Mbps is more a curiosity than a meaningful service today." It is important to note that the goal sets a target for actual speed (e.g., the download and upload speeds actually experienced by consumers), whereas the National Broadband Map data reflects advertised speed. The FCC has initiated the Measuring Broadband America Program to survey actual performance data of Internet Service Providers serving over 80% of the residential broadband market. The February 2013 Measuring Broadband America Report found that ISPs deliver on average 97% of advertised speeds during peak intervals. Meanwhile, the National Broadband Plan set—as a milestone—an interim goal of 100 million homes with actual download speeds of 50 Mbps and actual upload speeds of 20 Mbps by 2015. Accordingly, National Broadband Map data show 101 m illion households with advertised download speeds over 50 Mbps, and 22 m illion households with advertised upload speeds over 25 Mbps (which is the closest speed tier to 20 Mbps). Thus, while the interim goal has been met for download speeds (100 million households with 50 Mbps by 2015), the interim upload speed goal (100 million households with 20 Mbps) is farther from being reached. Recently, the cable industry has begun rolling out the latest generation of cable modem technology —DOCSIS 3.0—which can offer 100 Mbps download speeds. Thus, the number of households currently having access to 100 Mbps/50 Mbps is likely higher than what is reflected in the National Broadband Map data, which is current through June 2012. With respect to download speeds, the FCC is optimistic that the 100 squared goal will be met. According to the Measuring Broadband America report, In just the year since we collected data for our last Report, ISPs have improved in both their ability to deliver what they promise to their customers, and in the overall speeds they can and are delivering. This is a success story, and indicates strong progress toward the important goals set forth in the NBP, that by 2015, 100 million homes should have affordable access to actual download speeds of 50 Mbps, and by 2020 the actual download speed should have increased to 100 Mbps. Though we are making progress toward these goals, we have not yet reached them, and to ensure success it is essential that ISPs continue to improve at the impressive pace indicated by this Report. Over the next year, we anticipate that providers will continue to innovate and increase their offerings in the higher speed tiers. We know based on industry discussions that the major expansion in high speed service tiers first noted in the July 2012 report was enabled by the deployment by the cable industry of DOCSIS 3.0 technology which permitted service rates of 100 Mbps and above. The cable industry has also announced that it intends in the near future to extend its services to rates beyond 100 Mbps, both to support future service offerings such as ultra-high definition television, and to meet competition created by fiber-based service providers. Verizon fiber is now offering rates up to 300 Mbps in select parts of their market footprint, while Google offers 1 Gbps (1000 Mbps) service in Kansas City, MO. Similarly, the FCC, in its Eighth Broadband Progress Report , notes the acceleration of private sector rollouts of next generation broadband technologies: Higher-speed broadband (10 Mbps and above) is increasingly available in many areas of the country . We must keep in mind these developments as we assess the current market and project consumer demand and expectations in the future . For example, cable providers have made much progress on rolling out DOCSIS 3.0, which is capable of 100 Mbps speeds and even higher speeds . And, Americans continue to demand and subscribe to higher services . We will examine in the next Inquiry whether we should identify multiple speed tiers in these reports to assess the country's progress toward our universalization goal, as well as additional goals—such as affordable access to 100 Mbps/50 Mbps to 100 million homes by 2020. Goal No. 2: The United States should lead the world in mobile innovation, with the fastest and most extensive wireless networks of any nation . National Broadband Map data monitor the availability and extensiveness of wireless broadband networks in the United States. As Table 1 shows, lower download speeds (up to 3 Mbps, typically provided by 3G wireless technology) are available to 90% or more of U.S. households. The availability percentage for next generation wireless (4G LTE wireless technologies, which can provide over 6 Mbps) is less, at over 78% of U.S. households. These percentages, reflecting June 2012 data, can be expected to rise, given the recent and ongoing buildout and deployment of 4G LTE wireless broadband technologies. An assessment of whether or not the United States "lead[s] the world in mobile innovation" is a subjective judgment. The FCC notes that since 2010, U.S. wireless providers have aggressively built out the newest commercial technology for mobile broadband, known as 4G LTE, which offers download speeds in the range of 5 to 12 Mbps. According to the FCC, as of the summer of 2010 there was no LTE deployment in the United States; by January 2012, three mobile wireless providers had launched LTE networks which covered an estimated 211 million people. The FCC's most recent International Broadband Data Report asserts that this recent wireless network building is "securing the United States' position as the world leader in LTE adoption." The FCC notes that according to Deloitte, U.S. investment in 4G networks during 2012-2016 could be $25-$53 billion, that more than 80% of smartphones sold globally run on U.S. operating systems (up from less than 25% three years ago), and that as the first adopters of 4G LTE, the United States is the global test bed for wireless technology and services. In view of this recent progress, the FCC concludes that "the United States has regained its role as a global leader in and around mobile broadband." On the other hand, another data source, from the Organisation for Economic Co-operation and Development (OECD), provides international comparisons with respect to wireless broadband subscriptions per 100 inhabitants. These data refer to actual subscriptions as opposed to the coverage or extensiveness of wireless networks. The latest OECD data, current as of June 2012, shows the United States ranking 8 th behind Korea, Sweden, Australia, Finland, Denmark, Japan, and Norway in wireless broadband subscriptions per 100 inhabitants. Goal No. 3: Every American should have affordable access to robust broadband service, and the means and skills to subscribe if they so choose. This goal encompasses two separate but interrelated and measurable aspects of broadband deployment: availability and adoption. The download and upload speeds at which broadband might be considered "robust" is a subjective judgment that depends on what speeds and associated applications are considered required by broadband users. Section 706(d)(1) of the Telecommunications Act of 1996 ( P.L. 104-104 ) defines "advanced telecommunications capability" as "high-speed, switched, broadband telecommunications capability that enables users to originate and receive high-quality voice, data, graphics, and video telecommunications using any technology." The National Broadband Plan recommended a broadband benchmark speed of 4 Mbps download/1 Mbps upload, which could initially serve as a minimum threshold constituting broadband under section 706. According to the Eighth Broadband Progress Report : In each of the reports the Commission has conducted under section 706, it has relied on a speed benchmark for determining whether a service satisfies this statutory definition. In the 2010 Sixth Broadband Progress Report , the Commission updated this speed benchmark from 200 kbps in both directions to services that offer actual download (i.e., to the customer) speeds of at least 4 Mbps and actual upload (i.e., from the customer) speeds of at least 1 Mbps (4 Mbps/1 Mbps, or "speed benchmark"). In this report, we continue to rely upon this speed benchmark, which the Commission has used in the two most recent broadband reports. We find that this speed benchmark still reflects the requirements in section 706(d)(1) and generally "enables users to originate and receive high-quality voice, data, graphics, and video telecommunications using any technology." For instance, broadband service offering 4 Mbps/1 Mbps enables users to stream high-definition video and engage in basic video conferencing. Maintaining the speed benchmark from prior years also simplifies the measurement of progress from the prior two years. Because the consumer demand for bandwidth and services increases over time, the NBP recommended that the 4 Mbps download/1 Mbps upload benchmark be reviewed and possibly reset every four years. Broadband availability refers to the presence of broadband service that is offered in a given area. According to the National Broadband Map, 98.2% of the U.S. population has broadband service available with speeds of at least 3 Mbps download/768 kbps upload. This speed level is the National Broadband Map data measurement tier closest to the FCC's 4 Mbps/1 Mbps benchmark. Therefore, the FCC uses the 3 Mbps/768 kbps data as a surrogate for the broadband benchmark. Under this criterion, broadband availability levels appear to be approaching 100%. Broadband adoption refers to the extent to which Americans actually subscribe to and use broadband. Specifically, the NBP set an adoption goal of "higher than 90%" by 2020. There are several ways to characterize broadband adoption. The FCC's semiannual report tracking broadband subscribership (also known as the Form 477 report) provides subscribership ratios, which is the number of fixed broadband connections nationwide divided by the number of households. According to the most recent semiannual FCC subscriber data (current as of December 31, 2011, released in February 2013), the subscriber ratio is 40% for fixed residential connections with advertised speeds of at least 3 Mbps down and 768 kbps up. The subscribership ratio for fixed residential connections of at least 200 kbps in any direction (which previously was the FCC's minimum benchmark for broadband) is 68%. The latest Pew Internet and American Life Project telephone survey (conducted in April 2012) found that 66% of Americans surveyed said they have broadband connections at home. The download and upload speeds of those connections was not specified. The Pew data show that broadband adoption rates have slowed and plateaued in recent years—adoption was at 63% in 2009, as compared to 66% in the 2012 survey. Additionally, the 66% rate in the Pew Survey refers to any speed identified as broadband by the survey respondent. The subscribership rate for the NBP benchmark speed of 4 Mbps/1 Mbps is lower (at 40% for fixed residential connections) as reported by the FCC. Thus progress towards meeting the "higher than 90%" goal of the NBP appears to have slowed. According to the Pew Survey, certain demographic groups tend to have lower broadband adoption rates. These groups include minorities, low income households, the elderly, adults with less educational attainment, and rural populations. Of those surveyed without Internet, almost half said that the main reason they don't go on line is because they don't believe the Internet is relevant to them. In an April 2009 survey, most respondents without broadband said that a drop in price was most likely to get them to switch to broadband. The lack of a computer in the home is also a major reason why households choose not to subscribe to broadband service. Affordability is an important aspect of Goal 3, which calls for "affordable access to robust broadband service." Affordability is also a key factor affecting broadband adoption rates, given that one of the major reasons why people say they choose not to subscribe to a broadband service is its cost. The question then becomes: at what price should broadband service be considered "affordable?" While measuring affordability is complex, difficult to quantify, and often subjective, one way that broadband service affordability is often assessed is by comparing broadband service prices domestically with rates in other countries. Comparisons of international broadband data can be interpreted in very different ways. Some assert that Americans pay significantly more for broadband than those in other countries, especially for next-generation, very high speed connections. Others assert that broadband prices in the U.S. are reasonable, and that network performance in the U.S. is better than in all but a handful of nations that have densely populated urban areas and have used government subsidies. The Broadband Data Improvement Act ( P.L. 110-385 ) requires the FCC to prepare international comparisons of broadband service. The third annual International Broadband Data Report surveyed broadband plans in 38 countries, including 213 broadband plans (113 fixed, 100 mobile) in the United States. The FCC found that the cheapest plan among those surveyed was $23 per month with 768 kbps download speed and unlimited data. The most expensive standalone broadband plan was a fiber broadband plan at $199 per month with 150 Mbps of download speed, 35 Mbps of upload speed and unlimited data. Table 2 shows average prices of fixed residential (wireline) broadband plans in the United States surveyed by the FCC. The FCC found that From the analysis of the data, we have concluded that the United States is in the midprice range of countries, whether we compare by speed tier or price per gigabyte of data, for fixed residential broadband. With respect to mobile broadband, the FCC concluded that "particularly for smartphone plans, the United States is one of the ten least expensive countries in terms of price per gigabyte of data." Goal No. 4: Every American community should have affordable access to at least 1 gigabit per second broadband service to anchor institutions such as schools, hospitals , and government buildings. Based on currently available data, it is difficult if not impossible to determine how many communities have affordable access to at least 1 gigabit per second broadband service to their anchor institutions. The National Broadband Map includes a dataset which contains nearly 300,000 records of community anchor institutions (CAIs) including schools, colleges and universities, libraries, medical/healthcare facilities, public safety institutions, and community centers (both governmental and nongovernmental). For a large percentage of the CAIs in the dataset (54%) it is unknown whether or not they subscribe to broadband service. However, of the CAIs which have reported whether or not they have broadband service (and which have reported the download speeds they are receiving), 7.8% report download speeds greater than 1 gigabit per second. The most recent FCC report on the status of broadband deployment—the Eighth Broadband Progress Report —concluded that elementary and secondary schools may lack a sufficient level of broadband service, and that "it continues to appear that many schools and classrooms are underserved by broadband today." Specifically, the FCC cites a January 2011 survey of the Schools and Libraries Program (E-rate) funded schools and libraries in which 80% of E-rate recipients said their broadband connections did not fully meet their needs, and 78% of recipients said they need additional bandwidth. Based on National Broadband Map data, the FCC found that "providers offer download speeds of at least 25 Mbps to only 63.7 percent of the nation's schools, suggesting that many schools may not have a sufficient level of broadband service." Other data are available from the American Library Association's Information Policy and Access Center, which found that 31.2% of libraries have connectivity speeds greater than 10 Mbps, and 55% have speeds between 1.5 and 10 Mbps. Meanwhile, one of the purposes of the broadband stimulus grants awarded by the National Telecommunications and Information Administration (NTIA) is to provide ultra-high-speed broadband connections to CAIs. Specifically, the Comprehensive Community Infrastructure grant program (under the Broadband Technology Opportunity Program or BTOP) has awarded 117 grants, many of which are due to be complete by the end of FY2013. According to NTIA, 12,000 CAIs have been connected, and over 80% of the 1,500 communities served by the projects will receive speeds greater than a gigabit per second. Goal No. 5: To ensure the safety of the American people, every first responder should have access to a nationwide, wireless, interoperable broadband public safety network. In its 2010 National Broadband Plan report, the FCC stated that "nearly a decade after 9/11, our first responders still lack a nationwide public safety mobile broadband communications network, even though such a network could improve emergency response and homeland security." Provisions in the Middle Class Tax Relief and Job Creation Act of 2012 ( P.L. 112-96 ) called for developing, constructing, and operating a nationwide network, called FirstNet, designed to meet public safety communications needs. Goal No. 6: To ensure that America leads in the clean energy economy, every American should be able to use broadband to track and manage their real-time energy consumption. According to the FCC, "broadband and advanced communications infrastructure will play an important role in achieving national goals of energy independence and efficiency." In order for this goal to be realized, there must be universal broadband (see Goal 3, above) and, according to the NBP, "the country will need to modernize the electric grid with broadband and advanced communications." The FCC's central recommendation for reaching this goal involves integrating broadband into the Smart Grid. Currently, the United States "is undertaking a massive communications and information technology buildout to produce the Smart Grid, which the National Institute of Standards and Technology (NIST) defines as the 'two-way flow of electricity and information to create an automated, widely distributed energy delivery network.'" Title XIII of the Energy Independence and Security Act of 2007 ( P.L. 110-140 ) set forth the policy of the United States "to support the modernization of the nation's electricity transmission and distribution system to maintain a reliable and secure electricity infrastructure." P.L. 110-140 stipulated initiatives for government programs to undertake in Smart Grid investments, including coordinated research, development, demonstration, and information outreach efforts. The National Broadband Plan contained over 200 specific recommendations intended to help achieve the Plan's goals. The NBP's recommendations were directed to the FCC, to Congress, to the Executive Branch (both to individual agencies and to Administration as a whole), and to nonfederal and nongovernmental entities. The Benton Foundation maintains a database that tracks the implementation of the NBP recommendations. According to Benton, out of a total 218 recommendations, 17% are completed, 40.4% are in progress, 15.6% are started, and 27.1% are not started. Many of the key telecommunications issues that are currently being considered by the 113 th Congress are focused on improving broadband deployment, and thus are intended to have a positive impact on the nation's progress towards reaching one (or in many cases, several) of the NBP goals. Issues include Congressional oversight of the FCC's efforts to establish the Connect America Fund and its Mobility and Remote Areas component funds as part of Universal Service Fund reform; Congressional oversight of the FCC's efforts to expand the Lifeline Program by allowing subsidies to low-income Americans to be used for broadband, and to modify the Rural Health Care and Schools and Libraries (E-rate) programs, also part of Universal Service Fund reform; Congressional and FCC consideration of spectrum policies intended to make more spectrum available for wireless broadband; Congressional oversight of the development, construction, and implementation of FirstNet, a nationwide broadband network designed to meet public safety communications needs; Congressional oversight of ARRA broadband grant and loan programs and reauthorization of broadband loan programs in the 2013 farm bill; and Congressional consideration of possibly revising the current regulatory framework established by the 1996 Telecommunications Act (and its underlying statute, the Communications Act of 1934) in response to the convergence of telecommunications providers and markets and the transition to an Internet Protocol (IP) based network. Three years after the rollout of the National Broadband Plan, available data indicate that there has been progress towards reaching the 2020 goals. The following observations can be made: the United States is much closer to reaching broadband availability goals than broadband adoption goals, which remain a major challenge; the United States is much closer to achieving broadband download speed goals than upload speed goals; while the 100 squared goal seems well within reach (at least for download speeds), its price remains high—affordability could improve in the future depending on technological advances and consumer demand for 100 Mbps plus speeds; recent rollouts of next generation wireless technologies (4G LTE) have led the FCC to state that the United States leads the world in mobile innovation; on the other hand, the latest OECD data indicate that the United States remains in the middle of the pack with respect to wireless broadband subscriptions per 100 population; while broadband data are incomplete for Community Anchor Institutions, available information indicate that the number of CAIs with 1 gigabit connections remains relatively low; and two major initiatives—FirstNet and Smart Grid—are currently underway in order to help reach goals 5 and 6. In weighing progress towards reaching the goals of the National Broadband Plan, two important considerations should be taken into account. First, the specific broadband goals developed by the FCC are not necessarily universally agreed upon by all stakeholders. For example, the 100 squared goal has been criticized for endorsing an evolution of broadband deployment that could leave rural areas without the next generation broadband service that urban and suburban areas might enjoy. Second, it is impossible to quantify to what extent progress towards reaching these goals is due to the NBP recommendations versus the natural evolution of the broadband market, independent of any impact of the NBP. Finally, as the 113 th Congress considers contentious telecommunications issues such as universal service reform, wireless technology and spectrum policy, and telecommunications regulatory reform, the ongoing progress towards meeting the NBP goals is likely to be part of that debate. | On March 16, 2010, the Federal Communications Commission (FCC) released Connecting America: The National Broadband Plan. The National Broadband Plan (NBP) identified significant gaps in broadband availability and adoption in the United States, and in order to address those gaps and other challenges, the NBP set specific goals to be achieved by the year 2020. Goals were set for next generation broadband service; universal broadband service; mobile wireless broadband innovation and coverage; broadband access of Community Anchor Institutions; a nationwide, wireless, interoperable broadband public safety network; and broadband for tracking energy consumption. Three years after the rollout of the NBP, available data indicate that there has been progress towards reaching the 2020 goals. The following observations can be made: the United States is much closer to reaching broadband availability goals than broadband adoption goals, which remain a major challenge; the United States is much closer to achieving broadband download speed goals than upload speed goals; while the next generation broadband goal of 100 million households with 100 Mbps speeds seems within reach (at least for download speeds), the price remains high—affordability could improve in the future depending on technological advances and consumer demand for ultra-high speed next generation performance; recent rollouts of next generation wireless technologies have led the FCC to state that the United States leads the world in mobile innovation; on the other hand, the latest Organisation for Economic Co-operation and Development (OECD) data indicate that the United States remains in the middle of the pack with respect to wireless broadband subscriptions per 100 of the population; while broadband data are incomplete for Community Anchor Institutions, available information indicate that the number of CAIs with 1 gigabit connections remains relatively low; and two major initiatives—FirstNet and Smart Grid—are currently underway in order to help reach the goals for a public safety wireless network and for broadband monitoring of energy consumption. Many of the key telecommunications issues that are currently being considered by the 113th Congress are focused on improving broadband deployment and thus are intended to have a positive impact on the nation's progress towards reaching one (or in many cases, several) of the NBP goals. As the 113th Congress considers contentious telecommunications issues such as universal service reform, wireless technology and spectrum policy, and telecommunications regulatory reform, the ongoing progress towards meeting the NBP goals is likely to be part of that debate. |
On May 18, 2015, the World Trade Organization's (WTO) Appellate Body confirmed the findings of previous panels that U.S. country-of-origin labeling (COOL) for beef and pork violated U.S. WTO obligations by discriminating against imported livestock. In June 2015, Canada and Mexico requested permission from the WTO to impose about US$3 billion in concessions, in the form of retaliatory tariffs, against products imported from the United States. The United States objected to the request, and an arbitration panel was established to determine the appropriate level of concessions. On July 23, 2015, Senator Hoeven introduced the Voluntary Country of Origin Labeling (COOL) and Trade Enhancement Act of 2015 ( S. 1844 ), which, like H.R. 2393 , repeals mandatory COOL for beef, pork, chicken, and their ground products. In addition, S. 1844 amends the Agricultural Marketing Act (7 U.S.C. §1621 et seq.) requiring USDA to establish a label designation that enables meat processors to voluntarily use a U.S. label for beef, pork, and chicken from livestock exclusively born, raised, and slaughtered in the United States. Also, during debate on the vehicle for the Senate transportation reauthorization bill ( H.R. 22 ), Senator Roberts, Chairman of the Agriculture Committee, introduced an amendment ( S.Amdt. 2302 ) to repeal mandatory COOL for beef, pork, and chicken using language from H.R. 2393 . On July 26, 2015, Senator Hoeven also introduced S. 1844 as an amendment ( S.Amdt. 2371 ) to the transportation bill. Neither amendment was considered for inclusion in the final Senate-passed bill. Canada and Mexico have stated that the only way to resolve the WTO case is to repeal COOL. In response to Senator Hoeven's proposed voluntary program, Canada's Agriculture Minister said such a program would "guarantee Canadian retaliation" because it would continue to discriminate against imported livestock through segregation. If a voluntary COOL program was implemented, and Canada or Mexico opposed it, the United States could request that a WTO compliance panel determine if the new program is compliant with WTO requirements. Canada and Mexico could implement retaliation even if mandatory COOL is repealed and is replaced with a voluntary program. U.S. products would face higher tariffs while the compliance panel reviews the new voluntary program. The WTO arbitration panel met on September 15-16, 2015, to hear arguments to determine the level of concessions for Canada and Mexico. On December 7, 2015, the arbitration panel released its report, which found that Canada could request retaliation of C$1.055 billion (US$781 million) and Mexico US$228 million. As many stakeholders expected, the enacted Consolidated Appropriations Act, 2016 ( P.L. 114-113 , Div. A, Sec. 759) repealed COOL for beef and pork and ground beef and pork by amending the COOL statute. After COOL was repealed by Congress, the Secretary of Agriculture said that USDA would immediately halt enforcement of COOL and rewrite the COOL regulations to reflect the repeal of beef and pork. Unlike the House COOL repeal bill (Country of Origin Labeling Amendments Act of 2015; H.R. 2393 ) passed in June 2015, the repeal language in P.L. 114-113 did not include chicken and ground chicken products. Also, the legislation did not include any voluntary COOL provisions similar to what Senator Hoeven introduced in the Voluntary Country of Origin Labeling (COOL) and Trade Enhancement Act of 2015 ( S. 1844 ) in July 2015. Congressional repeal of COOL for beef and pork brings the United States into compliance with its WTO obligations and effectively ends the COOL case. On December 21, 2015, Canada and Mexico took the procedural step of formally requesting authorization to retaliate, and the DSB granted the request (see " Suspension of Concessions (Retaliation) " below for more information). Canada and Mexico have stated that they are pleased with the repeal of COOL. Although the threat of retaliation now has been removed, Canada and Mexico are likely to retain the authority to retaliate until USDA formally rescinds existing COOL regulations for beef and pork, and until Canada and Mexico are assured that cattle and hog trade is unimpeded as the repeal of COOL is implemented. On March 2, 2016, USDA issued the final rule to amend COOL regulations for beef, pork, and ground beef and pork by striking all references to beef and pork. The rulemaking brings COOL regulations into conformity with the repeal amendment in Section 759 of P.L. 114-113 . Since the 1930s, U.S. tariff law has required almost all imports to carry labels so that the "ultimate purchaser," usually the retail consumer, can determine their country of origin. However, certain products, including a number of agricultural commodities in their "natural" state, such as meats, fruits, and vegetables, were excluded. (See Appendix A for a description of this and two other food labeling laws covering the display of country of origin on imported products.) For almost as many decades, various farm and consumer groups have pressed Congress to end one or more of these exceptions, arguing that U.S. consumers have a right to know where all of their food comes from and that given a choice they would purchase the domestic version. This would strengthen demand and prices for U.S. farmers and ranchers, it was argued. Opponents of ending these exceptions to COOL contended that there was little or no real evidence that consumers want such information and that industry compliance costs would far outweigh any potential benefits to producers or consumers. Such opponents, including some farm and food marketing groups, argued that mandatory COOL for meats, produce, or other agricultural commodities was a form of protectionism that would undermine U.S. efforts to reduce foreign barriers to trade in the global economy. COOL supporters countered that it was unfair to exempt agricultural commodities from the labeling requirements that U.S. importers of almost all other products already must meet, and that major U.S. trading partners impose their own COOL requirements for imported meats, produce, and other foods. With passage of the 2002 farm bill, retail-level COOL was to become mandatory for fresh fruits and vegetables, beef, pork, lamb, seafood, and peanuts, starting September 30, 2004 ( P.L. 107-171 , §10816). Continuing controversy over the new requirements within the food and agricultural industry led Congress to postpone full implementation. The FY2004 Omnibus Appropriations Act ( P.L. 108-199 ) postponed COOL—except for seafood—until September 30, 2006; the FY2006 Agriculture Appropriations Act ( P.L. 109-97 ) further postponed it until September 30, 2008. During deliberations on the 2008 farm bill, the interest groups most affected by COOL reached consensus on various changes intended to ease what they viewed to be some of the more onerous provisions of the 2002 COOL law. Provisions dealing with record-keeping requirements, the factors to be considered for labeling U.S. and non-U.S. origin products, and penalties for noncompliance were modified. These amendments were incorporated into P.L. 110-246 , Section 11002. The enacted 2008 farm bill required that COOL take effect on September 30, 2008, and added goat meat, chicken, macadamia nuts, pecans, and ginseng as commodities covered by mandatory COOL. (See Appendix B for a timeline of key COOL developments.) The final rule to implement the COOL requirements for all covered commodities was issued by the U.S. Department of Agriculture's (USDA's) Agricultural Marketing Service (AMS) during the final days of the Bush Administration in January 2009. It included changes to the interim rule published in August 2008 that some had criticized as watering down the COOL statute (see " Changes Made from Interim Rule to Final Rule "). In February 2009, Secretary of Agriculture Vilsack announced that the final rule would take effect as planned on March 16, 2009. At the same time, he also urged affected industries to voluntarily adopt additional changes that, he asserted, would provide more specific origin information to consumers and more closely adhere to the intent of the COOL law (see sections " Vilsack Letter " and " Vilsack Letter Is Not a Technical Regulation " for details). COOL supporters argued that numerous studies show that consumers want country-of-origin labeling and would pay extra for it. Analysis accompanying USDA's interim and final rules concluded that, while benefits are difficult to quantify, it appears they will be small and will accrue mainly to consumers who desire such information. A Colorado State University economist suggested that consumers might be willing to pay a premium for "COOL meat" from the United States, but only if they perceive U.S. meat to be safer and of higher quality than foreign meat. USDA earlier had estimated that purchases of (i.e., demand for) covered commodities would have to increase by 1% to 5% for benefits to cover COOL costs, but added that such increases were not anticipated. Data from several economic studies that aimed to model COOL impacts appear to fall within this range. Critics of mandatory COOL argued that large compliance costs will more than offset any consumer benefits. USDA's analysis of its final rule estimated first-year implementation costs to be approximately $2.6 billion for those affected. Of the total, each commodity producer would bear an average estimated cost of $370, intermediary firms (such as wholesalers or processors) $48,219 each, and retailers $254,685 each. The USDA analysis also included estimates of record-keeping costs and of food sector economic losses due to the rule. Mandatory country-of-origin labeling (7 U.S.C. §1638 et seq.): applies to ground and muscle cuts of beef (including veal), lamb, and pork, fish and shellfish, peanuts, "perishable agricultural commodities" as defined by the Perishable Agricultural Commodities Act (i.e., fresh and frozen fruits and vegetables), goat meat, chicken, pecans, macadamia nuts, and ginseng (these are referred to as "covered commodities"); requires method of production information (farm-raised or wild-caught) for fish and shellfish to be noted at the final point of sale to consumers; exempts these items if they are an ingredient in a processed food; covers only those retailers that annually purchase at least $230,000 of perishable agricultural commodities, and requires them to inform consumers of origin "by means of a label, stamp, mark, placard, or other clear and visible sign on the covered commodity or on the package, display, holding unit, or bin containing the commodity at the final point of sale"; and exempts from these labeling requirements such "food service establishments" as restaurants, cafeterias, bars, and similar facilities that prepare and sell foods to the public. In designating country of origin, difficulties arise when products—particularly meats—are produced in multiple countries. For example, beef might be from an animal that was born and fed in Canada, but slaughtered and processed in the United States. Likewise, products from several different countries often are mixed, such as for ground beef. For covered red meats and chicken, the COOL law: permits the U.S. origin label to be used only on meats from animals that were exclusively born, raised, and slaughtered in the United States, with an exception for those animals present here before July 15, 2008; permits meats or chicken with multiple countries of origin to be labeled as being from all of the countries in which the animals may have been born, raised, or slaughtered; requires meat or chicken from animals imported for immediate U.S. slaughter to be labeled as from both the country the animal came from and the United States; requires products from animals not born, raised, or slaughtered in the United States to be labeled with their correct country(ies) of origin; and requires , for ground meat and chicken products, that the label list all countries of origin, or all "reasonably possible" countries of origin. Because these statutory requirements are at the heart of the ongoing WTO dispute case, Table 1 traces the progression of statutory language from the initial implementing regulations to the retail labels to be used for each of these five categories. Subsequent changes to these rules as now seen at the retail level are shown in Table 2 . The meat labeling requirements have proven to be among the most complex and controversial areas of rulemaking, in large part because of the steps that U.S. feeding operations and packing plants must adopt to segregate, hold, and slaughter foreign-origin livestock separately from U.S. livestock. After AMS issued the interim rules in August 2008, many retailers and meat processors reportedly planned to use the "catch-all" multiple countries of origin label on as much meat as possible—even products that would qualify for the U.S.-only label, because it was both permitted and the easiest requirement to meet. COOL supporters objected that the label would be overused, undermining the intent of COOL (i.e., to distinguish between U.S. and non-U.S. meats). In an effort to balance the concerns of both sides, USDA issued a statement attempting to clarify its August 2008 interim rule, stating that meats derived from both U.S.- and non-U.S.-origin animals may carry a mixed-origin claim (e.g., "Product of U.S., Canada, and Mexico"), but that the mixed-origin label cannot be used if only U.S.-origin meat was produced on a production day. The final (January 2009) rule attempted to further clarify the "multiple countries of origin" language. For example, muscle cut products of exclusively U.S. origin along with those from foreign-born animals, if commingled for slaughter on a single production day, can continue to qualify for a combined U.S. and non-U.S. label. "It was never the intent of the Agency [AMS] for the majority of product eligible to bear a U.S. origin declaration to bear a multiple origin destination. The Agency made additional modifications for clarity," AMS stated in material accompanying the rule. The clarifying changes failed to mollify some. The National Farmers Union (NFU) continued to view this portion of the rule as a "loophole that would allow meat packers to use a multiple countries, or NAFTA [North American Free Trade Agreement] label, rather than labeling U.S. products as products of the United States" and stated "[t]his is misleading to consumers." Seven Senators highlighted similar concerns, stating that it would allow "meatpackers to put a multiple country of origin label on products that are exclusively U.S. products as well as those that are foreign." They characterized the final rule as defeating COOL's primary purpose to provide "clear, accurate and truthful information" to U.S. consumers, and hoped the rules will be revised "to close these loopholes." To address these views to comply with an Obama White House directive that all agencies review recent regulations issued by the outgoing Administration, Secretary of Agriculture Vilsack in a February 20, 2009, letter urged industry representatives to voluntarily adopt three suggested labeling changes in order to provide more useful information to consumers than the final rule itself might imply, and to better meet congressional intent. These dealt with the labeling of meat products with multiple countries of origin, a reduction in the time allowance for labeling ground meat held in inventory, and exemptions to the rules for processed products. On labeling for multiple countries of origin, he stated that processors should voluntarily include information about what production step occurred in each country when multiple countries appear on the label. For example, animals born and raised in Country X and slaughtered in Country Y might be labeled as "Born and Raised in Country X and Slaughtered in Country Y." Animals born in Country X but raised and slaughtered in Country Y might be labeled as "Born in Country X and Raised and Slaughtered in Country Y." Vilsack's letter noted that the final rule allows a label for ground meat to bear the name of a country even if the meat from that country was not present in a processor's inventory in the preceding 60-day period. Noting that this allows for labeling this product "in a way that does not clearly indicate [its] country of origin," the Secretary asked processors to reduce this time allowance to 10 days, stating that this "would enhance the credibility of the label." Secretary Vilsack also stated that USDA would closely monitor industry compliance to determine whether "additional rulemaking may be necessary to provide consumers with adequate information." His letter was widely viewed as an effort to address the concerns of COOL adherents without reopening the rule and thereby attracting renewed criticism from the meat industry and U.S. trading partners. For perishable agricultural commodities, ginseng, peanuts, pecans, and macadamia nuts, retailers may only claim U.S. origin if the product was exclusively produced in the United States. However, a U.S. state, region, or locality designation is a sufficient U.S. identifier (e.g., Idaho potatoes). For farm-raised fish and shellfish, a U.S.-labeled product must be derived exclusively from fish or shellfish hatched, raised, harvested, and processed in the United States; wild fish and shellfish must be derived exclusively from those harvested either in U.S. waters or by a U.S. flagged vessel, and processed in the United States or on a U.S. vessel. Also, labels must differentiate between wild and farm-raised fish and shellfish. Consumers may not find country-of-origin labels on much more of the food they buy, due to COOL's statutory and regulatory exemptions. First, as noted, all restaurants and other food service providers are exempt, as are all retail grocery stores that buy less than $230,000 a year in fresh fruits and vegetables. Second, "processed food items" derived from the covered commodities are exempt, and USDA, in its final rule, defined this term broadly (at 7 C.F.R. §65.220). Essentially, any time a covered commodity is subjected to a change that alters its basic character, it is considered to be processed. Although adding salt, water, or sugar do not, under USDA's definition, change the basic character, virtually any sort of cooking, curing, or mixing apparently does. For example, roasting a peanut or pecan, mixing peas with carrots, or breading a piece of meat or chicken all count as processing. As a result, only about 30% of the U.S. beef supply, 11% of all pork, 39% of chicken, and 40% of all fruit and vegetable supplies may be covered by COOL requirements at the retail level. Whole peanuts are almost always purchased in roasted form, and will not have to be labeled. Some critics argued that AMS overstepped its authority, and congressional intent, by excepting such minimally processed commodities. AMS countered that in fact many imported items still must carry COOL under provisions of the Tariff Act of 1930. "For example, while a bag of frozen peas and carrots is considered a processed food item under the COOL final rule, if the peas and carrots are of foreign origin, the Tariff Act requires that the country of origin be marked on the bag," AMS argued, citing similar regulatory situations for roasted nuts and for a variety of seafood items. Vilsack's letter, however, acknowledged that the "processed foods" definition in the final rule "may be too broadly drafted. Even if products are subject to curing, smoking, broiling, grilling, or steaming, voluntary labeling would be appropriate," he wrote. The COOL law prohibits USDA from using a mandatory animal identification (ID) system, but the original 2002 version stated that the Secretary "may require that any person that prepares, stores, handles, or distributes a covered commodity for retail sale maintain a verifiable record-keeping audit trail that will permit the Secretary to verify compliance." Verification immediately became one of the most contentious issues, particularly for livestock producers, in part because of the potential complications and costs to affected industries of tracking animals and their products from birth through retail sale. Producers of plant-based commodities, as well as food retailers and others, also expressed concern about the cost and difficulty of maintaining records for commodities that are highly fungible and often widely sourced. The 2008 law eased these requirements somewhat by stating that USDA "may conduct an audit of any person that prepares, stores, handles, or distributes a covered commodity" in order to verify compliance. Such persons must provide verification, but USDA may not ask for any additional records beyond those maintained "in the course of the normal conduct of business." In its final rule, AMS stated that covered persons generally would have to keep records for one year that can identify both the immediate previous source and the immediate subsequent recipient of a covered commodity; certain exceptions are provided for pre-labeled products. Also, a slaughter facility can accept a producer affidavit as sufficient evidence for animal origin claims. Also, potential fines for willful noncompliance are set for retailers and other persons at no more than $1,000 per violation. The 2002 law had set the fine at no more than $10,000 (and for retailers only), but the 2008 farm bill lowered this amount. USDA's AMS oversees COOL through a retail and supplier surveillance program. AMS has cooperative agreements with all 50 states to conduct audits of retailers and suppliers that are covered under COOL. In 2014, the COOL program conducted 2,982 retail surveillance reviews and 570 follow-up reviews to ensure compliance with COOL requirements. About 37,000 individual retail stores are subject to COOL regulations. In 2014, AMS found that retailer COOL compliance was at 91%, compared to 96% in both 2012 and 2013. AMS conducted audits on 113 products in the supplier chain. Compliance from supplier to retailer was 98%. In 2014, muscle cuts of meat were not audited. The AMS COOL program was funded at about $5 million in FY2014, with funding of $4.8 million expected in FY2015 and FY2016. USDA's Office of Inspector General (OIG) audited the operations of the COOL program during 2010. Its report noted that "AMS made significant strides implementing the final rule" but found the need for improvements in its controls and processes to ensure that retailers and suppliers fully comply with COOL regulations. The OIG identified the need for AMS to strengthen its process to select retailers to be reviewed and the review process itself, and to more quickly evaluate the documentation kept by retailers and issue noncompliance letters. Auditors also pointed out that AMS needs to be more vigorous in enforcing COOL requirements, provide better oversight of the state agencies that conduct retailer reviews, and improve how it communicates with and provides program guidance to retailers. AMS agreed with all of the OIG recommendations, and by late 2012, had incorporated 11 of them into program operations. Meat labeling proved to be the most contentious of COOL requirements, leading Canada and Mexico to challenge COOL using the World Trade Organization's (WTO's) dispute settlement process. Canada and Mexico are major suppliers of live cattle and hogs that are fed in U.S. feeding facilities and/or processed into beef and pork in U.S. meat packing plants. As the U.S. meat processing sector geared up to implement COOL in mid-2008, Canada and Mexico expressed concern that COOL would adversely impact their livestock sectors. Indeed, U.S. cattle imports from Canada and Mexico and hog imports from Canada dropped in both 2008 and 2009 from year-earlier levels. Some analyses supported claims that COOL hampered livestock imports. Other analyses pointed out that factors such as exchange rates and inventory levels were also affecting import levels and that declines could not be entirely attributed to COOL (see Appendix C for background on livestock trade in North America). Canada and Mexico requested consultations with the United States in December 2008 and June 2009 about their concerns. Not satisfied with the outcome of these consultations with U.S. officials, both countries in early October 2009 requested the establishment of a WTO dispute settlement (DS) panel to consider their case. In response, the U.S. Trade Representative (USTR) and the Secretary of Agriculture commented that they "regretted that the formal consultations" did not resolve concerns, and stated their belief that U.S. implementation of COOL provides consumers with information that is consistent with WTO commitments. They noted that countries worldwide had agreed that the principle of country-of-origin labeling was legitimate policy long before the WTO was created, and that other countries also require goods to be labeled with their origin. Both the Canadian and Mexican governments, in requesting a panel, asserted that COOL is inconsistent with U.S. obligations under certain WTO agreements—the General Agreement on Tariffs and Trade 1994, the Agreement on Technical Barriers to Trade, and the Agreement on Rules of Origin. These obligations include treating imports no less favorably than like products of domestic origin; making sure that product-related requirements are not more trade restrictive than necessary to fulfill a legitimate public policy objective; ensuring that compliance with laws on marks of origin does not result in damaging imports, reducing their value, or unreasonably increasing their cost; and ensuring that laws, rules, and procedures on country of origin do not "themselves create restrictive, distorting, or disruptive" international trade, among others. On November 19, 2009, the WTO's Dispute Settlement Body (DSB) established a panel to consider both countries' complaints. In proceeding with this WTO case, Canadian officials stated that the COOL requirements are "so onerous" that when they were implemented, Canadian exporters of cattle and hogs were discriminated against in the U.S. market. The Canadian beef and pork industries, led by the Canadian Cattlemen's Association (CCA) and the Canadian Pork Council, actively pushed their government to initiate a WTO challenge. The CCA argued that COOL cost its producers C$92 million over the two months following the publication of the interim rule in August 2008, and could cost C$500 million per year. CCA estimated that slaughter steers and heifers were losing C$90 per head, because U.S. meat establishments did not want to assume the increased costs of complying with new labeling requirements by segregating, holding, and then slaughtering Canadian cattle separately from U.S. cattle. The losses included lower prices for all Canadian cattle due to decreased U.S. demand, as well as the cost of shipping those that are sold further distances to the fewer number of U.S. plants willing to take them. Canadian pork producers expressed similar concerns. USTR's request for public comment on this pending WTO case generated responses that reflected the heated debate on mandatory COOL seen earlier among key players in the livestock sector. The American Meat Institute (AMI), representing U.S. meat processors and packers, stated that the U.S. law, in addition to violating WTO commitments, also violates NAFTA commitments. AMI argued that COOL discriminates against imports in favor of domestic meat. The National Cattlemen's Beef Association (NCBA) expressed concern that Canada's decision to pursue its case against U.S. COOL rules has the potential for retaliatory action to be taken against U.S. beef. It noted that "COOL has damaged critically important trading relationships [i.e., the import of Canadian and Mexican livestock, the value added as they pass through U.S. feedlots and are processed into meat, and the export of finished meat products back to Mexican and Canadian consumers], and is not putting additional money into the pockets of cattlemen." In opposition, the U.S. Cattlemen's Association (USCA) and the National Farmers Union (NFU) argued that COOL is "fully consistent" with the General Agreement on Tariffs and Trade and the Agreement on Technical Barriers to Trade (key WTO commitments). Both stated that COOL "does not discriminate between domestic and imported beef ... [and] operates neutrally in the market place," and noted that COOL does not impose any domestic content requirements (i.e., does not stipulate what share of value or quantity determines country of origin). The Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America (R-CALF), presented similar comments. On November 18, 2011, the WTO dispute settlement (DS) panel ruled that certain COOL requirements violate two articles of the WTO Agreement on Technical Barriers to Trade (TBT) and the requirement for impartial administration of regulations laid out in the General Agreement on Tariffs and Trade 1994 (GATT 1994). The panel first concluded that the COOL "measure"—the statute and the final rule—constituted a "technical regulation" under the TBT Agreement and was thus subject to TBT obligations. It then found that the COOL measure (1) treated imported livestock less favorably than "like domestic livestock," particularly in the labeling of muscle cut meats (beef and pork), in violation of the national treatment obligation in the TBT's Article 2.1; and (2) failed to meet the legitimate objective of providing information to consumers on the origin of meat products, and thus violated the TBT's Article 2.2. The panel also found that the Vilsack letter's "suggestions for voluntary action" went beyond COOL's obligations and, while not a "technical regulation," constitute unreasonable administration of COOL itself, thus violating Article X:3(a) of the GATT 1994. The panel concluded that the United States has "nullified or impaired benefits" to which Canada and Mexico are entitled, and recommended that the WTO's DSB request the United States to conform these "inconsistent measures" with its obligations under the TBT Agreement and GATT 1994. (See Appendix D for more discussion of the WTO findings.) With the WTO's release of the DS panel's report, USTR welcomed its affirmation of "the right of the United States to require country of origin labeling for meat products." Acknowledging that the panel disagreed with the details on how the U.S. COOL requirements were designed, it expressed the U.S. commitment to provide "consumers with accurate and relevant information [on] the origin of meat products that they buy at the retail level." USTR stated that it would consider all options going forward, including an appeal. The U.S. meat sector expressed mixed reactions. Those in favor of making changes to COOL to address the panel's conclusions include NCBA, AMI, and the National Pork Producers Council (NPPC). The NCBA advised against appealing this ruling. Instead, it urged USTR to work "to apply pressure on Congress to bring the United States into WTO compliance across the board" and to act quickly before Canada and Mexico—two important trading partners—impose "unnecessary and unfortunate tariffs" on U.S. agricultural exports. NPPC "will be working with lawmakers to craft a legislative fix so that [COOL] is WTO-compliant" to avoid risking "retaliation from and a trade war with Canada and Mexico." AMI commented that the ruling "was not surprising," stating that it had "contended for years ... that [COOL] was not just costly and cumbersome, but a violation of our country's WTO obligations." Among other groups that opposed COOL, the Food Marketing Institute (FMI) agreed with the panel's conclusion that COOL "fails to provide information in a meaningful way" and highlighted that "COOL enforcement has become more burdensome than ever ... for retailers." Its spokesman stated that COOL "will need to be repealed or rewritten for the U.S. to meet its [trade obligations]" and that FMI will work with Congress and USDA "to develop an alternative system" that informs consumers with useful information. Livestock groups that support COOL as now implemented include R-CALF and USCA. R-CALF responded that "the WTO is trying to usurp our nation's sovereignty," questioning "when do we allow an international tribunal to dictate to our U.S. Congress what is or is not a legitimate objective of providing information to United States' citizens?" USCA strongly disagreed with the panel's findings, but was pleased that the report "affirmed the right of the U.S. to label meat for consumers." Its president expressed support for USTR's efforts to defend U.S. rights, pledging to assist "with the appeal process" and to work "with our allies in the Administration and Congress to ensure that COOL continues." Among others supporting COOL, the NFU responded that it will work with USTR and USDA "to ensure that COOL is implemented to the fullest extent of the law and in accordance with WTO." Its statement concluded that "if these results are unsatisfactory, then NFU will push to appeal the decision and continue to fight ... to ensure COOL is allowed to continue for as long as it takes to get this done." Public Citizen commented that the WTO's ruling against COOL for meats "make[s] it increasingly clear to the public that the WTO is leading a race to the bottom in consumer protection" by its second-guessing "the U.S. Congress, courts and public by elevating the goal of maximizing trade flows over consumer and environmental protection." Food and Water Watch urged the Administration to appeal the ruling, noting that the WTO "should not get to decide what U.S. consumers get to know about their food and should not be able to undermine rules put in place by U.S. elected officials." Members of Congress also hold diverse views on COOL's future. Some did not expect the WTO panel's decision on COOL to be favorable and view more "unwinnable" WTO cases as not in the "best interest" of U.S. agricultural producers. At a regional livestock meeting, Senator Pat Roberts, then ranking Member of the Senate Agriculture Committee, stated that he does not know of any market study that "shows American consumers will buy more American products with labels in the store" and hoped "we can change people's minds." By contrast, 19 Senators requested that the Obama Administration appeal the panel's ruling and "work to ensure that our COOL program both meets our international trade obligations while continuing to provide such information to consumers." Their letter expressed concern about the ruling's impact "on our ability to continue providing [COOL] information to consumers" and noted that congressional intent behind the 2008 statutory changes was for "such labeling [to] be nondiscriminatory in its treatment of imported products by requiring the labeling of both domestic as well as imported products." The letter further stated that the final COOL rule "appropriately establishes a labeling system which provides important and useful information to consumers while not placing an undue burden on the industry" and which "continues to provide the same opportunity for imported livestock to compete in the domestic marketplace as was the case prior to USDA's implementation of COOL." The Canadian government welcomed the panel's ruling as a "clear victory for Canada's livestock industry." Its Minister of Agriculture stated that the WTO decision "recognizes the integrated nature of the North American supply chain in this vitally important industry" and that "[r]emoving onerous labelling measures and unfair, unnecessary costs will improve competitiveness, boost growth and help strengthen the prosperity of Canadian and American producers alike." He expressed the hope this ruling "will open the door to a negotiated settlement of the dispute" and stressed Canada's commitment to work with the United States to "create a stronger more profitable livestock industry on both sides of the 49 th parallel." The Canadian Pork Council (CPC) stated that the panel's report "vindicates [the] objections" the pork industry had to COOL legislation, which it believes restricts market access (i.e., the movement of live swine to the U.S. market) and constitutes a technical barrier. The CPC plans to work "with like-minded groups in the U.S. to find a meaningful solution without further litigation" (referring to a possible U.S. appeal and the process that would follow). The Canadian Cattlemen's Association (CCA) stated the ruling confirms Canada's position that COOL discriminates against live cattle shipped to the United States to the detriment of Canadian cattle producers. In particular, it noted that since taking effect, COOL "has increased costs for U.S. companies that import live Canadian cattle," which has reduced "the competiveness of those Canadian cattle in the U.S. market." The CCA plans to continue working with the U.S. industry "not ... for the outright repeal of COOL but [to] seek only those regulatory and statutory changes necessary to eliminate the discrimination that COOL has imposed to the comparative disadvantage of livestock imported into the U.S. vis-a-vis U.S. livestock." Under WTO rules, the United States had various options available to respond to the dispute panel's adverse ruling on certain aspects of U.S. COOL. One was to accept the decision and make changes to the COOL statute and/or regulations to comply with the WTO findings. Another was to appeal the panel report on legal issues. On March 23, 2012, the United States appealed two findings of the DS panel's report to the WTO Appellate Body (AB). A USTR spokeswoman restated its position that the report had confirmed the U.S. right to adopt rules to inform consumers of the country of origin in their purchasing decisions, but expressed disappointment that the panel "disagreed with the way that the United States designed its COOL requirements" for beef and pork. USTR's chief counsel stated that the U.S. appeal is "a signal of our commitment" to ensure that consumers "are provided with accurate and relevant information" on the origin of beef and pork, and "to fight for the interests of U.S. consumers at the WTO." Interest groups that had urged the Obama Administration to appeal the WTO report (R-CALF, USCA, NFU, Food and Water Watch, Public Citizen) supported this decision. Those that advocated resolving this dispute (NCBA, NPPC, AMI) expressed disappointment, and noted that the appeal jeopardizes strong trading relationships with Canada and Mexico and invites the prospect of retaliation by these two countries against U.S. meat exports. Canada's Agriculture Minister expressed disappointment that the United States appealed, stating his confidence that the WTO findings "will be upheld so that trade can move more freely, benefiting producers and processors on both sides of the border." Mexico's Economic Ministry declared that it would defend Mexico's interests in the appeal process, and that it plans to file its own notice of appeal seeking a review of some issues in the panel's report that it says reflect inadequate legal analysis. On June 29, 2012, the WTO's AB upheld the DS panel's finding that the COOL measure treats imported Canadian cattle and hogs, and imported Mexican cattle, less favorably than like domestic livestock, due to its record-keeping and verification requirements. The AB, however, reversed the DS panel's finding that COOL does not fulfill its legitimate objective to provide consumers with information on origin. The AB found that the DS panel's interpretation of TBT Article 2.2 was too narrow, and that the U.S. COOL measure partially met its legitimate objective to provide country of origin information. However, the AB did not determine if COOL was more trade restrictive than necessary. (See Appendix D for more discussion of the WTO findings.) On July 23, 2012, the Dispute Settlement Body (DSB) adopted the AB's report and the DS panel's report, as modified by the AB, under the reverse consensus rule. Under this rule, both reports are adopted unless all WTO member countries present at the meeting vote not to do so. This rule makes adoption virtually automatic. In turn, the United States, Canada, and Mexico were required to unconditionally accept the AB's decision. The DSB, as is the practice, did not specify what the United States must do to comply with these reports' findings. The WTO's Dispute Settlement Understanding (DSU) lays out a multi-step process for a country to comply with the adopted WTO findings. Once WTO findings are adopted by the DSB, a compliance deadline is established. If a party or parties to a dispute believe compliance measures fail to meet WTO obligations, the process may move into a compliance panel phase. If that does not resolve disagreements among parties, the dispute could move into a retaliation phase. A resolution to a WTO case may be delayed for months as the parties work through the compliance and/or retaliation processes. After the adoption of the dispute settlement reports, the United States had up to 30 days to inform the DSB of its plans to implement the WTO findings. If a country is unable to comply immediately, the DSU allows for a "reasonable period of time" for this to occur. Often, WTO members are given approximately one year from the date of adoption of the panel report to comply. If the disputing countries fail to agree on a compliance deadline, as occurred in this case, an arbitrator may determine the deadline. Because the United States, Canada, and Mexico could not agree on a timetable or an arbitrator, the WTO Director-General appointed one. In the arbitration hearing, the United States argued that 18 months were needed to pursue the steps required to adopt a regulatory response. Canada argued that six months would be sufficient. Mexico argued for an eight-month compliance period, but would welcome six. On December 4, 2012, the arbitrator determined that 10 months from the reports' adoption (July 23, 2012) was a reasonable period of time for the United States to comply. The United States was given until May 23, 2013 to bring COOL into WTO compliance. Facing the deadline of May 23, 2013, the United States began the process of deciding how to modify those features of COOL targeted by the WTO panels' findings to bring them into compliance. This continued USTR's reported engagement in late 2012 and early 2013 with Congress and interest groups on how to proceed. (See Appendix E for discussion of options for bring COOL into compliance.) On March 12, 2013, USDA released a proposed rule to amend COOL regulations. According to USDA, the proposed rule would improve the operation of the COOL program and bring it into compliance with WTO trade obligations. There was a 30-day public comment period. The department issued the revised final rule on May 23, 2013, and published it in the Federal Register on May 24, 2013. The revised final rule was not significantly different from the proposed rule issued in March. On May 24, 2013, the United States notified the WTO Dispute Settlement Body (DSB) that it had complied with the WTO findings on COOL. USDA's revised COOL rule for covered meat products was intended to address the WTO's finding that COOL regulations are not enforced in an evenhanded manner. The WTO found that COOL requirements result in much more information being collected upstream than is passed on to consumers on labels, and that the information on labels may be confusing and incomplete. Under the revised COOL rule, the retail labeling of covered meat commodities must include the country of origin of each production step. That is, meat labels have to include where the animals were born, where raised, and where slaughtered. The rule also prohibits the practice of commingling muscle meat produced during a single production day and the use of multi-country labels for muscle meat. Under the revised COOL rule, meat from animals that are exclusively born, raised, and slaughtered in the United States has to be labeled "Born, Raised, and Slaughtered in the United States." Under the previous rule, meat exclusively from U.S. animals was labeled as "Product of the United States." (See Table 2 for comparison of the initial labels and revised labels at the retail level.) The revised rule also eliminates the previous use of mixed origin labels, such as "Product of the United States, and Country X, and/or Country Y" and "Product of Country X, and/or Country Y and the United States." Under the rule, each production stage must be included on the label. For example, beef from cattle that were originally imported into the United States as feeder cattle require a label stating "Born in Country X, Raised and Slaughtered in the United States." For cattle that were imported for immediate slaughter, the label is required to read "Born and Raised in Country X, Slaughtered in the United States." Previously the label would have read "Product of Country X and the United States." In addition, the revised COOL rule no longer allows meat that is processed during a single production day from animals of different origins to be commingled and labeled with a mixed label such as "Product of the United States, and Country X, and/or Country Y." Meat labels, as noted above, now must include each production step (born, raised, and slaughtered) for the processed animals. The labeling requirement for imported muscle cuts of meat is unchanged; however, the labels may include the production steps if there is supporting documentation for them. Last, the revised rule also amends the definition of retailer to extend it to any person that meets the definition of retailer in the Perishable Agricultural Commodities Act of 1930 (PACA; 7 U.S.C. §499a et seq.), whether or not the retailer has a PACA license. This provision clarifies who is subject to COOL regulations. The revised COOL rule went into effect on May 23, 2013, and did not apply to muscle cuts produced or packaged before that date. USDA recognized that meat processors would not be able to implement new labeling requirements immediately. During the first six months after the rule was published, USDA planned to conduct industry education and outreach activities. The six-month period also provided time for existing stocks of muscle meat labeled under old regulations to clear the pipeline. USDA also allowed meat processors to use their existing stock of old labels until they were completely used. However, under this allowance, retailers had to provide in-store signs or placards that notify country of origin according to the revised rule. In the proposed rule, USDA estimated the cost for implementing new labeling at $32.8 million (range of $17.0 million to $47.3 million), and estimated that 33,350 establishments owned by 7,181 firms would need to rework labels. However, the proposed rule did not calculate costs from prohibiting commingling. The final rule estimated the cost of losing commingling flexibility at $90.5 million, with a range of $36.1 million to $144.8 million. When labeling costs are added to the cost of lost commingling flexibility, total implementation costs range from $53.1 million to $192.1 million. USDA noted that it is not possible to specify how often packers use commingling flexibility, and therefore difficult to estimate. But USDA believed the cost of losing commingling flexibility would fall towards the lower end of the range, resulting in a likely total cost of $53.1 million to $137.8 million. Most of the labeling costs are expected to be borne by packing and processing facilities as they add new production steps to labels. USDA noted that it does not believe additional recordkeeping will be necessary under the new rule. As for the economic benefits of this change, USDA says it was unable to quantify benefits from adding production steps to labels, but noted they were likely "comparatively small" relative to benefits discussed in the final 2009 COOL rule. In previous analysis of COOL, USDA found the economic benefits to be positive but difficult to quantify. U.S. farm and ranch groups that have been long-time supporters of COOL responded positively to USDA's revised rule. The NFU said, "We are very pleased that the USDA has decided to stand strong and keep COOL. The decision to bring the law into compliance with the WTO's ruling is a win-win situation for all interested parties. We further applaud the administration for deciding to take a proactive approach in bringing COOL into compliance by providing more information on the origins of our food, instead of simply watering down the process." USCA also commended USDA for finalizing the COOL rule, which "will not only strengthen the overall program, but will also bring the U.S. into compliance with our international trade obligations. Consumers will have even more information on labels with which they can make informed purchasing decisions." When the proposed rule was issued, USCA, as well as NFU, noted that the rule was similar to the proposals presented in the legal analysis commissioned by USCA and NFU. R-CALF also supported USDA's revised rule because it would provide accurate information to consumers about the origin of their meat. R-CALF noted that, "Without COOL it is the meatpacker and not the consumer that decides from what country cattle will be sourced to satisfy consumer demand for beef. Only with COOL can consumers trigger a demand signal for cattle sourced from U.S. farmers and ranchers, which they can do simply by consistently choosing to purchase a USA product." U.S. livestock groups that have opposed mandatory COOL requirements also weighed in on the revised rule. AMI said, "It is incomprehensible that USDA would finalize a controversial rule that stands to harm American agriculture, when comments on the proposal made clear how deeply and negatively it will impact U.S. meat companies and livestock producers." NCBA called the rule shortsighted, and said it would increase discrimination against imported product, and increase recordkeeping burdens. NCBA noted that "any retaliation against U.S. beef would be devastating for our producers." In July 2013, the meat industry challenged USDA and the COOL rule in U.S. District Court. (See Appendix F for a discussion on the meat industry lawsuit.) In October 2013, Tyson Foods, Inc. announced that it would stop buying direct-to-slaughter cattle from Canada. According to the company, the COOL rule raised costs due to the need for additional product codes and product segregation. Tyson Foods will continue to purchase Canadian-born cattle that are fed in U.S. feedlots. Canadian cattle and hog industry representatives stated their belief that the revised COOL rule would not bring the United States into compliance, with both groups noting that it would increase discrimination. The Canadian Cattlemen's Association (CCA) said the new rule will increase the impact of COOL on Canadian cattle because it "will require additional segregation by eliminating the ability to commingle cattle of different origins." The Canadian Pork Council (CPC) also issued a similar statement: "The new rule does nothing to reduce discrimination against Canadian feeder pigs and slaughter hogs.... The new rule will strip away any flexibility to commingle Canadian and US live swine at processing plants. This will make a very bad situation of the last four years much worse." Both the CCA and CPC are plaintiffs on the meat industry lawsuit to halt the implementation of the COOL rule. The governments of both Canada and Mexico rejected the USDA revised rule as a solution to the WTO dispute. Canada's Minister of International Trade and Minister of Agriculture stated: "Canada is extremely disappointed with the regulatory changes put forward by the United States today with respect to COOL. These changes will not bring the United States into compliance with its WTO obligations. These changes will increase discrimination against Canadian cattle and hogs and increase damages to industry on both sides of the border. Canada will consider all options at its disposal, including, if necessary, the use of retaliatory measures." Mexico also stated that USDA's "new rule does not meet the requirements of the WTO and will further damage Mexican cattle exports. The U.S. COOL program has created severe trade distortions as it has unnecessarily increased costs for the cattle industry." On June 7, 2013, Canada's Minister of International Trade and Minister of Agriculture issued a press release stating that the revised COOL rule did not meet the WTO requirements. At the same time, Canada released a list of products imported from the United States that could be targeted for retaliation. The list includes 38 harmonized tariff codes that cover a range of food and agricultural commodities and products, as well as a few manufactured products (see Appendix G ). The list was officially published in the Canada Gazette (Canada's Federal Register ) for public comment. The press release states that Canada expects to consult with stakeholders to resolve the COOL dispute over the next 18 to 24 months, and that the Canadian government will abide by its WTO obligations and not take retaliatory measures until the WTO provides authorization. Mexico has not released a list of products that could be subject to retaliation, although it points to its list of products targeted during the U.S.-Mexico trucking dispute during 2009 to 2011 as an example of the types of products likely to be targeted for COOL. Initial estimates of damage claims could fall between $1 billion and $2 billion based on studies conducted in 2012 and 2013. According to a CPC study, COOL harms the Canadian hog industry by $500 million per year. For the Canadian cattle industry, annual losses from COOL have been estimated at $639 million. Mexico's claim on damages to its cattle sector could also be substantial. In the last three years, U.S. imports from Mexico have topped more than 1 million head, and per-head discounts on imported Mexican cattle due to COOL reportedly have been estimated by some analysts at as much as $60 per head. In addition, Mexico's cattle industry would likely argue that COOL has led to economic losses throughout the Mexican cattle sector beyond the discounted prices on cattle shipped to the United States. If the COOL dispute moves into the retaliation phase, the WTO would have to approve the level of retaliation, and the United States would be able to contest it. Canada and Mexico have the right under WTO rules to confirm whether or not they accept the substance of compliance taken by the United States. If either or both countries assert that the United States had not complied or had only partially complied with the WTO's findings, Canada and Mexico could request that a compliance panel investigate whether the United States had in fact adopted a compliance measure or whether any measure that it had adopted was consistent with the WTO decision. Both Canada and Mexico argued that USDA's May 23, 2013 revised COOL rule fails to bring the United States into compliance with its WTO obligations. On June 10, 2013, the United States, Canada, and Mexico communicated to the DSB that they had agreed to procedures for proceeding under WTO rules to establish a compliance panel and to address compensation or suspension of concessions. It was agreed that Canada and Mexico could request a compliance panel at any time, and consultations with the United States were not necessary prior to the request. On August 19, 2013, Canada and Mexico informed the DSB that they would request the establishment of a compliance panel. The United States objected to Canada's and Mexico's first request at the August 30, 2013, DSB meeting. At the September 25, 2013, DSB meeting, Canada and Mexico again requested the establishment of a compliance panel and the DSB accepted the request and referred the dispute to the original COOL dispute settlement panel. The compliance panel heard the COOL dispute February 18-19, 2014. The compliance panel issued its report on October 20, 2014. Although the panel found that COOL is a legitimate objective, it found that the manner in which COOL is implemented treats imported livestock unfavorably. The panel could not determine if the COOL rule was more trade restrictive than necessary. (See Appendix D for more discussion of the WTO findings.) Based on an agreement among the parties of the dispute, once the compliance report was released, the WTO DSB had 20 to 60 days to adopt it. The DSB granted a request by Canada and Mexico for a special meeting on November 28, 2014, to adopt the compliance panel report, and the United States appealed at that time. The United States asked the Appellate Body to review the finding that COOL discriminates against imported livestock. In addition, Canada and Mexico asked the Appellate Body to review the finding on whether COOL regulations were more trade restrictive than necessary. According to agreed-upon procedures, the Appellate Body report was to be released within 90 days of appeal. However, due to a heavy workload, the Appellate Body heard the appeal on February 16 and 17, 2015, and announced that its report would be released no later than May 18, 2015. The Appellate Body released its report on May 18 and upheld the findings of the compliance panel that COOL regulations violated U.S. WTO obligations. After the release of the appellate report, any party may request that the DSB adopt the compliance report and any Appellate Body modifications at a DSB meeting within 30 days of the report's circulation. The vote on adoption is conducted by "reverse consensus," requiring all members to vote against the reports in order for adoption to fail. At the request of Canada and Mexico, the DSB met on May 29, 2015, and adopted the reports. After the DSB adopted the reports, Canada and Mexico may request WTO authorization to suspend concessions with the United States, that is, retaliate. The reaction of supporters and opponents of COOL to the compliance panel findings are similar to those expressed about the dispute panel and Appellate Body findings. Supporters view the compliance panel findings as a win because the WTO again confirmed that it is a legitimate objective for a government to provide origin information about beef and pork to consumers. COOL supporters, such as NFU and USCA, have called on the United States to appeal the compliance panel ruling, and have strongly objected to calls for repeal of the COOL law. Supporters believe that the WTO process should proceed, and that the deficiencies the WTO found in the COOL rule could be corrected through revised regulations. On January 22, 2015, the National Farmers Union issued a new study that counters claims that COOL caused the decline in cattle exports to the United States. Opponents of COOL continue to believe that revised regulations will not successfully allow the United States to comply with the WTO findings and that the COOL law must be repealed. The COOL Reform Coalition, a group of more than 100 business and agribusiness organizations concerned about the potential effects of Canada and Mexico retaliation, have urged Congress to direct USDA to immediately rescind parts of COOL that violate WTO obligations. This would act as an interim step to provide Congress the time to repeal the COOL law. However, congressional views on COOL are mixed. In July 2014, 112 House members signed a letter to USDA recommending that the Secretary rescind the revised COOL rule if the WTO found against the United States. But on October 6, 2014, 32 Senators sent a letter to the Senate Appropriations Committee, asking that no appropriations action be taken on COOL until the WTO process was completed. Canada and Mexico issued a joint statement calling for the reintegration of the North American cattle and hog market through the repeal of the COOL law. They reiterated that both countries would seek authorization to retaliate against U.S. agricultural and nonagricultural products if the COOL case was not satisfactorily resolved. On June 4, 2015, Canada requested that the DSB authorize the suspension of concessions in the amount of C$3.068 billion (US$2.4 billion) and Mexico requested authorization of US$653.5 million. Mexico subsequently revised its request to $713 million at the June 17, 2015, DSB meeting. The United States objected to the requests, and Canada and Mexico's requests were referred to an arbitration panel. On July 30, 2015, USTR released a public version of its WTO submission to the arbitration panel refuting the value of damages claimed by Canada and Mexico. In total, USTR estimated damages from COOL at about $91 million, $43.2 million for Canada and $47.6 for Mexico. The arbitration panel heard the case for the suspension of concessions on September 15 and 16, 2015. Retaliation would be in the form of raising tariffs on U.S. products that Canada and Mexico import. Retaliation must not exceed the value of impairment, or losses, suffered by Canada and Mexico due to COOL. (See Appendix G for a list of commodities, both agricultural and non-agricultural, that could be targeted for tariff increases.) The arbitrator's (or arbitration panel's) role is to determine that the retaliation request is equivalent to the losses by Canada and Mexico. Once arbitration is requested, the WTO arbitrator has 60 days to issue a decision, although previous cases that went to arbitration took about six months before a decision was released. Once the decision is released, it is final. The WTO DSU provides that a country cannot suspend WTO concessions or other obligations as retaliatory measures in a dispute unless authorized by the WTO DSB. Canada and Mexico will formally request authorization from the DSB, and they may then implement the decision. Retaliation is terminated once the United States brings COOL into compliance or the parties reach an agreement that resolves the case. If unauthorized retaliation were to occur, the United States could challenge such retaliation in a separate WTO dispute settlement proceeding. On December 7, 2015, the arbitration panel released its report, which valued Canada's annual trade losses due to COOL at C$1.055 billion (US$781 million) and Mexico's losses at $228 million. The total amount of approved retaliation was slightly more than $1 billion, about one-third of the amount requested by Canada and Mexico. The arbitration panel based the level of retaliation on direct export losses for Canada and Mexico caused by COOL. The panel did not consider indirect losses. These were losses included in the retaliation requests that accounted for reduced prices received by Canadian and Mexican domestic livestock sectors due to the negative effects of COOL on exports. On December 21, 2015, the DSB granted concessions to Canada and Mexico, authorizing them to retaliate against imports of products from the United States. Although COOL for beef and pork was repealed on December 18, 2015, Canada and Mexico's formal request for authorization completed one of the last procedural steps of the dispute settlement process. As the WTO COOL case winds its way to conclusion, there have been increased calls for Congress to act on COOL. Some lawmakers agree with criticisms of COOL and could offer legislation to limit its scope and impacts, or outright repeal. Others remain strongly supportive of COOL as enacted and oppose any rollback. Efforts to modify COOL were also part of the 2014 farm bill debate but ultimately not included in the enacted law. In November 2014, Secretary of Agriculture Vilsack said that USDA analysis shows that there is no regulatory fix that would allow COOL regulations to be consistent with the COOL law and also satisfy the WTO rulings. Vilsack said that Canada and Mexico would need to specifically say what measures would be acceptable, or Congress would have to provide, in the law, "different directions" to USDA to allow for WTO compliance. On May 1, 2015, USDA delivered to Congress the economic study of COOL as required by Section 12104 of the 2014 farm bill (see " Farm Bill " below). Results of the study were similar to earlier studies of COOL and USDA's Regulatory Impact Analysis performed during the rulemaking process. USDA found that COOL information may be of some benefit to consumers that want the information, but there is insufficient evidence to conclude that demand for beef and pork will increase from the benefit. The study concluded that without an increase in demand for beef and pork, the costs of implementing COOL results in losses for producers (livestock producers, packers, processors, and retailers) along the supply chain. The FY2015 appropriations act ( P.L. 113-235 ) directed USDA to submit a report with recommendations for addressing COOL. As directed, on May 1, 2015, USDA Secretary Vilsack sent letters to the leadership of the House and Senate Agriculture Committees and the House and Senate Appropriations Subcommittees on Agriculture suggesting that the COOL statute be repealed or a generic label be established that might satisfy U.S. WTO obligations. On December 18, 2015, in response to the WTO arbitration panel's decision to allow Canada and Mexico to retaliate against imported products from the United States, Congress used the annual appropriations process to permanently repeal COOL for beef and pork and their ground products. Section 759 of the enacted Consolidated Appropriations Act, 2016 ( P.L. 114-113 , Division A) removed references to muscle cuts of beef and pork and ground beef and pork from the COOL statute (7 U.S.C. §1638 et seq.). On the same day, Secretary Vilsack stated that USDA would immediately halt the enforcement of COOL requirements for beef and pork and amend the COOL regulations as soon as possible to reflect the change in COOL law. The repeal provision differed from the House repeal bill (see " House Repeals COOL for Beef, Pork, and Chicken " below) in that chicken and ground chicken were not included in the repeal. Also, some stakeholders had hoped that Congress would have considered repealing mandatory COOL for beef and pork and enacting a voluntary COOL provision at the same time (see " Senate Introduces Repeal and a Voluntary COOL " below). The continued threat of retaliation by Canada and Mexico over a voluntary program likely made this scenario unfeasible under the tight timeline that the United States faced on retaliation. On May 18, 2015, House Agriculture Committee Chairman Conaway introduced the Country of Origin Labeling Amendments Act of 2015 ( H.R. 2393 ) that would repeal beef, pork, and chicken from the COOL statute. COOL for other covered commodities would remain in place. On May 20, 2015, the House Agriculture Committee marked up H.R. 2393 and, by a vote of 38-6, favorably reported it to the full House. On June 10, 2015, the House passed H.R. 2393 by a vote of 300 to 131. During the House Committee on Rules hearing on H.R. 2393 , Representative Massie (KY) submitted an amendment that would have established a voluntary country-of-origin labeling law to replace a repealed mandatory law for beef, pork, and chicken. The amendment would have allowed meat to be labeled "Product of US" if the livestock from which it is processed is exclusively born, raised, and slaughtered in the United States. The amendment was not considered by the Rules Committee. Support for COOL repeal has been less certain in the Senate. Senator Roberts, Chairman of the Senate Agriculture Committee, has noted that the views of Agriculture Committee members vary on COOL and that they are considering alternatives that would enable the United States to meet its WTO obligations. On July 23, 2015, Senator Hoeven introduced the Voluntary Country of Origin Labeling (COOL) and Trade Enhancement Act of 2015 ( S. 1844 ), which also repeals mandatory COOL for beef, pork, chicken, and their ground products. In addition, S. 1844 amends the Agricultural Marketing Act (7 U.S.C. §1621 et seq.) requiring USDA to establish a label designation that enables meat processors to voluntarily use a U.S. label for beef, pork, and chicken from livestock exclusively born, raised, and slaughtered in the United States. Also, during debate on the vehicle for the Senate surface transportation reauthorization bill ( H.R. 22 ), Senator Roberts introduced an amendment ( S.Amdt. 2302 ) to repeal mandatory COOL for beef, pork, and chicken using language from H.R. 2393 . On July 26, 2015, Senator Hoeven also introduced S. 1844 as an amendment ( S.Amdt. 2371 ) to the transportation bill. Neither amendment was considered for inclusion in the final Senate-passed bill. The Senate is expected to take up COOL repeal legislation after the August recess. Supporters of S. 1844 believe that a voluntary program would successfully address the WTO case by fully repealing mandatory COOL, provide integrity to the U.S. label for meat, and enable consumers to know about the origin of some of their meat purchases. Supporters also note that Canada already has a similar program in place for meat. Canada and Mexico have stated that the only way to resolve the WTO case is to repeal COOL. In response to Senator Hoeven's proposed voluntary program, Canada's Agriculture Minister said such a program would "guarantee Canadian retaliation" because it would continue to discriminate against imported livestock through segregation. If a voluntary COOL program was implemented, and Canada or Mexico opposed it, the United States could request that a WTO compliance panel determine if the new program is compliant with WTO requirements. However, once the arbitration panel determines the amount applicable in the ongoing case, Canada and Mexico could implement retaliation even if mandatory COOL is repealed and is replaced with a voluntary program. U.S. products would face higher tariffs while the compliance panel reviews the new voluntary program. COOL was addressed in the explanatory statement accompanying the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 , Division A, December 16, 2014). In the statement, Congress directed USDA, in consultation with the U.S. Trade Representative, to submit to the House and Senate Appropriations Committees a report with recommendations on how to change the COOL law to make certain it "does not conflict with or is in any manner inconsistent with" U.S. WTO obligations. The report is due to the committees within 15 days of final resolution (assumed to mean when the WTO issues an appellate ruling on the COOL compliance report) or May 1, 2015, whichever comes first. Secretary Vilsack has repeated his comments from November stating that there is no "regulatory fix" for COOL and maintains that Congress has to "fix" the law. For FY2014, in the explanatory statement for the Consolidated Appropriations Act, 2014 ( P.L. 113-76 ) the House Committee on Appropriations expressed disapproval of USDA's May 2013 COOL rule, pointing to its high costs to the livestock industry and the potential of retaliation in the WTO case. The committee recommended that USDA delay implementing the COOL rule until the WTO case is completed. On January 23, 2014, Representative DeLauro, a member of the House Committee on Appropriations, sent a letter to Secretary Vilsack urging that USDA continue to implement and enforce COOL regulations. On December 18, 2015, mandatory COOL for muscle cuts of beef and pork and ground beef and pork were repealed in Section 759 of the enacted Consolidated Appropriations Act, 2016 ( P.L. 114-113 , Division A). The provision removed all references to beef and pork in the COOL statute (7 U.S.C. §1638 et seq.). In the 113 th Congress, House and Senate conferees completed work on the farm bill without making any major changes to COOL's statutory language. Earlier, in May 2013, during the Senate Agriculture Committee markup of the Senate farm bill ( S. 954 ), Senator Mike Johanns offered and then withdrew an amendment to repeal COOL for beef, lamb, and pork. Senator Johanns noted that he believed the rule USDA had proposed to address the WTO findings would be a regulatory nightmare and would not satisfy the U.S. WTO obligations. But instead of asking for a roll call vote on the amendment, he withdrew it in recognition that the committee's opinion on COOL was divided. S. 954 , the Senate-passed farm bill, contains no provisions on COOL. The House-passed farm bill ( H.R. 2642 , passed July 11, 2013) contained a provision (Section 11105) that would have required USDA to conduct an economic analysis of USDA's March 2013 proposed COOL rule (78 Federal Register 15645). The analysis was to include the impact on consumers, producers, and packers of the COOL law and rule. The report on COOL would have been due to Congress within 180 days of farm bill enactment. During the first farm bill conference meeting on October 30, 2013, several conferees from both the House and Senate raised concerns about the COOL rules. While the farm bill conference leaders worked, reports speculated that conferees would repeal the COOL law or perhaps modify it. COOL opponents encouraged conferees to find a WTO-compliant resolution to the WTO COOL dispute. Reportedly, one proposal considered called for a "North American" meat label, which COOL proponents strongly oppose. USDA's Secretary Vilsack weighed in on COOL with the view that Congress should let the WTO process resolve the issue. The farm bill conference report to H.R. 2642 , released on January 27, 2014, did not contain any language or provision to repeal or modify the COOL law. The only COOL-pertinent provision (Section 12104) includes the economic analysis provision found in the House-passed farm bill. The conference report clarifies that the economic analysis is to be of the May 2013 final rule (78 Federal Register 31367) instead of the March 2013 proposed rule. In addition, the COOL provision adds venison as a covered commodity. In a letter to conference leadership, COOL opponents expressed their disappointment that conferees did not alter COOL in a way that would resolve the WTO COOL dispute. Appendix A. Other Laws with Food Labeling Provisions The COOL provisions of the 2002 and 2008 farm bills do not change the requirements of the Tariff Act or the food safety inspection statutes described below. Instead, they were incorporated into the Agricultural Marketing Act of 1946 (Sections 281-285). Tariff Act Under Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. §1304), every imported item must be conspicuously and indelibly marked in English to indicate to the "ultimate purchaser" its country of origin. The U.S. Customs and Border Protection generally defines the "ultimate purchaser" as the last U.S. person to receive the article in the form in which it was imported. So, articles arriving at the U.S. border in retail-ready packages—including food products, such as a can of Danish ham, or a bottle of Italian olive oil—must carry such a mark. However, if the article is destined for a U.S. processor where it will undergo "substantial transformation," the processor is considered the ultimate purchaser. Over the years, numerous technical rulings by Customs have determined what is, or is not, considered "substantial transformation," depending upon the item in question. The law has authorized exceptions to labeling requirements, including articles on a so-called "J List," named for Section 1304(a)(3)(J) of the statute. This empowered the Secretary of the Treasury to exempt classes of items that were "imported in substantial quantities during the five-year period immediately preceding January 1, 1937, and were not required during such period to be marked to indicate their origin." Among the items placed on the J List were specified agricultural products including "natural products, such as vegetables, fruits, nuts, berries, and live or dead animals, fish and birds; all the foregoing which are in their natural state or not advanced in any manner further than is necessary for their safe transportation." Although J List items themselves have been exempt from the labeling requirements, Section 304 of the 1930 act has required that their "immediate container" (essentially, the box they came in) have country-of-origin labels. But, for example, when Mexican tomatoes or Chilean grapes were sold unpackaged at retail in a store bin, country labeling had not been required by the Tariff Act. Meat and Poultry Products Inspection Acts USDA's Food Safety and Inspection Service (FSIS) is required to ensure the safety and proper labeling of most meat and poultry products, including imports, under the Federal Meat Inspection Act, as amended (21 U.S.C. §601 et seq .), and the Poultry Products Inspection Act, as amended (21 U.S.C. §451 et seq .). Regulations issued under these laws have required that country of origin appear in English on immediate containers of all meat and poultry products entering the United States (9 C.F.R. §327.14 and 9 C.F.R. §381.205). Only plants in countries certified by USDA to have inspection systems equivalent to those of the United States are eligible to export products to the United States. All individual, retail-ready packages of imported meat products (for example, canned hams or packages of salami) have had to carry such labeling. Imported bulk products, such as carcasses, carcass parts, or large containers of meat or poultry destined for U.S. plants for further processing also have had to bear country-of-origin marks. However, once these non-retail items have entered the country, the federal meat inspection law has deemed them to be domestic products. When they are further processed in a domestic, FSIS-inspected meat or poultry establishment—which has been considered the ultimate purchaser for purposes of country-of-origin labeling—FSIS no longer requires such labeling on either the new product or its container. FSIS has considered even minimal processing, such as cutting a larger piece of meat into smaller pieces or grinding it for hamburger, enough of a transformation so that country markings are no longer necessary. Meat and poultry product imports must comply not only with the meat and poultry inspection laws and rules but also with Tariff Act labeling regulations. Because Customs generally requires that imports undergo more extensive changes (i.e., "substantial transformation") than required by USDA to avoid the need for labeling, a potential for conflict has existed between the two requirements. Federal Food, Drug, and Cosmetic Act Foods other than meat and poultry are regulated by the U.S. Department of Health and Human Services' Food and Drug Administration, primarily under the Federal Food, Drug, and Cosmetic Act (FFDCA; 21 U.S.C. §301 et seq.). This act does not expressly require COOL for foods. Section 403(e) of the FFDCA does regard a packaged food to be misbranded if it lacks a label containing the name and place of business of the manufacturer, packer, or distributor (among other ways a food can be misbranded). However, this name and place of business is not an indicator of the origin of the product itself. Appendix B. Timeline of COOL Appendix C. North American Livestock Trade Overview After COOL took full effect in March 2009, Canada and Mexico continued to question the trade legality of mandatory COOL, and claimed that COOL disrupted normal live cattle and hog trade patterns and caused large financial losses to their livestock industries. Canada and Mexico were concerned that labeling requirements and the need to segregate imported and domestic animals to assure proper labeling would raise the cost of handling and processing imported animals. The increased cost would ultimately lead U.S. livestock buyers to reduce live animal imports or to offer lower prices for imported animals. The cattle and hog industries of Canada, Mexico, and the United States have become increasingly integrated over the last two decades, particularly after NAFTA took effect in 1994 and, before that, the Canada-U.S. Free Trade Agreement in 1988. These agreements, along with the global Uruguay Round Agreements under the WTO that reduced tariff and non-tariff barriers to trade, have enabled animals and animal products to move across borders more freely, based on market demand. A number of animal health incidents have disrupted this market integration from time to time. The most significant event was the discovery of bovine spongiform encephalopathy (BSE or mad cow disease) in 2003, first in Canada and later in the United States, which halted most cross-border movement of cattle from Canada to the United States from mid-2003 through mid-2005. The predominance of BSE cases in Canada rather than in the United States may have contributed to wider support for the mandatory COOL law, some analysts believe, although government officials assert that both countries now have strong, scientifically defensible safeguards in place to ensure that BSE is controlled and that its infectious agent does not enter the human food supply. Proximity, abundant feed supplies, and established feeding operations in the United States have resulted in an increase in live cattle and hog imports from Canada and Mexico. Imports may fluctuate year to year as factors such as relative animal and feed prices, inventory levels, currency exchange rates, and weather conditions influence the movement of cattle and hogs into the United States. Value of North American Livestock Trade Canada and Mexico are important U.S. trading partners for live animals. The value of U.S. cattle and hog exports to Canada and Mexico was about $76 million in 2014 ( Table C-1 ), accounting for about 47% of the total value of U.S. cattle and hog exports. The United States primarily exports breeding stock, and in recent years, U.S. cattle and hogs have been shipped to more than 70 foreign markets. Prior to 2011, Canada and Mexico accounted for a majority of the value of cattle and hog exports, but from 2011-2013 Russia and Turkey were leading markets for breeding cattle, and China was a leading market for breeding hogs. Shipments to those markets declined sharply in 2014, thus boosting the share of U.S. cattle and hogs moving to Canada and Mexico. On the import side, the value of trade with Canada and Mexico is much greater. In 2014, the United States imported more than $2.9 billion worth of cattle and hogs from Canada and Mexico, a record value for cattle and hog imports ( Table C-1 ). Almost all U.S. live cattle imports come from Canada and Mexico and almost all live hog imports come from Canada. U.S. Cattle Imports U.S. cattle imports plunged in 2004 after the discovery of BSE in Canada in May 2003 and the subsequent U.S. ban on Canadian cattle imports. In 2004, all U.S. cattle imports came from Mexico. But once the border was reopened to Canadian cattle in 2005, imports steadily increased and reached near pre-BSE levels by 2007 due to the steady rebound in imports from Canada. In 2008, cattle imports dropped 8% to 2.3 million head, and fell 12% to 2 million head in 2009 ( Figure C-1 ). U.S. cattle imports during the first half of 2008 were almost 9% higher than the previous year, but import growth slowed during the second half of 2008, and by December cattle imports had fallen 8% below 2007. Imports from Canada continued to grow during 2008 and imports of Canadian feeder cattle were particularly strong in the first half of the year. Under COOL regulations, cattle that were in the United States before July 15, 2008, were considered U.S. origin cattle, which likely encouraged feeder imports from Canada during the first part of the year. Canadian feeder imports through June 2008 were 72% higher than the previous year, but ended the year only 16% higher. However, during 2008 cattle imports from Mexico were 35% lower than 2007, and the lowest imports since 1998. Good range and forage conditions in Mexico likely allowed producers to keep cattle on grass and resulted in reduced U.S. imports. In 2009, U.S. cattle imports continued to decline, dropping 12%. But contrary to 2008, imports from Canada fell, while imports from Mexico increased. USDA's Economic Research Service (ERS) indicated that weaker U.S. cattle prices and weaker demand for beef in the United States, combined with a stronger Canadian dollar, reduced Canadian returns and incentives to send cattle to the United States. On the other hand, imports from Mexico started rising due to worsening drought conditions in Mexico during the latter part of 2009 that encouraged Mexican producers to ship cattle to the United States. Some analyses attribute the import decline during the last part of 2008 and all of 2009 to COOL, but differ on the extent currency exchange rates may have contributed to this development. CattleFax, an industry-funded data and analysis service based in Colorado, observed that the 2008 decline in cattle imports was due to mandatory COOL regulations, and that imports would "face a big wild card in 2009" for the same reason. Livestock sector analysts with the Chicago Mercantile Exchange (CME), examining cattle import trends through year-end 2008, commented that the COOL law "has been quite effective, if you measure effectiveness by the degree to which it has been able to stifle cattle trade in North America." They wrote that reductions in imports from both Mexico and Canada "came at a time when a significant devaluation in the value of the Peso and Canadian dollar normally would have been conducive of increased imports from these two countries. Under normal circumstances, one would expect cattle imports to actually increase rather than be cut by almost 40%." However, USDA's ERS suggested that the currency exchange factor may be somewhat more involved and that Canada's available supplies of slaughter cattle were reduced by earlier strong shipments of feeder cattle. Since 2009, U.S. cattle imports have been in the 2.1 million-2.4 million head range. In 2014, cattle imports increased 16% to nearly 2.4 million head, the highest level of imports since 2007. Imports from Canada were 19% higher and from Mexico 13% higher. Record high U.S. cattle prices provided ample incentive to pull Canadian and Mexican cattle into the United States. Cattle Imports from Canada In 2014, U.S. imports of cattle from Canada increased 19% to surpass 1.2 million head, the highest since 2008 ( Figure C-2 ). A majority of Canadian cattle shipped to the United States are for immediate slaughter—58% in 2014. Most of the remaining imports are feeder cattle that are usually destined for U.S. feedlots to be fed out to slaughter-ready weights. Dairy cows and breeding stock account for a small share of imports from Canada. In 2014, slaughter cattle imports from Canada increased 7% to 724,000 head from the previous year. Increases in slaughter cattle imports have been supported by larger shipments of cows coming into the United States for immediate slaughter. High U.S. cow prices and the closure of a cow slaughter plant in Quebec in 2012 have contributed to increases in slaughter cow imports. Feeder cattle imports increased 38% to 493,000 head. The share of feeder cattle imports—40% in 2014—has been steadily rising over the last several years. Record high U.S. feeder cattle prices supported the southern movement of Canadian feeders. Cattle Imports from Mexico Almost 100% of Mexican cattle shipped to the United States are stocker or feeder cattle that are usually raised in the northern states of Mexico, then shipped to the United States and placed on pasture or into feedlots ( Figure C-3 ). Cattle imports from Mexico are often influenced by prevailing precipitation conditions in northern Mexico. Persistent drought from 2009-2012 led to an increasing number of cattle imports from Mexico, reaching nearly 1.5 million head in 2012. Reduced cattle inventory and improved pasture conditions in Mexico in 2013 resulted in a decline of 33% in feeder cattle shipments to the United States. In 2014, imports from Mexico increased 13% as the record high feeder cattle prices encouraged Mexico's cattle producers to send more animals to the United States. U.S. Hog Imports U.S. hog imports from Canada started to rise sharply in the mid-1990s. U.S. hog imports were a record 10 million head in 2007, growing more than 13% per year on average during the previous 10 years. Furthermore, the composition of U.S. hog imports significantly shifted from hogs for immediate slaughter to feeder pigs. At one time the U.S. hog industry was composed of many small operations that raised hogs from birth to slaughter-ready weight (farrow-to-finish operations), but from the mid-1980s the hog industry moved toward vertical integration. With vertical integration there came increased demand for feeder pigs to meet the needs of finishing operations. Some Canadian producers focused their production on providing feeder pigs for shipment to the United States where access to abundant and cheaper supplies of grain made it more economical to feed pigs to slaughter weight. The feeder pig share of hog imports increased steadily from the mid-1990s, peaking at 85% in 2012. The feeder pig share of imports was 83% in 2014. U.S. imports of Canadian hogs dropped sharply from the 2007 peak. U.S. hog imports from Canada fell 7% in 2008 on a 30% drop in hogs for immediate slaughter. In 2009, hog imports dropped another 32% as both feeder pigs and hogs for immediate slaughter declined ( Figure C-4 ). An early 2009 USDA analysis suggested that COOL's implementation likely "made U.S. swine finishers reluctant to import Canadian finishing animals, in light of some major U.S. packers' stated unwillingness to process Canadian-origin animals." Another report suggested that COOL was affecting the U.S. hog sector, particularly in Iowa, as packers moved to process only U.S.-born hogs. With many Iowa producers operating finishing operations that source feeder pigs from Canada, a USDA document on COOL implementation cited that some producers' barns are "empty because of a lack of an assured outlet for slaughter hogs of mixed country of origin" (i.e., Product of Canada and United States). USDA also reported that some lenders were not extending credit to operations that finish mixed-origin pigs, and that lower prices at times were "being paid for mixed origin slaughter hogs compared to hogs of exclusively U.S. origin." After the sharp decline in 2009, U.S. hog imports were stable at about 5.7 million-5.8 million head for 2010-2012. In 2013, hog imports declined 12% to about 5 million head, and remained at that level in 2014. Canadian hog inventories have declined from the mid-2000s level resulting in tighter hog supplies available for export to the United States. However, as with the cattle markets, record high hog prices in 2014 encouraged feeder pig imports. Appendix D. WTO Findings The key WTO findings that U.S. COOL regulations violated U.S. WTO obligations centered on Article 2.1 and Article 2.2 of the Technical Barriers to Trade (TBT) agreement. Article 2.1 states that "Members shall ensure that... products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin.... " Article 2.2 states that "technical regulations [such as COOL] shall not be more trade-restrictive than necessary to fulfil a legitimate objective." This section summarizes key WTO findings of the dispute settlement panel, the Appellate Body, the compliance panel, and the Appellate Body on the compliance panel. The first two sections describe the key rulings on Articles 2.1 and 2.2 of the Technical Barriers to Trade (TBT). The last two sections summarize issues that were before the dispute settlement panel, but were not key in the appeal and compliance processes. COOL Treats Imported Livestock Less Favorably Than Domestic Livestock Dispute Panel The DS panel found that Canada and Mexico demonstrated that COOL is a technical regulation governed by, and in violation of, Article 2.1 of the TBT. The AB upheld this finding, but for different reasons (see below). This TBT article states: "Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country." The panel first found that the COOL statute and the final rule (but not the Vilsack letter) are a "technical regulation" because they are legally enforceable requirements governing the labeling of meat products offered for sale. The panel further found that Canadian and U.S. cattle, Canadian and U.S. hogs, and Mexican and U.S. cattle are "like products," and the muscle cut labels used to implement COOL affect competitive conditions for these products in the U.S. market to the detriment of imported livestock. According to the panel, COOL creates this "competitive advantage" by creating an incentive for "processing exclusively domestic livestock and a disincentive against handling imported livestock." More specifically, the panel found that to comply with COOL, processors need to segregate imported from domestic livestock to an extent that discourages them from using imported livestock at all. In turn, this reduces the competitive opportunities for imported livestock relative to those for domestic livestock. The panel based this conclusion on its assessment of the compliance requirements of COOL. It first reviewed the four statutory definitions used to label the origin of beef and pork muscle cuts (see Table 1 ), noting that "origin is determined by the country in which specific livestock production and processing steps took place (i.e., birth, raising and slaughtering)," and highlighted the distinctions between the exclusive U.S. origin label and the other three labels that identified livestock with an imported element (i.e., at least one step took place outside the United States). It observed that "there was ... major flexibility" under COOL's interim final rule (August 2008) to use "multiple countries of origin" (Category B) for muscle cuts eligible for the U.S.-origin only label (Category A) "without limitations." However, in response to public comment, COOL's final rule (January 2009) ended this flexibility, allowing the multiple countries declaration (Category B) to be used to label U.S.-origin meat only if U.S. and foreign livestock were commingled for slaughter "on a single production day." The panel then examined what is involved in segregating livestock and meat between domestic and foreign origin under five business scenarios. It determined that "the least costly way" to comply with COOL "is to rely on exclusively domestic livestock" rather than imported livestock. Accepting evidence provided by Canada and Mexico that major U.S. slaughterhouses are "applying a considerable COOL discount of [US$] 40-60 per head for imported livestock" but not to domestic livestock, the panel observed that COOL creates an incentive to process domestic rather than imported livestock because it is less costly to do so. It pointed out that several U.S. meat processors indicated they plan to move to use Category A (U.S. origin) "for the vast majority of their beef and pork products" and to ensure segregation by origin (i.e., minimize commingling). Other evidence presented confirmed that the U.S.-origin label accounts for a large share of the meat marketed. The United States indicated that 71% of the beef, and 70% of the pork, sold at the retail level carries the exclusive U.S. label. Canada showed that close to 90% of meat sold at retail carries this U.S. label. Based on the above, the panel "preliminarily" concluded that COOL "creates an incentive to use domestic livestock—and a disincentive to handle imported livestock—by imposing higher segregation costs on imported livestock than on domestic livestock." The panel's report also showed that some U.S. plants and companies "are simply refusing to process any imported livestock anymore," and that fewer U.S. processing plants are accepting cattle and hog imports than before. It also noted that certain suppliers had to transport imported livestock longer distances than before COOL, and that they also faced logistical problems and additional costs for timing delivery to specific times or days when processing is scheduled. Although the panel took these into account, it decided it also was important to make findings on COOL's actual trade effects. To do this, it considered data, economic analyses, and econometric studies submitted by Canada, Mexico, and the United States. In reviewing two economic studies on COOL's livestock segregation costs submitted by Canada, the panel stated "both studies shed some light on the different types of segregation and compliance costs encountered at different stages of the supply chain." Noting that such costs need to be absorbed somewhere in the marketing system, it concluded that "economic competition pressure" will dictate how these costs are allocated. Whether this involves processing only U.S.-origin livestock because it is the cheapest way to comply with COOL and because many U.S. consumers are not willing to pay a price premium for country-of-origin labeling, or incurring the additional costs associated with segregating imported livestock before processing, either option "is likely to cause a decrease in the volume and price of imported livestock." The panel also reviewed econometric analyses submitted by Canada and the United States that purported to assess COOL's impacts on prices and shares of imported livestock. Whereas the Canadian study concluded that COOL caused reduced competitive opportunities for Canadian livestock in the U.S. market, the U.S. study concluded that the economic recession was the primary cause. Rather than seeking to reconcile these disparate conclusions, the panel instead assessed "the robustness of each study." It considered Canada's study to be "sufficiently robust" because it included other economic variables that confirmed that COOL—not the economic recession that began in 2008, the 2004-2005 U.S. import ban due to the discovery of BSE in Canada's cattle herds, or transport costs—"had a negative and significant impact on Canadian import shares and price basis." Conversely, the panel found the U.S. study did not sufficiently show that the economic recession rather than COOL accounted for the negative impacts experienced in the cattle sector, did not fully analyze what occurred in both countries' hog sectors, and thus did not refute what Canada's study laid out. Appellate Body on the Dispute Panel Report The United States appealed the DS panel's finding that COOL treats imported livestock less favorably than domestic livestock (i.e., that COOL is inconsistent with TBT's Article 2.1). Its main argument was that COOL did not change the "conditions of competition" to the detriment of Canadian and Mexican cattle and hog producers. The U.S. legal brief acknowledged that though private market participants incur costs in complying with COOL, "any country of origin labeling will necessarily introduce compliance costs" and governments cannot control how participants respond to these costs. The brief argued that market forces, rather than the COOL measure in and of itself, increased the cost of selling Canadian and Mexican livestock into the U.S. market, and that COOL cannot be faulted for being discriminatory. In reviewing the U.S. appeal, the Appellate Body found that the panel's analysis of the finding of unfavorable treatment was incomplete in not considering whether or not the detrimental impact on imports was due exclusively to a "legitimate regulatory distinction" (i.e., a legally valid reason for similar products to be treated differently), which the TBT allows. The AB found that the COOL measure: lacks even-handedness because its recordkeeping and verification requirements impose a disproportionate burden on upstream producers and processors of livestock as compared to the information conveyed to consumers through the mandatory labelling requirements for meat sold at the retail level. That is, although a large amount of information must be tracked and transmitted by upstream producers for purposes of providing consumers with information on origin, only a small amount of this information is actually communicated to consumers in an understandable or accurate manner, including because a considerable proportion of meat sold in the United States is not subject to the COOL measure's labelling requirements at all. Based on these findings, the AB concluded that COOL's "regulatory distinctions" (i.e., the prescribed labels and labeling exemptions) "amount to arbitrary and unjustifiable discrimination against imported livestock, such that they cannot be said to be applied in an even-handed manner," rather than being based upon a "legitimate regulatory distinction." It thus upheld the DS panel's finding, but for different reasons, that COOL's requirements on labeling beef and pork accord "less favorable treatment to imported livestock than to domestic livestock." Compliance Panel The compliance panel found that the revised (May 2013) COOL rule violated Article 2.1 of the TBT. Like the dispute panel and the Appellate Body, the panel found that the revised rule was a technical regulation and that Canadian and Mexican cattle and hogs were like products. The compliance panel determined that the revised COOL rule required increased segregation and recordkeeping due to the ban on commingling and raises the possibility of needing more labels compared with the original rule, both of which increase the disincentive to use imported livestock. Therefore, it was found that the revised rule afforded less favorable treatment to imported livestock. The panel found that less favorable treatment was not due exclusively to a legitimate regulatory distinction—the need to inform consumers where livestock was born, raised, and slaughtered—because there still existed the possibility of inaccurate label information and a large amount of beef and pork was still exempt under the revised COOL rule. The compliance panel concluded that the amended COOL measure violates Article 2.1 because it accords imported Canadian livestock treatment less favourable than that accorded to like domestic livestock, in particular because the amended COOL measure increases the original COOL measure's detrimental impact on the competitive opportunities of imported [Canadian and Mexican] livestock, and this detrimental impact does not stem exclusively from legitimate regulatory distinctions. Appellate Body on the Compliance Report The Appellate Body upheld the findings of the compliance panel report that COOL violated Article 2.1 through increased recordkeeping and verification requirements that burden imported livestock. The panel found that the legitimacy for COOL is undermined because a large amount of beef and pork is exempt under COOL, placing imported livestock at a competitive disadvantage to domestic livestock for no reason. The panel notes between 57.7% and 66.7% of beef and 83.5% and 84.1% of pork do not provide origin information to consumers. COOL Does Not Meet Objective of Providing Consumers with Information on Origin of Meats Dispute Panel Canada and Mexico also alleged that COOL violates Article 2.2 of the TBT by being more trade-restrictive than necessary to fulfill a legitimate policy objective. Article 2.2 reads: Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade. For this purpose, technical regulations shall not be more trade-restrictive than necessary to fulfil a legitimate objective , taking account of the risks non-fulfillment would create. Such legitimate objectives are, inter alia : national security requirements; the prevention of deceptive practices; protection of human health or safety, animal or plant life or health, or the environment. In assessing such risks, relevant elements of consideration are, inter alia : available scientific and technical information, related processing technology or intended end-uses of products. (italics added for emphasis) The panel accepted the U.S. position that COOL's objective is to inform consumers of the country of origin of meat products, and it agreed with the United States that this is a "legitimate" policy objective under TBT's Article 2.2 to pursue. However, it concluded that COOL's implementation is more trade restrictive than is necessary to fulfill its objective because it does not meaningfully inform consumers about the countries of origin of meat products. In reaching its conclusion that COOL does not achieve its objective, the DS panel agreed with Canada and Mexico that the labels identifying multiple countries of origin could confuse or mislead, rather than inform, consumers. It noted that a consumer could not readily distinguish the origins of meat products listed on a Category B label as coming from multiple countries, from the origins of meat products shown on a Category C label as coming from those same multiple countries (e.g., Product of the United States, Canada [Category B], compared to Product of Canada, United States [Category C]—see Table 1 ). The panel added that because processors have the flexibility to use both types of labels interchangeably for commingled meat (i.e., meat processed from animals of different origins on the same day), the labels not only fail to inform the average consumer of the distinction between them but could also mislead a fully informed consumer about the precise origins of some meat products. Appellate Body on the Dispute Panel Report The United States appealed the DS panel's finding that COOL does not meet the objective of providing consumers with meaningful information on the origin of meats. It challenged the two-step approach the panel followed to determine whether COOL is consistent with TBT's Article 2.2. Its brief pointed out that the panel first looked at whether COOL fulfills a legitimate policy objective, and if it had been found to do so, would have examined whether COOL is more trade-restrictive than necessary compared to other possible less trade-restrictive measures that could have just as well met the policy objective. The United States argued that the panel took the wrong approach and instead should have focused only on whether COOL is more trade-restrictive than necessary. It argued that the panel went beyond the scope of Article 2.2 to make an "intrusive and far-ranging judgment" on whether COOL "is effective public policy." In its analysis, the Appellate Body found that the DS panel erred in interpreting and applying Article 2.2. Although it agreed with the panel that COOL's objective is to provide consumers with information on origin and that this is a legitimate objective, the AB viewed the panel's finding as too narrow. The AB found that the panel appeared to have considered, incorrectly, that a measure could be consistent with Article 2.2 only if it fulfilled its objective completely or exceeded some minimum level of fulfilment, and to have ignored its own findings, which demonstrated that the COOL measure does contribute, at least to some extent, to achieving its objective. The AB reversed the panel's finding that COOL is inconsistent with Article 2.2, but was not able to determine whether COOL is more trade-restrictive than necessary to meet the TBT requirement that it be a legitimate objective. Compliance Panel The compliance panel agreed with the dispute panel and Appellate Body that COOL is a legitimate objective providing U.S. consumers information on the country of origin of beef and pork. The panel found that the revised COOL rule contributes more than the original rule to the objective of providing origin information to consumers, but still exempted large portions of beef and pork from labeling. The panel also found that the revised rule increased trade restrictiveness compared with the original rule, but could not determine if the revised rule was more trade restrictive than necessary. To determine if the revised rule was more trade restrictive than necessary, the panel examined the risks of not fulfilling the objective of COOL and examined four alternative labeling schemes, provided by Canada and Mexico, that would demonstrate that the revised COOL rule was more trade restrictive than necessary. The panel could not determine the gravity of not fulfilling the legitimate objective, and found shortcomings in each alternative. The compliance panel found that Canada and Mexico had not made a prima facie case that the revised COOL rule was more trade restrictive than necessary, thus violating Article 2.2 of the TBT. Appellate Body on the Compliance Report The Appellate Body overturned the compliance panel's conclusion that Canada and Mexico did not make a prima facie case that COOL was more trade restrictive than necessary. However, like the compliance panel, the Appellate Body found there are not enough undisputed facts in the record to complete the legal analysis on whether or not COOL violated Article 2.2. Ground Meat Label Does Not Result in Less Favorable Treatment for Imported Livestock Dispute Panel The DS panel determined that, unlike the muscle cut labels, the ground meat labels were consistent with Article 2.1 of the TBT. It found that the 60-day "inventory allowance" gives significant flexibility to processors (e.g., beef grinders) in labeling country of origin. This rule is based on the statutory requirement that ground meat labels list all actual or "reasonably possible" countries of origin. In practice, the rule allows a processor to use the same label for all of its ground meat so long as the label lists all countries of origin of the meat in the processor's inventory for the last 60 days. Moreover, the 60-day "inventory allowance" flexibility is available not only for meat processors, but for market participants at every stage of meat supply and distribution. The panel determined that, contrary to Canada and Mexico's assertions, the rule's flexibility "limits any additional costs of implementing" the ground meat labeling requirements. It noted that Canada and Mexico did not present any evidence that, despite this flexibility, compliance with COOL for ground meat affected imported livestock less favorably than domestic livestock. Appeal Status Canada and Mexico did not appeal the DS panel's finding to the AB. Vilsack Letter Is Not a Technical Regulation Dispute Panel Although the panel recognized that the Vilsack letter is not a technical regulation within the scope of the TBT Agreement, the panel agreed with Canada and Mexico that the Vilsack letter constitutes "unreasonable administration" of COOL and thus violates Article X:3(a) of GATT 1994 (see " Vilsack Letter " for details). This article states that "[e]ach contracting party shall administer in a uniform, impartial and reasonable manner all its laws, regulations, decisions and rulings ..." Specifically, the panel found that the letter is an unreasonable act of administering COOL because (1) it could not find any "justifiable rationale" for simultaneously permitting the final rule to enter into force and suggesting stricter practices than the ones the rule requires, (2) the language of the letter may have caused uncertainty and confusion as to its force and effect, and (3) its timing relative to the final rule's entry into force may have caused confusion about whether processors should comply with the final rule or the Vilsack letter. The letter, it wrote, did not meet the minimum standards for transparency and procedural fairness in the administration of trade regulations. Appeal Activity The United States did not appeal this finding. Canada, in its appeal, requested that the AB make certain rulings on the Vilsack letter. Subsequently, Canada stated that it no longer sought a finding on this matter because the United States asserted that this measure had been withdrawn on April 5, 2012. Appendix E. Options to Bring COOL into Compliance With the WTO arbitrator establishing May 23, 2013, as the deadline for the United States to comply with the findings of the dispute settlement (DS) panel and Appellate Body (AB) reports, the case moved to the compliance stage. The WTO found that the COOL regulations treated imported livestock in an unfavorable manner by altering the conditions of competition in a way that favored domestic livestock over imported livestock. The United States has said it will bring COOL into compliance with its WTO obligations. Stakeholders have two views about how the United States should comply with the WTO findings. One is to amend the COOL legislation; the other is to change the COOL regulations to bring the United States into compliance. Legislative Approach Some U.S. stakeholders have argued that, for the United States to comply with the WTO findings, the COOL law would have to be changed, because the law requires that meat derived from foreign-born, or foreign-born and -raised, animals has to have a different label than meat from animals born, raised, and slaughtered in the United States. The National Cattlemen's Beef Association (NCBA), the National Pork Producers Council (NPPC), the American Meat Institute (AMI), and the Food Marketing Institute (FMI) have opposed mandatory COOL from its inception. They have advocated that Congress change the law to enable the United States to meet its WTO obligations, and warn that retaliation by Canada and Mexico will harm U.S. livestock and meat markets. These industry groups point to research conducted by Kansas State University, which found that consumers valued meat with a "Product of North America" label about the same as meat with a "Product of the United States" label. A "Product of North America" label could apply to any meat from imported livestock from Canada and Mexico that is substantially altered through slaughtering and processing in a U.S. meatpacking plant. A single label for meat that is from any animal slaughtered in the United States could eliminate the extra cost associated with segregating and recordkeeping for imported livestock, thus ending discriminatory pricing of imported livestock. Some in the meat industry argue that the "Product of the United States" label should apply to any meat being processed in a U.S. meatpacking plant. This approach would require a change in the COOL legislation. Canadian stakeholders have consistently contended that a change in legislation will be required. According to the Canadian Pork Council (CPC): for the U.S. to come into compliance with the WTO ruling will require legislative action to eliminate the conditions that give rise to the discrimination against live animals born outside of the U.S.—the discrimination arising from the requirement of COOL that there be different labels for animals processed in a U.S. plant (that are) born, raised and slaughtered in the U.S. from those not born raised and slaughtered in the U.S. Those labeling requirements are explicit in the legislation; thus, a legislative or statutory change will be needed. A representative from the Canadian Cattlemen Association (CCA) agreed with the CPC assessment. In the view of the CPC and CCA, mandatory COOL labels are acceptable, but the law would have to be amended to require that all meat processed from imported livestock in a U.S. meatpacking plant be labeled the same as meat processed from domestic livestock. During the WTO arbitration process over the compliance timeline, Canada expressed the view that a regulatory change is unlikely to bring the United States into compliance and that a legislative change could be necessary. In presenting their arguments for quicker compliance, Canada and Mexico argued that the United States had adequate time to take a legislative approach to compliance, especially because the ongoing 2012 farm bill debate would have provided a legislative vehicle for addressing COOL. Some U.S. stakeholders also have suggested that the farm bill would be an appropriate vehicle to legislatively comply with WTO obligations. Taking advantage of the placeholder provision inserted into the House-passed farm bill (Section 11105 of H.R. 2642 ), COOL was one of the outstanding issues placed on the agenda of farm bill conferees. The conference agreement sent to the floor did not include any major changes to COOL (see " Congressional Action on COOL "). Regulatory Approach Other stakeholders advocated that USDA rework the COOL regulations to bring the United States into compliance with the WTO ruling. Reportedly, at the beginning of 2012, USTR considered but did not follow through with making changes to COOL regulations. The change would have allowed for more flexibility for commingling imported and domestic cattle and using a multi-country label. This approach was dropped as supporters of COOL believed such a change would undermine the COOL law. Others argued that the change would not go far enough. Interest Group Support for Regulatory Fix In August 2012, the Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America (R-CALF) sent a letter to Secretary Vilsack and U.S. Trade Representative Kirk that proposed regulatory changes to simplify the recordkeeping requirements of COOL. Because U.S. animal health regulations require that imported cattle have a foreign mark and that cattle imported for immediate slaughter be shipped in sealed conveyances to slaughter plants, R-CALF proposed that any cattle arriving at a slaughter plant without a mark or seal be considered U.S. cattle. The WTO found that more information was collected on imported cattle compared with what was passed on to consumers on labels. According to R-CALF, its proposed presumption for U.S. cattle would reduce additional documentation and recordkeeping for imported cattle. Currently, hogs are exempt from a country-of-origin mark under the Tariff Act of 1930. R-CALF suggested that this livestock exemption be removed, thus requiring a country-of-origin mark on hogs. Once the exemption is lifted, the presumption of domestic hogs would become workable. R-CALF also called on USDA to eliminate the use of a mixed label (Labels B or C; see Table 1 on meat from an animal that is exclusively of U.S. origin). R-CALF also suggested that ground beef labeling be revised to not allow for a country to be listed on a label if meat from that country is not included in the ground product (see Ground Beef label, Table 1 ). Lastly, R-CALF's proposal calls for the expanded coverage of minimally processed products, such as cooked, smoked, or cured meats, that are currently exempt from COOL regulations. On February 4, 2013, the National Farmers Union (NFU) and the United States Cattlemen's Association (USCA) released an analysis of proposed options to bring COOL into WTO compliance. This analysis laid out their case for how the United States could comply with its WTO obligations if USDA required more information to be added to labels about where cattle were born, raised, and slaughtered. The proposal also called for USDA to halt the commingling of meat from animals of different origin. For minimally processed products, such as smoked, cured, or cooked products, which are exempt from labeling, USDA could revise the regulations to require that these products be labeled. The proposal also suggested that COOL should be extended to food service, which the COOL statute currently exempts. The proposal noted this would require a change in law and could not be accomplished through a change in regulations. Congressional Support for a Regulatory Fix Some Members of Congress have expressed the view that USDA and USTR should bring the United States into WTO compliance through regulatory means. In a January 31, 2013, letter to the Secretary of Agriculture and the U.S. Trade Representative, 31 Senators asked that USDA and USTR find a regulatory solution. The Senators asked that a regulatory fix make the COOL regulations consistent with WTO rules, provide accurate origin information for all meat cuts to consumers, engage industry stakeholders in the rulemaking process, and keep Congress informed. Appendix F. Meat Industry Lawsuit On July 8, 2013, a group of eight meat industry organizations, led by the American Meat Institute (AMI), filed a lawsuit in the U.S. District Court for the District of Columbia to block USDA's revised COOL rule. The plaintiffs challenged the COOL rule for three reasons. They contend first, that COOL violates the U.S. Constitution because it compels speech in the form of a label that does not advance a government interest; second, that the rule violates the COOL statute, which does not allow for detailed labels; and third, that the rule is arbitrary and capricious, violating the Administrative Procedure Act, because it is burdensome for industry but provides little or no benefit to consumers. According to the plaintiffs, USDA's final rule is more complex and discriminatory against foreign meat and livestock than the previous rule because stricter segregation will be necessary to meet the requirements. They say that the rule would be particularly onerous for U.S. meat processors that are located near the border of Mexico or Canada who often use imported livestock. Furthermore, the plaintiffs do not believe the rule will meet U.S. WTO obligations. The National Farmers Union, which supports COOL, characterized the lawsuit as a tactic to delay the implementation of a stronger COOL rule by groups that do not support COOL. In response to the lawsuit, R-CALF started a petition requesting that USDA stop NCBA, one of the plaintiffs in the lawsuit, from receiving mandated beef checkoff funds. R-CALF claims that it is a conflict of interest for NCBA to receive those funds while suing USDA to halt the implementation of the popular COOL program that provides U.S. consumers information about the source of their beef. On July 25, 2013, the plaintiffs requested that the U.S. District Court for the District of Columbia grant a preliminary injunction against the implementation of the final COOL rule. The plaintiffs argued that they would likely succeed in challenging USDA on the final rule, and that they would suffer irreparable harm if USDA continued to implement the rule during the challenge. On August 9, 2013, supporters of COOL, led by the United States Cattlemen's Association (USCA), filed a motion to intervene in the meat industry lawsuit, and the court granted the request on August 20. The district court heard the plaintiffs' arguments for a preliminary injunction on August 27. On September 11, 2013, the court denied the plaintiffs' request. The court found that the plaintiffs were unlikely to succeed on their constitutional, statutory, or arbitrary and capricious claims. Furthermore, the court found that the plaintiffs did not demonstrate they would suffer irreparable harm if an injunction was not granted. AMI disagreed with the court's decision and appealed the decision. Supporters of COOL that intervened in the case will continue to oppose AMI's court challenge to the COOL rule. The plaintiffs' appeal was heard on January 9, 2014, before a three judge panel of the U.S. Court of Appeals for the District of Columbia Circuit. On March 28, the court denied the injunction request on COOL, but then vacated the ruling the following week and ordered that the case be reheard en banc (all judges of the court) in May to reexamine the constitutional issue of compelled speech, and whether or not COOL requirements violated the plaintiffs free speech rights. On July 29, 2014, the Court of Appeals ruled 8-3 against the meat industry plaintiffs. The court denied a request for a preliminary injunction to block USDA from implementing COOL, ruling that the COOL requirements do not amount to impermissible government-compelled speech under the First Amendment. In September 2014, AMI petitioned for a rehearing on the case arguing that the segregation requirements of COOL amounted to USDA dictating the day-to-day operations of the livestock industry. On October 31, 2014, the court denied the plaintiffs petition for a rehearing on free speech claims and a rehearing on other claims from the March ruling on non-free speech claims. (See Appendix A for a timeline of key lawsuit developments.) Appendix G. Retaliation Lists In June 2013, Canada released a list of products ( Table G-1 ) that could be targeted for retaliation if the United States fails to bring COOL into compliance with WTO obligations. Mexico has not published a similar list for the COOL case. However, Mexico has indicated that its retaliation list for COOL would be similar to products ( Table G-2 ) targeted during the trucking dispute with the United States during 2009 to 2011. That list, as provided by the Embassy of Mexico, is in the second table. | Since the final rule to implement country-of-origin labeling (COOL) took effect in March 2009, most retail food stores have been required to inform consumers about the country of origin of fresh fruits and vegetables, fish, shellfish, peanuts, pecans, macadamia nuts, ginseng, and ground and muscle cuts of beef, pork, lamb, chicken, and goat. The rules were required by the 2002 farm bill (P.L. 107-171) as amended by the 2008 farm bill (P.L. 110-246). COOL for beef and pork resulted in a World Trade Organization (WTO) dispute settlement case with Canada and Mexico that started in 2009 and finally concluded in 2015. Canada and Mexico challenged U.S. COOL in the WTO, arguing that COOL had a trade-distorting impact by reducing the value and number of cattle and hogs shipped to the U.S. market, thus violating WTO trade commitments. In November 2011, the WTO dispute settlement panel found that COOL treated imported livestock less favorably than U.S. livestock, and did not meet its objective to provide complete information to consumers on the origin of meat products. In March 2012, the United States appealed the WTO ruling. In June 2012 the WTO's Appellate Body (AB) upheld the panel's finding that COOL treated imported livestock less favorably than domestic livestock. But the AB reversed the finding that COOL did not fulfill its legitimate objective to provide consumers with information on origin. The United States welcomed the WTO's affirmation of the right to adopt labeling requirements to inform consumers on the origin of their meat. Participants in the U.S. livestock sector had mixed reactions, reflecting the ongoing heated debate on COOL. In order to meet a compliance deadline of May 23, 2013, USDA issued a revised COOL rule requiring that labels show where each production step (born, raised, slaughtered) occurred and prohibited the commingling of muscle-cut meat from different origins. COOL's supporters applauded the revised rule for providing consumers with specific, useful information on origin. In September 2013, a compliance panel was formed to determine if the revised COOL rule complied with WTO agreements. On October 20, 2014, the panel found that the revised COOL rule treated imported livestock less favorably than domestic livestock. The panel confirmed that COOL was a legitimate objective, but could not determine if the rule was more trade restrictive than necessary. The United States appealed the compliance panel findings in November 2014, and the AB heard the appeal in February 2015. The AB report, released in May 2015, again found that COOL violated U.S. WTO obligations. On June 4, 2015, Canada and Mexico requested authorization to retaliate against U.S. imported products in the amount of US$3 billion. The United States objected to the requests, and on September 15-16, 2015, an arbitration panel met to determine the appropriate level of retaliation. On December 7, 2015, the arbitration panel set the retaliation levels at C$1.055 billion (US$781 million) for Canada and at US$228 million for Mexico. On December 18, 2015, Congress repealed the COOL requirements for beef and pork and ground beef and pork in the enacted Consolidated Appropriations Act, 2016 (P.L. 114-113). After the repeal by Congress, USDA halted enforcement of COOL for beef and pork. On December 21, 2015, the WTO authorized Canada and Mexico to retaliate against products imported from the United States. Canada and Mexico stated that they were pleased with the repeal of COOL but will retain the authority to retaliate until they are assured that cattle and hog trade is unimpeded as the repeal of COOL is implemented. On March 2, 2016, USDA issued a final rule that amended the COOL regulations to bring them into conformity with P.L. 114-113. Congressional repeal of COOL for beef and pork and the amended regulations have brought the United States into compliance with its WTO obligations. |
In its FY2008 Budget Request, the Administration requested the 110 th Congress to enact a new performance-based compensation system for the Foreign Service. By the close of the 109 th Congress, the Administration, the American Foreign Service Association (AFSA), which is the recognized bargaining agent for the members of the Foreign Service, and the leadership of House Committee on International Relations (HIRC) and the Senate Committee on Foreign Relations (SFRC) agreed on provisions establishing a new Foreign Service compensation system. They unsuccessfully tried to bring this language to the floor of the House for consideration. The provisions would allow the Administration to establish a new Foreign Service performance-based compensation schedule for those at the upper mid-level rank of FS-01 and below. The new compensation system would also eliminate an 18.59% higher pay level that Foreign Service personnel receive for being posted in the Washington, DC, area than for being posted abroad. The pay disparity was resolved in 2005 for the Senior Foreign Service when its compensation system was converted to a performance-based system and all in the Senior Service began being paid at the Washington, DC, level regardless of their posting. Secretary of State Rice wrote to the House leadership on November 30, 2006, supporting the proposed Foreign Service Compensation Reform proposal, and stated that it was the intent of the Administration to fund the new system out of its FY 2007 budget request and out year estimates. The House Republican Leadership, however, omitted the provisions from the final bill providing certain State Department authorities, H.R. 6060 , the day before it was to be considered by the full House. The Leadership expressed concerns over whether the bill could get the necessary votes under a Suspension of Rules procedure because of costs involved. Thus on December 8, H.R. 6060 passed the House of Representatives without the new Foreign Service performance-based compensation provisions. The 110 th Congress may choose to decide if and how to address an issue that both the Department of State and the American Foreign Service Association (AFSA) consider to be a high priority personnel issue for the Foreign Service—the elimination of a 18.59 % pay disparity between service in the continental United States and service abroad. The Administration, in its February 2007 Budget Request to the Congress for FY 2008, urged the enactment of legislation creating a new compensation system for the Foreign Service, and the appropriation of $34.5 million needed to implement the first phase of the new compensation system. During the 109 th Congress, Republican and Democratic leadership of both the House Committee on International Relations and the Senate Committee on Foreign Relations worked to resolve this issue by developing the Foreign Service Compensation Reform proposal. This proposal would (1) place the Foreign Service compensation system on a pay-for-performance basis, and (2) eliminate the current pay disparity by creating a new worldwide pay structure at the Washington, DC, salary level. However, reportedly due to cost concerns among the House Republican leadership, this proposal was not included in the final version of H.R. 6060 , which was passed by the House and Senate, and enacted as P.L. 109-472 . The Foreign Service personnel and compensation system is separate and quite different from the federal government's General Service (GS) system. The current Foreign Service system was created under the authorities provided by the Foreign Service Act of 1980 ( P.L. 96-465 ). There are about 13,000 Foreign Service Officers and Specialists with two-thirds of them serving abroad at over 250 posts and missions at any one time. The remaining third is generally posted in Washington, DC. Typically, members of the Foreign Service spend two-thirds of their careers abroad serving at a post from one to three years, and then are assigned elsewhere in the world. In terms of levels or rank within the Foreign Service, it is divided into two categories. The Senior Foreign Service (SFS) is divided into 5 pay categories and, like the Civil Service Senior Executive Service (SES), requires a presidential appointment into the senior service. The regular Foreign Service is divided into nine ranks or classes with the FS-01 level the highest. Most Foreign Service Officers enter the Foreign Service at the 05 or 06 levels, and generally serve for four to five years before being tenured and commissioned as Foreign Service Officers. The personnel system is basically an "up-or-out" system that reviews the members of the Foreign Service annually and has both Time-in-Class (TIC) and Time-in-Service (TIS) limitations that require promotions within certain time frames or the person is separated from the Service. Because of this system, most members of the Foreign Service leave the service after a full and distinguished career in their mid-50s at an 01 or 02 rank. With the creation of locality pay adjustments for federal employees in 1990, a pay gap began for the Foreign Service depending upon whether one was posted in Washington, DC, or abroad because locality pay adjustments were not available for positions abroad. Each year the gap increased and by 2007, an individual's salary was 18.59% higher if he/she served in Washington as opposed to serving abroad. Proponents of revision to the Foreign Service system indicated that the gap impacts morale and the assignments procedure, and diminishes the intent of adjustments such as the hardship and danger pay differentials. They point out that if a person were to go to a 15% hardship post from a Washington assignment, he or she would still experience nearly a 3.6% decrease in salary. The elimination of this difference is a major issue for the members of the Foreign Service and its union, the American Foreign Service Association. The Bush Administration, however, opposes any changes in the Foreign Service compensation system unless it is linked to performance, and part of an overall review of Foreign Service personnel modernization. The Administration states its belief that the current civil service system is ineffective and needs to be tied to a market-sensitive, performance-based system. Thus for the Administration, any changes for Foreign Service also would have to include a performance-based pay system. The 109 th Congress's HIRC and SFRC leadership developed provisions addressing both the Foreign Service and the Administration's views. These provisions, which were designated as the Foreign Service Compensation Reform proposal, were supported by the Administration and AFSA. On November 30, 2006, Secretary of State Rice wrote the House Leadership expressing her support for these provisions and urging prompt consideration and passage by the House of Representatives. For the Administration to support a legislative proposal overhauling the Foreign Service pay structure, the proposal needed to eliminate automatic pay increases and base all salary adjustments on performance. AFSA also sought certain basic assurances in order to support the move to a new pay-for-performance/global rate of pay system. These assurances included a sufficiency of funds to implement and sustain the new system, maintenance of the traditional role of the selection boards, and the traditional relationship between the Foreign Service's recognized bargaining agent and management. Ultimately AFSA needed to believe that the move to a pay-for-performance system from one that included automatic salary increases would be in the best interests of the members of the Foreign Service. The 109 th Congress Foreign Service Compensation Reform proposal had the support of the Administration, the Foreign Service union, and broad support on Capitol Hill. That support, however, was not unanimous. There were some members of the Foreign Service, as well as some Members and staff, concerned about the loss of the current system's automatic increases in salary with the elimination of both the step increases and the tie to the annual Employment Cost Index (ECI) adjustment. There were others who question the Administration's intent, considering the difficulty between labor and the Administration at the Departments of Defense and of Homeland Security as the Administration attempts to institute a new performance-based personnel structure at these two departments. Some of Members and congressional staff who are concerned about the proposed performance-based system state that congressional dynamics have changed with the 2006 election. They believe the elimination of the pay disparity between service in Washington and abroad is reasonable. However, they state that the elimination of the pay disparity does not need to be linked to a pay-for-performance system. The top legislative issue for members of the Foreign Service and AFSA is elimination of the pay disparity that exists between service in Washington, DC, where most Foreign Service personnel are domestically assigned, and service abroad. The Federal Pay Comparability Act of 1990 excludes federal employees posted outside the continental United States from receiving locality pay adjustments. Locality pay is designed to create pay comparability between federal employees and non-federal workers doing the same levels of work within a specific geographic locality in the continental United States. Because there is no basis for comparison of Foreign Service personnel posted abroad to non-federal workers in the United States, those in the Foreign Service, who spend about two-thirds of their careers posted abroad, receive less salary while serving abroad than their colleagues in Washington, DC. This pay difference affects both morale and decisions Foreign Service personnel make when applying for assignments. Supporters of changing the pay system argue that by FY2006 this difference resulted in more than a 17% pay disparity and "created an increasing pay disincentive to overseas service." However, this Foreign Service pay difference exists only for those at the 01 level and below. In 2005, the pay difference was eliminated for those in the Senior Foreign Service as they went to a pay-for-performance system. At that time, all members of the Senior Foreign Service were brought to the Washington, DC, salary levels regardless of where they were posted. AFSA reportedly estimated in 2005 that a member of the Foreign Service who had been hired in 1995 and served a standard 27-year career, leaving at the 01 level, would lose $444,162 in pay and retirement benefits over the course of that career when compared to a similar individual in the Civil Service who served only in Washington, DC. Surveying its members in August 2005, AFSA reported that "getting overseas comparability pay (OCP, a.k.a. 'locality pay') for nonsenior FS personnel posted overseas is overwhelmingly our members' highest priority." A 2006 Government Accountability Office (GAO) study discussing obstacles to attracting mid-level officers to hardship posts also noted the impact of the pay disparity as a deterrent to bidding for hardship assignments: ...officers and State personnel we interviewed both at hardship posts and in Washington, D.C. consistently cited the lack of locality pay as a deterrent to bidding at hardship positions. In 2002, we reported that the differences in the statutes governing domestic locality pay and differential pay for overseas service had created a gap in compensation penalizing overseas employees. This gap grows every year, as domestic locality pay rates increase, creating an ever-increasing financial disincentive for overseas employees to bid on hardship posts. After accounting for domestic locality pay for Washington, D.C., a 25 percent hardship post differential is eroded to approximately 8 percent. As estimated in our 2002 report, differential pay incentives for the 15 percent differential hardship posts are now less than the locality pay for Washington, D.C., which is currently 17 percent and can be expected to soon surpass the 20 percent differential hardship posts. On July 20, 2005, the House of Representatives passed H.R. 2601 , the Foreign Relations Authorization Act 2006 and 2007. Section 305 of H.R. 2601 created an Overseas Comparability Pay Adjustment for those at 01 levels and below posted abroad that, over a three year period, would become equal to, and then be maintained at the Washington, DC, locality pay level. The Administration opposed the proposed pay adjustment system for the Foreign Service in H.R. 2601 , and for the first time stated under what conditions it would consider any Foreign Service pay adjustment. The Administration said, "Adjustments to overseas compensation levels should be linked to performance and considered as part of an overall review of Foreign Service personnel modernization." The Bush Administration contends that the current GS pay framework is a "failure." It maintains that the "one size fits all" approach of the GS pay schedule can mask dramatic disparities in the market value of different federal jobs, and uses on-the-job longevity as a substitute for performance. The Administration proposes repealing the current GS Schedule by 2010, and replacing it with "a system of occupational pay groups, pay bands within those groups and pay for performance across the federal government. The new system would be a pay-for-performance system." At the request of the Administration, Congress developed new structures for civilians working for the Departments of Defense (DOD) and Homeland Security (DHS). These personnel systems, which are currently being challenged in the courts by federal employee unions, would cover nearly one-half of all non-uniformed federal employees if fully implemented. The Administration sought to change the entire Civil Service system through its 2005 draft legislative request, the "Working for America Act (WFAA)," and also the separate request for the Foreign Service system. During much of the fall of 2005, discussions within the Administration regarding a new Foreign Service personnel modernization system took place. In February 2006, Secretary of State Rice said, "the President has requested funding to modernize the Foreign Service pay system and in so doing address the problem of the ever-growing overseas pay gap for FS 01s and below." The Department of State's Budget in Brief for Fiscal Year 2007 elaborated on the funding request, explaining that this was "the first step of transition to a performance-based pay system and global rate of pay for Foreign Service personnel grade FS-01 and below." On July 28, 2006, after months of discussions among the Office of Management and Budget (OMB), the Office of Personnel Management (OPM), various Departments and agencies with Foreign Service personnel, AFSA, and Members and congressional staff, an agreed-upon legislative text was developed that served as the basis of the Administration's request to the Congress for a new Foreign Service compensation system. This text, in large measure, served as the basis of discussion in developing the Foreign Service pay-for-performance/compensation sections in the House bill, H.R. 6060 as reported, and S. 3925 in the Senate. In arriving at this merging of views, the draft bill submitted by the Administration addressed the concerns of both the Administration and AFSA, the Foreign Service's union. For the Administration with its desire for a performance-base system, the proposal contained a new personnel/compensation system that maintains the current nine classes with the 01 level as the highest, but within those classes there are no intervening steps. The Secretary of State determines which basic salary rate within a salary class would be paid to the members of that class, but the Secretary's determination would take into consideration several factors, some of which are negotiated with AFSA. The draft stated that salary adjustments would be based on performance, and that individuals found to be performing below the standards of their class would receive no salary adjustment. The following issues were advocated by AFSA: the role of the Selection Boards in determining performance and promotion recommendations to the Secretary is incorporated into the legislation. the current requirement that the Selection Board recommendations be followed in the order that they are presented is also maintained. The Secretary continues to have the authority to withhold action temporarily on the recommendations of the Selection Boards, but to do so would be under transparent procedures negotiated in advance with AFSA. the role of the Foreign Service's union is recognized and is consistent with current procedures. assurances that a sufficient pool of funds will be allocated to implement a pay-for-performance system, and an assurance that in April 2008, a new Foreign Service worldwide compensation schedule shall become effective with pay at the Washington, DC, level. However, a key question for the Department of State and the Foreign Service was whether the proposal would avoid the labor-management problems affecting DOD and DHS. Currently the full implementation of the personnel systems for DOD and DHS is being contested by actions in the courts as federal employee unions seek to block the pay-for-performance system and the associated labor-management rules, contending that they do not provide for adequate employee protection and collective bargaining rights. Because the Foreign Service would forgo an automatic 3% in-grade step increase plus the annual ECI and locality pay adjustments and accept performance based adjustments with unknown percentages of increases, AFSA sought assurances that the system would be fair to its employees. In this case, both labor and management concluded that the Administration/AFSA agreed upon proposal of July 28 was significantly different enough from the other pay-for-performance proposals, and the Foreign Service system was unique enough, that a conversion to a pay-for-performance system could be mutually beneficial. The AFSA President, Ambassador J. Anthony Holmes, earlier explained his views regarding the general concept of tying a pay-for-performance system with an overseas comparability pay system stating: Pay for performance is an unknown for most of us. From media reports of DOD/DHS efforts to convert their civil servants to a PFP system and the administration's Working for America Act targeting the rest of the Civil Service, one can easily view it as menacing, ideological, and anti-employee. But it is clear from State's own experience with the Senior FS conversion to PFP two years ago that it should be possible to make this work and have a win-win situation all around. The reality is that the present FS personnel system, with its rank-in-person, not in-job, annual evaluations, and competitive up-or-out system is inherently PFP already. So the changes in the system should be much less dramatic than many of our members fear. The Foreign Service personnel and compensation systems are very different from the Civil Service system. As Ambassador Holmes stated, the Foreign Service system resembles more a pay-for-performance system than it does the Civil Service system. Proponents of the change to a new system believe it is important to understand these differences because the impact that a performance-based compensation system would have on the Foreign Service is less dramatic than many, especially those who are familiar with the Civil Service system, might anticipate. Further, the Senior Foreign Service (SFS) personnel system became performance-based in 2005 when the Senior Executive Service (SES) was changed. But unlike the SES, the experience for the SFS has been viewed more positively because of the different nature of the existing, decades-old Foreign Service personnel system. Like the Civil Service system, the Foreign Service system currently has both levels or ranks, and within these levels there are in-grade step adjustments that periodically allow an individual's salary to increase without getting a promotion. The members of the Foreign Service regularly receive an Employment Cost Index (ECI) adjustment equivalent to their Civil Service counterparts. Foreign Service personnel serving in a Locality Pay area also receive a Locality Pay adjustment equal to that which Civil Service personnel receive in the same locale. Foreign Service (FS) personnel carry their rank in person and not in position as do members of the Civil Service. Thus a member of the Foreign Service may be an 02 Officer successfully holding an 01 position, but receives the salary of an 02 officer, and when evaluated for a promotion, may or may not receive a promotion to an 01 level. FS personnel have their performance reviewed annually for promotions regardless of the position they hold. FS personnel are judged for promotions by Selection Boards of their colleagues and not by their supervisors, and the performance determinations are based on Employee Evaluation Reports (EER). The factors used to judge performance are negotiated with AFSA about a year ahead of the reviewing cycle, and those involved are supposed to be aware of the criteria upon which they will be judged. AFSA is present when management briefs the Selection Boards on the criteria and expectations are explained. Selection Boards make their recommendations for promotions to the Secretary, and, by law, the Secretary must follow those recommendations in the order presented. The Secretary can temporarily withhold the recommendations of a Selection Board under negotiated procedure but the final decision is left to a Selection Board for action. The FS is an up-or-out system with promotions required in terms of both "Time-in-Class" (TIC) and "Time-in-Service" (TIS). If an individual exceeds these limits, the individual is separated/retired from the Service. In general, because of this system, an individual is separated/retired from the Service when they are in their mid-50s as an 01 or 02 rank. Selection Boards are required to identify and designate those individuals who are ranked at the bottom 5% of their class. If an individual is "low ranked" twice in a five-year period, and the employee had different rating officials in these two years of "low ranking," that individual is referred to a Performance Standards Review Board for possible separation from the Service. Beyond the low ranking procedure, however, the Selection Board also can refer others directly to the Performance Standards Review Board to be considered for separation from the Service. The Administration's draft bill served as the basis for the bills H.R. 6060 as approved by HIRC and S. 3925 as introduced in the Senate during the 109 th Congress. Both bills contained many similar ideas such as maintaining the nine classes but not having any intervening steps within those classes, or requiring that all salary adjustments be made on the basis of performance. Important differences also existed between the two bills. However, on November 28, 2006, SFRC and HIRC leadership agreed to final language, the Foreign Service Compensation Reform proposal, and it was hoped that the proposal could be brought before the House and Senate under expedited procedures. On November 30, 2006, Secretary of State Rice wrote to the House and Senate leadership expressing the Administration's support for the provisions in the Foreign Service Compensation Reform title, and requesting prompt consideration and passage. She also stated that the Administration intends to fund this initiative within its FY 2007 budget request and out year estimates. If the 110 th Congress chooses to address the elimination of the Foreign Service "service in Washington/service abroad" pay disparity, one possible approach would be to reintroduce the agreed upon authorization language of the Foreign Service Compensation Reform proposal. Such language would authorize the following: The President establishes, reviews on an annual basis, and periodically adjusts a new worldwide Foreign Service schedule consisting of nine classes with no intervening steps within each class. The annual review shall include consideration of pertinent economic measures, including changes in the Economic Cost Index (ECI). The new system becomes effective April 2008. The Secretary determines, on at least an annual basis, the size of any salary adjustment, expressed as a percentage or otherwise, which shall be paid to members of a salary class. The Secretary's determination takes into account several factors, some of which are negotiated with AFSA as the recognized bargaining agent for the FS. All subsequent salary adjustments are based on performance. If an individual is performing below his or her class, that individual receives no salary adjustment for that year. Selection Boards make recommendations to the Secretary regarding performance-based salary adjustments. As with promotions, AFSA negotiates the standards to be used by the Selection Boards in its performance determinations. Also, as in the case of promotion recommendations, the Secretary must follow the recommendations of the Selection Board, except in those cases and through procedures previously negotiated with AFSA. After conversion to the new system, members of the Foreign Service will not be eligible for the January ECI adjustment, locality pay, or the non-foreign area salary allowances. Each year, the Secretary must allocate funds to ensure that, in the aggregate, a minimum funding pool is available for performance-based adjustments that would not disadvantage employees due to the conversion to the new system. The funds to be allocated would be equal to or greater than the sum of an amount that would be required if the within grade step increase system still existed, plus amounts that would cover adjustments for an ECI increase that would be provided to the Civil Service under 5 U.S.C. 5303, and funds that would cover locality pay adjustments if the Foreign Service were still covered under 5 U.S.C. 5304. For those members of the Foreign Service posted in areas where locality pay is higher than the Washington, DC level or are receiving a non-foreign area allowance, the Secretary may establish a special transition rule to prevent those personnel from suffering a salary decrease. Once that person is rotated out of that assignment, however, the compensation level for that post will be set at the worldwide scale. A one year transition compensation system is established which maintains the current nine levels and 14 steps. Pay is tied to the January ECI increase and to locality pay adjustments as appropriate. Beginning in April 2007, those members of the Foreign Service who are posted in non-locality pay, non-foreign area allowance areas would receive a 9% pay increase (unless the President sets a lower level) in their salary levels. Management has as "Management Rights" certain authorities regarding performance pay provisions for members of the Senior Foreign Service, within-grade salary adjustments for those ranked 01 and below, salary adjustment for those not yet reviewed, and the allocation of funds for the pay-for-performance system. Designated as "Management Rights," these authorities are not subject to negotiation with labor. The new system adds authorities to existing "Management Rights," but it also recognizes the ability of management and labor to negotiate the procedures that management officials observe in exercising their rights, and an appropriate process to consider the situation of those adversely affected by management determinations. The list of issues excluded from the definition of "grievance" is amended and the provisions clarify that judgments with respect to pay determinations, within-grade pay adjustments, and the allocation determined to meet performance pay requirements are not subject to grievances. As the Foreign Service Compensation Reform proposal was being developed in the closing days of the 109 th Congress, important differences between H.R. 6060 and S. 3925 were resolved for Republican and Democratic leaders on both HIRC and SFRC, the Administration, and AFSA to agree to common language. These compromises were made under a deadline in order to move the legislation to the floor before adjournment. If the Foreign Service compensation issue is addressed in the 110 th Congress, some issues could be reopened for discussion. The key difference between the HIRC-reported version of H.R. 6060 and S. 3925 was that H.R. 6060 provided the Secretary sole and exclusive discretion in making certain determinations, such as which basic salary rate within a band of rates of pay members of the Foreign Service would receive. S. 3925 did not include that discretionary authority. Initially, the Administration insisted upon the phrase "in the Secretary's sole and exclusive discretion." Many who are concerned about employee rights questioned whether the phrase should be included in the legislation. They were concerned that it could be interpreted as curtailing traditional bargaining rights to negotiate procedures for the pay for performance system and appropriate arrangements for employees adversely impacted by the change to such a system. Those Members and Congressional staff asserted that it is contradictory to use the phrase "sole and exclusive" and then put limitations on the exercise of that discretion. They were concerned that in the end, "the Secretary's sole and exclusive discretion" would have greater standing than the limitations if an issue had to be resolved in court. The Foreign Service Compensation Reform provisions did not include the phrase "in the Secretary's sole and exclusive discretion." Instead, existing "Management Rights" authorities under the Foreign Service Act of 1980 were expanded to include certain salary adjustments and the allocation of funds to cover these adjustments. The existing provisions regarding "Management Rights" also continued providing for labor and management to negotiate procedures in making within grade salary adjustment determinations, and appropriate arrangements for those adversely affected by management decisions. These provisions further clarified that those areas reserved as "Management Rights" were not subject to a grievance. H.R. 6060 as reported, and S. 3925 as introduced, required the President to establish and periodically adjust a new worldwide Foreign Service schedule. There was no agreed upon language in the bills as to how often the President would make adjustments. The salary range of the class created by the President would establish a floor and ceiling for a person in a particular class. The concern was that the ceiling for that class could end up below what would be an inflation-adjusted level if the class ranges were not adjusted by the President frequently enough. The provisions in the Foreign Service Compensation Reform proposal provided that the President establish, review on an annual basis, and periodically adjust a new worldwide Foreign Service schedule consisting of nine classes with no intervening steps within each class. The annual review would include consideration of pertinent economic measures, including changes in the Economic Cost Index. Some members of the Foreign Service expressed concern that due to the lack of automatic increases in the new system because of the elimination of both the step adjustments and the ties to the ECI and Locality Pay increases, the Foreign Service compensation system could fall behind the Civil Service. The Foreign Service Compensation Reform proposal stated that the Secretary would annually allocate sufficient funds so that "employees, in the aggregate, are not disadvantaged in terms of the overall amount of pay available as a result of conversion to the new foreign service performance-based compensation system...." Some were concerned that on an individual basis, without the automatic 3% step increase and the ECI adjustment, among other things, an individual could fall behind what he or she would have been receiving under a system that was tied to those automatic adjustments. Those supporting the performance-based system argued that the automatic increases were part of the problem of the old system that did not recognize performance. In its February 2008 budget submission, the Administration requested $34.5 million to begin implementing the new system. During the 109 th Congress with the lower budget request of $32 million and the pre-January 2007 salary adjustment, the Congressional Budget Office (CBO) estimated that the costs resulting from the new Foreign Service Compensation System then being proposed would "cost about $32 million in 2007, $99 million in 2008, and an average of $141 million a year over the 2009-2011 period, assuming appropriation of the necessary funds." The estimate total, at that time, was $554 million over five years. CBO's cost estimate would be higher for the 110 th Congress to implement a similar program. | At a time when increasing numbers of Foreign Service personnel are going to posts of greater hardship and danger, an 18.5% pay differential that currently exists between service in Washington, DC, and service abroad is impacting morale and assignment considerations. Provisions implementing a new compensation system to address this issue were developed and supported by the George W. Bush administration, the American Foreign Service Association (AFSA), and the bipartisan leadership of both the House Committee on International Relations (HIRC) and the Senate Committee on Foreign Relations (SFRC). These provisions, which were to be part of the Department of State Authorities Act of 2006 (P.L. 109-472; H.R. 6060), were dropped from the final version of the bill because of House Republican Leadership concerns over the five-year cost of implementing the new compensation system. The Bush administration, AFSA, and the leadership of both HIRC and the SFRC were in discussion and negotiations for more than a year before developing the consensus compensation provisions. These provisions, the Foreign Service Compensation Reform proposal, would institute a new worldwide, performance-based system for the Foreign Service that would be tied to Washington, DC, salary rates. The compromise language addressed two outstanding issues—the morale-impacting pay disparity, and the institution of a performance-based pay system that the Administration believed would improve the Service. The Administration, once again, requested enactment of a new worldwide, performance-based, compensation system in its fiscal year 2008 budget request. The concepts behind the agreed upon Foreign Service compensation system have wide support. However, support is not unanimous. Some members of the Foreign Service are concerned about the elimination of automatic pay increases that are inherent to the proposed performance-based system. Others question the Administration's intent with regard to the rights of labor. Further, House Republican Leadership expressed concerns regarding the reaction of some of the more fiscally conservatives Members to the more than $500 million five-year cost that is associated with the full implementation of this new compensation system. This report discusses (1) the background leading to a proposal to change the compensation system from both an Administration and Foreign Service perspective, (2) the current Foreign Service (FS) System as established in the Foreign Service Act of 1980 and why the Foreign Service views its personnel system as already a performance-based system, (3) the 109th Congress agreements on this legislation, (4) major issues that remained to be resolved in arriving at the agreement, (5) continuing concerns, and (6) cost estimates. |
Early during the 113 th Congress, the Consolidated and Further Continuing Appropriations Act, 2013 ( P.L. 113-6 ), enacted March 26, 2013, appropriated funding for the full fiscal year through September 30, 2013. Seven regular appropriations acts, including Interior, Environment, and Related Agencies, which funds the Environmental Protection Agency (EPA), are covered by the full-year continuing appropriations provided in Division F of P.L. 113-6 .The discussion in this report focuses on the debate and actions regarding EPA FY2013 appropriations during the 112 th Congress preceding the enactment of P.L. 113-6 . For discussion of the full fiscal year funding for FY2013, see CRS Report R43207, Environmental Protection Agency (EPA): Appropriations for FY2013 in P.L. 113-6 , by [author name scrubbed] and [author name scrubbed]. On September 28, 2012, the President signed a continuing resolution ( P.L. 112-175 , H.J.Res. 117 ), the Continuing Appropriations Resolution, 2013, to provide appropriations for federal departments and agencies, including EPA, funded under each of the regular appropriations bills through March 27, 2013. Section 101(a) of P.L. 112-175 as enacted ( H.J.Res. 117 ) generally continued the rate of appropriations for operations of EPA and other departments and agencies at the FY2012 enacted level. Section 101(c) increased those amounts by 0.612%, with the exception of activities funded in the Disaster Relief Appropriations Act, 2012 ( P.L. 112-77 ). The continuing resolution ( P.L. 112-175 , H.J.Res. 117 ) also funded certain activities of the Department of Defense (DOD) designated as "Overseas Contingency Operations/Global War on Terrorism," and various departments and agencies for which specific funding levels are designated in the resolution itself. Section 116(a) of P.L. 112-175 ( H.J.Res. 117 ) required EPA and all other departments and agencies to submit a spending, expenditure, or operating plan to the House and Senate Committees on Appropriations 30 days after enactment. Subsequent to the passage of H.J.Res. 117 by Congress, the bipartisan leadership of the Senate Appropriations Subcommittee on Interior, Environment, and Related Agencies released a draft bill on September 25, 2012, that proposed $8.52 billion for EPA for FY2013. The leadership intended the draft document to "... serve as a roadmap as discussions continue to finalize a responsible, balanced fiscal year 2013 appropriations bill." Prior to the passage of H.J.Res. 117 by Congress, the House Committee on Appropriations reported the Interior, Environment, and Related Agencies Act, 2013 ( H.R. 6091 , H.Rept. 112-589 ), on July 10, 2012. Title II of the House committee-reported bill proposed a total of $7.06 billion for the Environmental Protection Agency (EPA) for FY2013, $1.29 billion (15.5%) less than the President's FY2013 request of $8.34 billion, and $1.39 billion (16.5%) less than the $8.45 billion (including applicable rescissions ) as enacted in the Consolidated Appropriations Act, 2012 ( P.L. 112-74 ). Established in 1970 to consolidate federal pollution control responsibilities that had been divided among several federal agencies, EPA's responsibilities grew significantly as Congress enacted and later amended an increasing number of environmental laws as well as major amendments to these statutes. EPA's appropriations support the agency's primary responsibilities including the regulation of air quality, water quality, pesticides, and toxic substances; the management and disposal of solid and hazardous wastes; and the cleanup of environmental contamination. EPA also awards grants to assist states and local governments in complying with federal requirements to control pollution, and to help fund the implementation and enforcement of federal regulations delegated to the states. The adequacy of federal funds to assist states with these responsibilities has become a more contentious issue over time, as state revenues and spending generally have declined under recent economic conditions. Since FY2006, Congress has funded EPA programs and activities within the Interior, Environment, and Related Agencies appropriations bill. In the annual budget resolution that is intended to guide the annual appropriations process, EPA is included within Budget Function 300 for Natural Resources and Environment, along with the Department of the Interior and other agencies. The budget resolution establishes policies and assumptions for spending and revenue for each of the federal budget functions, but the discretionary funding made available to an agency for obligation is determined in the annual appropriations process itself. The statutory authorization of appropriations for many of the programs and activities administered by EPA has expired, but Congress has continued to fund them through the appropriations process. Although House and Senate rules generally do not allow the appropriation of funding that has not been authorized, these rules are subject to points of order and are not self-enforcing. Congress may appropriate funding for a program or activity for which the authorization of appropriations has expired, if no Member raises a point of order, or the rules are waived for consideration of a particular bill. Congress typically has done so to continue the appropriation of funding for EPA programs and activities for which the authorization of appropriations has expired, but has also not funded others. For FY2013 for example, the House committee proposed limiting funding for unauthorized programs by decreasing or terminating appropriations within the reported bill, including EPA's U.S. Mexico border grant and environmental education grant programs. In comparison to historical funding levels adjusted for inflation, the total appropriation in H.R. 6091 as reported for EPA for 2013 was less than appropriations enacted by Congress in most prior fiscal years since the agency was established in FY1970 (see Appendix A ). EPA's funding over the long term generally has reflected an increase in overall appropriations to fulfill a rising number of statutory responsibilities. Without adjusting for inflation, appropriations enacted for EPA have risen from about $1.0 billion when the agency was established in FY1970 to a peak of $14.86 billion in FY2009. The funding level that year included both the $7.64 billion in "regular" fiscal year appropriations provided in the Omnibus Appropriations Act for FY2009 ( P.L. 111-8 ), and the $7.22 billion in emergency supplemental appropriations provided in the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ). Table A -1 in Appendix A provides a history of enacted appropriations (not adjusted for inflation) by EPA appropriations account from FY2008 through FY2012, and includes the House committee-reported H.R. 6091 and the FY2013 President's budget request. Figure A -1 depicts historical funding trends (adjusted for inflation) for the agency back to FY1976, and Figure A -2 presents EPA's full-time-equivalent (FTE) employment ceiling for FY2001 through FY2013 (proposed and requested). In general, the term appropriations used in this report refers to total discretionary funds made available to EPA for obligation, including regular fiscal year and emergency supplemental appropriations, as well as any rescissions, transfers, and deferrals in a particular fiscal year, but excludes permanent or mandatory appropriations that are not subject to the annual appropriations process. This latter category of funding constitutes a very small portion of EPA's annual funding. The vast majority of the agency's annual funding consists of discretionary appropriations. Since FY1996, EPA's appropriations have been requested by the Administration and appropriated by Congress within eight statutory appropriations accounts. Appendix B briefly describes the scope and purpose of the activities funded within each of these accounts. In this report, the House Committee on Appropriations is the primary source for the FY2011 and FY2012 enacted amounts after rescissions, and the FY2013 amounts proposed by the House committee and in the President's budget request for FY2013 unless otherwise specified. FY2013 amounts for EPA provided in the continuing resolution as enacted ( P.L. 112-175 , H.J.Res. 117 ) are not reflected in this report for the agency as a whole nor by account and program activity, because the specific funding levels for most individual departments and agencies and their program activities are not available at this time. As noted above, Section 116(a) of P.L. 112-175 ( H.J.Res. 117 ) required EPA and all other departments and agencies to submit a spending, expenditure, or operating plan to the House and Senate Committees on Appropriations 30 days after enactment. The FY2013 amounts for EPA included in the Senate draft bill released September 25, 2012, are also not included in the comparisons. Additional information regarding the FY2013 request was obtained from EPA's FY2013 Justification of Appropriation Estimates for the Committee on Appropriations (referred to throughout this report as the EPA FY2013 Congressional Justification), and the President's Budget of the United States Government, Fiscal Year 2013 , issued by the Office of Management and Budget (OMB). FY2010 enacted appropriations are from the conference report to accompany the Interior, Environment, and Related Agencies Appropriations Act for FY2010 ( H.R. 2996 , H.Rept. 111-316 , pp. 240–244). With the exception of the historical funding presented in Figure A -1 in Appendix A , the enacted appropriations for prior fiscal years presented throughout this report have not been adjusted for inflation. In some cases, small increases above the prior-year funding level may reflect a decrease in real dollar values when adjusted for inflation. Funding increases and decreases discussed in more detail in this report generally are calculated based on comparisons between the proposed funding levels reported by the House Appropriations Committee and requested by the President for FY2013, and the enacted FY2012 appropriations. This report also includes references to funding levels enacted for FY2009 for certain EPA programs and activities, including both the regular fiscal year appropriations provided in P.L. 111-8 and the emergency supplemental appropriations provided in P.L. 111-5 , the latter of which is referred to throughout this report as ARRA or Recovery Act funding. The following sections of this report provide a brief overview of FY2013 funding for EPA as proposed in the House committee-reported bill and contained the President's FY2013 budget request and enacted FY2012 for EPA. The report examines funding levels and relevant issues for selected EPA programs and activities that received prominent attention during the debate in the 112 th Congress. Appropriations are complex, and accordingly not all issues are summarized in this report. Further, the appropriations bills and accompanying committee reports identify funding levels for numerous programs, activities, and sub-activities that are beyond the scope of this report. Table 1 presents the FY2013 amounts for EPA proposed by the House Appropriations Committee compared to the President's FY2013 budget request, and the FY2012, FY2011, and FY2010 enacted amounts by each of the agency's eight accounts (see detailed descriptions of the appropriations accounts in Appendix B ). The enacted amounts presented in the table reflect rescissions and supplemental appropriations, where relevant. The table identifies transfers of funds between the appropriations accounts, and funding levels for several program areas within certain accounts that have received prominent attention. Figure 1 following Table 1 presents a comparison of the allocation of the total FY2013 appropriations among the agency's eight appropriations accounts as proposed in the House committee-reported bill and the President's budget request. H.R. 6091 as reported proposed $7.06 billion for EPA for FY2013, 15.5% below the President's FY2013 request of $8.34 billion, and 16.5% below the FY2012 enacted appropriation of $8.45 billion provided in the Consolidated Appropriations Act, 2012 ( P.L. 112-74 ). As indicated in Table 1 , the overall total decrease proposed in the House committee-reported bill for EPA below the President's FY2013 request and FY2012 enacted level resulted largely from the proposed reductions of $753.7 million (22.5%) and $1.01 billion (28.0%), respectively, for the State and Tribal Assistance Grants (STAG) account. Most of the proposed decrease in the STAG account is attributed to a combined $507.0 million reduction below the FY2013 request and $866.3 million below FY2012 enacted funding for grants to help capitalize Clean Water and Drinking Water State Revolving Funds (SRFs) (see " Wastewater and Drinking Water Infrastructure " below). Relative to the FY2013 President's request, the House committee-reported bill proposed reductions for FY2013 for nearly all other state and tribal grants funded within the STAG account, including most of the "categorical grants." Categorical grants are used by states and tribes to support the day-to-day implementation of federal environmental laws, such as monitoring, permitting and standard setting, training, enforcement, and other pollution control and prevention activities. These grants also assist multimedia projects. House committee-proposed reductions generally would fund these grants at FY2012 levels, with the exception of reductions for a subset of certain grants below the FY2012 enacted level, and an increase above FY2012 for one grant program to support wetlands development (see " Other STAG Grants " below). Proposed funding in House committee-reported H.R. 6091 for the remaining EPA accounts, with the exception of the Leaking Underground Storage Tank Trust Fund (LUST) account, were below the FY2013 request. The FY2013 levels proposed in the House committee-reported bill were below the FY2012 enacted levels for each of EPA's accounts, except for the Office of Inspector General and Buildings and Facilities accounts, which was the same as the FY2012 enacted amounts. The House committee-reported bill proposed a variety of decreases and increases in funding for many of the individual programs and activities funded within the eight appropriations accounts compared to the FY2013 requested and FY2012 enacted levels. In addition to the funding amounts presented by account in Table 1 , the "Administrative Provisions" for EPA in Title II of H.R. 6091 , as reported, proposed a rescission of $130.0 million from unobligated balances funded through the STAG account. The FY2013 request proposed a $30.0 million rescission of prior years' unobligated balances, but did not specify from which account. Similar rescissions of unobligated balances have been included in EPA appropriations since FY2006. For FY2012, Title II of Division E under P.L. 112-74 included a rescission of $50.0 million from unobligated balances funded through the Hazardous Substance Superfund ($5.0 million) and STAG ($45.0 million) accounts. Much of the attention on EPA's appropriations for FY2013 during the 112 th Congress focused on federal financial assistance for wastewater and drinking water infrastructure projects, various categorical grants to states to support general implementation and enforcement of federal environmental laws, funding for implementation and research support for air pollution control requirements, climate change and greenhouse gas emissions, and funding for environmental cleanup. Also garnering Congressional interest were the proposed funding levels for several geographic-specific initiatives, including the Great Lakes Restoration Initiative, efforts to restore the Chesapeake Bay, and congressionally designated "National Priorities" and certain other program activities. In commenting on the proposed reductions for EPA in its report on H.R. 6091 , the House Appropriations Committee noted that EPA "continues to play an important role in protecting public and environmental health," but expressed its concern about "the efforts of EPA to expand its regulatory authority beyond what Congress intended by legislating via regulation." The committee stated its position that the proposed reductions in funding would "restore a needed balance to the EPA's budget, in light of previous increases and the severe fiscal challenges facing our country." In contrast, the Minority Views included in the committee's report expressed the concern of some Members that the reductions for EPA "would put at risk the very health and safety of Americans." These Members noted particular concerns about the proposed reductions in funding for EPA programs that support local drinking water and wastewater infrastructure projects, other water quality activities, science and technology to support EPA's pollution control responsibilities, and the cleanup of Superfund sites. In addition to funding priorities among the various EPA programs and activities, several recent and pending EPA regulatory actions that were central to debates on EPA's FY2011 and FY2012 appropriations were again prominent in the debate regarding the FY2013 appropriations. EPA regulatory actions issued under the Clean Air Act (CAA), in particular EPA controls on emissions of greenhouse gases, as well as efforts to address conventional pollutants, received much of the attention during the FY2012 appropriations debate and again in the FY2013 debate. Several regulatory actions under other pollution control statutes administered by EPA also received attention. Some Members expressed concerns related to these actions during hearings and markup of EPA's FY2013, FY2012, and FY2011 appropriations, and authorizing committees continued to address EPA regulatory actions through hearings and legislation during the 112 th Congress. The following sections discuss EPA issues that have generally received prominent attention in the congressional appropriations debate during the 112 th Congress. Although not included in the continuing resolution for FY2013 appropriations ( P.L. 112-175 , H.J.Res. 117 ) as enacted, a number of proposed administrative and general provisions in H.R. 6091 as reported July 10, 2012, addressed several EPA regulatory activities that were the focus of considerable debate during deliberation on EPA's FY2013 appropriations. As mentioned previously, recent actions issued related to the CAA, in particular EPA controls on emissions of greenhouse gases and efforts to address conventional pollutants (e.g., mercury, particulate matter, sulfur dioxide), received much of the attention. Several actions under the Clean Water Act, Safe Drinking Water Act, Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), and the Toxic Substances Control Act (TSCA) also received some attention. Concerns regarding these EPA actions, as well as other agencies funded in the bill, were addressed primarily in the "General Provisions." Table C -1 through Table C -6 in Appendix C present the text of those general provisions included in Title IV of H.R. 6091 impacting EPA, and include information regarding the associated sections of the bill and whether a provision was an amendment adopted during full-committee markup, if applicable. During the past two years, EPA has proposed and promulgated a number of regulations implementing provisions of many of the federal pollution control statutes enacted by Congress. Beginning in the first session of the 112 th Congress and continuing into the second session, many stakeholders and some Members expressed concerns that the agency has been "overreaching" the authority given it by Congress, and ignoring or underestimating the costs and economic impacts of proposed and promulgated rules, and potentially overstating the associated benefits. EPA and others have countered that these actions were consistent with statutory mandates and in some cases compelled by court ruling, that the pace in many ways is slower than a decade ago, and that the costs and benefits are appropriately evaluated. The general provisions proposed in the House committee-reported bill would have impacted ongoing and anticipated EPA activities, including those addressing greenhouse gas emissions, hazardous air pollutants (e.g., asbestos), permitting of new source air emissions, water quality impacts, lead-based paint removal, environmental impacts associated with livestock operations, financial responsibility for Superfund cleanup, and stormwater discharge. Provisions included restrictions or limitations on the use of funds, and prohibitions on certain actions (e.g., permitting), as well as requirements to conduct analyses and/or report on certain activities including funding. Several of the provisions proposed for FY2013 in the House committee-reported bill were similar to those enacted for FY2012 ( P.L. 112-74 ), and to a subset of those included in the House Appropriations Committee-proposed version of the FY2012 Interior, Environment, and Related Agencies Appropriations bill ( H.R. 2584 ). P.L. 112-74 included a subset of the House-proposed provisions. EPA "Administrative Provisions" setting terms and conditions for the use of FY2013 appropriations under Title II in H.R. 6091 , as reported, contained six provisions, including a larger rescission of unobligated balances than had been requested within the STAG account and authorization for EPA to transfer funding for the Great Lakes Restoration Imitative to other federal agencies participating in this effort (discussed later in this report). Other provisions would have authorized EPA to enter into cooperative agreements with federally recognized Indian tribes or Intertribal consortia; authorized collection and obligation of pesticide registration fees under FIFRA; raised the limitation on projects for construction, alteration repair, rehabilitation, and renovations of EPA facilities to $150,000 per project within S&T, EPM, Superfund, OIG, and LUST accounts; and increased the number of appointments for the Office of Research and Development under the authority provided in 42 U.S.C. 209 from the existing maximum 30 persons to 50 persons per fiscal year. In its report on H.R. 6091 , the House Appropriations Committee included directive language within the S&T account regarding specific EPA scientific research activities upon which some of the agency's pollution control decisions may be based. Certain directives for FY2013 built upon those included in the conference report on the FY2012 appropriations bill ( H.Rept. 112-331 ). For example, the House Appropriations Committee included a directive that for FY2013 EPA would need to make specific refinements and modifications to the agency's policies and practices for conducting human health risk assessments under the Integrated Risk Information System (IRIS). EPA uses this system to establish toxicity concentrations and risk thresholds for various chemical substances, which may inform the agency's regulatory decisions under multiple pollution control statutes. Also within the S&T account, the committee would not have provided a $4.25 million increase for hydraulic fracturing research that the President had requested, and would have disallowed EPA from using any of the funds that would be provided in H.R. 6091 to research environmental justice impacts related to hydraulic fracturing. Although the conferees on the FY2010 appropriations bill had urged EPA to study the relationship between hydraulic fracturing and drinking water, the House Appropriations Committee noted in its report on H.R. 6091 that EPA had expanded its research beyond the scope of the congressionally directed study. With respect to other research related to drinking water, the committee rejected the $2.33 million reduction that the President had requested for research of innovative technologies for small drinking water systems. In its report on H.R. 6091 , the House Appropriations Committee specified no FY2013 funding within the EPM account for several activities, including the greenhouse gas New Source Performance Standards; the Community Action for Renewed Environment (CARE) program; and the Northwest Forest geographic program. Also under this account, no funding would have been provided for EPA "Administrator Priorities." The committee noted its concern that EPA had not yet submitted a report identifying the amount of funding that the agency had allocated for the Administrator's priorities in FY2010 and FY2011, as directed in the conference report on the FY2012 appropriations bill. The committee indicated that no funding would have been provided in FY2013 for these priorities because of a "lack of transparency" in the nature of these activities and the lack of "performance metrics." The committee would have directed EPA to submit a report that would identify how FY2011 and FY2012 funding was used for the Administrator priorities. The committee proposed $2.20 million for the Administrator's Immediate Office and $4.24 million for the Office of Congressional and Intergovernmental Relations, the latter of which was $4.0 million below the budget request. The committee expressed concern raised by Member offices regarding a backlog of responses to congressional letters, informal questions, and questions for the record. With respect to enforcement, the committee expressed concerns regarding aerial compliance monitoring, and directed EPA to submit a report providing certain information regarding aerial monitoring activities. The committee noted that EPA and the states have used aerial monitoring for nearly a decade as a "cost-effective" enforcement tool to verify compliance with environmental laws, particularly in impaired watersheds. The committee would have directed EPA to include information in its report on the number of enforcement actions for which aerial monitoring was used as evidence to identify a violation, and the outcome of those actions. The overall decrease for FY2013 proposed in H.R. 6091 as reported compared to the President's FY2013 request and FY2012 enacted appropriations was largely due to the proposed reduction in EPA's STAG account for grants to aid states in capitalizing their Clean Water and Drinking Water State Revolving Funds (SRFs). Historically, these grants have represented a relatively significant proportion of EPA's total appropriations. The amount proposed by the House Appropriations Committee for these SRF capitalization grants represented roughly 21% of the total EPA appropriation included in H.R. 6091 as reported for FY2013. Funding for SRF grants included in the President's FY2013 budget request was about 24% of the proposed total EPA funding. In FY2011 and FY2012, more than 28% of EPA's annual appropriations had been for these SRF grants within the STAG account. As indicated in Table 2 below, the House committee-proposed $1.52 billion combined for the Clean Water and the Drinking Water SRFs for FY2013 was $507.0 million (25%) less than the $2.03 billion in the President's FY2013 request and $866.3 million (34%) less than the $2.38 billion enacted for FY2012. The combined amount was also less than the FY2011 and FY2010 enacted levels, as indicated in Table 2 . The SRF funding supports local wastewater and drinking water infrastructure projects, such as construction of and modifications to municipal sewage treatment plants and drinking water treatment plants, to facilitate compliance with the Clean Water Act and the Safe Drinking Water Act, respectively. EPA awards SRF capitalization grants to states and territories based on formulas. H.R. 6091 as reported proposed $689.0 million for the Clean Water SRF capitalization grants for FY2013, 41% below the President's FY2013 request of $1.18 billion and 53% below the FY2012 enacted level of $1.47 billion. The $829.0 million for the Drinking Water SRF capitalization grants in the House committee-reported bill was also less than the FY2013 requested and FY2012 enacted levels, but the magnitude of decrease was significantly smaller, as shown in Table 2 . Although the House Appropriations Committee expressed its recognition of the importance of the Clean Water and Safe Drinking Water SRFs to the states, it noted that these accounts received a combined additional $6.00 billion in the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ), and a "130 percent increase" in funding above FY2008 and FY2009 regular enacted appropriations in FY2010 or "… the equivalent of six years' worth of appropriations in one calendar year." The House committee further asserted that funding these accounts through regular appropriations is unsustainable and must shrink under the current allocation, and encouraged the appropriate authorizing committees to examine funding mechanisms for the SRFs that are sustainable in the long term. FY2013 funding levels included in the House committee-reported bill for the two SRF programs are the same as the amounts appropriated in FY2008. Some Members objected to the proposed reductions, while others noted that the infusion of greater resources in recent years through FY2009 supplemental funding provided under the ARRA of 2009 ( P.L. 111-5 ) have been instrumental in meeting many local water infrastructure needs. The FY2013 request, and enacted levels for the three most recent fiscal years were larger than the regular appropriations for FY2009 in P.L. 111-8 , but much smaller than total FY2009 appropriations when including the additional $4.0 billion for the Clean Water SRF capitalization grants and $2.0 billion for the Drinking Water SRF capitalization grants in P.L. 111-5 (see Table A -1 in Appendix A ) . The extent of federal assistance still needed to help states maintain sufficient capital in their SRFs to finance projects has been an ongoing issue. Demonstrated capital needs for water infrastructure, as identified in EPA-state surveys, continue to exceed appropriated funding. Some advocates of a prominent federal role have cited estimates of hundreds of billions of dollars in long-term needs among communities, and the expansion of federal water quality requirements over time, as reasons for maintaining or increasing the level of federal assistance. Others have called for more self-reliance among state and local governments in meeting water infrastructure needs within their respective jurisdictions, and contend that reductions in federal funding for SRFs are in keeping with the need to address the overall federal deficit and federal spending concerns. In addition to the funding levels for the SRFs, House committee-reported H.R. 6091 would not have retained a requirement within the STAG account that 20% of SRF capitalization grant assistance be used for "green" infrastructure. This requirement was initially required in the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ) and retained as modified in the subsequent fiscal year appropriations. Further, H.R. 6091 would have required that between 20% and 30% of the funds available to each of the SRFs be used by states to provide an additional subsidy to eligible recipients in the form of forgiveness or principal, negative interest loans or grants (or a combination of these), or to restructure debt obligations. While the SRF monies constitute the majority of EPA grant funds within the STAG account, numerous other grants also are funded within this account. The President's FY2013 request included funding for Alaska Native Villages and the U.S./Mexico Border water infrastructure grants projects, but the House Appropriations Committee would not have provided any funding for these projects for FY2013. Enacted appropriations for FY2011 and FY2012 (and other previous fiscal years) had included funding for these geographic-specific areas: the FY2013 request included $10.0 million for the construction of wastewater and drinking water facilities in Alaska Native Villages, compared to $10.0 million appropriated for FY2012, $10.0 million for FY2011, and $13.0 million for FY2010; and $10.0 million for wastewater infrastructure projects along the U.S./Mexico border, compared to $5.0 million appropriated for 2012, $10.0 million for FY2011, and $17.0 million for FY2010. Some Members and state stakeholder groups have expressed concerns about the adequacy of federal grant funding to assist states in carrying out federal pollution control requirements, particularly in light of recent economic conditions and the impacts on state budgets. In addition to the Clean Water and Drinking Water SRFs, and the geographic-specific area infrastructure grants discussed above, the STAG account funds "categorical grants" to states and tribes for numerous pollution control activities, as well as separate grants for Brownfields Section 104(k) projects to assess or remediate contaminated sites, Brownfields Section 128 grants to states and tribes to implement their own cleanup programs, and diesel emissions reduction grants. Brownfields grants are discussed in the section entitled " Brownfields ," and the diesel emissions reduction grants are discussed in " Air Quality and Climate Change Issues ," later in this report. H.R. 6091 as reported by the House Appropriations committee proposed $994.4 million to support state and tribal "categorical" grant programs within the STAG account, $203.0 million below the President's FY2013 budget of $1.20 billion, $94.8 million less than the FY2012 appropriation of $1.09 billion. EPA categorical funds are generally distributed through multiple grants to support various activities within a particular media program (air, water, hazardous waste, etc.), and are generally used to support the day-to-day implementation of environmental laws, including a range of activities such as monitoring, permitting and standard setting, training, and other pollution control and prevention activities. These grants also assist multimedia projects such as pollution prevention incentive grants, pesticides and toxic substances enforcement, the tribal general assistance program, and environmental information. Table 3 below provides a comparison of H.R. 6091 as reported with the President's FY2013 budget request, and the three most recent fiscal years for 20 individual categorical grant programs that generally cut across six broad categories: air and radiation, water quality, drinking water, hazardous waste, pesticides and toxic substances, and multimedia. Relative to the FY2013 President's request, the House committee-reported bill proposed reductions for FY2013 for nearly all of the categorical grants, with a few exceptions. House committee-proposed reductions generally reflected funding of these grants at FY2012 levels, with the exception of reductions for a subset of certain grants below the FY2012 enacted level. The House committee adopted the FY2013 request's proposal to eliminate the grants for Beach Protection, but restored grant funding for Radon to the FY2012 level of $8.0 million. The Administration's rationale for proposing to terminate funding for the Beach Protection categorical grant for FY2013 was that non-federal agencies have the capacity to run their own programs as a result of 10 years of this federal assistance. Congress appropriated $9.9 million for this categorical grant for FY2012. The Administration proposed to eliminate the Radon categorical grant, which has provided assistance to states in developing and implementing their own programs to assess and mitigate radon risks for more than 20 years. The Administration asserted that the states had developed the technical expertise and procedures to continue these efforts without federal grant assistance. Under the President's FY2013 proposal, the remaining federal role in mitigating radon risks would have focused on interagency coordination of existing federal housing programs that address these risks. As indicated in Table 3 , the largest reduction for categorical grants proposed in the House committee-reported bill compared to the FY2013 request was a $100.8 million (more than 33%) decrease below the FY2013 request (from $301.5 million to $200.7 million) for State and Local Air Quality Management grants. The House committee-proposed FY2013 level for these grants was also the largest decrease ($35.0 million, 15%) below the FY2012 enacted appropriations of $235.7 million. The increase for FY2013 proposed in the President's FY2013 request for the Air Quality Management grants was to be used to support: permitting sources of greenhouse gas emissions; expanded state core workload for implementing revised, more stringent Clean Air Act (CAA) regulations; additional air monitors; and facilitation of states' collection and review of emission data required under the Greenhouse Gas Reporting Rule. House committee-reported H.R. 6091 also proposed a $61.0 million (23%) reduction below the FY2013 request for Section 106 Water Pollution Control Grants (from $265.3 million to $204.3 million). The proposed amount was $34.1 million (14%) less than the FY2012 enacted level of $238.4 million. The Section 106 grants support efforts to prevent and develop control measures to improve water quality and address nutrient runoff. According to the EPA FY2013 Congressional Justification, the President's proposed $26.9 million increase above the FY2012 levels for these grants was to provide additional resources for: addressing nutrient loads; strengthening the state, interstate and tribal base programs; addressing total maximum daily load (TMDL), monitoring, and wet weather issues; and help states improve their water quality programs relating to the management of nutrients. The House Appropriations Committee omitted language proposed in the FY2013 request to authorize additional Section 106 grants for nutrient reductions ( H.Rept. 112-589 , p. 66). The House committee also did not agree to the President's proposed $28.7 million (43%) increase (from $67.6 million to $96.4 million) for the Tribal Assistance Grant Program (GAP), and recommended funding these grants at the FY2012 level. Citing the agency's commitment to tribes, the Administration's proposed increase for the Tribal GAP for FY2013 was to enhance program resources to further build tribal capacity and assist tribes in leveraging other EPA and federal funding to achieve added environmental and human health protection. Other comparisons are reflected in the table that follows. Several EPA actions under the Clean Air Act (CAA), including those addressing greenhouse gas (GHG) emissions, hazardous air pollutants (including mercury) and particulate matter emissions, received considerable attention, including proposed legislation, during the 112 th Congress and continued to be an area of interest among some Members in the consideration of FY2013 appropriations for EPA. These issues were also the subject of proposals to modify or curtail EPA actions, during the FY2011 and FY2012 appropriations debate. In addition to funding FY2013 levels for several program activities in Title II of the House committee-reported bill and in the accompanying report (see Table 4 below), Title IV of H.R. 6091 as reported proposed a number of general provisions addressing EPA's use of FY2013 funds to support the development, implementation, or enforcement of CAA regulatory actions noted above, as well as directives for conducting evaluations of certain activities and providing reports to the committee. Some of these provisions were similar to general provisions included in the FY2012 Interior appropriations law ( P.L. 112-74 ), and a subset of those proposed during deliberations on the FY2012 and FY2011 EPA appropriations. Additionally, in lieu of certain general provisions proposed for FY2013 in H.R. 6091 as reported, the report accompanying the reported bill, H.Rept. 112-589 , contained extensive language with regard to specific climate change and air quality regulatory actions by EPA. As indicated in Table C -1 in Appendix C , general provisions proposed in Title IV of the House committee-reported bill would have prohibited the use of FY2013 appropriations for issuing permits for emissions from biological processes associated with livestock (§420); requiring reporting of GHGs from manure management systems (§421); regulating GHGs from new motor sources (§444); administering or enforcing the National Emission Standards for Hazardous Air Pollutants regulations for asbestos for residential buildings with four or fewer units (§446); issuing or enforcing standards of performance applicable to emission of GHGs by any new or existing electric utility generating unit (§448). The general provisions also proposed requirements for EPA to conduct a 48-month pilot project for the North American Emission Control Area (which requires the use of low sulfur fuels by ships within 200 miles of the U.S. coast) jointly with the U.S. Coast Guard (§440), development of a seventh edition of the document entitled ''EPA Air Pollution Control Cost Manual'' (§449), and publication in the Federal Register of a notice to solicit comment on revising the agency's ''Guideline on Air Quality Models'' (§405). More broadly, in its report the House committee expressed skepticism with regard to the repackaging of existing program activities and funding new ones as "climate change programs," noting that in the Interior, Environment, and Related Agencies Appropriations alone, funding for programs identified as "climate change" nearly doubled from $192.0 million to $372.0 million between FY2008 and FY2011. Citing its concern with the number of new seemingly duplicative programs and a lack of effective coordination and communication of climate change activities, budgets, and accomplishments across the federal government, the House committee proposed cutting climate change funding by 29% in H.R. 6091 as reported. Similar to the FY2012 appropriations, the House committee-reported bill included a general provision in Title IV (§419) that would have required the President to submit a comprehensive report to the House and Senate Appropriations Committees detailing all federal (including EPA) fiscal year obligations and expenditures, domestic and international, for climate change programs and activities by agency for FY2012. EPA is one of 17 federal agencies that have received appropriations for climate change activities in recent fiscal years. EPA's share of this funding is relatively small, but EPA's policy and regulatory roles are proportionately larger than other federal agencies and departments. Appropriated funds for EPA's climate change and air quality actions are distributed across several program activities under multiple appropriations accounts. Because of variability in these activities and modifications to account structures from year to year, it is difficult to compare the overall combined funding included in appropriations bills with the President's request and prior-year enacted appropriations. However, comparisons can be made among certain activities for which Congress does specify a line-item in the appropriations process. Table 4 below presents a comparison, when possible, of the House committee-reported bill for FY2013 with the President's FY2013 request and FY2010 through FY2012 enacted appropriations for air quality and climate change program activities within various EPA appropriations accounts. The program activities included in the table are as typically presented in funding tables included in EPA's congressional justifications and in congressional appropriations committee reports. As an example, the House committee-reported bill would have provided a total of $372.5 million for FY2013 within the EPM and the S&T accounts for EPA "clean air and climate" programs, compared to the President's FY2013 request of $440.2 million, and the FY2012 appropriation of $410.5 million. The House committee would not have provided requested increased funding within the S&T account for implementation of the Cross-State Air Pollution Rule, and would have provided no funding in the EPM account for greenhouse gas New Source Performance Standards. Also within the S&T account, the House committee-reported bill proposed $95.0 million for "Research: Air, Climate, and Energy" for FY2013, compared to FY2013 requested $105.9 million, and FY2012 enacted $98.8 million. Much of the increase above the FY2012 enacted level proposed in the President's FY2013 request was largely the result of a $27.1 million (9.5%) increase above the FY2012 enacted amount of $286.1 million for Climate Change and Air Quality in the EPM account. Also, as indicated in Table 4 , the House committee-reported bill proposed $256.7 million for this program area. As indicated in the table, there was variability across the multiple program activities funded under S&T and EPM accounts when comparing proposed FY2013 amounts with the previous fiscal years' enacted levels. As discussed in the previous section of this report, under the STAG account, the House committee-reported bill proposed $200.7 million for State and Local Air Quality Management grants, $100.8 million (33%) less than the FY2013 request of $301.5 million, and $35.0 million (15%) less than the FY2012 enacted level of $235.7 million. Within this line item, the House committee stated that no funds would be provided for greenhouse gas (GHG) permitting grants, or for the GHG reporting rule within this program activity. States use these federal funds to help pay the costs of operating their air pollution control programs. Much of the day-to-day operations of these programs (i.e., monitoring, permitting, enforcement, and developing site-specific regulations) is done by the states with federal Clean Air Act authorities delegated to them by EPA. The National Association of Clean Air Agencies (NACAA) testified that the Clean Air Act (CAA) authorizes federal grants to the states for up to 60% of the costs of running these state and local air quality programs; however, NACAA noted that the grant amounts have declined over the last decade, with the federal contribution falling to roughly 25% of the total cost of these programs. According to the EPA FY2013 Congressional Justification, of the total $65.8 million requested increase for FY2013 for these air quality management categorical grants, $39.0 million would have supported the core state workload for implementing revised and more stringent federal National Ambient Air Quality Standards, including the installation of additional air quality monitors and overseeing compliance with air toxics regulations. Another $26.5 million of the increase for these grants in the STAG account was to support states and tribes in permitting sources of GHG emissions and implementing the federal GHG Reporting Rule. Also within the STAG account, the House committee proposed $30.0 million for the Diesel Emission Reduction Grants program for FY2013, $15.0 million more than the FY2013 request and roughly the same as FY2012. The ARRA of 2009 ( P.L. 111-5 ) provided an additional $300.0 million in supplemental funds for these grants in FY2009 for a total of $360.0 million in FY2009, much of which was awarded in FY2010. The Energy Policy Act of 2005 (EPAct 2005) authorized $200.0 million annually for these grants from FY2007 through FY2011. The House committee-reported bill also would have reinstated funding for state indoor radon (categorical) grants at the FY2012 level of $8.0 million. As indicated previously, the FY2013 request proposed eliminating the Radon grant program, noting that states had established the necessary technical expertise and program funding in place to continue radon protection efforts without federal funding. Although some Members and stakeholders raised concerns about the proposed funding for various air quality programs in the President's FY2013 budget request, much of the attention during deliberations on the FY2013 appropriations and other recent fiscal years has focused less on the level of funding and more on the costs and economic impacts of several EPA regulatory actions to address air quality and climate change. For example, although relatively minor in terms of EPA's funding, the agency's responses to a 2007 U.S. Supreme Court decision remain a prominent topic of debate. This decision found greenhouse gases (GHGs) to be "air pollutants" within the Clean Air Act's definition of that term, and required EPA to consider, among other things, whether GHGs endanger public health or welfare. EPA's "endangerment finding" was the first step in promulgating regulations to limit emissions, which led to concerns among affected stakeholders and within Congress about the potential costs of compliance and the economic impacts of such regulations. The Hazardous Substance Superfund (Superfund) account supports the assessment and cleanup of sites contaminated from the release of hazardous substances. EPA carries out these activities under the Superfund program. The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) authorized this program, and established the Superfund Trust Fund to finance discretionary appropriations to fund it . As reported by the House Appropriations Committee, H.R. 6091 proposed a total of $1.16 billion for the Superfund account in FY2013. The committee's recommendation was $11.5 million (1%) less than the President's FY2013 request of nearly $1.18 billion, and $48.9 million (4%) less than the FY2012 enacted appropriation of $1.21 billion. These proposed amounts replicated an overall downward funding trend since FY2010. (See Table 5 .) For the previous decade, annual funding levels for the Superfund account had remained fairly steady, averaging approximately $1.25 billion annually. However, some have observed that the funding levels declined during this period when accounting for the effects of inflation. As amended, CERCLA authorizes EPA's Superfund program to clean up sites that are among the nation's most hazardous and to enforce the liability of parties who are responsible for the cleanup costs. Many states also have developed their own cleanup programs to address contaminated sites that are not pursued at the federal level. These state programs complement federal cleanup efforts. At sites that are addressed under the federal Superfund program, EPA first attempts to identify the responsible parties to enforce their liability for the cleanup costs. Sites financed by the responsible parties do not rely upon Superfund appropriations, except for situations in which EPA may use the appropriations up front and later recover the costs from the responsible parties. If the responsible parties cannot be found or do not have the ability to pay, EPA is authorized to use Superfund appropriations to pay for the cleanup of a site under a cost-share agreement with the state in which the site is located. Sites at which there are no viable parties to assume responsibility for the cleanup are referred to as "orphan" sites. The use of Superfund appropriations has focused primarily on cleaning up contamination from the release of hazardous substances at high-risk sites that EPA has placed on the National Priorities List (NPL). The cleanup of federal facilities on the NPL is funded apart from the Superfund program by the federal agencies that administer those facilities. Annual funding for the cleanup of all contaminated federal facilities combined exceeds EPA's Superfund appropriations by several billion dollars. Although Superfund appropriations are not eligible to pay for the cleanup of federal facilities, EPA oversees their cleanup through the Superfund program in conjunction with the states in which the facilities are located. The Superfund account also funds EPA's homeland security responsibilities to prepare for the federal response to incidents that may involve the intentional release of hazardous substances, EPA's operational and administrative expenses in carrying out the Superfund program, and EPA's enforcement of cleanup liability under CERCLA. Enforcement is a core tenet of the statute intended to ensure that the responsible parties pay for the cleanup of contamination whenever possible, in order to focus the use of Superfund appropriations at orphan sites. Most of the decrease that the House Appropriations Committee recommended for the Superfund account in FY2013 would be for EPA's operational and administrative expenses, and the enforcement of cleanup liability. Although a decrease in the enforcement budget may yield savings in the near term, the need for appropriations possibly could rise in the future if less enforcement were to result in fewer parties contributing to cleanup costs, and more of the costs being shifted to the taxpayer. Although the committee proposed an overall decrease for the Superfund account, it recommended an increase above the President's FY2013 request for long-term Remedial actions to clean up sites on the NPL, but at a lower funding level than enacted for FY2012. Historically, funding within the Superfund account also has been transferred to EPA's Science and Technology account for the research and development of cleanup technologies, and to EPA's Office of Inspector General account for independent auditing, evaluation, and investigation of the Superfund program. In past years, annual appropriations acts have included statutory language authorizing these transfers. The House Appropriations Committee's report on H.R. 6091 recommended funding for these activities within the Superfund account at the same level as enacted for FY2012. However, the committee did not include explicit statutory authority in the bill itself to transfer these funds to the Science and Technology account and the Office of Inspector General account, a departure from past appropriations acts. The committee continued to present the funding levels as transfers in the tables accompanying its report, which would appear to presume that EPA would execute the transfers under some other authority. Generally, transfers of appropriations from one account to another must be authorized in law. Table 5 presents the House Appropriations Committee's proposed funding levels for the Superfund account in FY2013 by major program area, compared to the President's FY2013 request, and appropriations enacted from FY2010 through FY2012. Transfers to the Science and Technology account and the Office of Inspector General account are presented consistent with the committee's report on H.R. 6091 . The following sections discuss selected issues that have received more prominent attention in the appropriations and budget debate, including the adequacy of funding for long-term Remedial actions at NPL sites, overall cleanup progress, the development of Superfund financial responsibility requirements, the management of private settlement funds in Superfund Special Accounts, the use of Superfund Alternative agreements in lieu of listing sites on the NPL, and proposals to reinstate Superfund taxes to augment resources available for appropriation. CERCLA authorizes two types of cleanup actions at individual sites. Remedial actions are intended to address long-term risks to human health and the environment, whereas Removal actions are intended to address more imminent hazards or emergency situations. In the Superfund cleanup process, Removal actions may precede Remedial actions to stabilize site conditions while Remedial actions are developed and constructed. Only sites listed on the NPL are eligible for Superfund appropriations to pay for Remedial actions, whereas Removal actions may be funded with Superfund appropriations regardless of whether a site is listed on the NPL. The pace of long-term cleanup efforts at many sites has raised concerns among Members of Congress, states, and affected communities about the adequacy of funding for Remedial projects. The House Appropriations Committee proposed $546.8 million for Remedial projects in FY2013, an increase of $15.0 million above the President's request of $531.8 million, but $18.2 million less than the FY2012 enacted appropriation of $565.0 million. In its report on H.R. 6091 , the committee stated its concern about the President's requested "deep cuts" for Remedial projects while requesting "marginal reductions or increases" for other activities funded within the Superfund account, and stated its position that the President's request reflects a "wrong distribution of funds for the Superfund account." The House Appropriations Committee proposed the smaller $1.1 million reduction that the President had requested for Removal projects, from $189.6 million enacted for FY2012 to $188.5 million for FY2013. The President had proposed a smaller reduction for Removal projects to focus priorities on near-term risks, as opposed to Remedial projects that address long-term risks. EPA had acknowledged in its FY2013 Congressional Justification that the requested decrease for Remedial projects could have an impact on the pace of long-term cleanup efforts. EPA had indicated that available funding would be prioritized for continuing ongoing Remedial Projects, with no new construction projects planned in FY2013. However, new Remedial projects still could begin at sites financed by the responsible parties, which do not rely on Superfund appropriations. Although EPA had cited federal budgetary constraints as a reason for the proposed decrease for Remedial projects, the agency indicated at the same time that state budgetary constraints have resulted in some sites being deferred to the federal Superfund program. Federal involvement at these sites could increase demands for appropriations. EPA emphasized that it would continue its policy of enforcing the liability of responsible parties first to reserve available appropriations for orphan sites. The long-standing debate over the adequacy of funding for the Superfund program has centered primarily on the pace and adequacy of cleanup at NPL sites. EPA mainly has used the measure of "construction completion" to track overall cleanup progress at individual sites over the life of the program. This measure generally indicates that all long-term cleanup remedies are in place and operating as intended, after which point operation and maintenance of the remedies may continue for years, or even decades in some instances. The annual number of construction completions has been declining for more than a decade, from a high of 88 in FY1997 to a low of 18 in FY2010, and increasing to 22 in FY2011. EPA has estimated 22 construction completions again in FY2012, and 19 in FY2013 based on the President's budget request. This overall downward trend since the late 1990s has raised questions as to whether annual appropriations for the Superfund program have been adequate to maintain consistent progress to ensure protection of human health and the environment. In its report on H.R. 6091 , the House Appropriations Committee commented on EPA's projected reduction in the number of construction completions and other performance measures for FY2013. The committee stated its position that the slowed pace is "wrong policy for addressing the nation's most contaminated hazardous waste sites." The committee cited this concern in recommending a higher level of funding for Remedial projects than the President had requested. Although there has been much focus on the impacts of funding on the pace of cleanup, funding alone is not the sole factor that determines how quickly cleanup may proceed. The scope and complexity of cleanup challenges at individual sites, and technological capabilities, can be significant factors as well. Consequently, greater time may be required to complete construction at larger and more complex sites. Furthermore, measuring the completion of construction on a site-wide basis alone does not reflect progress made among individual projects. In some cases, the construction of nearly all of the individual projects at a site may be complete, but the site is not designated as construction complete until all projects are completed. As reported by the House Appropriations Committee, Section 447 of H.R. 6091 would have prohibited EPA from using any funds that would be provided in that bill for the agency to "develop, propose, finalize, implement, enforce, or administer" Superfund financial responsibility requirements for facilities that manage hazardous substances. Section 108(b) of CERCLA directed the President to identify the initial classes of facilities that would be subject to these requirements no later than December 11, 1983, and to promulgate the requirements no earlier than December 11, 1985. Section 108(b) stated that the purpose of the requirements is for facilities to "establish and maintain evidence of financial responsibility consistent with the degree and duration of risk associated with the production, transportation, treatment, storage, or disposal of hazardous substances." Implementation of Section 108(b) is delegated to EPA by executive order, with the exception of transportation facilities delegated to the Department of Transportation (DOT). The lack of action by EPA and DOT in identifying classes of facilities and promulgating financial responsibility requirements for those classes was challenged by environmental groups in a citizen suit. In February 2009, the court found that the groups had shown standing to sue EPA, but not DOT, and held that under CERCLA, EPA had a non-discretionary duty to identify classes of facilities for establishing financial responsibility requirements by the act's deadline. The court therefore ordered EPA to identify those classes. In August 2009, the court acknowledged that EPA had by then fulfilled its obligation to identify the initial classes of facilities (specifically hardrock mining facilities), albeit years later than the statutory deadline of December 11, 1983. The court held, however, that plaintiffs' remaining claim, seeking an order that EPA take the next step of promulgating financial responsibility requirements, had to be rejected. The absence of a statutory deadline for such promulgation, combined with legislative history, led the court to view this second step as not being a non-discretionary duty of EPA (and instead a discretionary duty with respect to the timing of promulgation)—hence unenforceable by citizen suit. EPA has since identified additional classes of facilities, but has not yet proposed the actual requirements for any of these facilities to demonstrate financial responsibility. In its report on H.R. 6091 , the House Appropriations Committee stated its position that no funding should be provided to develop or implement Superfund financial responsibility requirements, at least until EPA completes an analysis of the capacity of the financial and credit markets to provide the necessary instruments for facilities to demonstrate their financial responsibility. The committee noted its concern that proceeding with new financial responsibility requirements under current economic conditions may impose an undue burden on the affected industries. As a practical matter, some also have questioned whether existing financial responsibility requirements promulgated under other statutes may lessen the need for similar requirements under CERCLA. Still, the adequacy of existing requirements continues to be an issue among those concerned about the capability of facility owners and operators to fulfill their potential liability under CERCLA, if a release of hazardous substances were to occur. Supporters of Superfund financial responsibility requirements contend that the burden of cleanup costs could be shifted to the federal and state taxpayer if responsible parties are incapable of fulfilling their liability. Fiscal budgetary constraints also have focused greater attention on EPA's management of private settlement funds obtained from responsible parties, which augment discretionary Superfund appropriations. These private settlement funds are deposited into site-specific Special Accounts within the Superfund Trust Fund. Section 122(b)(3) of CERCLA authorizes EPA to retain these funds and directly use them to finance the cleanup of the sites covered under the settlements, without being subject to discretionary appropriations. Once all planned future work is completed at a site, EPA may "reclassify" the funds remaining in a "Special Account" to pay for work needed at other sites, or may transfer the remaining funds to the general portion of the Superfund Trust Fund to be made available for discretionary appropriations. In its FY2013 Congressional Justification, EPA reported that it had deposited a total of $3.7 billion in private settlement funds into site-specific Special Accounts over time, and that a total of $1.8 billion remained available for obligation in 992 special accounts as of the end of FY2011. Although this remaining balance is greater than the level of annual discretionary Superfund appropriations, Special Account funds are intended to finance all future cleanup work planned at the sites covered under the settlements over the long term. As such, this remaining balance does not represent the level of annual funding available to EPA from Special Accounts. At some sites, Special Account funds may be expended over several years, or even decades in some cases, to complete construction of all cleanup remedies and operate and maintain them over the long term. In its report on H.R. 6091 , the House Appropriations Committee acknowledged the progress that EPA has made in developing centralized procedures to manage Special Account funds more effectively. However, the committee still expressed its concern about the pace at which the $1.8 billion available balance in Special Accounts may be spent in the future. In its report, the committee directed EPA to submit a report within 120 days of enactment examining the "practical and legal implications" of reprioritizing Special Account funds currently allocated for long-term future work, and identifying alternative uses of the funds to address near-term risks at other sites. The use of Special Account funds is governed by the site-specific settlements under which the responsible parties paid the funds to EPA. The authority of EPA to reprioritize and reallocate these funds among other sites would depend on the terms and conditions of the individual settlements. As such, it should be emphasized that Special Account funds are not subject to agency reprogramming authorities in the same manner as discretionary appropriations. Furthermore, if Special Account funds for long-term work were reallocated and spent for other purposes, there could be a need for appropriations in later years to replace the reallocated funds. Otherwise, EPA may not be able to perform that work when needed to ensure the protection of human health and the environment in accordance with CERCLA. In its report on H.R. 6091 , the House Appropriations Committee expressed interest in EPA's use of Superfund Alternative agreements at some sites, in lieu of EPA listing them on the NPL. Under these agreements, EPA may elect not to pursue the listing of an otherwise eligible site, if the responsible party voluntarily enters into a settlement agreement to perform the cleanup. These agreements are intended to address the cleanup liability of the parties and to free up Superfund appropriations for other sites. The avoidance of an NPL listing may encourage a responsible party to settle if that party is concerned about its association with the site. Some communities also may wish to avoid the perceived stigma of an NPL listing because of possible impacts on property values or economic development. In its report on H.R. 6091 , the House Appropriations Committee included a directive to EPA to continue reporting annually on the use of Superfund Alternative agreements by EPA Region. In its FY2013 Congressional Justification, EPA reported that there were 51 Superfund Alternative agreements covering 67 sites. (The number of agreements is smaller than the number of sites because some agreements cover multiple sites). The number of sites covered under these alternative agreements is a relatively small fraction of the more than 1,600 sites that EPA has listed on the NPL historically, including federal facilities and deleted sites. If the responsible parties are willing to perform the cleanup, listing a site on the NPL is not essential from a funding standpoint because Superfund appropriations are not needed. As noted earlier, a site must be listed on the NPL to be eligible for Superfund appropriations to pay for the long-term Remedial actions. CERCLA generally authorizes EPA to enter into settlements with responsible parties to allow them to perform the cleanup, and settlements are used at many NPL sites to address cleanup liability. The difference in the use of settlements under the Superfund Alternative approach is that EPA elects not to pursue the listing of the site on the NPL, as long as the responsible party performs the cleanup satisfactorily in accordance with the agreement. Sites cleaned up under these agreements are not strictly precluded from being listed on the NPL, but EPA's expectation is that listing them will not be necessary to achieve the cleanup. The performance of the cleanup itself is subject to the same process under CERCLA as those that are listed on the NPL. As such, this approach is an alternative to listing a site on the NPL, but is not an alternative to the Superfund cleanup process. EPA asserts that the Superfund Alternative approach has the potential to save the time and resources associated with listing a site on the NPL, contingent upon the responsible parties performing the cleanup satisfactorily. However, some have expressed concern that the lack of an NPL listing may reduce public transparency and awareness of potential hazards at these sites. Interest in greater resources to enhance cleanup progress also has raised the issue of whether the dedicated industry taxes that once helped to finance the Superfund program should be reinstated. Excise taxes on the sale of petroleum and chemical feedstocks, and a special environmental tax on corporate income historically provided the majority of funding for the Superfund Trust Fund. The authority to collect these taxes expired on December 31, 1995. As the remaining revenues were expended over time, Congress has increased the contribution of tax revenues from the General Fund of the U.S. Treasury to the Superfund Trust Fund, in an effort to make up for the shortfall in revenues from the expired industry taxes. Whether to reinstate Superfund taxes has been a long-standing controversy for over 15 years. The debate has involved numerous issues regarding whether the taxes ensure that polluters pay for the cleanup of contamination, or whether the taxes may place an unfair burden of the costs on certain parties who did not cause or contribute to contamination. Reinstatement of the taxes would be subject to the enactment of reauthorizing legislation. The President's FY2013 budget request included a legislative proposal to reinstate Superfund taxes through 2022 and estimated total revenues of nearly $21 billion over that period. At least four bills to reauthorize Superfund taxes were introduced in the 112 th Congress to date: H.R. 1596 , H.R. 1634 , H.R. 3638 (Subtitle G of Title II), and S. 461 . EPA also administers another cleanup program to provide financial assistance to state, local, and tribal governmental entities for certain types of sites, referred to as "brownfields." Sites eligible for this assistance tend to be sites where the known or suspected presence of contamination may present an impediment to economic development, but where the risks generally are not high enough for the site to be addressed under the Superfund program or other related cleanup authorities. Consistent with liability under CERCLA, responsible parties at these brownfields sites are not eligible for this federal financial assistance, as they are to be held accountable for the cleanup costs. Accordingly, the Brownfields program focuses on providing federal financial assistance for "orphan" sites at which the potential need for cleanup remains unaddressed. EPA's Brownfields program awards two different categories of grants, one competitive and one formula-based. Section 104(k) of CERCLA authorizes EPA to award competitive grants to state, local, and tribal governmental entities for the assessment and remediation (i.e., cleanup) of eligible brownfields sites, job training for cleanup workers, and technical assistance. Section 128 authorizes EPA to award formula-based grants to help states and tribes enhance their own cleanup programs. These grants are funded within the STAG account, whereas EPA's expenses to administer the Brownfields program are funded within the EPM account. In reporting H.R. 6091 , the House Appropriations Committee proposed a total of $131.2 million within the STAG and EPM accounts combined for EPA's Brownfields program, $35.3 million less than the President's FY2013 request of $166.5 million, and $36.6 million less than the FY2012 enacted appropriation of $167.8 million. The committee's proposed decrease is attributed to a 36% reduction below the President's request for Brownfields competitive grants, and a 37% reduction below the FY2012 enacted appropriation. In proposing this decrease, the committee did note its support for "the continued work of the Brownfields program, but at a reduced rate." The committee also included language within its reported bill that would have prohibited EPA from using more than 25% of the Section 104(k) grant funds to address petroleum sites. Under existing law, Section 104(k) requires that 25% of these funds be set aside for petroleum sites, but does not explicitly prohibit EPA from allocating a higher percentage. Table 6 presents appropriations for EPA's Brownfields program proposed for FY2013 in H.R. 6091 , as reported by the House Appropriations Committee, compared to the President's FY2013 request, and appropriations enacted from FY2010 through FY2012. These amounts are presented by EPA account for the competitive and formula grants awarded under the program, and EPA's expenses to administer the program. As indicated in Table 7 below, House committee-reported H.R. 6091 proposed $104.1 million for EPA from the Leaking Underground Storage Tank (LUST) Trust Fund, the same as the President's FY2013 request and roughly the same as the FY2012 level, but less than the enacted amounts for the previous two fiscal years. These trust fund monies are used by states and EPA to implement the LUST corrective action and the underground storage tank (UST) leak prevention programs. In addition to the $104.1 million from the trust fund for these activities the House committee-reported bill also proposed $12.3 million for FY2013 within the EPM account to support EPA staff and extramural expenses used for preventing releases from USTs, the same as the FY2013 request, but slightly less than the FY2012 level. An additional $1.5 million, the same as requested and nearly the same as the previous fiscal year, was proposed within the STAG account for categorical grants to support state implementation of certain other UST leak prevention and detection regulations that are not eligible for LUST trust fund money. Congress established the LUST Trust Fund to provide a source of funds for EPA and states to conduct cleanups where no responsible party has been identified, where a responsible party fails to comply with a cleanup order, in the event of an emergency, and to take cost recovery actions against parties. EPA and states have been successful in getting responsible parties to perform most cleanups, and historically, states have used the bulk of their annual LUST Trust Fund grant to oversee and enforce corrective actions performed by UST owners and operators. The trust fund is supported by a 0.1 cent-per-gallon motor fuels tax and had a balance of $3.33 billion as of the beginning of FY2012. EPA and the states (through cooperative agreements) use appropriated LUST funds primarily to oversee and enforce LUST cleanup activities conducted by responsible parties. Funds also are used to take emergency actions to respond to petroleum releases that may present more immediate risks, clean up abandoned tank sites, and pursue cost recovery actions against the responsible parties. Since the program began, the frequency and severity of releases from USTs have declined markedly, as regulations intended to prevent and detect releases have been developed and enforced over time and as progress has been made in responding to known releases. Through FY2011, cleanup had been initiated or completed at 82.5% of the roughly 501,000 confirmed release sites, while a backlog of some 88,000 contaminated sites remained. The Energy Policy Act of 2005 (EPAct 2005, P.L. 109-58 ) expanded the leak prevention provisions in the UST regulatory program, imposed new responsibilities on the states and EPA, such as requiring states to inspect all tanks every three years. EPAct also broadened the authorized uses of the LUST Trust Fund to support state implementation of the new leak prevention and detection requirements, in addition to supporting the LUST cleanup program. Congress now appropriates funds from the trust fund to support both the LUST cleanup program and the UST leak prevention and detection program. Before EPAct 2005, the UST program had been supported entirely from general revenues. As noted above, a relatively small portion of the total UST program funding is now derived from general revenues. Program funding has posed a perennial issue. The LUST Trust Fund balance has grown annually as appropriations from the trust fund have remained lower than annual tax receipts and interest earned on the unexpended balance of the fund. Whether or not Congress should increase appropriations from the trust fund to support state leak prevention and cleanup programs has been an issue among the states. States note both the backlog of sites needing remediation and the increased need for resources to comply with the additional UST leak prevention requirements added by EPAct 2005. Although substantial progress has been made in responding to known releases, an emerging issue is whether the effect of alternative fuels on storage tank infrastructure has caused more leaks and may increase the need for cleanup funds in the future. The renewable fuel mandates in EPAct and the Energy Independence and Security Act of 2007 (EISA; P.L. 110-140 ) present new technical issues for USTs and for fuel storage, delivery and dispensing infrastructure, generally. EISA requires a substantially increasing use of biofuels each year, and blending ethanol into gasoline is the least-cost and most available option thus far. Most storage tanks are not designed to account for the potential effects of blends of ethanol above 10% by volume (E10) on the structural integrity of the tanks over time. EPA estimates that half of the tanks in the ground are 20 years old and have never been tested for compatibility with higher ethanol blends. Tank owners, EPA, states, and industry are concerned that a new wave of leaks could occur as the amount of ethanol blended in gasoline increases to meet EISA renewable fuel requirements. Under this scenario, EPA expects that more leaks would occur, potentially contaminating groundwater at some sites and possibly placing more demands on state programs and the LUST Trust Fund if the responsible parties are not financially capable of paying for the cleanup. In addition to continuing to implement EPAct requirements, a key area of work for EPA is assessing the compatibility of USTs with alternative fuels and evaluating the transport and degradation characteristics of ethanol and biodiesel blends in groundwater. The Environmental Programs and Management (EPM) account includes funding for several geographic-specific/ecosystem programs to address certain environmental and human health risks in a number of identified areas of the United States. These programs often involve collaboration among EPA, state and local governments, communities, and nonprofit organizations. Table 8 presents a comparison of the FY2013 funding proposed in H.R. 6091 as reported by the House Appropriations Committee with the President's FY2013 request and with FY2010 through FY2012 enacted appropriations for geographic-specific/ecosystem program areas identified as individual line-items in the request. In 2004, President Bush established a Great Lakes Interagency Task Force, chaired by EPA, to develop a strategy (released in 2005) that will guide federal Great Lakes protection and restoration efforts. To better coordinate these efforts, the FY2010 budget requested, and Congress endorsed in P.L. 111-88 , a Great Lakes Restoration Initiative involving EPA and eight other federal agencies. The purpose of the initiative is to target the most significant problems in the ecosystem, such as aquatic invasive species, nonpoint source pollution, and toxics and contaminated sediment. Projects and programs are to be implemented through grants and agreements with states, tribes, municipalities, universities, and other organizations. The initiative consolidates funding for a number of existing federal Great Lakes programs, including EPA's Great Lakes National Program Office (GLNPO), its implementation of the Great Lakes Legacy Act to clean up contaminated sediments, and other agencies' Great Lakes programs. The $250.0 million proposed for FY2013 for the Great Lakes Restoration Initiative within the EPM account by the House committee is $50.0 million less than requested for FY2013 and $49.5 million less than the FY2012 enacted level, and $175.0 million below the FY2010 enacted appropriations of $475.0 million. Some Members and stakeholders expressed concern about the reduced funding level since FY2011. In May 2009, President Obama issued Executive Order 13508: Chesapeake Bay Protection and Restoration , which directed federal departments and agencies to exercise greater leadership in implementing their existing authorities to restore the Bay. Despite restoration efforts of the past 25 years, which have resulted in some successes in specific parts of the ecosystem, the overall health of the Bay remains degraded by excessive levels of nutrients and sediment. As indicated in Table 8 , for FY2013 the House committee proposed $50.0 million to implement its Chesapeake Bay program, the same level as enacted for FY2010 but $22.6 million less than the FY2013 President's budget request, $7.3 million less than FY2012, and $4.4 million less than FY2011. Of the funding proposed by the House committee for FY2013, $8.0 million is for nutrient management and sediment removal grants, and $2.0 million is for small watershed grants to control polluted runoff from urban, suburban, and agricultural lands. The FY2013 President's requested increase for the program was intended to accelerate pollution reduction and aquatic habitat restoration efforts in the Bay, consistent with the objectives of the 2009 executive order. The House Appropriations Committee proposed a combined total of $20.0 million for "National Priorities" within the Science and Technology (S&T) and the Environmental Programs and Management (EPM) accounts for FY2013, roughly the same combined total included in the FY2012 enacted appropriations. The $5.0 million proposed within the S&T account for FY2013 in the House committee report ( H.Rept. 112-589 ) for "Research: National Priorities" is slightly higher than the amount included for FY2012 after accounting for rescissions. The funding is to be used for competitive extramural research grants to fund high-priority water quality and availability research by not-for-profit organizations who often partner with the agency. Additionally, $15.0 million was proposed for FY2013 for "Environmental Protection: National Priorities" in the EPM account to be used for competitive grants for qualified nonprofits to provide rural and urban communities with technical assistance to improve water quality and provide safe drinking water. Of the total, which again is slightly higher than FY2012 after accounting for rescissions, $13.0 million would have been for providing training and technical assistance on a national level, or multi-state regional basis, and $2.0 million would have been for providing technical assistance to private drinking water well owners. The House committee has adhered to an earmark moratorium during the 112 th Congress as put forth by the leadership in both chambers, generally precluding earmarks in the appropriations bills for FY2011, FY2012, and FY2013. The moratorium followed the adoption of definitions of earmarks in House and Senate rules. While there is no consensus on a single earmark definition among all practitioners and observers of the appropriations process, the Senate and House both in 2007 adopted separate definitions for purposes of implementing new earmark transparency requirements in their respective chambers. In the House rule, such a funding item is referred to as a congressional earmark (or earmark ), while, in the Senate rule, it is referred to as a congressionally directed spending item (or spending item ). Appendix A. Historical Funding Trends and Staffing Levels The Nixon Administration established EPA in 1970 in response to growing public concern about environmental pollution, consolidating federal pollution control responsibilities that had been divided among several federal agencies. Congress has enacted an increasing number of environmental laws, as well as major amendments to these statutes, over three decades following EPA's creation. Annual appropriations provide the funds necessary for EPA to carry out its responsibilities under these laws, such as the regulation of air and water quality, use of pesticides and toxic substances, management and disposal of solid and hazardous wastes, and cleanup of environmental contamination. EPA also awards grants to assist state, tribal, and local governments in controlling pollution in order to comply with federal environmental requirements, and to help fund the implementation and enforcement of federal regulations delegated to the states. Table 1 presents FY2008-FY2012 enacted appropriations and the President's FY2013 budget request for EPA by each of the eight accounts. Figure A -1 presents a history of total discretionary budget authority for EPA from FY1976 through FY2012, and the President's FY2013 budget request, as reported by the Office of Management and Budget (OMB) in the "Historical Tables" accompanying the President's Budget of the U.S. Government, Fiscal Year 2013 . Levels of agency budget authority prior to FY1976 were not reported by OMB in the Historical Tables. In Figure A -1 , the levels of discretionary budget authority are presented in nominal dollars as reported by OMB, and are adjusted for inflation by CRS to reflect the trend in real dollar values over time. EPA's historical funding trends generally reflects the evolution of the agency's responsibilities over time, as Congress has enacted legislation to authorize the agency's programs and activities in response to a range of environmental issues and concerns. In terms of the overall federal budget, EPA's annual appropriations have represented a relatively small portion of the total discretionary federal budget (just under 1% in recent years). Without adjusting for inflation, EPA's funding has grown from $1.0 billion when EPA was established in FY1970 to a peak funding level of $14.86 billion in FY2009. This peak includes regular fiscal year appropriations of $7.64 billion provided for FY2009 in P.L. 111-8 and the emergency supplemental appropriations of $7.22 billion provided for FY2009 in P.L. 111-5 . However, in real dollar values (adjusted for inflation), EPA's funding in FY1978 was slighter more than the level in FY2009, as presented in Figure A -1 . EPA Staff Levels In its report ( H.Rept. 112-589 ) accompanying H.R. 6091 as reported, the House committee expressed concerns about the distribution of EPA regional "Full Time Equivalents" (FTEs) to headquarters, and directed the agency to bring the headquarters FTE level in line with the regional levels. EPA is also directed by the committee to cap its total FTEs at no more than 16,594, the FY2010 level, similar to direction provided in the FY2012 Interior, Environment, and Related Agencies conference report. The committee believes EPA can achieve this reduction of 515 FTEs below the FY2013 budget request with the funding provided. Figure A -2 below provides a trend in EPA's authorized FTE employment ceiling from FY2001 through FY2013, the last year of which is based on the levels proposed by the House committee and the President's request. Information prior to FY2001 is available in a March 2000 testimony by the Government Accountability Office (GAO), in which GAO reported that EPA FTEs increased by about 18% from FY1990 through FY1999, with the largest increase (13%, from 15,277 to 17,280 FTEs) occurring from FY1990 though FY1993. From FY1993 through FY1999, GAO indicated that EPA's FTEs grew at a more moderate rate at less than 1% per year. As indicated in Figure A -2 , with the exception of increases in four fiscal years, there has been a general downward trend since FY2001, with the largest single-year decrease (2.3%) occurring from FY2011 to FY2012. Appendix B. Descriptions of EPA's Eight Appropriations Accounts Since FY1996, EPA's funding has been requested by the Administration and appropriated by Congress under eight statutory accounts. Table B -1 describes the scope of the programs and activities funded within each of these accounts. Prior to FY1996, Congress appropriated funding for EPA under a different account structure, making it difficult to compare funding for the agency historically over time by the individual accounts. Appendix C. Selected Provisions Contained in House Committee-Reported H.R. 6091 and Accompanying Report House committee-reported H.R. 6091 included several provisions and report language within most of EPA's appropriations accounts and a number of administrative provisions at the end of Title II, setting terms and conditions for certain EPA activities. The relatively more controversial provisions regarding several EPA programs and regulations were contained in the "General Provisions" in Title IV of H.R. 6091 . Table C -1 through Table C -6 , which follow, identify those provisions in the House committee-reported bill. The provisions included in H.R. 6091 presented in the following tables are categorized in this report by general program areas, that is, air quality and climate change, water quality, and waste management. Related provisions that are under the jurisdiction of agencies other than EPA are listed separately in Table C -6 . The tables contain information about the provisions, including the associated sections of the bill and those that were amendments adopted during full-committee markup, if applicable. Several of the general provisions included in House committee-reported H.R. 6091 for FY2013 are the same or similar to several provisions included in the enacted FY2012 appropriations ( P.L. 112-74 ), and a subset of those proposed for FY2012 in H.R. 2584 as reported by the House Appropriations Committee on July 19, 2011, and for FY2011 in the Full-Year Continuing Appropriations Act, 2011 ( H.R. 1 ), as passed by the House on February 19, 2011. These provisions were not included in the final FY2011 appropriations law ( P.L. 112-10 ) enacted April 15, 2011. | Preceding the March 26, 2013, enactment of the Consolidated and Further Continuing Appropriations Act, 2013 (P.L. 113-6), during the 113th Congress, the Continuing Appropriations Resolution, 2013 (P.L. 112-175, H.J.Res. 117), enacted September 28, 2012, provided appropriations for federal departments and agencies—including the Environmental Protection Agency (EPA)—funded under each of the regular appropriations bills through March 27, 2013. The continuing resolution provided funding generally at FY2012 levels with an across-the-board increase of 0.612% unless otherwise specified. Subsequent to the passage of the joint resolution in 112th Congress, the bipartisan leadership of the Senate Appropriations Subcommittee on Interior, Environment, and Related Agencies released a draft bill on September 25, 2012, that proposed $8.52 billion for EPA for FY2013. As reported July 10, 2012, by the House Committee on Appropriations, Title II of H.R. 6091, the Interior, Environment, and Related Agencies Act, 2013, proposed $7.06 billion for EPA for FY2013. The proposed level was $1.28 billion (15.5%) below the President's FY2013 request of $8.34 billion, and $1.39 billion (16.5%) below the FY2012 enacted appropriation of $8.45 billion. The House committee-reported bill, H.R. 6091, would have decreased funding for seven of the eight EPA appropriations accounts compared to the President's FY2013 request, and for six of the accounts relative to FY2012 enacted levels. The largest decrease in H.R. 6091 as reported was for the State and Tribal Assistance Grants (STAG) account: $2.60 billion for FY2013, compared to $3.36 billion requested (23% decrease) and $3.61 billion for FY2012 (28% decrease). This account consistently contains the largest portion of the agency's funding among the eight accounts. The majority of the proposed decrease was attributed to a combined $507.0 million reduction in funding for grants that provide financial assistance to states to help capitalize Clean Water and Drinking Water State Revolving Funds (SRFs). Respectively, these funds finance local wastewater and drinking water infrastructure projects. H.R. 6091 as reported included $689.0 million for Clean Water SRF capitalization grants and $829.0 million for Drinking Water SRF capitalization grants, compared to $1.18 billion and $850.0 million requested for FY2013, and $1.47 billion and $917.9 million appropriated for FY2012, respectively. The STAG account also includes funds to support "categorical" grant programs. States and tribes use these grants to support the day-to-day implementation of environmental laws, such as monitoring, permitting and standard setting, training, and other pollution control and prevention activities, and these grants also assist multimedia projects. The $994.0 million total proposed for FY2013 for categorical grants in H.R. 6091 as reported was $208.4 million less than the $1.20 billion requested for FY2013, and $94.8 million below the $1.09 billion FY2012 enacted amount. Other prominent issues receiving attention during the 112th Congress within the context of FY2013 EPA appropriations included funding for implementing certain air pollution control requirements including greenhouse gas emission regulations, climate change research and related activities, cleanup of hazardous waste sites under the Superfund program, cleanup of sites that tend to be less hazardous (referred to as brownfields), and cleanup of petroleum from leaking underground tanks. Additionally, several recent and pending EPA regulatory actions continued to be controversial in the FY2013 appropriations. H.R. 6091 as reported included a number of provisions (similar to those considered in the FY2012 appropriations debate) that would have restricted the use of funding for the development, implementation, and enforcement of certain EPA actions that cut across the various pollution control statutes' programs and initiatives. These provisions were not included in the September 28, 2012, FY2013 continuing resolution. |
Since the terrorist attacks of September 11, 2001, the U.S. Armed Forces, under guidance from the Department of Defense (DOD), have conducted the following military operations: Operation Enduring Freedom (OEF) in Afghanistan and other small Global War on Terror (GWOT) operations like the Philippines and Djibouti that began immediately after the 9/11 attacks and continue; Operation Iraqi Freedom (OIF) that began in the fall of 2002 with the buildup of troops for the March 2003 invasion of Iraq and continued with counter-insurgency and stability operations until 2010; Operation New Dawn (OND), a successor to OIF that began on September 1, 2010, when U.S. troops adopted an advisory and assistance role and concluded in December 2011 when all U.S. troops withdrew from Iraq (though some 13,000 combat-ready troops remain in Kuwait); Operation Noble Eagle (ONE) providing enhanced security for U.S. military bases and other homeland security that was launched in response to the attacks and continues at a modest level; and Operation Inherent Resolve (OIR), authorized by the President on August 7, 2014, beginning with DOD air strikes in Iraq and Syria to "degrade and ultimately defeat" the Islamic State (IS) without deploying U.S. ground troops. On May 27, 2014, President Obama's announced that the number of U.S. troops in Afghanistan would decrease from 33,000 to 9,800 by January 1, 2015; would halve again by January 1, 2016, to about 4,900; and be limited to an embassy presence of about 1,000 thereafter. Some unspecified number of the 60,000 U.S. troops currently providing in-theater support would remain in the region as an "enduring presence" after the withdrawal of troops from Afghanistan. In June 2014, after the announcement of troop levels for the Afghan withdrawal, the Administration replaced its earlier $79.4 billion placeholder request for DOD (submitted with the original FY2015 budget in March) with an amended war request of $58.6 billion. Including this amended DOD request with State Department/U.S. Agency for International Development (USAID), and Veterans Administration (VA( Medical requests, the total FY2015 war request—including the new November 2014 request for OIR—totals $79.0 billion. The FY2015 Continuing Resolution ( H.J.Res. 124 / P.L. 113-164 ) sets war spending levels for this fiscal year at $95.5 billion, reflecting the FY2014 enacted level. That total is $16.5 billion above the $79.0 billion amended request that includes OIR. The continuing resolution (CR) exceeds the request primarily because DOD's FY2015 request is below the FY2014 enacted level. The CR expires on December 11, 2014, and Congress is expected to pass another CR or an Omnibus Appropriations act to set final FY2015 spending levels. At that time, Congress may consider the following war budget issues: the amount, purposes, and appropriateness of the FY2015 Department of Defense (DOD) war cost request reflecting the troop drawdown to 9,800 troops in December 2014; the utility of an Administration proposal for $5 billion for the Counterterrorism Partnerships Fund (CTFP), a broadly-flexible new account intended to respond to "evolving threats" primarily through "Train and Equip" programs; whether to rely on OCO-designated funding for all DOD expenses, including paying for an "enduring presence" of some 60,000 U.S. troops in the region, and financing Afghan security forces rather than transferring some of these costs to DOD's base budget; and responding to the new November funding request of $5.5 billion for Operation Inherent Resolve, including whether to set restrictions on the use of U.S. ground forces. These defense budget issues are discussed below after a summary of the status of the FY2015 request and an accounting of cumulative and annual war funding levels for FY2001-FY2015. Under the FY2015 Continuing Resolution or CR ( H.J.Res. 124 / P.L. 113-164 ), enacted September 19, 2014, OCO-designated funding would total $95.5 billion. This total includes $85.8 billion for DOD, $21.7 billion above the amended request of $64.1 billion including OIR. After the CR expires on December 11, 2014, Congress is expected to pass either another CR or an Omnibus Appropriations Act that could adjust these levels. Since it is not clear, at this time, whether Congress will address the $5.5 billion amended request for OIR during the lame duck session and whether those funds should appropriately be allocated to Iraq, CRS tables that follow exclude that amount. The House-passed version of H.R. 4435 , the FY2014 National Defense Authorization Act (NDAA), included $79.4 billion for DOD war funding, matching the OCO placeholder request included in the Administration's original FY2015 budget. The House NDAA also adopted an amendment that required that the Administration's war funding request meet OMB's 2010 criteria for DOD war funding that placed certain limitations on what would be considered war-related (see " War Funding and Budget Controls "). Reported on June 2, 2014, the Senate Armed Services Committee version of the FY2015 National Defense Authorization Act ( S. 1970 ) did not address either the placeholder OCO request or the amended request submitted on June 14, 2014. The Senate has not taken up S. 1970 ( Table 1 ). The House passed a conference version of the NDAA, H.R. 3979 , on December 4, 2014, and the Senate is expected to consider it prior to the adjournment of the 113 th Congress. With the exception of the request for Counterterrorism Partnership Response Fund (CTPF), H.R. 3779 made minor adjustments to DOD's entire OCO-designated request. The conference bill reduces the $4.0 billion DOD request to $1.3 billion. The final NDAA will set a cap on funding levels. Although H.R. 3979 approves the $1.618 billion requested for a new Iraq Train and Equip account, it makes several revisions, including sunsetting the authority on December 31, 2016, rather than September 30, 2017. The bill endorses the Administration cost-sharing provision in which U.S. obligations are capped at 60% until Iraqi, Kurdish, and tribal security forces contribute 40% of the $1.6 billion total, in cash or in kind. The conference draft also sets a 25% cap on obligations and expenditures that would go into effect 15 days after the Secretary of Defense and the Secretary of State submit a specific plan identifying, to the appropriate congressional committee and the House and Senate leadership, the forces to receive assistance and the retraining and rebuilding for those forces. The plan is to include goals, concept of operations, timelines, types of training and other assistances, roles of other partners, number and roles of U.S. military personnel, and additional military support and sustainment, and other relevant details. Ninety days later, and every 30 days thereafter, the Secretary of Defense is to submit quarterly reports of any changes. Instead of the blank waiver of other laws requested, H.R. 3979 permits more limited waiver authority for the Secretary of Defense of acquisition and arms sales provisions. It also includes a more general waiver for the President if it is determined to be vital to U.S. national security, and it can be implemented only 15 days after notification to the appropriate defense committees. H.R. 3979 also continues the Continuing Resolution provision that funds training of vetted Syrian opposition forces by reprogramming from other funds. The bill also rejected the broad authorities requested, and included additional reporting requirements for both the Iraq and the Syria Train and Equip programs. The House passed H.R. 4870 , the FY2015 DOD Appropriations Act on June 20, 2014, providing OCO-designated funding of $79.4 billion, matching the Administration's placeholder request. Funding levels were set at the title level (Military Personnel, Operation and Maintenance) rather than by account, as is customary. The Senate Appropriations Committee version of H.R. 4870 provided $58.3 billion for DOD, close to the amended request of $58.6 billion; the Senate version added about $1 billion to both Operation and Maintenance and procurement accounts that was offset by halving the $4.0 billion requested for the new flexible Counterterrorism Response Program (CTRP) that would give the Administration broad discretion to provide funds to countries conducting counter-terror efforts (see Table 2 and Figure 9 ). The section below summarizes cumulative war funding by operation and agency. It also analyzes the major factors affecting annual funding levels. The tables below do not reflect the $5.5 billion budget amendment to combat the Islamic State, considered to be a new operation by the Department of Defense. That request is discussed separately in the section titled " The New Request to Counter the Islamic State ." Based on funding enacted from the 9/11 attacks through FY2014, CRS estimates a total of $1.6 trillion has been provided to the Department of Defense, the State Department and the Department of Veterans Administration for war operations, diplomatic operations and foreign aid, and medical care for Iraq and Afghan war veterans over the past 13 years of war. Allocated by operation, this $1.6 trillion total is made up of: $686 billion for Afghanistan and other counter-terror operations (OEF); $815 billion for Iraq (OIF); $27 billion for enhanced security (Operation Noble Eagle); and $81 billion in other spending designated as war funding but tangentiallyrelated to the Afghan and Iraq war ( Table 3 ). Of the total amount appropriated,: 43% for the Afghan war; 51% for the Iraq war; 2% for enhanced security; and 5% for "Other war spending," by DOD and the State Department designated for war but not part of war operations or direct support (see Table 3 and " War Funding and Budget Controls "). As would be expected, the majority of the FY2015 request is for the war in Afghanistan with $58.1 billion for Afghanistan/OEF; $5.0 billion for Iraq/OIF/OND; $100 million for enhanced security; and $10.4 billion for other war-designated costs that are not directly part of war operations or aid to Afghanistan or Iraq. If Congress approves the FY2015 war funding request for $73.5 billion for DOD, State/USAID, and VA Medical (excluding the new OIR request), cumulative funding over the past 15 years would rise to $1.69 trillion, including $744 billion for Afghanistan/OEF, $820 billion for Iraq/OIF/OND, $28 billion for Enhanced Security, and $92 billion in "Other" funding ( Table 3 ). In this report, CRS war funding totals include all funding designated by statute as for emergencies or for Overseas Contingency Operations or for Afghanistan and Iraq. Of the $1.6 trillion total for FY2001-FY2015 request (excluding OIR), "other" war funding designated as emergency or OCO but not directly related to Afghan or Iraq war operations, diplomatic support, or foreign aid to Afghanistan or Iraq countries totals $91 billion or about 5.4% of the total (see Table 3 and " Changes in DOD Definitions of War Funding "). Splitting the cumulative total of $1.6 trillion (excluding OIR) appropriated by agency: $1.5 trillion was appropriated to DOD; $92.7 billion to State/USAID, and $17.6 billion to the Veterans Administration (VA) for medical treatment In terms of shares for the three agencies: 92% was appropriated to the Department of Defense for military operations and support and training Afghan and Iraq forces; 6% for the State/USAID reconstruction and foreign aid programs; and 1% for VA Medical funding for OEF/OIF/OND veterans ( Table 4 ). By agency, the FY2015 war request includes: $58.6 billion for the Department of Defense; $9.4 billion for State Department/U.S.AID; and $5.2 billion for VA Medical. By shares, in the FY2015 request: 80% is for DOD; 13% for State/USAID, higher than the cumulative share; and 7% for VA Medical, also above the cumulative share ( Table 4 ). DOD funds are used to conduct and support military operations and reset damaged or destroyed equipment, to train the Afghan and Iraq security forces, and to provide other assistance for reconstruction, coalition support, and counter-drug operations. State Department funding is for the conduct of diplomatic operations and foreign assistance programs ranging from the Economic Support Fund to counter-drug programs. VA medical funding provides for medical care of OEF/OIF/OND veterans; this does not include the cost of VA disability payments because VA does not provide those figures. Although there are other significant variables, the main factor in determining costs is the number of U.S. troops deployed to Afghanistan and Iraq at different points in time. Between 2001 and 2014, troop levels in Iraq and in Afghanistan changed dramatically. Because policy announcements typically focus on "Boots on the Ground" in-country, Figure 1 shows those figures and excludes military personnel providing support in the region or conducting other counter-terrorism operations (see Figure 2 ). For FY2002-FY2007, overall troop levels reflect the combined effect of the gradual buildup in U.S. troop levels in Afghanistan after the 9/11 attacks and the Iraq invasion in 2003, followed by the Iraq surge ordered by then-President George W. Bush from 2007-2008. The next phase includes the phased withdrawal for Iraq by December 2012 and the gradual buildup resulting from the troop surge in Afghanistan initiated by then-President Bush in 2008 and continued by President Obama in 2009. That surge peaked in May 2011 and was followed by a phased withdrawal that is to culminate in January 2017 with a limited embassy presence ( Figure 1 ). Six months after the invasion of Iraq in March 2003, U.S. troop levels reached 149,000 troops in-country. By December 2003, troop levels fell to 124,000 and remained at about that level for the next three years. In January 2007, then-President Bush initiated the Iraq surge in response to growing levels of violence and a request for assistance in fighting insurgents, referred to as the "Sunni Awakening." The "Iraq surge" peaked at 165,000 troops in November 2007. As levels of violence fell by July 2008, then-President Bush began to reverse the surge and troop levels declined to 147,000 ( Figure 1 ). After President Obama took office in January 2009, the Administration conducted a strategy review of both the Afghan and Iraq wars. In that review, the President decided to shift U.S. forces in Iraq from a combat to an advisory and assistance role, and reduce troop levels from 141,000 in March 2009 to about 50,000 by September 2010. The bilateral security agreement at that time required that all U.S. troops be withdrawn by December 31, 2011. Although the United States hoped to revise that agreement and retain some troops beyond 2011, the Iraqi government refused to sign a new agreement that would shield U.S. troops from local law, so all U.S. troops were withdrawn by December 31, 2011. There are currently 100 to 200 U.S. military personnel in Iraq to manage arms sales. Compared to Iraq, troop strength in Afghanistan grew more slowly but is falling as rapidly. After the initial defeat of the Taliban in December 2001, the number of U.S. troops gradually doubled from 10,000 in 2002 to 20,000 in 2005 as the mission expanded, although violence remained at a fairly low level. In response to concerns about the deteriorating security situation raised by U.S. commanding officers, then-President Bush agreed to gradually double U.S. troop levels to about 40,000 between 2007 and 2008. Before leaving office in 2009, then-President Bush agreed to increase U.S. troops in Afghanistan to 45,000, initiating what became known as the Afghanistan surge. After its strategy review, the new administration decided to continue the surge and add another 20,000 troops by November 2009. After a second review in December 2009 prompted by pressure from military commanders for additional troops to combat worsening security, President Obama approved an additional increase of 30,000 troops, bringing the total number of U.S. total to 98,000 by September 2010. At that time, President Obama committed to evaluate current U.S. strategy in Afghanistan in December 2010 to "allow us to begin the transfer of our forces out of Afghanistan in July of 2011." The total peaked at 100,000 in May 2011 ( Figure 1 ). On July 22, 2011, President Obama announced the surge would be reversed and the U.S. role would transition from a combat role to a train and assist role in Afghanistan, stating that by "2014, this process of transition will be complete, and the Afghan people will be responsible for their own security." As Afghan troops gradually took the lead, U.S. troop levels declined fairly rapidly from the May 2011 peak of 100,000 to about 65,000 in September 2012. In February 2013, President Obama announced that the number of U.S. troops in Afghanistan would halve from 65,000 to 33,000 within a year. The President also announced that the "drawdown will continue and by the end of next year, our war in Afghanistan will be over." After over a year of speculation about future U.S. troop levels in Afghanistan, President Obama announced on May 27, 2014, that once the U.S. combat role ended by December 31, 2014, some 9,800 troops would remain for another year to train Afghan security forces and conduct counter-terror operations. That number would halve to about 4,900 by January 2016, and fall to "an embassy presence" by January 2017. This plan was contingent on the Afghan government signing a new bilateral security agreement (BSA) with Afghanistan which would shield U.S. troops from Afghan law, a U.S. precondition, and possibly specify the size and role of the residual force and U.S. funding support for Afghan Security Forces, subject to congressional appropriations. Although then-President Karzai was unwilling to sign the agreement, his successor, President Ashraf Ghani signed the agreement on September 30, 2014, the day after taking office. The new BSA does not specify U.S. troop levels or require that the United States remain in Afghanistan after 2014 or provide for permanent U.S. bases in Afghanistan. In addition to U.S. troops, some 28 NATO and other allies have also deployed troops to Afghanistan as part of the International Security Assistance Force (ISAF). Between 2001 and 2008, these allies contributed roughly the same number of troops as the United States. During the Afghan surge, that ratio dropped to 50% and has remained at roughly that level since then. Figure 2 shows the number and location of U.S. military personnel serving in either OEF or OIF/OND as of March 2014 based on DOD documents. As points of comparison, it also shows the number of U.S. military personnel deployed in the region before 9/11, at the peak of the Iraq surge in 2008 and the Afghan surge in 2011. These figures differ from the more-commonly cited "boots on the ground" numbers that include only U.S. military personnel in-country, in Afghanistan, and in Iraq. The additional personnel shown include those military personnel providing "in-theater support," those engaged in other counter-terrorism operations, and those deployed on ships afloat. Before the 9/11 attacks, the number of U.S. military personnel in the Area of Operations (AOR) for OEF, OIF, and OND totaled some 30,000 including about 15,000 on ships afloat in the region. During the Iraq surge of April 2008, U.S. personnel reached a peak of just over 300,000, a 10-fold increase. That total included some 53,000 for OEF and about 224,000 for OIF as well as 17,000 on ships afloat ( Figure 2 ). In May 2011, during the Afghan surge, the number of U.S. military personnel peaked at 278,000, somewhat below the Iraq surge. That total included 156,000 for OEF, another 86,000 for OIF, and 30,000 afloat. By the end of December 2011, all U.S. troops were withdrawn from Iraq and the Iraq mission (OND) ended. After December 2011, troops providing in-theater support for Iraq were transferred to OEF because of the end of the Iraq mission. By March 2014, the total U.S. military personnel assigned to OEF had dropped to 138,000, reflecting the drawdown in Afghanistan ( Figure 2 ). From the 9/11 attacks until FY2008, total war costs for all three operations—Iraq, Afghanistan, and other GWOT and enhanced security—rose steeply from $36 billion in FY2001/FY2002 to a peak of $195 billion in FY2008, primarily because of Iraq war costs. In FY2009, overall war funding fell to $157 billion, reflecting the decline in troop levels after the Iraq surge, and the beginning of troop withdrawals. The decline of total war costs since FY008 due to the Iraq withdrawal was partly offset by the rise in Afghan war costs because of the FY2009-FY2011 troop surge in Afghanistan. In FY2001/FY2002, the cost of enhanced security (Operation Noble Eagle) covered the initial responses to the 9/11 attacks, repair of the Pentagon, and combat air patrols in the United States. These costs declined, falling to less than $200 million by FY2008 ( Figure 3 ). As troop levels in Iraq rose to 149,000 after the invasion in the spring of 2003, war funding for the year reached $51 billion, rising further to $77 billion in FY2004 and to $79 billion in FY2005 as the United States established bases in Iraq to support somewhat lower troop levels. With the initiation of the surge in 2007, costs increased to $131 billion, then peaked at $144 billion in FY2008. With the reversal of the Iraq surge, Iraq costs declined to $93 billion in FY2009, $65 billion in FY2010. As the U.S. combat mission was replaced with an "advise and assist" role, costs continued to fall to $47 billion in FY2011, and $20 billion in FY2012 when all U.S. troops were withdrawn ( Figure 1 and Figure 3 ). After dropping from $23 billion in FY2002 to $17 billion in FY2003 and $15 billion in FY2004, Afghan war costs rose to $19 billion in FY2005 and $31 billion in FY2006 with troop levels around 20,000. By FY2008, Afghan costs increased to $39 billion as both troop levels and the conflict's intensity grew. With the initiation of the Afghan troop surge, costs grew to $56 billion in FY2009, and $94 billion in FY2010, peaking at $107 billion in FY2011 ( Figure 3 ). As U.S. troop levels declined and Afghan forces have taken the lead in operations, U.S. costs dropped to $86 billion in FY2013 and $77 billion in FY2014. The current FY2015 request is $58 billion for Afghanistan expenses for DOD, State/USAID, and VA Medical. In addition to higher troop strength, cost increases reflect substantial amounts to train Afghan security forces and higher investment levels in response to policy changes. Funding for Enhanced Security (Operation Noble Eagle) peaked at $13 billion in the first year after the 9/11 attacks, primarily for one-time costs like Pentagon reconstruction ($1.3 billion), security upgrades, combat air patrol (about $1.3 billion for around-the-clock coverage), and activating reservists to guard bases. These costs fell to $4 billion in 2003, and then to $2 billion in FY2004. Beginning in FY2005, DOD funded this operation in its baseline budget rather than as emergency or Overseas Contingency Operation (OCO) funding. Costs fell to under $1 billion in FY2006, $500 million in FY2007, and about $100 million per year in FY2008 and after ( Figure 3 ). The Department of Defense accounts for $1.5 trillion or 92% of the $1.6 trillion total enacted war funding. Diplomatic operations and foreign aid programs of the State Department account for another $93 billion, or 6% of the total. Another $18 billion, or just over 1% of war funding, funds medical care in the Department of Veterans Affairs (VA) for OEF and OIF veterans. The VA does not provide figures showing the cost of its benefits for veterans of the two wars ( Figure 4 ). DOD's war funding for the Afghan and Iraq wars primarily pays for deploying and supporting U.S. troops (e.g., special pays for deployed personnel), conducting and supporting military operations, repairing war-worn equipment, and transporting troops and equipment to and from the war zone (O&M activities); buying and upgrading weapon systems (Procurement); conducting Research, Development, and Testing and Evaluation (RDT&E); Military Construction on site; and conducting intelligence activities. In addition, DOD war funding finances training for the Afghan and Iraqi security forces and other reconstruction activities. DOD funding grew more rapidly than might have been expected based on changes in troop levels alone. Instead, much of the increase reflects other factors discussed below—higher than anticipated support costs, an expanded definition of war-related procurement, and the growth of programs to meet specific needs, such as training Afghan and Iraqi security forces. The $93 billion in war appropriations enacted thus far for the State Department/USAID funds diplomatic operations: e.g., paying staff, providing security, building and maintaining embassies, and funding a variety of foreign aid programs in Afghanistan and Iraq ranging from the Economic Support Fund to counter-drug activities. This figure reflects all funds for Afghanistan and Iraq provided in the regular base budget or as emergency or OCO-designated appropriations. Starting in FY2012, the State Department, like DOD, began to designate certain monies in its regular request as OCO, to fund the extraordinary, but temporary, costs of the Department of State and the U.S. Agency for International Development (USAID) operations in the Frontline States of Iraq, Afghanistan, and Pakistan... [identifying] the exceptional costs of operating in these countries that are focal points of U.S national security policy [as opposed to] the permanent base requirements in the Frontline States, which will endure after OCO funding is phased out. Except for a one-time appropriation of $20 billion for Iraq reconstruction in FY2004, war-related annual foreign aid and diplomatic operations funding hovered between $4 billion and $5 billion each year until FY2011 with one exception in FY2010. When the State Department began to designate spending as OCO, funding levels rose to $11 billion in FY2012 and $9 billion in FY2013, partly due the budgetary advantage of the designation which exempts this funding from budget limits. State/USAID funding fell to $6 billion in FY2014 ( Figure 4 ). In its FY2015 request of $14 billion, the State Department gives another rationale for OCO-designated funding—"an important tool that allows the Department to deal with extraordinary activities that are critical to our immediate national security objectives without unnecessarily undermining funding for our longer-term efforts to sustain global order and tackle transnational challenges." The VA identifies the dollar value of all medical services provided to OEF/OIF veterans who qualify for care based on statutory criteria. Costs for VA medical services have increased not only as the number of those eligible grows but also as the criteria for eligibility has expanded since the 9/11 attacks. In general, veterans who served in combat theater of operations are entitled to five years of VA health care services following their separation from active duty, regardless of whether they are eligible for VA services on other grounds, such as service-related medical condition. For combat veterans who were discharged or released from active service on or after January 28, 2003, they may enroll in the VA health care system within five years from the date of their most recent discharge. Most of VA's medical expenses for OEF/OIF veterans have been funded with regular appropriations. The VA also provides disability benefits to OEF and OIF veterans but has not published the amounts attributable to these veterans. See Table 5 for a more detailed breakdown of the cost of the Afghan and Iraq wars. Since the 9/11 attacks, some observers have criticized war funding as "off-budget" or a "slush fund" appropriated largely in emergency supplemental acts or for "Overseas Contingency Operations" (OCO) where normal budget limits in annual budget resolutions or the Budget Control Act (BCA) do not apply. In recent testimony on September 18, 2014, for example, former Secretary of Defense Chuck Hagel acknowledged these ambiguities, saying "there're a lot of different opinions about whether there should be an overseas contingency account or not and whether it's a slush fund or not." Some observers have argued that the tendency to designate funding for activities only tangentially related to OCO or war has intensified with the threat of sequestration in the BCA. Under that act, if final appropriations breach separate, annual "defense" and non-defense budget caps, OMB must administer a largely across-the-board sequestration reducing each account, and sometimes individual programs, by the same percentage to ensure that caps are met. (Should a sequestration be required, however, all budgetary resources, including war funding, would be affected by across-the-board cuts.) Others have suggested that the "OCO" designation has provided a "safety valve" to preserve base budget programs and help agencies meet BCA caps by designating funding for base budget programs as OCO. For example, Congress transferred $9.2 billion in Operation and Maintenance (O&M) funds from DOD's base budget request to the OCO-designated Title I funds in the FY2014 Consolidated Appropriations Act ( P.L. 113-76 ). Under the BCA caps, DOD spending has been constrained to $496 billion in FY2013, FY2014, and FY2015, with a $3 billion increase to $499 billion in FY2016. DOD contends that the BCA "sequester" caps (the limits that must be reached to avoid a sequester) would require DOD to make significant cuts from current plans that would affect both readiness and modernization. DOD's current Future Years Defense plan exceeds the BCA limits by $176 billion or 3.3% over the BCA caps between FY2012 and FY2021. In addition, departmental spokesmen argue that congressional reluctance to accept DOD-proposed compensation reforms and weapon system cancellations could create an additional "hole" of $70 billion in DOD's current five-year defense plan, which already exceeds sequester caps by about 4.4%. In both FY2014 and FY2015, the Administration has contended that the BCA limits for both defense and nondefense should be raised with additional savings achieved from tax and entitlement reform, proposals that have not been addressed by Congress. The OCO or emergency designation can be applied to all or only some accounts within an appropriation act. There is no single account for war funding in any agency. Generally, war funding is appropriated in regular appropriation accounts for incremental expenses associated with war activities or programs. For DOD, war funding designations has been provided in individual accounts in emergency supplemental, omnibus, or DOD Appropriation Acts for amounts that cover incremental or additional expenses related to deploying military personnel, conducting combat or train and assist operations, and supporting troops overseas. With BCA spending limits in place until FY2021, some believe that the definition of what constitutes war funding may continue to be applied broadly. For example, concerned about DOD's proposal to end funding for A-10 ground attack aircraft in its base budget, the House version of the FY2015 National Defense Authorization Act included $635 million in Title XV for OCO funding to retain A-10 aircraft. In a similar way, the State Department has requested emergency or OCO designations for some of the costs of diplomatic operations or USAID programs associated with Afghanistan and Iraq, such as the Diplomatic and Consular Programs or the Economic Support Fund. Congress has also created new accounts or spending caps to fund activities that do not fit neatly into the purposes of regular accounts and to provide additional flexibility (see Figure 9 ). Recently, some Members have expressed concerns about and taken action to limit the tendency by both the Administration and Congress to apply the OCO designation to activities only tangentially related to war. For example, in H.R. 4435 , the FY2015 National Defense Authorization Act, the House adopted the Mulvaney amendment to require that the Administration's requests comply with OMB's relatively strict 2010 war spending criteria that are intended to limit DOD war spending to activities and programs directly related to the incremental costs of war operations. This provision would not apply to congressional decisions to attach an OCO designation to activities and programs that may be marginally related to those costs. The FY2015 House Budget Resolution report contends that the OCO designation for war costs "has created a loophole that could be used to circumvent discretionary spending limits" and warns that "the Budget committee will be vigilant that the OCO/GWOT cap adjustment is not abused as a means of evading the statutory caps on discretionary spending." During a July 17, 2014, hearing by the House Budget Committee on the FY2015 OCO request, both Democratic and Republican members raised concerns about ever-broader definitions of war costs. For example, ranking member Congressman Chris Van Hollen noted a tendency for creeping allocations from the base budget into the OCO budget. And I have to say, this is not just on the side of the administration. In fact, I think if you look at the record, Congress has actually been a greater offender in this area. But the reality is we have to work together—the executive branch, the congressional branch—to make sure that we have clear and transparent budgeting. In a similar vein, Congressman Bill Pascrell emphasized it's important that the committee ensure that the caps on spending in that law are respected or renegotiated. No one is innocent here. The administration, the Congress have used the OCO budget in the past to skirt the Budget Control Act's caps ... But it's critical that emergency spending be just that. For emergencies. And not just an accounting gimmick that undermines the budget discipline we've all agreed on. While acknowledging that BCA budget limits have made DOD planning "complicated and difficult," Congressman Adam Smith suggested that "a substantial portion of this OCO request really is not directly related to the war in Afghanistan [and] has been spread out amongst a variety of different other funds." DOD witness Deputy Secretary Robert Work agreed that there's is an awful lot in this request that is outside Afghanistan, but that supports Afghanistan or is an integral part of our operations in Afghanistan. But I'd also like to make the point that as sequester has impacted the department, it has really squeezed our ability to absorb within the department unanticipated operations. While House Armed Services Committee Chairman, Bud McKeon called for a more expansive definition of war costs to cover "readiness shortfalls" developed over "a decade of war," Deputy Joint Chiefs of Staff, Admiral Winnefeld, responded that Mr. Chairman, in trying to stay true and faithful to what the concept of overseas contingency operations really means, we didn't view that kind of [full-spectrum] training necessarily as falling into that category. It'd be tempting to do that. We'd love to do that. But we really wanted to stay faithful and really reset this OCO idea into what it really is supposed to be. With the prospect of smaller war budgets as U.S. troop levels fall and as BCA caps continue through FY2021, Congress is likely to continue to face the question of what is appropriately designated as emergency or OCO. The two key questions in assessing the use of emergency or "OCO" designations are: What is necessary for funding to qualify as "emergency" or "Overseas Contingency Operations" that exempts it from budget caps? How are war costs defined by the Administration, DOD, and the State Department? Current budgetary law provides that any funding designated by Congress in statute and by the President in writing as "emergency" or "Overseas Contingency Operations" does not count against budget caps. In other words, what qualifies as "emergency" or "OCO" funding is its designation by Congress and the President. The Chairs of the respective budget committees are required to raise budget limits to accommodate that spending, which effectively exempts that funding from spending limits set in either annual budget resolutions or more recently, the BCA (see Box B . ). According to budget law, "emergency" spending is to be "unanticipated," meaning that it is "sudden ... urgent ... unforeseen ... and temporary" (See § 102 (4) (20) in Box B . ). Although a Member can raise a point-of-order challenge to the emergency designation on the Senate floor, the challenge would have to be sustained by 60 votes, which has has seldom happened. The OCO designation was added in the Budget Control Act ( P.L. 112-25 ), presumably to provide Congress with an alternate way to designate war funding than the "emergency" designation, which no longer seemed appropriate after over ten years of wars. There are no criteria for the OCO designation nor is t here a similar point of order to challenge it ( Box B . ). In the initial years of the Afghan and Iraq wars, most war-related funding was provided in supplemental emergency appropriations. Starting in FY2004, DOD received some of its war funding in Title IX of its regular appropriation act to ensure that war funding was available at the beginning of the fiscal year but these funds were also designated as emergency; this funding was thus exempt from budget limits. DOD monies were first designated as "OCO" in FY2012 and also were exempt. When war funding needs were higher than anticipated, the Administration submitted additional emergency or OCO supplemental requests. DOD definitions of what constitutes war-related activities and expenses have shifted over the years. Because of the flexibility of the emergency or OCO designations, some have questioned whether there are any limitations on what could be counted as war funding. The only check on the amount of funding that can be designated as either "emergency" or "OCO" is the requirement that Congress and the Administration agree. Shifts in DOD definitions have reflected differing viewpoints about the extent, nature, and duration of the Afghan and Iraq wars and the "Global War on Terror" (GWOT) as well as growing budget pressures. Over the years, both Congress and the President have adopted sometimes more and sometimes less expansive definitions to accommodate the needs and pressures of the moment. DOD's financial management regulations appear to specify fairly clearly the types of activities that would be considered related to contingency operations. Since the 1990s Bosnian war, DOD regulations have defined war costs as those expenses necessary to cover incremental costs " that would not have been incurred had the contingency operation not been supported (italics added)." War costs would not cover, for example, base pay for troops or normal training activities since those are normal peacetime expenses, or planned equipment modernization. Only those costs in addition to DOD's normal peacetime activities such as those incurred because troops are deployed for war are to be considered OCO . To identify these activities, the guidance requires that the services show how additional wartime deployments and operations affect peacetime assumptions about troop levels and operational tempo. Investment costs were only to be included if "necessary to support a contingency operation." Under these regulations, the following types of expenses were considered war costs: Military personnel funds to cover special pay for deployed personnel (e.g., imminent danger and separation pay) and the additional cost of activating reservists to full-time status; Operation and Maintenance (O&M) funds to transport troops and their equipment to Iraq and Afghanistan, conduct military operations, provide in-country support at bases, provide medical services for deployed troops, and repair and return war-worn equipment; Procurement funding to buy new weapons systems to replace war losses; Research, Development, Test & Evaluation (RDT&E) funds to develop more effective ways to combat war threats such as improvised explosive devices (IEDs) or roadside bombs; Working Capital Funds to expand inventories of spare parts and fuel to ensure wartime support; Military construction for facilities in bases in Iraq or Afghanistan or neighboring countries; and National and military intelligence (NIP and MIP) activities to gather and analyze war-related intelligence collected through surveillance and reconnaissance. In addition, the Administration initiated several programs and accounts designed to fund specific war-related activities that do not fit into traditional accounts. These programs and accounts include: the Afghan Security Forces Fund (ASFF) and the Iraq Security Forces Fund (ISFF) to pay the cost of training, equipping and expanding the size of the Afghan and Iraqi armies and police forces; coalition support to reimburse regional allies (primarily Pakistan) for logistical costs of conducting counter-terror operations supporting U.S. efforts; the Commanders Emergency Response Program (CERP) to give individual commanders funds for small reconstruction projects and to pay local militias in Iraq and Afghanistan to gain support from local populations and counter- insurgent groups; the Afghan Infrastructure Fund (AIF) to finance larger reconstruction projects than under the CERP program and the Task Force for Business Stability Operations (TFBSO) to support privately-funded reconstruction activities; Joint Improvised Explosive Device (IEDs) Defeat Fund to develop, buy, and deploy new devices to improve force protection for soldiers against roadside bombs or IEDs; and Mine Resistant Ambush Protected (MRAP), Rapid Equipping Force, and Urgent Operational Needs funds to purchase critical war equipment quickly. As often occurs in supplemental appropriations, DOD added funds for unanticipated "must pay" bills and Congress added funds for programs that were designated as "emergency" or "OCO." For DOD, examples included unanticipated increases in basic housing allowances, incentive pays, fuel prices and base support expenses. Before the 9/11 attacks, such expenses would often be offset by reductions in other programs. Congress added funds for childcare centers and barracks improvements to improve morale, post traumatic stress disorder (PTSD) and traumatic brain injury (TBI) as urgently-needed mental health programs, C-130 and C-17 transport aircraft facing production line cut-offs, and National Guard and Reserve equipment. In recent years, Congress has transferred funds requested in base budget accounts to Title IX war-designated funding, ranging from monies for Mission and Other Operations funding training to base support of state-side facilities; in FY2014, Congress moved $9.2 billion in Operation and Maintenance funds requested in DOD's base budget to Title IX war funding. The effect was to ease the limits of BCA spending caps. In its initial July 19, 2006, guidance to the services for developing the FY2007 Supplemental and FY2008 war cost requests, DOD reiterated that war funding must comply with financial regulations limiting expenses to incremental costs or strictly war-related procurement. For example, this guidance specifically prohibited including the Army's modularity funds to reorganize units as war funding "because it is already programmed in FY2007 and the outyears," and warned that the services would have to demonstrate that investment items were "directly associated with GWOT operations," rather than to offset "normal recurring replacement of equipment." In addition, the services would have to show that reset (the repair or replacement of war-worn equipment) plans were executable in FY2007, indicating it was urgently needed for war operations. On October 25, 2006, however, Deputy Secretary of Defense Gordon England issued revised guidance for requesting war funds to the services that significantly changed these criteria. New requests were to be submitted within two weeks that reflected the "longer war on terror" rather than strictly the requirements for war operations in Iraq, Afghanistan and other counter-terror operations. There was no definition of what types of expenses might be covered by the "longer war on terror." Presumably, this change reflected presidential policy. Since the longer war on terror was an integral part of DOD's national strategy, some might argue that these types of expenses would more appropriately be included in DOD's regular base budget, where they would compete with other defense needs. In response to this new guidance, the services expanded the types of programs and activities considered to be war-related. Examples included acceleration of planned equipment upgrades, modernization of the Army's Bradley fighting vehicles, M-1 tanks and its truck and vehicle fleet, and state-side base support. The effect of this policy change can be seen in the doubling of war-funded procurement from $22.9 billion in FY2006 to $49.5 billion in FY2007, with a peak of $65.9 billion in FY2009. The peak year also reflects a congressional decision to add $16.8 billion in a special account to quickly purchase mine resistant ambush protected (MRAP) vehicles, a heavy truck with a V-shaped hull that increased soldier survivability against roadside bombs or improvised explosive devices (IEDs) ( Table 7 ). Overall, between FY2001 and FY2014, DOD's war-designated procurement added almost $300 billion, or about 25%, to the $1.2 trillion in procurement funds appropriated to the base budget. Although some war funding for procurement net was unanticipated, new wartime needs, such as uparmored Humvees for force protection, other war procurement funding converted Army brigades to modular units, and upgraded and purchased equipment sooner than planned. For example, a 2007 CBO study found that more than 40% of the Army's spending for reset—the repair and replacement of war-worn equipment—was not for replacing lost equipment or repairing equipment sent home. Instead, Army funds were spent to upgrade systems to increase capability, to buy equipment to eliminate longstanding shortfalls in inventory, to convert new units to a modular configuration, and to replace equipment stored overseas for contingencies. Such investment funding contributed to DOD's modernization. In the case of the Army, particularly, war funding paid and accelerated the modernization of "nearly its entire fleet of ground combat vehicles [e.g., Abrams tanks and Bradley Infantry Fighting vehicles] and ... dramatically increased its stocks of small arms and support vehicles [e.g., Humvees, trucks]." In this way, DOD war funding, in fact, financed some modernization requirements sooner than anticipated, effectively reducing funding that would otherwise be financed in DOD's base budget. In 2009, at the beginning of the Obama administration, OMB issued new guidance outlining the criteria for war funding that largely restored earlier regulations. This guidance was modified in 2010 ( Appendix B ). While the new OMB guidance restored some of the earlier limits on what would be considered "war-related" expenses, it adopted a broad geographic span for war-related activities. The theater of operations for "combat or direct combat support operations ... [for] non-classified war overseas contingency operations funding ... [is] to include Iraq, Afghanistan, Pakistan, Kazakhstan, Tajikistan, Kyrgyzstan, the Horn of Africa, Persian Gulf and Gulf nations, Arabian Sea, the Indian Ocean, the Philippines, and other countries on a case-by-case basis." The criteria permitted the Administration to add other countries "on a case-by-case basis," as appears to be the case with the use of OCO funds for recent Syrian operations. Under this new guidance, procurement requirements were limited to: war losses excluding items currently scheduled for replacement; upgrades directly supporting war operations; and put on contract within 12 months . Operational requirements were confined to: transport to, from and within the theater of operations; incremental costs to directly support operations with indirect costs to be evaluated on a case-by-case basis; and fuel costs for plus "sufficient cash" to ensure combat operation. War-related military construction was designed for the minimum to meet operational requirements; and "for temporary use" at non-enduring locations; with exceptions, on a case-by-case basis for construction at "enduring locations," tied to surge operations or major changes in operational requirements. Certain items were to be funded in the base budget rather than OCO (as had been the case) : regular training equipment, acceleration of upgrade programs, base closure projects, family support initiatives, childcare facilities, support for service members' spouses' professional development, recruiting and retention bonuses to maintain end-strength, and basic pay to maintain authorized end strength (italics added; see Appendix B ). At the same time, then-Secretary of Defense Robert Gates pushed to move some war costs to the base budget that reflected long-term requirements for counter-terrorism operations, such as expanding special operations forces and higher funding for mental health. Some $8 billion was transferred from the war to the base budget in FY2010, and smaller amounts in FY2011. DOD also included some funding for the Joint Improvised Explosive Device Defeat Fund (JIEDDF) in its base budget to cover research and procurement costs to counter IEDs or homemade land mines, with the rationale that this threat was likely to persist beyond the Afghan and Iraq wars. Congress, however, chose to move this funding to war-related Title IX of the DOD Appropriations Act. Partly in response to this revised guidance, war procurement levels dropped from the peak of $65.9 billion in FY2008 to $34.6 billion in FY2009 to $32.6 billion in FY2010 and $29.8 billion in FY2011. Along with the new guidance, the end of U.S. combat operations and the withdrawals from Iraq and Afghanistan caused war procurement to fall to $16 billion in FY2012, $8 billion in FY2013, $7 billion in FY2014, and $6 billion in the FY2015 request ( Table 7 ). Another area with shifting definitions of what is and what is not considered war funding are changes in force structure over the past decade. In FY2005 and FY2006, the Army requested and received $10 billion in war funding over two years to pay for the Army's ongoing modularity initiative to redesign and modernize its brigades. The Army claimed the initiative would extend the time between deployments ("dwell time"), which would reduce stress on those units that were frequently deployed. Studies by CBO and RAND questioned this conclusion, finding that modularity would only marginally improve rotation schedules. DOD does not count modularity as a war cost (see Table 6 ). The Army acknowledged that the distinction between war and base budget needs is murky "since modularity requirements mirror the equipment requirements the Army already procures for its units, the ability to precisely track modularity funds is lost." Congress included the funds in the FY2005 and FY2006 war appropriations acts (effectively giving the Army more room in its regular budget for other things) but with the understanding that DOD would rely on the regular budget after FY2006 and set aside $25 billion in future years to cover these costs. The 2006 England guidance reversed this decision. The FY2007 Supplemental included $3.6 billion to convert two Army brigade teams and create an additional Marine Corps regimental combat team, and the FY2008 war request included $1.6 billion to accelerate the creation of more modular brigades plus additional funds for equipping them (see " DOD's 2006 Guidance Expands Definition of "War-Related" '"). In addition to modularity, war funding was also used to pay for the cost to equip an additional 30,000 soldiers temporarily added to the Army in FY2004 to help reduce the frequency of wartime rotations for certain units. In January 2007 in light of war experience, DOD decided that Army and Marine Corps ground forces were needed for the long term and increased them by 92,000 from pre-war levels over the next several years so that the United States would be able to deploy substantial numbers of troops to conduct "stability operations" for prolonged periods of time. The Army's pre-war level of 482,000 would increase by 65,000 in this "Grow the Army" initiative while the Marine Corps pre-war level of 175,000 would grow by 27,000 active-duty forces. The FY2007 Supplemental included $4.9 billion to cover the cost of 22,000 additional military personnel plus $1.7 billion for equipment and infrastructure although DOD promised that other funding for this force structure growth would be included in the regular budget starting in FY2009. In new strategic guidance issued in January 2012, after the death of Bin Laden and passage of the Budget Control Act mandating lower defense spending levels for the next decade, President Obama reversed this plan to size ground forces to conduct long-term stability operations, arguing instead that the United States will emphasize non-military means and military-to-military cooperation to address instability and reduce the demand for significant U.S. force commitments to stability operations ... [and that] U.S. forces will no longer be sized to conduct large-scale, prolonged stability operations. In 2013, as part of the changes to meet the first tranche of BCA reductions, the President announced that the size of the Army would be reduced from its wartime peak of 570,000 to 490,000 while the Marine Corps could be cut from 202,000 to 183,100—both close to pre-war levels. DOD then argued that the cost of gradually shedding Army and Marine Corps personnel because of this change should be considered a war cost, and included $6.0 billion in FY2013, $4.6 billion in FY2014, and $2.4 billion in FY2015 in its war request to cover the "over strength" or excess personnel on-board because of the change in strategic guidance. Unlike other war-related military expenses, this funding did not pay for troops deployed overseas in a war zone. Some may argue that these transition costs should be funded in the base budget since the decision reflected a choice about the appropriate size of all ground forces. Another type of expense affected by the changing definitions of war funding is reset or reconstitution—the amount of funds needed to "reset" or restore the services' equipment to pre-war levels, the "process of bringing a unit back to full readiness once it has been rotated out of a combat operation." Reset funds consist of both depot maintenance costs to repair equipment and replacement when repair is not worthwhile. Between FY2004 and FY2008, reset accounted for the largest increase, not only because ongoing operations had built up wear and tear on equipment, but also because of the 2006 Deputy Secretary of Defense England policy decision to broaden the definition of what was considered a war-related cost. Estimates of reset costs have changed frequently. In March 2005, CBO estimated that annual repair and replacement costs would run about $8 billion a year based on the current pace of operations and service data. According to 2007 testimony by then-Army Chief of Staff, General Peter J. Schoomaker, and other military spokespeople, Army reset was estimated to be $12 billion to $13 billion a year as long as the conflict lasted at the current level and "for a minimum of two to three years beyond." There is some evidence that DOD front-loaded (funded in advance of need) its reset needs in 2007, a fact acknowledged by then-OMB Director Robert Portman in testimony at the time. Congress has generally funded, if not added to, Army and Marine Corp reset requests. The FY2007 Supplemental and the FY2008 war request both appear to include an extra year of Army and Marine Corps reset requirements; GAO has also questioned the accuracy of DOD's reset requirements. Another indication of frontloading reset is when procurement obligations rates are slower than normal (generally about 90% in the first year), resulting in large carryovers of war-related investment from earlier appropriations. As of the beginning of FY2008, for example, DOD had $45 billion in war-related carryover that had not been obligated or placed on contract. As of April 30, 2010, about 40% of FY2009 war procurement funds remained unobligated. As mentioned, Army and Marine Corps spokesmen have also frequently predicted that reset funding would be needed two to three years after U.S. troops leave. Frontloading may reflect DOD desires to include reset funding before troop levels fall, anticipating greater difficulties in getting funding after U.S. troops leave. This frontloading practice may help explain why reset funding initially fell less rapidly than troop strength in Iraq but declined rapidly once all U.S. troops left. In Iraq, reset funding halved from $16.5 billion in FY2009 to $8.5 billion in FY2010 while troop strength dropped one-third, perhaps reflecting the effects of the Iraq surge. In FY2011, the following year, reset funding remained at $8.9 billion while troop levels fell by another third. In FY2012 when troop levels fell to 9,200, Iraq reset funding fell steeply to $1.6 billion, then to $1.3 billion in FY2013 when troop levels in-country fell to zero. ( Table D-1 ). Reset funding for the Afghan war appears to lag troop reductions. Afghan reset funding decreased from $12.7 billion in FY2011 to $11.3 billion in FY2012 as troop strength dropped modestly from the 98,000 peak to 89,000, a decrease of close to 10% for both. By FY2013, however, with troop strength one-third below the peak, reset funding declined modestly to $9.9 billion. Despite another halving in troop strength between FY2013 and FY2014, reset decreased by $1.5 billion to $8.4 billion. And in the FY2015 request, Afghan troop funds increased to $9.2 billion while troop strength fell to 11,660 ( Table D-1 ). This pattern could suggest frontloading of reset requests. Over the war years, reset funding to repair, upgrade, and replace war-worn equipment contributed to both DOD's modernization and depot maintenance requirements for its equipment inventory. This war funding effectively filled some of DOD's base budget requirements by repairing and replacing equipment sooner than anticipated, potentially cushioning flattening and decreases in DOD budgets in recent years. The scope of military construction raised concerns with some policy makers about whether extensive construction indicated DOD intentions to set up permanent U.S. bases in Iraq and in Afghanistan. Because of that concern, both defense appropriation and authorization acts include provisions that prohibit the United States from establishing permanent bases in either Iraq or Afghanistan. Over the past decade of war, DOD built up an extensive infrastructure to support troops and equipment in and around Iraq and Afghanistan. Military construction funding for this purpose more than doubled from $0.5 billion in FY2005 to a peak of $4.2 billion in FY2008,then dropped to zero in FY2012 ( Table 7 ). In response to congressional concerns, DOD guidelines re-emphasized building that was "re-locatable" rather than permanent in Iraq and Afghanistan though some construction could be classified both ways. With the U.S. withdrawals from Iraq and Afghanistan, bases have been either returned to the host country or demolished. In its monthly war cost tracking, DOD, lists "non-war" costs, including "must-pay" bills, modularity, and congressional additions and transfers. DOD does not include "excess over strength" as a non-war cost though some observers would count that as well. Based on DOD's definition, "non-war" costs between FY2001 and FY2014 totaled $70.9 billion ( Table 6 ). This total reflects growth from $6.6 billion in FY2005 to a peak of $12.1 billion in FY2008, dropping from $5 billion to $7 billion for FY2009 through FY2013, and then rising again to $10 billion in FY2014. The amount of "non-war" costs could be considered higher than shown by DOD depending on definitions. DOD's initial FY2015 war request submitted in February 2014 was a "placeholder" figure because the President had not yet decided about the pace of future withdrawal of U.S. troops from Afghanistan. In June 2014, DOD submitted a specific FY2015 request for $58.6 billion for the Afghan war and post-war Iraq activities reflecting two policy announcements by President Obama about U.S. withdrawal plans. In his February 2013 State of the Union address, the President announced that U.S. troops in Afghanistan would decrease to 33,000 by February of 2014, and that by the end of 2014, "our war in Afghanistan will be over," with later activities focusing "on two missions—training and equipping Afghan forces so that the country does not again slip into chaos, and counterterrorism efforts that allow us to pursue the remnants of al Qaeda and their affiliates." On May 27, 2014, President Obama announced further reductions in the number of U.S. troops in Afghanistan during the transition to an "advise and assist" role with decreases from 33,000 in February 2014 to 9,800 by January 1, 2015; by another halving to about 4,900 by the January 1, 2016; and the number of U.S. troops in Afghanistan would be an "embassy presence," of about 1,000 according to press reports by January 1, 2017. Recent press reports suggest that the decrease to 9,800 U.S. troops may be delayed from January 1, 2015, to at least the spring of 2015 as U.S. troops fill the "train and assist" role of some allied nations who are still finalizing their contributions. Another pressure to retain more U.S. troop could also be posed by the recent decision by President Obama to allow DOD to provide more extensive support for Afghan operations through air support and sometimes accompanying Afghan troops on ground operations. These figures do not include over 60,000 U.S. troops located primarily in the region who provide "in-theater" support to war operations as well as headquarters and presence ( Figure 2 and Appendix A ). The size of a U.S. "enduring presence" in the region after the withdrawal from Afghanistan remains a key policy question to be decided with significant cost implications. DOD's FY2015 war request is $26.6 billion, or 31% below the FY2014 enacted level, while troop strength in Afghanistan falls by 69% ( Table 7 ). In testimony before the House Armed Services Committee, Department of Defense Comptroller, Mike McCord, stated that the decrease in FY2015's request reflects "a continued downward trajectory of our war-related spending as we conclude our combat mission in Afghanistan after 13 years of war ..." but argues that DOD is also "faced with covering the costs of returning, repairing and replacing equipment ... [and] the costs associated with our broader presence in the Middle East, from which we support a number of critical missions in-country from FY2014 to FY2015." In justifying both its FY2014 and FY2015 requests, DOD contended that war expenses would not fall proportionately with troop levels because the cost of closing bases ; returning, repairing, or disposing of equipment ; and maintaining some 60,000 troops in the region offset some of the lower cost of deploying fewer troops at lower operating tempo. In addition, DOD Deputy Secretary Robert Work argued that costs remained high because of continued support for the Afghan national security forces, our coalition partners in theater, and pay for the retrograde equipment and personnel will continue to reset the forces to enable a truly vast range of support activities, including logistics, intelligence, and will support a portion of the temporary Army and Marine Corps in strength that supports OEF, which has been approved by Congress. The FY2015 DOD OCO request also includes $4 billion for DOD's Counterterrorism Partnership Fund (CTPF), a controversial, new transfer fund intended to provide " a flexible mechanism that allows the Department of Defense (DOD) and the Federal Government as a whole to respond more nimbly to evolving terrorist threats from South Asia to the Sahel." It also includes $925 million for a European Reassurance Fund (ERI) to " reassure allies of the U.S. commitment to their security and territorial integrity as members of the NATO Alliance" in response to Russian moves in the Ukraine. (The Administration requests another $1 billion for the State Department's CTPF account.) Some ways to evaluate DOD's FY2015 request for war funding which Congress may consider as part of the appropriations and authorization process may include: reviewing whether DOD has spent all the war funds appropriated over the past several years; comparing operational and troop costs experienced during the Iraq drawdown with the proposed FY2015 costs of the Afghanistan drawdown; and comparing the Administration's new CTPF proposal to expand funding for "Train and Equip" counterterrorism training programs with previous similar programs. Passed in June 2014, the House-passed version of the DOD Appropriations bill, H.R. 4870 , reflected the Administration's initial OCO placeholder request, while the Senate-reported version of H.R. 4870 marked up DOD's amended request. Neither the House nor the Senate version includes the additional $5.5 billion requested for DOD in November 2014 to combat the Islamic State by conducting air strikes in Syria and Iraq and re-instituting training of Iraqi security forces. That request is discussed separately below because the request is for a new military operation with different purposes (" The New Request to Counter the Islamic State "). One standard measure to evaluate whether the budget authority (BA) appropriated is sufficient or in excess of the amount needed is to examine an agency's previous obligations history (obligations reflect when contracts to purchase goods or services are signed and when military and civilian personnel are paid). If funds are not obligated within their specified life, they are presumably not needed during that time. The funds then lapse and are returned to the Treasury, and reduce the deficit. Funds to cover day-to-day expenses and activities like military personnel and Operation and Maintenance (O&M) funds are available for one year, while procurement monies to buy weapon systems are available for three years because the contracting process takes more time. As contracts are executed, funds are then disbursed. Amounts designated for war (as emergency or OCO) are specified in Title XV of the defense authorization and Title IX of the DOD appropriation acts. These funds are separately tracked by DOD in its accounting systems, and reported to Congress. DOD has some flexibility to move funds from base budget accounts to those designated for war. DOD can also transfer funds from one emergency or OCO-designated account to other war-designated accounts. If funds are inadequate, DOD can transfer funds from base budget accounts to emergency or OCO-designated accounts, also within caps set in law. Using DOD sources, CRS analyzed DOD's obligations of war funds appropriated between FY2008 and FY2014 to see how much of that funding lapsed after its life expired, and the amounts that DOD transferred from the base budget to meet war needs because war funding was inadequate. Between FY2008 and FY2013, a total of $17.2 billion in funds designated for war lapsed. The amount of war funding that lapsed made up 2.3% of the total available. At the same time, DOD transferred a total of $9.8 billion from its base budget funding to meet war needs or 0.9% share of available war funds ( Table 8 ). In terms of dollar amounts, lapsed funding ranged from a low of $1.2 billion in FY2009 to a high of $5.8 billion in FY2010. The largest dollar amount of lapsed funds came from one-year monies for military personnel and O&M, while the highest shares of lapsed funding came from three-five year funds primarily for procurement ( Figure 5 ). There are other indications that war obligations in FY2014 may be more than needed. Based on DOD's June 2014 war cost report, some obligations are slower than the experience of the past five years. For example, while O&M, Army obligations averaged 65% as of June over the past five years, the share obligated in June, 2014 made up 60% of available BA ( Figure 6 ). If obligations in the last quarter of FY2014 followed the pattern of the past five years, then O&M, Army obligations would total $22.7 billion out of $29.7 billion available. That would leave some $6.7 billion in available BA that could lapse unless DOD transferred the funds for other uses. In August and September 2014, DOD submitted three requests to the four congressional defense committees to transfer a total of $2.66 billion in FY2014 O&M, Army war funds to pay for other expenses: $165 million in unanticipated expenses of conducting airstrikes against the Islamic State (IS) in Iraq and Syria; $1.0 billion to provide humanitarian assistance for the Ebola crisis in several nations in West Africa; and $1.5 billion to finance buys of Joint Strike Fighters and AH-64 helicopters to replace war losses. Transfer provisions require that war funds can only be used to finance other more urgent war needs. In all three cases, the funds transferred were to be used for other OCO needs, including the Ebola response, which was "deemed" an OCO requirement. DOD received congressional approval to transfer O&M, Army funds to pay for the Navy's additional aviation fuel and maintenance for ships deployed to support Navy airstrikes in Iraq and Syria in the Middle East as well as the cost of replacing Hellfire missiles. To finance this unanticipated expense, DOD tapped O&M, Army monies that were not needed because aviation units deployed in Central Command to support Afghanistan were sent home sooner than anticipated. DOD also received approval to provide $750 million in humanitarian assistance for the Ebola crisis, using additional O&M, Army funds that were available because of lower support costs for units re-deployed home sooner than planned. DOD also asked to transfer an additional $1.5 billion from O&M, Army war funds not needed because re-deployments occurred earlier than planned to finance the purchase of: 21 AH-64 helicopters to replace 21 OH-58F helicopters lost in 2012; 6 F-35 Joint Strike Fighters (JSF) to replace 6 AV-8Bs lost in 2012; and 2 JSFs to replace two F-15 aircraft lost in 2012-2013. Congress denied these requests because the replacement purchases were already included in DOD's future budget plans, violating one of the OMB criteria for war funding (see " OMB 2009 Guidance Restores War Funding Limits " and Appendix B ). Another potential indicator of previous excess war funding is DOD's implementation of the FY2013 sequester that was levied on all accounts, both base and war. In January 2013, before the March sequester order, Deputy Secretary Ashton Carter issued guidance to the services to "fully protect all wartime operations," and "protect investments funded in Overseas Contingency Operations if associated with urgent operational needs." In May 2013, Secretary of Defense Chuck Hagel warned that "because our wartime budget is also subject to sequestration, we must utilize funds originally budgeted for other purposes in order to provide our troops at war with every resource they need." Under sequester rules, DOD's individual accounts for O&M funds and individual weapon system programs must be cut by the amounts specified in the OMB order. Because both base and OCO funds are generally in the same accounts, DOD has the flexibility to allocate sequester reductions to base or OCO-designated funds as long as the overall sequester savings are achieved. So, DOD could have assigned all of the sequester cuts to base accounts to protect war funding. Instead, DOD directed $5.3 billion of its total sequester cut of $37.2 billion to war funding, a proportional share with both base and OCO funding cut by 6%. OCO-designated O&M accounts were cut by 6% and OCO-designated procurement funds by10%. DOD may have believed that OCO-designated funds could absorb these cuts without jeopardizing war operations. Another metric that might be used to assess DOD requests is to examine the cost per troop over time. Conceptually, per-troop costs would be expected to decrease with higher troop levels, reflecting economies of scale. This has generally not been the case in Iraq and Afghanistan. As the number of troops decrease during withdrawals, per-troop costs would be expected to rise temporarily because support costs remain high as bases stay open to support remaining troops, and because one-time costs must be paid to close bases, ship home and repair equipment retained in-theater, and dispose of equipment. Although per-troop costs increased in both Iraq and Afghanistan during withdrawals, the increase has been steeper in Afghanistan ( Figure 7 ). At the same time, such increases could be at least partially offset by lower costs to support fewer U.S. troops and conduct the less-costly train-and-assist mission. To capture costs likely to rise or fall with troop strength, CRS defined per - troop costs as operational costs to conduct combat operations and support deployed troops; investment for war-related procurement, RDT&E, and military construction; and excluding special purpose, flexible accounts such as training Afghan and Iraq security forces, which would not necessarily change with deployed troop strength. The cost per deployed troop—operational and investment—rose from $490,000 in FY2005 to $800,000 in FY2008 in Iraq, a 63% increase. During the same period, the per-troop cost in Afghanistan rose from $580,000 in FY2005 to $820,000 in FY2008, a 41% increase ( Figure 7 ). When the cost per troop rises substantially, questions may be raised about the reasons. A variety of factors may help explain increases in per-troop costs, including: rising intensity of operating tempo; unanticipated need for more force protection (e.g., armored Humvees); growth in base support facilities for soldiers in-country and in the region; higher command, communications, control, computers and intelligence support; expanded war-related benefits; cumulative effects of war usage on equipment; DOD policy decisions to expand the definition of war costs (see section on " DOD's 2006 Guidance Expands Definition of "War-Related" "); and deficient wartime contracting practices and corruption in DOD's purchase of war-time goods and services. Per-troop costs increased more steeply during U.S. withdrawal from Iraq and Afghanistan than during other phases of the operations. In Iraq, per-troop costs doubled from $800,000 in FY2008 to $1.6 million in FY2012 when the last U.S. troops left the country. In Afghanistan, per-troop costs fluctuated between $820,000 and $910,000 between FY2008 and FY2011. Based on the FY2015 request, per-troop costs in Afghanistan are to increase by 345% or over three-fold from $870,000 in FY2011 to $3.9 million in FY2015. This growth in Afghanistan is steeper than in Iraq in terms of both dollars and rate of increase ( Figure 7 ). In previous years, Congress has reduced DOD's request based on similar analysis of trends in per-troop costs. For example, in FY2011, Congress transferred over $5 billion to the Overseas Contingency Operations Transfer Fund (OCOTF) after the House Appropriations report found excessive growth, and in FY2013 war appropriation, Army Operation and Maintenance was cut by $500 million because of "unjustified growth in average operations per troop." Another way to gauge the funding in the FY2015 war funding request is to compare the withdrawal experiences in both countries for operational and investment costs separately. The trends described below suggest that DOD's FY2015 request for operational expenses in Afghanistan may be higher than would be expected in light of the experience during the Iraq withdrawal. Between FY2005 and FY2008, troop strength in Iraq rose gradually from 143,000 to 157,000, a 10% increase. From FY2005 to FY2009, troop strength in Afghanistan more than doubled from 18,000 to 43,800, a more rapid increase than in Iraq. The peak strength in Iraq was 156,000 during the surge in FY2008 while the peak strength in Afghanistan was 100,000 during the troop surge. In both countries, the rate of decrease from these peaks was similar. Compared to the peak in FY2008, U.S. troop levels in Iraq dropped by about 10% to 140,000 in FY2009; one-third to 94,000 in FY2010; two-thirds to 47,000 in FY2011; and over 90% to 9,200 in FY2012 as all U.S. troops left Iraq. The pace of the troop withdrawal in Afghanistan is similar to Iraq. Compared to the peak troop strength of 98,300 during the Afghan surge in FY2010, troop levels dropped by 9% to 90,000 in FY2012; about one-third to 63,000 in FY2013; almost two-thirds to 37,000 in FY2014; and almost 90% to 12,000 in FY2015 request. So, in both operations, compared to peak strength during their respective troop surges, during their respective withdrawals, the number of U.S. troops initially declined gradually and then fell by roughly a third, two-thirds, and then 90% from the peak level before the final withdrawal ( Figure 8 ). Total operational costs in Iraq rose steadily while troop strength remained fairly stable. At the same time, operational costs in Afghanistan closely mirrored changes in troop strength. In both cases, operating tempo rose before and during troop surges. Both wars included fairly steep declines in troop strength from peak levels that occurred during FY2008 in Iraq and FY2011 in Afghanistan. While operational costs in Iraq declined proportionately, those in Afghanistan continued to rise sharply, showing a clear discrepancy between DOD's current FY2015 request and the Iraq experience ( Figure 8 ). Although operational costs in Afghanistan have generally exceeded those in Iraq because of the high costs of transportation and other logistical difficulties, these factors alone would not appear to explain the higher costs during the withdrawal in DOD's FY2015 request, given similarities in costs in both theaters in FY2009-2011. Investment cost changed roughly in parallel with troop strength since FY2005 in both Iraq and Afghanistan. In earlier years, investment in Iraq grew sharply even as troop strength remained stable, presumably reflecting the new guidance from Deputy Secretary England redefining the scope of war costs as well as a buildup in repair and replacement costs ( Figure 9 ). Afghanistan's investment costs grew with troop strength after FY2009, and then remained roughly level between FY2009 and FY2011 even though strength grew. In both wars, investment spending declined fairly rapidly with troop strength, though more slowly in Afghanistan ( Figure 9 ). One of the more controversial issues in the FY2015 request is the Administration's proposal to set up the new Counterterrorism Partnership Fund (CTPF) intended to allow DOD and other agencies "to respond more nimbly to evolving terrorist threats from South Asia to the Sahel" by building "partnership capacity." DOD's CTPF is a $4 billion OCO-designated transfer account available for three years. Monies could be spent in any appropriation account, in any geographical location, for a variety of general purposes, and notwithstanding any other provision of law. The Administration argues that this broad flexibility is necessary. Budget justification materials provide nonbinding illustrative funding allocations and Congress could only participate in allocation decisions by raising objections after receiving notifications 15 days in advance of transferring funds. The CTPF has raised congressional concerns because of the amount requested and the flexibility to apply the funds for broadly-defined purposes after enactment, including an illustrative allocation of $500 million to train and equip Syrian opposition groups fighting the Islamic State (IS). The Administration is also requesting funds for a less controversial new European reassurance initiative (ERI) to help "reassure NATO allies and bolster the security and capacity of U.S. partners" and counter recent Russian actions in the Ukraine for more specific activities such as increasing the number of bilateral and multilateral exercises in Europe, building partner capacity with newer Eastern European NATO members and expanding U.S. presence through additional pre-positioning of U.S. equipment. The issue for Congress is the amount of flexibility to give DOD to respond to needs that it cannot define when appropriations are requested. From the Administration's perspective, the trade-off is between flexibility and acting quickly. From a congressional perspective, the trade-off is between flexibility and congressional oversight. Unlike individual appropriation accounts where funds are used for specific types of purposes and expenses, or specific items, flexible funding generally appropriates a lump sum or sets an overall cap on the amount of money that can be spent and then permits an agency to move the monies to different accounts for different purposes depending on how needs develop. To assess the CTPF proposal, CRS compared it with other flexible funds for war approved by Congress since the 9/11 attacks. Since the 9/11 attacks, Congress established 10 new, specific accounts and set a dozen new spending caps within other accounts to provide DOD with flexibility to conduct various war-related activities that do not neatly fit into traditional accounts that cover specific types of expenses (e.g., military personnel). Funding has either been provided in a lump sum or can be drawn from other accounts up to a certain cap. In some cases funds are available for a year and in others for more than one year, which enhances flexibility. To establish the scope of the program, Congress generally defines purposes and criteria for use of the funds, countries eligible, types of security assistance provided, and notification before or after funds are obligated. Congress has typically revised Administration requests by reducing the funding amounts, narrowing flexibility, and requiring more detailed notification and reporting. In light of this history and congressional concerns, the Administration's FY2015 proposals for the Counterterrorism Partnership Fund (CTPF) and the European Reassurance Initiative (ER) may also be modified. Flexible funds have played an important role in war funding, making up a significant share of total funding ranging from a high of 100% in FY2001 immediately after the 9/11 attacks to a low of 7% in FY2003. Between FY2005 and FY2014, flexible war funding fluctuated between 15% and 23% of total DOD war funding. After FY2008, the share of flexible funding enacted declined, presumably reflecting less uncertainty as war needs decline. The FY2015 DOD request reverses this trend, rising to 26% of war funding ( Table 9 ). Congress has approved these lump-sum flexible funds in the past 13 years to enable DOD to respond to different types of uncertainties in wartime operations and needs at the beginning of wars when expenses are not known; to expand DOD's Train and Equip authorities for partner nations or non-state actors before agreements have been reached; to provide for wartime activities, like training Afghan and Iraqi security forces, or reconstruction activities where expenses cut across traditional appropriation accounts; to meet unexpected urgent war-time requirements; and to move monies between accounts after enactment to deal with the unexpected. Congress has been willing to provide the greatest flexibility about where, how, and for what funds can be spent at the beginning of hostilities. Shortly after the 9/11 attacks, Congress appropriated $40 billion to the Emergency Response Fund (ERF) for the entire government. Of this total, $10 billion was available immediately, another $10 billion within 15 days after the Administration submitted a planned allocation, and the remaining $20 billion as specified in a subsequent appropriations act. DOD's funds to conduct operations in Afghanistan and respond to the attacks on the Pentagon and New York City were transferred to the Defense Emergency Response Fund (DERF), a newly established account. Initially, the Administration reported allocations of defense funds according to a new set of categories for wartime needs, such as "Increased Situational Awareness" (intelligence) and "Increased Worldwide posture" (operations) rather than traditional appropriations accounts. These new categories were largely replaced by traditional appropriation accounts in the FY2002 Supplemental that allocated the last $20 billion. At the beginning of the Iraq invasion, the Administration requested that $75 billion be appropriated to the DERF to provide the maximum flexibility. Although Congress provided $15.6 billion in the newly-established Iraq Freedom Fund (IFF) flexible account, $59.3 billion, or most of the request, was provided in traditional appropriation accounts. DOD was given flexibility in the new IFF account to distribute funds after enactment and then report to Congress. As the Afghan and Iraq wars continued, Congress insisted that DOD receive war funding primarily in traditional accounts. For example, in FY2004 when the Administration requested $25 billion in "contingent emergency funds" to be allocated in a later request, Congress appropriated the funds to specific accounts. The Administration is arguing that the same broad flexibility requested in the CTPF is necessary to respond quickly to unanticipated crises in any part of the world. The rationale for the CTPF is: to provide counterterrorism (CT) support to partner nations by increasing "the ability of partner forces in these countries to conduct CT operations within their own borders, prevent the spillover of terrorist presence and activities from neighboring states, and participate in multinational CT operations to degrade terrorist threats" ($2.5 billion in illustrative funding); to address the conflict in Syria and the impact on its neighbors through a Regional Stabilization Initiative, including training and equipping the moderate Syrian opposition ($1.0 billion in illustrative funding); to send advisors to support Iraqi security forces to combat the Islamic State; to increase U.S. capabilities for Intelligence, Surveillance and Reconnaissance (ISR), helicopter, and communications and logistical capabilities (amount unspecified); and to establish a crisis response fund for contingencies ranging from noncombatant evacuation operations to smaller-scale combat missions ($500 million). In July 2014 congressional hearings by the House Budget Committee and the House Armed Services Committee, Members raised concerns that the funds could be "slush funds" with little control over their use, that the proposal "lack[ed] detail and is too broad in scope," would not be subject to other provisions of law, allowed the funds to be spent in any country, lacked restrictions on how the funds could be spent, and included limited congressional oversight. Some Members asked why the Administration did not simply ask to expand currently available authorities to provide logistical support to nations participating in complementary counterterrorism efforts. DOD witnesses, Deputy Secretary Robert Work and Vice-Chairman, Joint Chiefs of Staff, Admiral James Winnefeld defended the proposals, stating they were intended to "increase flexibility" beyond that already available in order to respond to an unanticipated "fast-moving situation ... or unexpected problems," that proposed spending would be subject to rigorous interagency review, and that Congress could participate because of 15-day advance notifications in line with other flexible funds. In the FY2015 Continuing Resolution (CR; H.J.Res. 124 / P.L. 113-64 ) appropriating funds until December 11, 2014, Congress provided limited authority for the Syria Train-and-Equip part of the CTPF request. It would allow DOD to train vetted insurgent groups fighting the Islamic State under certain conditions: DOD would have to reprogram monies from existing DOD funds (either base or OCO), which under DOD regulations, must be approved in writing by the four congressional defense committees (authorization and appropriations); and the authority would sunset with the CR rather than by December 31, 2018, as requested. Much of the debate has focused on the Train-and-Equip provision for Syria, where a U.S. train-and-equip program could be complicated by the complex dynamics among non-governmental Syrian groups with varying political goals. CTPF funds could also be used for any counterterrorism partner, including Somalia, Cameroon, Chad, Liberia, and Nigeria to Yemen or other countries not listed in budget justification materials. While the four congressional defense committees could participate in allocation decisions under the CR because of DOD's regulatory requirement that transfers be approved by those committees, other Members would not have a voice. The $500 million request for a Crisis Response Fund for "small combat operations" would allow the Administration to begin military operations without the need to seek appropriations. This could raise concerns about whether a potentially new conflict was authorized by current Authorizations of the Use of Force or was justified by the Administration as conducted under the President's power as Commander-in-Chief. On November 10, 2014, the Administration requested $5.0 billion for DOD in an FY2015 supplemental to combat the Islamic State, including additional authority to Train and Equip Iraqi forces (see " The New Request to Counter the Islamic State "). The CR anticipated that Congress may revise this Train-and-Equip authority in the National Defense Authorization Act ( H.R. 4435 , S. 2430 ). The draft conference version of the FY2015 NDAA ( H.R. 3797 ), passed by the House by a vote of 300-119 on December 4, 2014, extended the language in the CR, continuing to rely on reprogramming to fund Syria Train-and-Equip activities. H.R. 3797 also reduced the DOD CTPF request from $4.0 billion to $1.3 billion for a two-year program to build partnership capacity in the Middle East and Africa (except for Iraq, separately funded) but required DOD to rely on existing authorities. The conference bill also added congressional oversight and reporting requirements. While the Administration cites precedents for the CTPF, the proposed statutory language is broader than other flexible funds approved by Congress. In its scope, the CTPF request most resembles the two funds set up at the beginning of the Afghan and Iraq war, the DERF and the IFF. In terms of its purpose—building partnerships to counter terrorism—the following flexible funds created after the 9/11 attacks appear to be closer precedents. Some of these flexible funds are financed in the base budget and others with emergency/OCO-designated funds, but all are more specifically defined with lower spending levels than the CTPF (see Table 9 ). Set up in FY2003, " coalition support " allows DOD to reimburse other nations (primarily Pakistan's border operations) for logistical and military support for U.S. counterterror operations; the total amount has generally been capped at about $1.5 billion a year with funds drawn from the Operation and Maintenance, Defense-wide account (emergency/OCO-designated). Funds were appropriated in FY2009 and FY2011 to the Pakistan Counter-Insurgency Fund to enable DOD, with State Department concurrence, to provide counter-insurgency funds to Pakistan ; this type of funding was later transferred to the State Department/USAID (emergency/OCO-designated). Section 1203 authority , authorized in the FY2013 NDAA, permits DOD to use up to $150 million in O&M monies to enhance counterterror capabilities of Yemen (up to $75 million) and Djibouti and Somalia ($150 million) (base-budget funded); Section 1206 authority , first authorized in FY2006, is designed to build the capacity of foreign military forces by training, equipping, and providing supplies to conduct counterterror operations jointly with the United States or on their own; DOD could tap funds within Operation and Maintenance (O&M) accounts up to a statutory cap generally set at $200 million to $300 million annually (base budget-funded). Another Section 1206 authority , "Support foreign forces disarming the Lord's Resistance Army (LRA)," permits DOD to provide support to Ugandan-led military operations to capture or kill LRA commanders, and is set at $50 million annually (base-budget funded). Section 1207 , Security and Stabilization Assistance, authorized from FY2006 to FY2010, permits DOD to provide security assistance for stability operations at the request of the Secretary of State within a spending cap set annually at about $100 million. A new Global Security Contingency Fund was authorized in FY2012 to allow DOD to transfer up to $350 million from other accounts to enhance the capabilities of other countries' military forces to conduct border security, internal defense, counterterrorism, and support U.S. stability operations (base-budget funded). Authority for " global lift and sustain " (10 U.S.C. Sec. 27d) and specific Iraq and Afghanistan lift and sustain authorizations in NDAAs allow DOD to provide logistical support to foreign nations participating in counterterror operations with the United States ($400 million funding for Afghanistan) (Emergency/OCO funded). In each of these cases, Congress restricted the Administration's requests for broadly-defined authorities, (i.e., eliminated statutory clauses "notwithstanding other provisions of law" that exempted the authority from all other laws), reduced spending limits, and added reporting requirements. Generally, authorized funding levels were set for one, two, or several years, requiring Congress to revisit the program's parameters; in a few cases, the amount was set for each fiscal year. Some of these Train-and-Equip authorities were funded within other accounts up to statutory caps, and could require some trade-offs with other programs if the amount was not anticipated in DOD's budgeting. Setting caps provides less flexibility than providing specifically dedicated funding in a separate appropriation account. With the exception of support for Pakistan's counterterror operations on the border with Afghanistan to reimburse logistical support, funding levels for other partnership-building activities are below the CTPF request, ranging from a low of $25 million a year for Sec. 1207 activities for irregular forces working with U.S. special operations teams to $350 million for Sec. 1206 Global Train-and-Equip activities to train and aid counterterrorism efforts of other countries ( Table 9 ). The Administration's FY2015 DOD request of $4 billion is roughly five times as much as the sum of other Train-and-Equip authorities, excluding funds that reimburse Pakistan border operations. Funds in the CTPF would also be additional appropriations rather than drawn from other accounts and would be available for three years rather than one year. An additional $1.0 billion is also requested for the State Department to use for its own set of tools for broadly defined goals. In deciding whether to approve the Administration's proposal to "scale up" Train-and-Equip programs for counterterrorism partners, a key question is whether earlier similar programs have been effective. Despite extensive studies, there does not appear to be any consensus that such programs are generally successful. Rather, a wide variety of problems have been identified, ranging from the "patchwork" of current legal authorities to the complexities of U.S. intervention in another country's military whose goals, operating practices, and political constraints may be very different. In a 2013 study, the RAND Corporation found that there were 165 security cooperation programs, requiring DOD professionals to pull together a "patchwork" of ways to build partner capacity and provide security assistance. Together, the RAND study suggested, this patchwork "is more a tangled web, with holes, overlaps, and confusions," where several funding sources and programs may support individual events or initiatives by DOD and the State Department. This study argues that the lack of multi-year, flexible authorities, limitations and regional focus of particular authorities, and coordination and congressional reporting requirements "hinder[s] effective planning and efficient execution." It also recommends expanding authority to build partnership authority and counterterrorism training. At the same time, the study acknowledges that evaluating the effectiveness of current programs is difficult because of data limitations, lack of assessments, and the long time horizon for partnership efforts. The study also observes that showing the relationship between upgrading indigenous forces and reducing the need for U.S. combat forces to intervene—the underlying rationale for the CTPF—"is not a straightforward endeavor." Another problem identified in two other RAND studies is that most assessments "if they are done at all, are largely conducted by the same organizations that executed the activities," and "are subject to concerns about bias," or by program managers who lack the longevity needed to evaluate these programs. While officials claim that relationships improve with partnership programs, that does not necessarily mean that Train-and-Equip programs were effective in improving military capabilities. In response to criticism, DOD conducted assessments of several Sec. 1206 programs. While DOD found a general improvement in the ability of recipients to conduct counterterrorism or stability operations using the equipment provided, there were limitations in "absorptive capacity" and the sustainability of programs (particularly for training and logistics) as Sec. 1206 funding was withdrawn. An ambitious statistical evaluation of 29 partner nations since World War II by RAND found several factors key to success: on the partner's side: shared security goals, financial participation, high governance, and strong economy; on the U.S. side: consistency in funding and implementation, matching the absorptive capacity of the partner, and including sustainment mechanisms. The study did not, however, identify whether these conditions were generally the case. In more recent cases, Train-and-Equip programs are more likely to be initiated in failing or unstable states. A recent 2014 RAND study reiterates the importance of the factors cited in its 2013 study, but emphasizes the difficulties in ensuring that the goals of the United States and partner nations are compatible, particularly when the United States is working with insurgency groups or non-state actors whose control of forces and support from the general population may be problematic, factors relevant to Syria. Other complications are the difficulty in getting consistent, long-term support from both the legislative and executive branches of government, and unanticipated consequences of U.S. intervention. At the same time, the study concludes that doing nothing could also be harmful. In January 2014, President Obama acknowledged the uncertainties in the effectiveness of Train-and-Equip programs for insurgency groups, noting that when the CIA looked for examples of cases when U.S. financing and supplying of arms to an insurgency worked out well, "they couldn't come up with much." Overt Train-and-Equip operations could be equally if not more problematic. In some ways, U.S. efforts over the past decade to train and support operations, and pay and equip armed and police forces of the Afghanistan Security Forces Fund (ASFF) and Iraq Security Forces Funds (ISFF), are much larger versions of Train-and-Equip programs. While other Train-and-Equip programs are intended to substitute for U.S. forces before intervention, ASFF and ISFF funding is intended to create capable, independent forces to enable the United States forces to leave. U.S. funding requests generally reflect plans to develop security forces by a certain date. Initially funded at $150 million, annual support of the ASFF peaked at $11.6 billion in FY2010. Since then, funding has declined to $4 billion-$5 billion a year, a level DOD predicts is likely to continue to be needed for several years in light of the limited resources of the Afghan government ( Table 10 ). Funding for the ISFF fluctuated between $3.0 billion and $5.7 billion between FY2004 and FY2008. In 2008, Congress became reluctant to pay for Iraqi security forces as Iraqi government revenues rose with the upswing in oil prices. After that, funding fell to about $1 billion annually to zero in FY2012, as Iraqis took over funding and operational responsibility and U.S. troops withdrew ( Table 10 ). In addition to requiring Iraq to share the burden of rebuilding Iraqi security forces in the FY2008 Supplemental ( P.L. 110-252 ), Congress adopted other restrictions in funding "infrastructure" projects, including those to rebuild security forces in the FY2008 Supplemental, and required reports on the readiness and transfer of responsibility to Iraqi units, as well as the overall cost to train both Iraqi and Afghan security forces. The Administration did not provide estimates of total costs for either Iraq or Afghanistan. Over the years, Congress and others have voiced many concerns about these training programs, including the performance of contractors; coordination between DOD, State Department, and NATO coalition efforts; shortages in trainers; government corruption; absenteeism; illiteracy; and high levels of attrition of local forces. Other concerns center on the capabilities of indigenous forces to conduct operations, and maintain and sustain security forces. As the United States withdraws forces in Afghanistan, the Special Inspector General for Afghanistan (SIGAR) raised the issue of how to conduct oversight. Despite such concerns, Congress has generally provided DOD with most, if not all, of the funds requested because the withdrawal of U.S. troops depends on the success of these efforts. Beginning in 2005, Congress required a report entitled "Measuring Stability and Security in Iraq" that assessed the training and development of the Iraqi security forces, including both the armed services, the police, and other paramilitary forces that together reportedly total 666,500. In late November 2014, Iraqi Prime Minister Haider al-Abadi reported that Iraqi security forces paid salaries to 50,000 "ghost" soldiers not in military service. In its June 2010 report, the last report issued as U.S. troops were transitioning to advising and assisting Iraqi forces, the security environment was characterized as stable but "fragile," with declining levels of violence despite activities by some Sunni insurgents, Al Qaeda in Iraq, and Shia extremist groups. The report complimented the Iraqi security forces on providing security during the March 7, 2010, elections. Despite some logistics and sustainment issues, DOD predicted that the Iraqi security forces would reach Minimum Essential Capability (MEC), the level needed for internal security, when U.S. forces left. Overall, the report concluded: In spite of progress this period, challenges remain. Violent extremist networks, while significantly degraded, are still able to execute attacks. Tensions will remain high until the government is seated. Iraq remains fragile, primarily because many underlying sources of political instability have yet to be resolved. In a November 2011 hearing, when it was clear that all U.S. forces would withdraw from Iraq by the end of December 2011 because a Bilateral Security Agreement with the Iraqi government that would exempt U.S. forces from Iraqi law could not be reached, then-Secretary of Defense Leon Panetta remained confident of the abilities of Iraqi security forces stating that While these groups remain capable of conducting these types [high-profile] of attacks, they do not enjoy widespread support among the Iraqi population, and more importantly, the Iraqis have developed some of the most capable counterterrorism forces in the region. Iraqi officials and Iraqi public opinion (particularly Sunnis) were not optimistic about the Iraqi Security Forces' capabilities and legitimacies, as reported in an extensive after-action RAND report commissioned by DOD. After U.S. troops left, the United States continued its security relationship through arms sales administered by the Office of Security Cooperation–Iraq and the State Department, which took over police training. In the spring of 2013, the Chief of the Office of Security Cooperation, General Robert Caslen, voiced confidence about the capabilities of the Iraqi Navy, Air Force, and Counter-Terrorism Service, though with some concerns about Iraqi Army units stationed in cities where they competed with provincial governments and the Iraqi police. Some observers suggest that the weaknesses in the Iraqi security forces did not become apparent until 2013 because they did not face significant challenges from insurgencies. A December 2013 study by the Center for Strategic and International Affairs noted deterioration in Iraqi military capabilities, a push by President Maliki to install loyalists and marginalize Sunnis, and considerable corruption in both the armed forces and the police. After a November 2013 visit where Prime Minister Maliki requested more U.S. military help to counter rising threats from internal insurgencies and spillover from the Syrian civil war, Senators John McCain, Carl Levin, James Inhofe, Robert Menendez, Bob Corker, and Lindsey Graham wrote to President Obama that "Prime Minister Maliki's mismanagement of Iraqi politics is contributing to the recent surge in violence," and that additional U.S. arms sales should be part of a comprehensive Iraqi strategy that addresses the political sources of current violence. Although the United States increased arms sales, the weaknesses in the Iraqi military became apparent between December 2013 and February 2014 when Iraqi Security Forces proved unable to recapture Fallujah and Ramadi from Islamic State forces. By May 2014 the Iraqi Army had still not recaptured Fallujah and barely held onto to Ramadi despite dispatching 42,000 troops, and was plagued by mass desertions and an inability to gain the loyalty of Sunni tribesman in Anbar province. The collapse of Iraqi security forces was not anticipated and may reflect an underestimate by the United States of the effects of endemic corruption, President Maliki's sectarianism, and the limitations of the Train-and-Equip program in ensuring that Iraqi security forces could provide adequate logistical support or sustain operations in the face of insurgent attacks. Congress also required a detailed assessment of the Afghan security forces in the semi-annual Section 1230 report on Progress Toward Security and Stability in Afghanistan in the FY2008 National Defense Authorization Act ( P.L. 110-181 ). While the latest report describes progress by the Afghans in taking over security responsibilities from U.S. troops, it also acknowledges serious longstanding problems from corruption and personnel attrition. Similar to the Iraq experience, corruption in Afghan security forces remains a serious concern, including both contractual corruption and the buying and selling of officer billets. At the same time, sectarian divisions are seen as less of a problem with Afghan army and police units generally being balanced ethnically. In terms of capabilities, the Afghan security forces show some of the same weaknesses as Iraqi security forces—in logistics, sustainment, officer quality, and contract administration. In addition, Afghan security forces face persistent problems in attrition, where about 30% of personnel need to be replaced each year. Although Afghan security forces continue to be tested by Taliban insurgent attacks, some observers remain concerned that the U.S. troop withdrawal may occur at a time when Afghan security forces may not be able to sustain its forces without U.S. support. An extensive evaluation required by the FY2013 National Defense Authorization Act raised familiar concerns about weaknesses in Afghan logistical, contracting, intelligence, and communication capabilities, and concluded that Afghan security forces would not be able to effectively meet an enhanced Taliban threat in the next few years if the planned reduction in U.S. and allied assistance occurred. The Special Inspector General for Afghanistan (SIGAR) also reported buildup in unobligated balances, signaling slower-than-anticipated execution of plans, as well as changes in the size of Afghan security forces, prompting some reductions by Congress. The SIGAR has also voiced concerns about the difficulty in maintaining oversight of U.S. funding for ASFF and other reconstruction funding as the U.S. presence shrinks. In the past 13 years, Congress has set up and provided appropriations in a lump sum to special accounts to meet unanticipated wartime needs as quickly as possible. The largest annual appropriation was the $16.8 billion provided by Congress in FY2008 to a newly established Mine Resistant Ambush Program (MRAP) account to purchase, train, and transport MRAPS vehicles that provide better protection than armored Humvees against Improvised Explosive Devices (IED), the signature threat of both the Afghan and Iraq wars; The Joint Improvised Explosive Device Defeat Fund (JIEDDF), set up in FY2006 with a $2.0 billion appropriation, was to provide funds to develop, buy, and field devices to counter Improvised Explosive Devices (IEDs) which permitted funds to be shifted to procurement, RDT&E, or operation and maintenance accounts as needed. The Joint Urgent Operational Needs account was a successor to the Rapid Acquisition Fund, both set up to provide a lump sum that could be allocated quickly to meet unanticipated war needs, bypassing normal appropriation accounts. Congress created two other wartime programs intended to improve relationships between U.S. troops and the local population by funding local reconstruction needs. The first, the Commander's Emergency Response Program (CERP), was established in 2003, to provide funds to local commanders to "respond to urgent humanitarian relief and reconstruction requirements within their area of responsibilities ... that will immediately assist the Iraqi people ... and fund a similar program to assist the people of Afghanistan." Funding for this program peaked at $1.2 billion in FY2007 and has fallen steadily as U.S. troops have been withdrawn from Iraq and Afghanistan ( Table 9 ). Over the years, as concerns rose about the size and effectiveness of CERP projects, Congress expanded reporting requirements, and set up the Afghan Infrastructure Fund (AIF) in FY2011 to fund larger projects. The Special Inspector Generals for Iraq and for Afghanistan criticized CERP for its selection of projects, corruption, management problems, and effectiveness. The IGs also raised concerns about whether the Afghan or Iraqi government would continue to fund larger reconstruction projects after U.S. support ended. The Task Force for Business and Stability Operations was established as a separate account in FY2011 to stimulate private sector growth by encouraging foreign investment in Afghanistan. For the past decade, Congress has set annual caps on transfers between DOD accounts for both non-war funds and emergency or OCO-designated funds. DOD can transfer funds from one account to another if the activity is for a higher priority and based on unforeseen military requirements, after receiving written approval from the four congressional defense committees. DOD can also reprogram funds within an account from one activity to another, as long as the purpose remains the same. For the base budget, transfer caps are generally between $3 billion and $4 billion, or less than 1% of total DOD base budget funding. Recognizing the greater uncertainty in predicting wartime spending, DOD appropriations acts have typically set a cap for war funds of about $4 billion, or about 3.5% of total war funds in a year, over three times the cap set for base budget funds. On November 10, 2014, the Administration submitted a FY2015 budget amendment of $5.5 billion in OCO funds—$5 billion for DOD and $520 million for the Department of State—to support efforts to combat the Islamic State (IS) after its takeover of territory in Iraq and Syria. The November amendment would increase DOD's OCO request from $58.6 billion to $63.6 billion ( Table 13 ). Several budgetary and policy questions may be raised about the new $5.0 billion budget amendment funding military action against the Islamic State: Could all or some of the additional $5.0 billion request be accommodated within the original $58.6 billion request since there are indications that DOD's June request may be larger than needed? What are the pros and cons of the new Train-and-Equip authority for Iraq, and how might it be modified to narrow its scope and increase congressional oversight? Is the cost-sharing arrangement proposed practical? Would Congress want to include restrictions on the missions of U.S. troops deployed in Iraq or in Syria? As of November 20, 2014, DOD estimated that $855 million had been spent to conduct the IS campaign, an average of $8.1 million a day. Initially, DOD financed airstrikes and the deployment of U.S. military personnel to Iraq to conduct an assessment and provide advice using OCO funds already appropriated for FY2014. Starting October 1, 2014, DOD tapped OCO-designated funds in the FY2015 CR. For example, DOD used OCO-designated FY2015 Navy O&M and Air Force O&M funds to conduct air strikes in Iraq and Syria, based on the type of expenses involved. This practice of relying on current funding until supplemental funding is provided later in the year is known as "cash flowing." Starting October 1, 2014, incremental costs of the new Iraq and Syria operations (named Operation Inherent Resolve) are being paid for from funds appropriated by Congress in the FY2015 Continuing Resolution (CR, H.J.Res. 124 / P.L. 113-164 ). Under the CR, OCO for DOD is appropriated at a rate of operations based on the $85.4 billion in OCO funds enacted in FY2014. This is $26.6 billion above the FY2015 request of $58.6 billion. On November 10, 2014, DOD submitted an amendment to its FY2015 OCO request for an additional $5.0 billion ( Table 11 ). The November 10, 2014, amended DOD/OCO FY2015 request of $5.0 billion is for: incremental military personnel expenses (e.g., hardship pay) for U.S. military supporting Operation Inherent Resolve (OIR); fuel, supplies, and repair costs for ground operations, flying hours, and steaming hours of ships in the region, as well as other support; command, control, and intelligence activities, and intelligence, surveillance, and reconnaissance (ISR), and classified activities; replacement of expended munitions (e.g., Hellfire, Maverick, Tomahawks); and building the capacity of Iraqi security forces and Kurdish and tribal forces, providing support to coalition members, and other small-scale humanitarian relief and reconstruction. Under its request for broad authority to train and equip Iraqi and other security forces, DOD would provide assistance to military and other security forces of, or associated with, the Government of Iraq, including Kurdish and tribal security forces, with a national security mission, to counter the Islamic State in Iraq and the Levant, including the provision o0f equipment, supplies, services, training, facility and infrastructure repair, renovation, construction, and stipends.... The Administration is also requesting authority for the Secretary of Defense to waive "any other provision of law that would otherwise prohibit, restrict, limit or otherwise constrain the obligation or expenditure of [these] funds." Typically, Congress has not accepted this kind of exception. In order to be fully obligated, the proposal would require Iraqi, Kurdish, and tribal security forces to contribute 40% of the $1.6 billion DOD request (including in-kind contributions), with at least half of that contribution to come from the government of Iraq. Arms sales could not count toward the contribution. DOD obligations would be capped at 60% of the total or $972 million until the 40% ($647 million) contribution—in cash or in-kind—from Iraq and Kurdish and tribal security forces is received. The draft conference agreement of the FY2015 NDAA deletes the exclusion of arms sales, which would presumably permit arms sales to count as part of the contribution. The Secretary of Defense would monitor the contribution level. The Administration is also asking to expand current coalition support authorities to include reimbursing Iraq for logistical support of U.S. forces. In addition, $15 million more would be provided for "emergencies and extraordinary payments" for "confidential military purposes," typically intelligence support. Like the Syria Train-and-Equip authority already proposed, the new Iraqi Train-and-Equip authority would be used with not only the Iraq army and police force, but also Kurdish and tribal groups. It could encounter some of the same difficulties and politico-military complications of the proposed Syria Train-and-Equip authority temporarily authorized in the FY2015 CR. Another potential issue is the likelihood of success. Previous U.S. efforts to train and equip foreign militaries—both covert by the CIA and overt—have often proved problematic (See the section " Do Train-and-Equip Programs Work: The Effectiveness Issue .") DOD's additional request would increase U.S. troop strength in and around Iraq and Afghanistan by some 4,000 in FY2015, including troops providing training and assistance in Iraq as well as providing additional support in the region. If the overall FY2015 OCO request is approved, troop strength in and around Iraq and Afghanistan would total 79,047 including 64,482 providing in-theater support ( Table 12 ). Predicting future costs of the new U.S. role in countering the Islamic State is difficult because of the nature of the air campaign and uncertainties about whether the U.S. mission may expand. Compared to other, earlier air campaigns, counter-ISIL operations are more episodic and reactive because targets are less predictable. U.S. operations in Libya during Operation Odyssey Dawn in 2011 focused on supporting other coalition partners' air operations, with some interdiction of pro-Qadhafi units threatening civilian populations. Earlier, during Operation Allied Force in Serbia and Kosovo (1999), air operations targeted infrastructure, particularly military bases and airfields, along with electrical and broadcast centers. By contrast, ISIL has few fixed facilities, and attacks tend to focus on "targets of opportunity," which can be units or trucks and other equipment supporting ISIL operations ( Figure 10 and Figure 11 ). Compared to an attack on a base or infrastructure, it can be difficult to determine the effect of a given attack. This kind of operation also provides a challenge to estimating costs. With a fixed target set, it is comparatively straightforward to determine the number of strikes and re-strikes required to destroy the targets and prevent their reconstitution. In the current situation, the number and type of strikes largely depend on the level of ISIL activity so that extrapolating future costs from experience may not be accurate. The President's Afghanistan withdrawal plan calls for: 9,800 U.S. troops in Afghanistan as of January 1, 2015 (the end of the first quarter of FY2015) to train and assist Afghan security forces and conduct counter-terrorism operations; about 4,900 U.S. troops by January 1, 2015, a halving; and an "embassy" presence of about 1,000 with unspecified counterterrorism forces. According to recent reports, the Administration is considering keeping more U.S. troops in Afghanistan at least into the spring of 2014 to make up for shortages in training capacity due to delays in commitments of ISAF allies to commit troops. There may also be pressure to retain troops because of the Administration's recent agreement to expand the mission of U.S. forces to include providing air support and sometimes accompanying Iraqi ground troops on operations. At the September 4, 2014, Wales summit, International Security Assistance Force (ISAF), made up of United States and its allies supporting Afghanistan, "reaffirmed their commitment" to Operation Resolute Support, the "non-combat train, advise, and assist mission in Afghanistan beyond 2014." There were no specific funding commitments beyond 2015. If the Afghan government signed a Bilateral Security Agreement (BSA), ISAF agreed to "contribute significantly to the financial sustainment of the ANSF [Afghan National Security Force] throughout the decade of transformation." On September 30, 2014, the United States and Afghanistan signed the Bilateral Security Agreement, the day after President Ghani succeeded President Karzai, who had been unwilling to sign the agreement. In light of this potential, long-term commitment, and the current presence of over 60,000 U.S. troops in the region, Congress may have to face the issue of whether and how much DOD funding would be needed in later years and whether those funds should continue to be designated as OCO—and exempt from budget limits—or whether paying for a U.S. "enduring presence" mission like the U.S. military in South Korea or Japan should be carried in the base budget. Post-withdrawal expenses that might or might not be considered "OCO" could possibly include the cost of residual U.S. troops in the region or the "enduring presence"; continued support of the Afghan security forces in the next decade; continued or expanded funding of Train-and-Equip programs with partner countries; and reset and reconstitution of equipment, Army and Marine Corps excess strength from the earlier planned force structure expansion, and some Intelligence, Surveillance, and Reconnaissance (ISR) programs, as proposed in the FY2015 CTPF request. In August, 2014, press reports suggested that DOD would soon issue "migration guidance" to the services for the FY2016 budget that would identify areas currently funded as OCO that would be folded back into the base budget. More recently, DOD Deputy Secretary Robert Work suggested that OCO funding should be continued but under stricter rules. Recently, DOD Comptroller Mike McCord suggested that DOD is negotiating with OMB to retain the OCO budget for the next couple of years in order to fund global counterterrorism while dealing with spending limits imposed by the BCA. Some observers cite the Islamic State (IS) threat along with Russian actions in the Ukraine as justifications for continuing OCO-designated funding. Although Congress did not consider the Administration's request for funding above BCA caps in DOD's FY2015 budget request, some Members are calling for lifting sequester caps in later years. Assuming that current BCA budget caps are maintained, DOD would need to reduce its planned funding for the FY2012-FY2021 decade by $176 billion or 3.3% to meet BCA caps. Under these caps, DOD's funding would grow from $496 billion in FY2015 to $499 billion in FY2016, essentially a spending freeze that would not cover inflation. After that, DOD funding is slated to increase by about $12 billion annually under the sequester caps until FY2021, a "real" freeze that would largely cover inflation. The migration of some or all OCO-designated costs to the base budget would increase budgetary pressures. There are several questions that Congress may wish to raise about future war costs. Are Afghan security forces likely to be able to ensure security as U.S. troops withdraw? Should the current 60,000 troops in the region providing "enduring presence" (like U.S. troops in Japan) be considered an OCO or base budget cost? Should RDT&E and procurement programs designed to counter Improvised Explosive Devices (IEDs), a standard tool of insurgents, be classified as OCO or base budget costs? Is the $5.0 billion requested for the Counterterrorism Partnership Fund (CTPF) to train, equip, and develop the capabilities of other countries to counter terrorist threats an OCO cost or a set of tools developed to meet current U.S. counterterrorism strategy? Is the European Reassurance Fund request of $925 million in FY2015 in response to actions by President Putin of Russia a temporary OCO expense or part of basic U.S. defense strategy? Does the requirement to meet BCA caps justify loosening the definition of war-related costs? Below are several projections of residual war costs that may reflect responses to these questions, as well as expectations about developments in Afghanistan. One uncertainty is whether Afghan security forces will be capable of sustaining gains against the Taliban achieved in partnership with ISAF forces once U.S. and ISAF troops withdraw. Drawdown supporters cite the most recent DOD report that says that the Afghan National Security Forces (ANSF) have increasingly demonstrated their ability to plan and conduct independent and combined operations that employed multiple ANSF capabilities, disrupted the insurgency, protected the populace, and prevented the Taliban from disrupting recent national elections or holding "any significant terrain." This report also notes a decline in enemy-initiated attacks by some 30%, with 80% of these attacks occurring in regions where 46% of the population lives. Others argue that Afghanistan may have difficulty sustaining its security once ISAF troops leave because the "overall trend is one of escalating violence and insurgent attacks" with continuing fighting, as well as because the ability of the insurgents to mount larger assaults reduces the likelihood of peace talks. Other assessments conclude that the security environment will become increasingly challenging after ISAF forces leave. Table 13 shows several projections of long-term war costs, based on somewhat different scenarios or rationales: the Administration's $33.0 billion annual "placeholder" figure for OCO costs for FY2016-FY2021 in its FY2015 10-year budget plan; CBO's projection of long-term war costs under "current law" growing from $87 billion in FY2015 to $98 billion in FY2021, reflecting a continuation of the enacted amount with increases for inflation; CBO's alternate policy projection that assumes war costs decline to $30 billion as troop levels drop from current levels to 30,000 by 2017; and CRS's estimate that assumes war costs decrease to $20 billion by FY2017 as troops in the region decline from 60,000 to 38,000, and then fall to $15 billion a year from FY2019-FY2024. The Administration's original FY2015 projection shows war funding falling from $85 billion in FY2015 to a series of $30 billion annual placeholders from FY2016-FY2021. There is no war funding shown for the rest of the decade. The Administration does not cite any particular scenario in terms of troop levels in Afghanistan or the region. Instead, the Administration has argued that the uncertainties are too great to estimate war spending beyond the request year. Each year, however, the placeholder figure has declined as the President has announced decreases in troop levels. In the past several years, the Administration has also proposed a multiyear $450 billion cap on war funding over the next 10 years that has not, up to now, achieved legislative traction, and is no longer congruent with the latest 10-year total of $265 billion. The Administration's FY2015 Mid-Session July 2014 update reflects the specific $58.6 billion DOD war request submitted in June 2014 and increases the annual placeholder figure from $30 billion to $33 billion ( Table 13 ). CBO is required to provide a baseline estimate each year, which reflects either the latest enacted level increased to cover inflation or statutory requirements . T here are no statutory controls on future war funding, so CBO's projection extrapolates from the latest enacted level, in this case the $86 billion appropriated in FY2014 with increases to cover inflation. Under this scenario, war costs rise from $87 billion in FY2015 to $98 billion in FY2021 and total $646 billion over the next ten years ( Table 13 ). In the past several years, both the Administration and some Members have proposed using "savings" from this baseline projection (or current services level) of war funding to "pay for" other legislative changes. Typically, savings are calculated by subtracting a proposed statutory cap over 10 years from CBO's baseline projection, with the difference or "savings" allocated to other purposes from deficit reduction to expanded benefits for veterans. These proposals are criticized by some analysts as "budget gimmickry." CBO has pointed out that since war spending is appropriated in annual discretionary spending, a multi-year cap would not be binding. Moreover, war spending reflects policy decisions about planned troop levels rather than continuing indefinitely at the same level. Because of these considerations, CBO has also produced alternative policy projections of war spending that reflect specific assumptions about future troop levels. In FY2015, for example, CBO's alternative war funding projection assumes that troops will decline from about 100,000 U.S. troops deployed in country and in the region in 2014 to 70,000 in 2015, 50,000 in 2016, and 30,000 in 2017, remaining at that level through FY2024. These CBO estimates do not reflect troop levels in particular countries and include proportionate reductions in diplomatic operations and foreign aid. Under this alternative scenario, CBO projects annual war funding would decline from $58 billion in FY2015 to $30 billion in FY2017, and continue at that level for the rest of the decade. This estimate totals $340 billion in budget authority over 10 years, about half of the $646 billion in CBO's baseline estimate. CBO does not provide any additional details about the basis for its war cost estimate, which averages about $1 million per troop ( Table 13 ). Another way to analyze future war costs is to build from the "bottom up" by looking at the following key factors that affected Iraq withdrawal costs, particularly the number and cost of U.S. troops who remain in Afghanistan to train and support Afghan forces and conduct counter-terror operations; the extent of the decline in U.S. troops in the region providing regional support; the scope of reset/reconstitution after FY2015; and the U.S. contribution to the cost of supporting Afghan security forces. Assuming that U.S. troop levels in Afghanistan decline as the President has announced, the cost of in-country forces could decline from $11 billion in the FY2015 request to about $1 billion in FY2017. If the number of troops providing in-theater presence declines by about 25% based on the Iraq experience, then those costs could decline from $18 billion now to about $11 billion by FY2019. Another post-withdrawal cost could be reset expenses for two to three years after U.S. troops leave. Based on the Iraq experience, reset costs may fall rapidly once U.S. troops leave from $9.0 billion in the FY2015 request to $4.0 billion in FY2016 and $2.0 billion in FY2015. Helping to pay for Afghan security forces could be another long-term cost. While the United States has not committed to specific funding amounts, both the 2012 Strategic Partnership Agreement and the NATO Wales summit communique this year call for ISAF nations "to contribute significantly" to sustaining Afghan security forces" through "the decade of transformation." U.S. defense officials have estimated this commitment at $4.0 billion annually as long as the Afghan forces remain at current levels. Taking these factors and historical experience into account, this CRS analysis suggests that U.S. war costs could fall from the $58 billion request in FY2015 to about $25 billion in FY2016 and then gradually decline to $20 billion in FY2017 and $15 billion for the rest of the decade. In light of the new U.S. operation against the Islamic State, as well as some uncertainty about the nature of continued U.S. operations during the last stages of withdrawal from Afghanistan, Congress has voted on several amendments designed to place limits on military operations. Some concerns have been raised in response to recent press reports, saying that the President is permitting the military to broaden its mission to support Afghan security forces after December 2014 from "train and assist" to include air support and airstrikes in support of Afghan combat missions and in some circumstances, to accompany Afghan forces in ground operations against the Taliban. In drafting such amendments, Congress has turned to experience from Vietnam, Cambodia, and Iraq to look for options. In the past, Congress has considered both funding and non-funding options. Most observers would maintain that restrictions tied to appropriations have been more effective. Restrictive funding options generally prohibit the obligation or expenditure of current or previously appropriated funds for certain purposes. Obligations occur when the government pays military or civilian personnel, or the services sign contracts or place orders to buy goods or services. Expenditures, or outlays, take place when payment is provided. Past attempts or provisions to restrict funding have followed several patterns, including those that cut off funding for particular types of military activities but permit funding for other activities (e.g., prohibiting funds for combat activities but permitting funds to withdraw troops); as of a certain date in a specific country; "at the earliest practical date," which essentially gives the president leeway to set the date; or if certain conditions are met (such as a new authorization) or certain events take place (such as the release of U.S. prisoners of war). Other non-funding approaches to restrict military operations have required that troops be withdrawn by a specified date or at the "earliest practical date"; withdrawn funds unless there was a declaration of war or a specific congressional authorization of war; or repealed previous congressional resolutions authorizing military activities. One or both houses may also state a "sense of the Congress," or non-binding resolution that does not need to be signed by the President, that U.S. military operations should be limited, wound down, or ended or forces withdrawn. While only a handful of provisions have been enacted, congressional consideration of these various limiting provisions did place pressure on the Administration at the time, influencing the course of events. For example, the well-known Cooper-Church provision that prohibited the introduction of U.S. ground troops into Cambodia was enacted in early 1971 after U.S. forces had invaded and then been withdrawn from Cambodia. That provision was intended to prevent the reintroduction of troops. Although President Nixon did not reintroduce U.S. troops, the United States continued to bomb Cambodia for the next three years. Later in 1973, Congress passed two provisions that prohibited the obligation or expenditures of "any funds in this or any previous law on or after August 15, 1973" for combat "in or over or from off the shores of North Vietnam, South Vietnam, Laos, or Cambodia." The final version of that provision reflected negotiations between the Administration and Congress about when the prohibition would go into effect, with August 15, 1973, set in the enacted version. Bombing did, in fact, stop on that day. Several well-known proposals that were not enacted—two McGovern-Hatfield amendments and an earlier Cooper-Church amendment—were also part of this Vietnam-era jockeying between the Administration and Congress. One McGovern-Hatfield amendment prohibited expenditure of previously appropriated funds after a specified date "in or over Indochina," except for the purpose of withdrawing troops or protecting our Indochinese allies, while another also prohibited spending funds to support more than a specified number of troops unless the president notified the Congress of the need for a 60-day extension. The earlier Cooper-Church amendment prohibited the expenditure of any funds after July 1, 1970, to retain troops in Cambodia "unless specifically authorized by law hereafter." Generally, Congress continued to provide funds for U.S. troops in Vietnam at the requested levels as the Nixon Administration reduced troop levels. Overall, funding restrictions, it might be said, have generally proven more effective than the War Powers Act, which has been challenged by the executive branch on constitutional grounds. During the current Congress, the House voted on the following resolutions and amendments that would place limits on military operations in Iraq, Afghanistan, or Syria: H.Con.Res. 105 prohibits the President from deploying or maintaining U.S. armed forces in a sustained combat role in Iraq without specific, subsequent statutory authorization (passed House July 25, 2014); H.Amdt. 928 to H.R. 4870 , the FY2015 DOD Appropriations Act, provided that none of the funds in this act may be used to conduct combat operations in Afghanistan after December 31, 2014 (defeated 153-260, June 19, 2014); H.Amdt. 914 to H.R. 4870 stated that "None of the funds made available in this Act may be used to provide man-portable air defense systems to Syria" (agreed to by voice vote, June 19, 2014). H.Amdt. 917 to H.R. 4870 stated that none of the funds in Act "may be used to provide weapons in Syria" (defeated 167-244, June 19, 2014). In the 112 th Congress, before President Obama announced the most recent troop withdrawal plan for Afghanistan, amendments were considered to limit funds to withdrawal costs: H.Amdt. 1103 to H.R. 4310 , the FY2013National Defense Authorization Act, limited war funding in the act to paying for the safe and orderly withdrawal of U.S. troops and military contractors from Afghanistan (failed 113-303, May 17, 2012); H.Amdt. 330 to H.R. 1540 , the FY2012 National Defense Authorization Act required DOD to begin a "safe, responsible, and phased withdrawal" of U.S. ground troops except for small, counter-terrorism units (defeated 123-294, May 25, 2011). During the House debate over the FY2010 Supplemental ( H.R. 4899 ), three amendments were voted on to restrict funding or troop levels for the Afghan war, similar to Vietnam-era amendments: H.Amdt. 3 would have deleted all military funding for the Afghan war (defeated 25-376); H.Amdt. 4 would have limited the obligation and expenditure of funds to the protection and "safe and orderly withdrawal from Afghanistan of all members of the Armed Forces and Department of Defense contractor personnel who are in Afghanistan" (defeated 100-321); and H.Amdt. 5 would have required the President to submit a plan for a "safe, orderly, and expeditious redeployment of the Armed Forces from Afghanistan," along with a "timetable for the completion of that redeployment and information regarding variables that could alter that timetable," as well as require that none of the funds in the act be obligated or expended "in a manner that is inconsistent with the President's policy announced on December 1, 2009, to begin the orderly withdrawal of United States troops from Afghanistan after July 1, 2011," unless the Congress approves a joint resolution that would receive expedited consideration in both houses (defeated 162-260). Appendix A. U.S. Troop Levels in Afghanistan and Iraq, FY2001-FY2015 Table A-1 shows monthly U.S. troops deployed in-country in Afghanistan and in Iraq from January 2002-September 2014 based on reports prepared by the Joint Staff and provided to Congress and CRS. Beginning in May 2008, DOD began to include the total number of U.S. troops deployed not only in-country but also in the surrounding area to provide in-theater support, as well as those conducting other counterterror operations. Appendix B. OMB Criteria for War Costs In February 2009, at the beginning of the Obama administration, OMB issued new budget guidance to DOD providing criteria for expenses to be considered as appropriate for war funding. Revised in September 2010 to clarify the distinctions, the letter states that the criteria "for deciding whether funding properly belongs in the base budget or in the budget for overseas contingency operations (OCO) ... have been very successful in delineating between these two sources of funding," according to OMB (see below). Appendix C. War Appropriations by Public Law and Agency The table below shows enacted appropriations by act from FY2001-FY2014. Appendix D. War Funding by Function, FY2009-FY2015 Since FY2009, DOD has provided a functional breakdown of war costs, which helps to compare changes in troop levels and changes in war costs. The categories range from operational costs to coalition support. Table D-1 combines these elements into three major categories: Operational , including operations, force protection, in-theater support, military intelligence, and military construction, largely reflecting troop levels; I nvestment , including reset or reconstitution that pays for repairing and replacing war-worn equipment reflecting the extent and pace of operations as well as changing definitions of war costs; P rogrammatic support , covering training of Afghan and Iraq security forces, coalition support, and other supporting activities not necessarily related to changes in troop strength. O ther costs , including national intelligence and activities with little, if any, relationship to war operations. Operational Costs and Troop Levels While overall costs may not rise or fall with troop levels, operational costs would be expected to change roughly proportionately. In the case of Iraq, both overall and operational costs fell by about 90%, in line with troop strength. As troop strength fell from 140,000 in FY2009 to 9,180 in FY2012, overall funding fell from $89.1 billion in FY2009 to $9.6 billion in FY2012 when all U.S. troops were out of Iraq ( Table D-1 ). In the case of the Afghan drawdown, neither overall nor operational costs have fallen proportionately since the FY2011 peak in strength. As of the FY2015 request, average strength is slated to fall by 88% and total cost by 56% since that peak. While operational costs would fall slightly faster, by 62%, the decline lags decreases in troop strength. DOD has suggested that operational costs remain high because of the need to dismantle bases and dispose of equipment as troop levels fall as would also have been the case in Iraq. One source of the disparity between Afghanistan and Iraq may be the $18 billion cost for over 60,000 U.S. troops currently providing in-theater support. While the number of in-theater support troops declined as U.S. troops left Iraq, some troops in neighboring countries like Kuwait remained and their cost was allocated to OEF ( Figure 2 ). In FY2015, DOD projects an increase in these support troop levels to 63,000. The persistence of these support troops raises the question of whether the cost of these troops is more appropriately considered an "enduring" cost that could transition into DOD's base budget. Reset—repair or replacing war-worn equipment—costs in Afghanistan are projected to remain high during the withdrawal, increasing from $8.4 billion in FY2014 to 9.2 billion in FY2015, unlike the Iraq experience when these costs fell rapidly from $8.9 billion in FY2011 to $1.6 billion in FY2012 ( Table D-1 ). While DOD may argue that more equipment may have accumulated in Afghanistan over the past 13 years of war, these high levels of funding for reset could also reflect "forward financing," or providing funds before the work can be executed by the depots. Based on Army budget repair plans—and the bulk of equipment returned from Afghanistan goes to Army depots—the amount of orders estimated to carry over from one fiscal year to the next is expected to be $3.5 billion in FY2014 and $2.9 billion in FY2015. Both these levels exceed DOD criteria for appropriate carryover levels. In the past, Congress has reduced funding when carryover levels are high, questioning whether plans can be executed. As would be expected, operational costs make up the bulk of war costs in both the Afghan and Iraq war, generally an average of 65% in Afghanistan and over 70% in Iraq. The share for reset in Iraq rose as equipment was more heavily used and as the definition of war expense broadened, and then decreased as the definition narrowed and equipment was used less heavily as the U.S. mission shifted to "train and assist," and the number of troops fell. The FY2015 request for Afghanistan does not follow this pattern. Programmatic costs cover a wide range of tools that support troop operations indirectly and so do not necessarily reflect the pace of war operations. The largest amounts for the training of Afghan and Iraq security forces reflect both policy decisions about the size of the Afghan and Iraq armies and police, as well as the U.S. commitment to equipping and training those forces. Other tools, like coalition support to reimburse primarily Pakistan for its logistical costs of conducting counterterror operations that support the United States, have been funded between $1.0 billion and $2.0 billion over the years. A local tool, the Commanders' Emergency Response Fund (CERP), is intended to help U.S. commanding officers win the support of local populations by providing funds for local development projects, and generally reflects the pace of operations and troop levels. Funds to research and buy new systems to defeat Improvised Explosive Devices or land mines grew as it became clear that this was the weapon of choice for insurgents. | With enactment of the FY2014 Consolidated Appropriations Act on January 1, 2014 (H.R. 3547/P.L. 113-73), Congress has approved appropriations for the past 13 years of war that total $1.6 trillion for military operations, base support, weapons maintenance, training of Afghan and Iraq security forces, reconstruction, foreign aid, embassy costs, and veterans' health care for the war operations initiated since the 9/11 attacks. Of this $1.6 trillion total, CRS estimates that the total is distributed as follows: $686 billion (43%) for Operation Enduring Freedom (OEF) for Afghanistan and other counterterror operations received; $815 billion (51%) for Operation Iraqi Freedom (OIF)/Operation New Dawn (OND); $27 billion (2%) for Operation Noble Eagle (ONE), providing enhanced security at military bases; and $81 billion (5%) for war-designated funding not considered directly related to the Afghanistan or Iraq wars. About 92% of the funds are for Department of Defense (DOD), 6% for State Department foreign aid programs and diplomatic operations, 1% for Department of Veterans Administration's medical care for veterans. In addition, 5% of the funds (across agencies) are for programs and activities tangentially-related to war operations. The FY2015 war request for DOD, State/USAID, and Veterans Administration Medical totals $73.5 billion including $58.1 billion for Afghanistan, $5.0 billion for Iraq, $ 100 million for enhanced security, and $10.4 billion for other war-designated funding. These totals do not reflect the new FY2015 request submitted in November 2014 to cover expenses for Operations Inherent Resolve (OIR) that began with airstrikes launched in late August 2014, to aid Syrian insurgents and the Iraq government to counter the takeover of territory by the Islamic State (IS). The Administration submitted a $5.5 billion FY2015 budget amendment for this operation that Congress is considering. Including the new request, the FY2015 war funding now totals $79.0 billion. In late May 2014, the President announced that troop levels in Afghanistan would fall from 33,000 to 9,800 by January 1, 2015 with the U.S. role focusing on advising Afghan security forces and conducting counter-terror operations. A year later, by January 1, 2016, the President stated that the number of troops in Afghanistan would halve to about 4,900 and then by the beginning of 2017, settle at an embassy presence of about 1,000. Overall U.S. troop levels in Afghanistan and Iraq began to decline with the withdrawal of all U.S. troops from Iraq by December 2011. The troop decline continued with President Obama's announcement in February 2013 that the number of U.S. troops in Afghanistan would halve from 67,000 to 34,000 by February 2014. Annual war costs also decreased from a peak of $195 billion in FY2008 to $95 billion enacted in FY2014. After the reversal of the 2009 Afghanistan surge, the President promised in the 2013 State of the Union address that "our troops will continue coming home at a steady pace as Afghan security forces move into the lead [and] our mission will change from combat to support." He also stated that by "2014, this process of transition will be complete, and the Afghan people will be responsible for their own security." The FY2015 Continuing Resolution (H.J.Res. 124/P.L. 113-164) sets war funding at the FY2014 enacted level of $95.5 billion, which exceeds the FY2015 amended request (with OIR) by about $16.5 billion. The CR expires on December 11, 2014, and Congress is expected to enact another CR or an Omnibus appropriations act for the rest of the fiscal year. Congress may face several budgetary issues about how to respond to the FY2015 war request and longer-term war cost issues including: assessing the amount, purposes, and level of funding to support U.S. troops during the post-2014 drawdown; evaluating the Administration proposal for a new flexible funding account that would provide $5 billion for a Counterterrorism Partnerships Fund (CTFP) to respond to unspecified "evolving threats from South Asia to the Sahel" by "building partnership capacity" through Train & Equip programs; defining what is an appropriate war-related cost as opposed to what is in the base, non-war budget, a choice made more difficult in part by the potential squeeze on agencies' base budgets that are subject to Budget Control Act spending limits (P.L. 112-25); estimating the potential long-term cost of the war, including repairing and replacing war-worn equipment and maintaining an "enduring presence" that could entail a substantial footprint in the region; and responding to the November 2014 request for $5.5 billion for Operation Inherent Resolve, the new operation to counter the Islamic State. There are some indications that the FY2015 DOD war funding request may be more than is needed in light of FY2014 experience when expenses for returning troops and equipment have proven to be lower and the pace faster than anticipated. If expenses are lower and withdrawal is faster than anticipated, the FY2015 request may also include excess funds that could be used to pay for part or all of the new $5.5 billion request to counter the Islamic State. Savings in FY2015 could be partly offset by the recent announcement by Secretary Hagel that up to 1,000 U.S. troops could be kept in Afghanistan until the spring of 2015 to substitute for a delay in NATO troops being available to provide needed support. Members have raised various concerns about the broad authorities requested for the new CTPF, which exceed current authorities for other Train & Equip programs. The conference version of the FY2015 National Defense Authorization Act, H.R. 3797, reduces the funding and rejects most of the new authorities requested. Other concerns include the lack of evidence of success in previous similar programs, particularly in situations like the complex political-military environment in Syria and Iraq. Congress may wish to consider ways to restrict war-funding to exclude activities marginally related to war operations and support, and to limit the use of ground troops in Operation Inherent Resolve. |
The year 2007 has seen Pakistan buffeted by numerous and serious political crises culminating in the December 27 assassination of former Prime Minster and leading opposition figure Benazir Bhutto, who had returned to Pakistan from self-imposed exile in October. Bhutto's killing in an apparent gun and bomb attack (the circumstances remain controversial) has been called a national tragedy for Pakistan and does immense damage to already troubled efforts to democratize the country. Bhutto was "chairperson for life" of what arguably is Pakistan's most popular party, the Pakistan People's Party (PPP), which won the most total votes in the 2002 national election. The assassination came just 12 days after Pakistani President Pervez Musharraf had lifted a 6-week-old emergency order. The PPP named her young son, Bilawal, and her husband, Asif Zardari, to succeed her as party leaders. Bhutto's long-time party deputy, Makhdoom Amin Fahim, is expected to be the put forward as the PPP's prime ministerial candidate. On November 3, 2007, Pakistani President General Pervez Musharraf issued a Proclamation of Emergency suspending the country's Constitution. The proclamation justified the suspension as necessary due to the country's rapidly deteriorating security circumstances ("an unprecedented level of violent intensity posing a grave threat to the life and property of the citizens of Pakistan") and to the allegedly negative role being played by the country's judiciary, which was claimed to be "working at cross purposes with the executive and legislature in the fight against terrorism and extremism thereby weakening the Government and the nation's resolve and diluting the efficacy of its actions to control this menace." According to the proclamation, the situation required "emergent and extraordinary measures." A Provisional Constitution Order (PCO) was issued by Musharraf (in his role as army chief) on the same day pursuant to the emergency proclamation. The PCO requires, inter alia , that the country's judiciary take a new oath of office, and it bars the judiciary from making any orders against the PCO or from taking any action against the President, the Prime Minister, or anyone acting under their authority. It also suspends a number of "Fundamental Rights" listed in Chapter One of the Pakistani Constitution. These include freedom from unlawful arrest and detention, and freedoms of movement, assembly, association, and speech. Seven Supreme Court justices, including the Chief Justice, and scores of High Court judges refused to take a new oath of office under the PCO and were summarily dismissed. Top U.S. officials repeatedly have urged President Musharraf to make more energetic efforts to restore civilian government and rule of law in Islamabad by respecting the independence of the country's judiciary and by holding free and fair parliamentary elections in early 2008. These admonitions continued following Bhutto's demise. Despite seemingly undemocratic developments in Islamabad, the United States has since 2001 provided billions of dollars in foreign assistance to Pakistan. Developments in Pakistan in 2007 have led many Washington-based critics—both governmental and independent—to more forcefully question the Bush Administration's largely uncritical support for President Musharraf. News of the November emergency decree and PCO elicited immediate criticism from Washington: According to the State Department, Musharraf's move "was a setback": [W]e had hoped to see this transition unfold differently.... It is our fervent hope that [scheduled] elections will be free, fair, transparent, and credible. We are working closely with Pakistani officials and U.S., Pakistani and international civil society organizations to ensure that these elections are as transparent as possible. Secretary of State Condoleezza Rice said she had "communicated very clearly to the Pakistanis that the holding of free and fair elections is an absolute necessity" and later said U.S. aid to Pakistan would come under review. The Pentagon announced a postponement of scheduled high-level bilateral defense consultations. In his first public comments on the issue, President George W. Bush said the United States expects elections in Pakistan as soon as possible and that Musharraf should resign his military post. President Bush later telephoned Musharraf for a "very frank discussion" on the strong U.S. belief that the Pakistani leader should resign from the military and hold elections. Islamabad characterized President Bush as showing understanding of the "difficult circumstances" being faced by Musharraf and of the Pakistani leader's commitment to "full democracy and civilian rule." Several bills condemning the emergency declaration were introduced in Congress ( S.Res. 372 , H.Res. 810 , and H.Res. 823 ), but none has moved out of committee to date. On November 17, Deputy Secretary of State John Negroponte met with President Musharraf in Islamabad, reportedly delivering a "strong message" on the need to heed U.S. advice or face a possible reduction in military assistance. Islamabad rejected U.S. calls to end the emergency and dismissed the Deputy Secretary's admonitions as "nothing new." The Under Secretary also met with Musharraf ally and National Security Advisor Tariq Aziz and Vice Army Chief Gen. Ashfaq Pervez Kiyani, and spoke by phone with Benazir Bhutto. Musharraf's "second coup" appeared to many observers to be a desperate power grab by a badly discredited military ruler. While Musharraf insisted the emergency decree was meant to deal with the country's security crisis and spreading Islamist militancy, most analysts believe it was a preemptive assault on the country's judiciary in light of signs that the Supreme Court was set to invalidate Musharraf's October 6, 2007, reelection as president. One international human rights group issued a report making this argument and criticizing the U.S. and other Western governments for "propping up" Musharraf with military and financial assistance. There are fears that the move further destabilized Pakistan and emboldened Islamist militants, while further alienating Pakistani civil society. It also brought a surge in unwanted attention to the Pakistani military's failure to defeat the country's militant extremist elements, as well as to its major and hugely profitable role in the country's economy. The security of Pakistan's nuclear weapons and materials becomes an especially crucial issue during a period of political instability in Islamabad. Moreover, Pakistan's Western allies find themselves in the awkward position of supporting an increasingly unpopular Musharraf who has twice used force to obtain or maintain power. The Islamabad government's harsh crackdown on political opposition apparently spurred former Prime Minister and opposition leader Benazir Bhutto to end what had been ongoing negotiations toward a power-sharing arrangement with Musharraf. Musharraf, for his part, called Bhutto "too confrontational" and himself ruled out further power-sharing negotiations. The U.S. government had supported a Musharraf-Bhutto accommodation as being in the best interests of both Pakistan and the United States. Bhutto's catastrophic removal from Pakistan's political equation thus dealt a serious blow to U.S. policies aimed at bringing greater stability to that country. Pakistan in 2007 suffered from considerable political uncertainty as the tenuous governance structure put in place by President Musharraf came under strain. Among ordinary Pakistanis, criticism of the military—typically among the most respected institutions in the country—and its role in governance has become much more common, especially as the army has proven unable to ensure security and stability in both major cities and in the western provinces of Baluchistan and the North West Frontier. Many among the Pakistani public appear increasingly put off by a seemingly arbitrary electoral process that preserves the power of a corrupt elite that demonstrates little meaningful concern with the problems of ordinary citizens. Moreover, there has been an accompanying and widespread dismay among Pakistanis at the appearance of unabashed U.S. interference in their political system, interference that from their perspective serves only to perpetuate the corruption. A judicial crisis began with President Musharraf's summary March 2007 dismissal of the country's Chief Justice, Iftikhar Chaudhry, on charges of nepotism and misconduct. Analysts widely believe the action was an attempt by Musharraf to remove a potential impediment to his continued roles as president and army chief, given Chaudhry's rulings that exhibited independence and went contrary to government expectations. The move triggered immediate outrage among Pakistani lawyers; ensuing street protests by opposition activists grew in scale. By providing a platform upon which anti-Musharraf sentiments could coalesce, the imbroglio morphed into a full-fledged political crisis. The deposed Chief Justice became an overnight political celebrity. In May, tens of thousands of supporters lined the streets as Chaudhry drove from Islamabad to Lahore to address the High Court there. Chaudhry later flew to Karachi but was blocked from leaving the city's airport, reportedly by activists of the regional, government-allied Muttahida Qaumi Movement (MQM) party. Ensuing street battles between MQM cadres and opposition activists left at least 40 people dead on May 12, most of them PPP members. Reports had local police and security forces standing by without intervening while the MQM attacked anti-Musharraf protesters, leading many observers to charge the government with complicity in the bloody rioting. In July, in what was widely seen as a major political defeat for Musharraf, the Supreme Court unanimously cleared Chaudhry of any wrongdoing and reinstated him to office. When, in August, Musharraf reportedly came close to declaring a state of emergency, Secretary of State Rice placed a late-night telephone call to Islamabad, by some accounts in a successful effort to dissuade him. August brought further indications that the Supreme Court would not be subservient to military rule and could derail President Musharraf's political plans. Most significantly, the court ruled that former Prime Minister Nawaz Sharif could return to Pakistan after seven years in exile. When Sharif attempted to return on September 10, the government immediately arrested him on corruption charges and deported him. (On October 24, Pakistan's Chief Justice stated that Sharif still has an "inalienable right" to return to Pakistan, and he accused then-Prime Minister Shaukat Aziz of violating a Supreme Court order by arranging for Sharif's most recent deportation.) In September, the Islamabad government arrested hundreds of opposition political leaders and activists, many of them deputies of Nawaz Sharif, including some sitting members of Parliament. A statement from the U.S. Embassy called the development "extremely disturbing and confusing," and Secretary Rice called the arrests "troubling." At year's end, Pakistan's judicial crisis was far from fully resolved. Changes made by Musharraf under the emergency remain controversial, perhaps most especially the questionable dismissal of many Supreme Court justices, some of whom remain under house arrest in 2008. Aitzaz Ahsan, the lawyer who lead the successful effort to have former Chief Justice Chaudhry reseated earlier in 2007, has been at the forefront of the current effort to have the Supreme Court reconstituted by Musharraf restored to its pre-November status. In early December, he proposed requiring all parliamentary candidates to sign an oath pledging to restore the judiciary, but this tack was rejected by Bhutto and other opposition leaders as unrealistic. Ahsan himself accused the U.S. government of not seeming to care about Musharraf's crackdown on the Supreme Court and making no mention of the issue in various agency briefings. President Musharraf won provisional reelection on October 6, 2007, capturing 98% of the votes cast by Pakistan's 1,170-member Electoral College. About 57% of the total possible vote from the membership of all national and provincial legislatures went to Musharraf; two-fifths of the body had either abstained (members of the Bhutto-led PPP) or resigned in protest (mostly members of the Islamist party coalition). Musharraf vowed to resign his military commission following reelection, even knowing he would become even more politically vulnerable as a civilian president. Controversy had arisen over Musharraf's intention to seek reelection by the current assemblies, as well as his candidacy while still serving as army chief (2002 and 2005 Supreme Court rulings allowed for his dual-role until November 15). Opposition parties called such moves unconstitutional and they petitioned the Supreme Court to block this course. On October 5, the court ruled the election could take place as scheduled but that official results would be withheld until after the court rules on such legal challenges. While few observers predicted the court would void the result, Musharraf was to some degree left in political limbo—he was not expected to doff his army uniform until his reelection was confirmed. Some analysts feared that a state of emergency would be declared were the court to rule against Musharraf. U.S. and other Western officials, including Secretary Rice, urged Musharraf to refrain from any such move. On November 19, the new Supreme Court (as reconstituted under the PCO) struck down legal challenges to the validity of the reelection, thus paving the way for Musharraf's retirement from the army and swearing in for a second term, which took place on November 29. President Musharraf and former Prime Minister Benazir Bhutto in 2007 had negotiations on a power-sharing arrangement that could facilitate Musharraf's continued national political role while also allowing Bhutto to return to Pakistan from self-imposed exile, potentially to serve as prime minister for a third time. The Bush Administration reportedly encouraged such an arrangement as the best means of both sustaining Musharraf's role and of strengthening moderate political forces in Islamabad. Pakistan's deputy information minister reportedly claimed that the United States essentially forced a reluctant Islamabad to allow Bhutto's return from exile. Some analysts took a cynical view of Bhutto's motives in the negotiations, believing her central goal was personal power and removal of standing corruption cases against her. Bhutto insisted that she engaged Musharraf so as to facilitate "an effective and peaceful transition to democracy." On October 4, President Musharraf and Bhutto agreed to an accord that could have paved the way for a power-sharing deal. The National Reconciliation Ordinance (NRO) provides amnesty for all politicians who served in Pakistan between 1988 and 1999, thus essentially clearing Bhutto of pending and potential corruption charges. Officials said the amnesty would not apply to former Prime Minister Sharif. In return, Bhutto reportedly agreed (tacitly) to accept Musharraf's reelection plans. (The incumbent ruling party's chief, Chaudhry Shujaat Hussain, was later quoted as saying the NRO was part of "a deliberate strategy to prevent the opposition from uniting and she [Bhutto] fell for it.") The Supreme Court subsequently put a spanner in Bhutto's scheme by ruling on October 12 that it would hear challenges to the NRO, thus threatening a Musharraf-Bhutto deal by potentially reinstating corruption charges against the former prime minister. Many Pakistanis were unhappy with news of the potential deal, viewing it as a politically unprincipled arrangement between two opportunistic figures. Following the imposition of emergency, Bhutto stated that she would not meet or negotiate with Musharraf, effectively ending prospects for a deal. When asked whether the United States still favored a Musharraf-Bhutto power-sharing agreement in the wake of the emergency decree and deteriorating relations between the president and former prime minister, U.S. officials only reiterate a belief that Pakistan's moderate forces should work together to bring constitutional, democratic rule. Yet reports continued to suggest that Washington pushed for such an accommodation even after Bhutto's apparently full embrace of the opposition. On October 18, Benazir Bhutto returned to Pakistan after more than eight years of self-imposed exile and was welcomed in Karachi by hundreds of thousands of jubilant supporters. She proceeded to vigorously re-entered Pakistan's political stage with a major and polarizing effect; even segments of her own powerful Sindh-based clan were bitterly opposed to her reentry. While Bhutto continued to enjoy significant public support in the country, especially in rural Sindh, there were signs that many PPP members were ambivalent about her return and worried that her credibility as an opponent of military rule has been damaged through deal-making with Musharraf. Only hours after Bhutto's arrival in Karachi, two blasts near her motorcade—likely perpetrated by at least one suicide attacker—left some 145 people dead, but Bhutto was unharmed. To date, police have made no breakthroughs in the case, but there are signs (along with widely-held suspicions) that the perpetrators are linked to Al Qaeda and other Islamist extremists in Pakistan. Without offering evidence, Bhutto herself implicated elements of Pakistan's own security apparatus in the attack. (Following Bhutto's December assassination, a letter was released in which she requested that President Musharraf be held ultimately responsible for her potential violent death; see below). As Islamist-related militancy surged and political uncertainty continued unabated in Pakistan in October 2007, observers grew increasingly concerned that President Musharraf would impose martial law through an emergency proclamation. When asked about the possibility on November 1, Secretary Rice said it was "quite obvious that the United States would not be supportive of extra-constitutional means," and she reiterated Washington's view that Pakistan "needs to prepare for and hold free and fair elections" as planned. The next day, the Commander of the U.S. Central Command, Adm. William Fallon, met with Musharraf in Islamabad and warned against declaring a state of emergency that would "put the [Pakistan-U.S.] relationship at risk." One report claimed that during this time U.S. diplomats received forewarning from Pakistani officials that an emergency declaration was imminent. According to this report, the reaction of the U.S. diplomats was muted, which some senior Pakistanis took as a sign that they could proceed. However, a U.S. official denied that any "green light" was given. President Musharraf announced his decision to declare a state of emergency in a late-night televised address to the Pakistani people on November 3. In that speech, Musharraf argued that the country was under existential threat from terrorism and extremism, and that his government and its law enforcement agencies were stricken by paralysis due especially to Supreme Court interference. He also held certain elements in the Pakistani media responsible for deteriorating conditions. Calling his emergency proclamation necessary in the interests of the state, he compared his actions to those of Abraham Lincoln's "sweeping violations of constitutional limits" as an effort to preserve the union, and he pleaded with Pakistan's "friends in the United States" to give the country more time to establish democratic rule. The emergency declaration led to an immediate and harsh crackdown on Pakistan's independent media outlets. Numerous private television and radio stations were blacked out in the wake of Musharraf's announcement and a new government order banned any media reports that "defame or bring ridicule" to the government or military. Violations of the order can bring a one-year prison sentence or a five million rupee ($82,000) fine. For many days after the emergency decree, independent domestic news stations, as well as international outlets such as the BBC and CNN, remained off the air in Pakistan. Indications are that the Musharraf government has continued to clamp down on the country's media. Moreover, several thousand opposition figures, human rights activists, and lawyers were rounded up and detained in the days following the emergency proclamation. On the Monday after Musharraf's weekend speech, thousands of lawyers protested in several Pakistani cities and were met with police beatings and mass arrests. Chief Justice Chaudhry, who was among seven Supreme Court judges dismissed by the Musharraf government, publicly urged the country's lawyers to continue their protests. The U.S. government expressed "grave concern" at the crackdown, calling such "extreme and unreasonable measures" contradictory to the goal of a fully democratic Pakistan. Musharraf later had Pakistan's 1952 Army Act amended to allow for military trials of civilians, chilling human rights groups and potentially providing a retroactive sanctioning of "disappearances" traced to the country's security services and criticized by the Supreme Court. As noted above, the United States called the emergency declaration a serious setback to Pakistan's democratization process. Many other world governments, including that of key Pakistani benefactor Britain, echoed U.S. criticisms. Pakistani neighbor and rival India, wary of becoming involved in Pakistan's domestic problems, issued a notably restrained expression of "regret" for "the difficult times that Pakistan is passing through." In response to what it called "unwarranted criticism and excessive reactions" from abroad, Pakistan's Foreign Ministry asked that the international community "show understanding of this difficult decision" and reiterated that the government and President Musharraf are "committed to full civilian democratic rule and holding of elections." A November session of the 53-member Commonwealth Ministerial Action Group (CMAG) issued a condemnation of the abrogation of the Pakistani Constitution and threatened Pakistan with suspension from the Commonwealth unless Musharraf repeals the emergency provisions, retires from the army, releases all political detainees, and removes curbs on media freedom by November 22. Islamabad expressed "deep disappointment and regret" at the CMAG statement, saying it reflected "ignorance to the ground realities." On November 22, the CMAG made good on its suspension threat pending restoration of democracy and rule of law there. Islamabad expressed "deep regrets" at the "unreasonable and unjustified" decision, saying it "does not take into account the objective conditions prevailing in Pakistan." International human rights groups were vociferous in their criticisms: New York-based Human Rights Watch decried the "coup against Pakistan's civil society" and demanded that Pakistan immediately return to constitutional rule and end its crackdown on the judiciary, media, human rights activists, and political opponents. London-based Amnesty International warned that the "wholesale abrogation of fundamental human rights protections" represented a "blatant breach of international law" and it also demanded the restoration of human rights and justice. The Pakistani public appeared overwhelmingly opposed to Musharraf's coup, but street protests were relatively modest in scale (due in part to police crackdowns and blockades). The Pakistani media were largely unanimous in their criticism of what was widely seen to be a bald-faced attempt by Musharraf to maintain his own power in the face of increasing pressures. Many leading U.S. press outlets urged the Bush Administration to end its reliance on Musharraf, seeing him as an obstacle both to more effective counterterrorism efforts and to democratization. On December 15, President Musharraf lifted the state of emergency in what he claimed was a "complete restoration of the constitution." In a speech to the Pakistani nation, he again asserted that the emergency was declared as a last resort—"against my own will"—in order to defeat a "conspiracy" to "derail the democratic process." Musharraf also took credit for laying "the foundation of real democracy." Skeptics saw little evidence that the lifting of the emergency would lead to meaningful change, given what they see as repressive media curbs and a stacked judiciary. One senior Pakistani analyst called Musharraf's move a "public relations exercise." Human Rights Watch echoed the sentiments of many in calling the "restoration of the constitution" a "sham" that would do little to restore genuine rule of law unless "arbitrary" laws and amendments made after November 3 were withdrawn. On the day before his action, Musharraf, acting under the PCO, issued several decrees and made amendments the Pakistani Constitution, some of which would ensure that his actions under emergency rule would not be challenged by any court. On December 27, 2007, former Prime Minister and key opposition leader Benazir Bhutto was assassinated in a gun and suicide bomb attack following a political rally in the city of Rawalpindi. President Bush and the State Department offered deep sympathy and sincere condolences, strongly condemning the "cowardly" attack. The killing elicited widespread condemnation from around the world. The next day, Bhutto's body was interred in her ancestral village in Sindh as the Pakistani government ordered a nearly total shutdown of services in anticipation of spreading violence. Serious rioting occurred in the Sindhi capital of Karachi, as well as at numerous other sites. The circumstances of Bhutto's death remain controversial. Early reports about the cause were conflicting: a government official claimed that neither bullets nor shrapnel caused her death and that she was killed after her head hit a latch on the vehicle's sunroof. A more senior official later withdrew the claim, but the government has continued to maintain that gunshots played no role. Emergency room doctors who tried to revive Bhutto may have been pressured to conform to the government's accounts and later sought to distance themselves from such accounts, calling for an autopsy. Video and photographs of the event appear to show a gunman firing three shots at Bhutto from close range, closely followed by an explosion which left more than 20 bystanders dead. In a blow to subsequent investigations, city fire trucks used high-pressure hoses to clear the crime scene of debris, likely destroying what could be vital forensic evidence. Many observers have criticized the Musharraf government for providing insufficient security for Bhutto. Questions about how she was killed become more relevant in this context, as death from gunshots fired at close range would be more damning of existing security than would a suicide bombing, which is more difficult to defend against. With Pakistanis widely skeptical of their government's capacity and intention in launching a probe—and many holding the government directly or indirectly responsible for Bhutto's death—demands soon came for an international investigation into the assassination. As articulated by one Pakistani daily, "Only an inquiry by a credible, neutral panel of international experts would hold any weight with people." Some called for a U.N. probe modeled on that which investigated the 2005 assassination of Lebanon's Prime Minister; Bhutto's widower supported the course. The Islamabad government denied any need for U.N. involvement, a sentiment echoed by Washington. Under international diplomatic pressure, Musharraf on December 30 agreed to consider foreign assistance in the investigation and three days later announced that a team from Britain's Scotland Yard would take a role in the investigation. The U.S. government welcomed Musharraf's decision as positive step and stands ready to provide its own assistance should Pakistan request it. Pakistani government officials quickly blamed pro-Taliban and Al Qaeda-linked militant Baitullah Mehsud for Bhutto's killing, claiming they had intercepted a telephone conversation in which Mehsud took credit for the act. Through a spokesman, Mehsud has denied any involvement in the killing. A Taliban spokesman suggested that the attack was a "well-planned conspiracy" carried out by Pakistani government agents. The U.S. government has not taken a position on the identity of Bhutto's killers, with some officials saying Islamabad was too abrupt in blaming Mehsud. At least one former U.S. counterterrorism official is convinced that Al Qaeda or one of its Pakistan-based allies was behind the assassination. U.S. agencies reportedly had provided Bhutto with "nonactionable" intelligence about potential threats to her safety, but Musharraf rebuffed Washington's requests that her security be bolstered. U.S. officials apparently recommended several reputable Pakistani contractors to provide protection, however these were not employed due to Bhutto family fears they might be infiltrated by extremists. Along with Al Qaeda itself, a number of religious extremist groups indigenous to Pakistan are seen to have had a motive for assassinating Bhutto and the means to do so. These include banned terrorist groups such as Lashkar-e-Taiba and Jaish-e-Mohammed, as well as Sunni extremists in Lashkar-e-Jhangvi or Sipah-e-Sahaba (Bhutto had Shiite ancestry). Conspiracy theories became rampant in Pakistan, with many versions implicating government agencies as complicit. By imposing what was in essence martial law President Musharraf did harm to the cause of Pakistani democratization. In late November, the newly reconstituted Supreme Court struck down challenges to the validity of Musharraf's October 2007 reelection, clearing the way for Musharraf to resign his military commission, which he did on November 28. The next day he was sworn in as a civilian for a second five-year presidential term. Secretary Rice called Musharraf's resignation "a good first step," but added her view that "the most stabilizing thing [for Pakistan] will be to have of free and fair elections." In November, Musharraf specified that elections would come by early January, but he declined to set a date for ending the emergency (other government officials had suggested the emergency would be lifted by early December). Bhutto responded by ending negotiations with Musharraf and promising to go ahead with a November 13 "long march" protest from Lahore to Islamabad. As the date approached, authorities again placed her under house arrest with a seven-day detention order, and some 600 police surrounded the Lahore home of her host. In a powerful indicator of a major policy change, Bhutto declared, "It's over for Musharraf," and she issued her most stringent public demand to date: that Musharraf resign both his military commission and presidency. She called on the international community to stop backing the "dictator" and subsequently reached out to other opposition leaders, including former Prime Minister Sharif—who quickly welcomed her shift away from Musharraf—and even Qazi Hussain Ahmed, chief of the Islamist Jamaat-i-Islami party. Musharraf, for his part, called Bhutto "too confrontational" and ruled out further power-sharing negotiations with her. In Bhutto's view, the ruling, Musharraf-allied PML-Q party saw its fortunes rapidly declining and expected to lose badly in any free election. Thus, she asserted, its leaders chose to collude with allies in the intelligence agencies to have the polls postponed (she called Musharraf's electoral plans "a farce"). As Musharraf's political clout wanes, the PML-Q party faces more daunting odds in convincing a skeptical electorate that it deserves another five years in power. Former Prime Minister Sharif has been even more explicit in his criticisms of Musharraf, calling him a "one-man calamity" who has single-handedly brought ruin to Pakistan through efforts to retain personal power. Sharif calls for restored democracy and urges the U.S. government to support the Pakistani nation rather than a single individual. Benazir Bhutto's assassination dramatically altered Pakistan's political field. As per Bhutto's will, and in what one Pakistani daily called "the unfortunate reality of South Asia's dynastic politics," the PPP on December 30 named her young son, Bilawal, and her husband, Asif Zardari, to succeed her as party leaders. Until Bilawal completes studies at Oxford, Zardari will run the party. Zardari is a controversial figure in Pakistan: he has spent years in prison (without conviction) on charges ranging from corruption to complicity in murder. His rise to leadership of Pakistan's largest opposition party could present difficulties for U.S. policy makers. Bhutto's long-time party deputy and recent National Assembly member Makhdoom Amin Fahim is expected to be put forward as the PPP's prime ministerial candidate. Fahim, who comes from a feudal Sindh background similar to that of Bhutto, led the party competently in her absence, but does not possess national standing and support anything close to that enjoyed by Bhutto herself. Moreover, with Bhutto's demise, Nawaz Sharif has been able to step up as the most visible opposition figure with national credentials. A conservative with long-held ties to Pakistan's Islamist political parties, Sharif is a bitter enemy of Musharraf and is viewed with considerable skepticism by many in Washington, where there are concerns that a resurgence of his party to national power could bring a diminishment of Pakistan's anti-extremism policies and be contrary to U.S. interests. Two major political crises—a November emergency declaration and suspension of the Constitution followed by the December assassination of the leading prime ministerial candidate—led to obvious questions about the credibility of elections held in their immediate wake. Even before the emergency proclamation, some observers saw signs that the government did not intend to conduct credible elections, most prominently controversy surrounding the possible disenfranchisement of scores of millions of Pakistanis from voter rolls and the apparent absence of an effective and neutral Election Commission. In November, President Musharraf reportedly told a meeting of PML-Q parliamentarians that elections would not be held under U.S. dictation, and he repeatedly refused to give a firm date for ending what was in essence martial law. Deputy Secretary Negroponte met with the Pakistani President days later, delivering a message that emergency rule was "not compatible" with free and fair elections. Musharraf reportedly replied by saying the emergency would be lifted only after Pakistan's security situation was sufficiently improved. Secretary Rice opined that it would be "very difficult" to have free and fair elections in Pakistan under a state of emergency. Upon his swearing-in to a second presidential term, Musharraf suggested that the emergency order would be lifted in early December, about one month before scheduled polls. When asked about the possibilities for conducting credible elections only weeks after restoration of the country's Constitution, a State Department spokesman said he would "leave that to the experts," but he went on to suggest that—with a "concerted and dedicated effort"—it would be possible. A White House spokeswoman answered by saying, "We are not going to judge the date of lifting the emergency order." Independent analyses were less circumspect. For example, a Pakistani legislative watchdog organization called it "obvious" that free and fair elections were not possible in the given setting. A report by a Brussels-based nongovernmental organization concluded that Musharraf has sought to smother Pakistan's nascent moves toward civilian rule and that no "proper" elections could be held under the circumstances. It called on the international community to recognize Musharraf's negative role and to respond with graduated aid sanctions that would target the military without reducing its counterterrorism capabilities, while at the same time expanding development aid. Especially worrisome for skeptics is Musharraf's demolition of the country's judiciary: deposed Chief Justice Chaudhry remains under house arrest, as does many of the approximately 100 high court judges who refused to take a new oath of office under the PCO. There have been numerous reports of government efforts to "pre-rig" the polls. Those who see a "stacked judiciary, cowed media, and toothless election commission" have been pessimistic about the chances for a credible process. Bhutto herself reportedly was set to give visiting U.S. Members of Congress a 160-page report detailing the Election Commission's and major intelligence agency's alleged plans to illicitly manipulate the outcome. Pakistan's National Assembly ended its five-year term on November 15. This was the first time in the country's history that the body had completed a full term without interruption. With Shaukat Aziz's term also ending, President Musharraf appointed his political ally and current Chairman of the Senate, Mohammadmian Soomro, to serve as caretaker Prime Minister during the election period. Soomro, who also is the constitutional successor to the Pakistani presidency should the office become vacant, is a former banker from an influential Sindhi family. Many analysts view the caretaker cabinet as being stacked with partisan Musharraf supporters and so further damaging to hopes for credible elections. Musharraf repeatedly has promised that the elections will be open and transparent, and he avers that opposition parties make unsubstantiated claims of rigging to justify their own anticipated losses. On November 20, Pakistan's Chief Election Commissioner announced that national polls would be held on January 8, 2007. About 13,500 candidates representing 49 parties filed papers to vie for Pakistan's National Assembly seats and provincial assembly constituencies. Among them were three serious contenders for the premiership: former two-time Prime Ministers Benazir Bhutto and Nawaz Sharif, and recent Punjab Chief Minister Chaudhry Pervaiz Elahi. Elahi, a cousin of the ruling PML-Q's chief Chaudhry Shujaat Hussain, is viewed as a close ally of Musharraf's who would likely bolster the president's continued influence. Sharif's electoral plans met a major obstacle when, on December 3, his nomination papers were rejected, making him ineligible to compete in the elections because of criminal convictions related to his 1999 ouster from power (his brother Shabaz, a former Punjab Chief Minister and political heavyweight in his own right, saw his own nomination papers rejected days earlier, apparently due to pending criminal charges against him). Meanwhile, the Islamist Muttahida Majlis-e-Amal (MMA) coalition has over time become weakened by the increasingly divergent approaches taken by its two main figures—Jamaat-e-Islami (JI) chief Qazi Hussain Ahmed, a vehement critic of the military-led government, and Jamiat Ulema-e-Pakistan chief Fazl ur-Rehman, who largely has accommodated the Musharraf regime. With its two major constituents holding directly opposing views on the wisdom of participating in upcoming elections, the MMA has all but formally split, diminishing its prospects for holding power in Pakistan's two western provincial assemblies. Opposition parties were placed in the difficult position of choosing whether to participate in elections that were perceived as manipulated by the incumbent government or to boycott the process in protest. Sharif, along with Qazi Hussain's Jamaat-e-Islami party (a member of the Islamist MMA coalition), was for a time clear in his intention to keep his party out of the planned elections he calls a "farce," but Bhutto was less direct about her own intentions. This left the opposition divided until Bhutto announced her intention to participate, which spurred Sharif to reverse course. On December 9, Sharif announced that his party would participate in elections after he failed to convince Bhutto to join a boycott. Bhutto welcomed the decision. Some analysts insisted that an election boycott would only serve the interests of the ruling PML-Q, and they urged full poll participation while stressing the need to minimize any rigging or manipulation of the process. Upon Bhutto's assassination, a nationwide debate was launched over the issue of postponing the election date. Both Zardari, the new PPP leader, and Sharif demanded that the election be held as scheduled. The Bush Administration appeared to support their demands. Zardari's calculation likely was rooted in expectations of a significant sympathy vote for the PPP. The ruling PML-Q appeared to seek (and later welcome) a decision to postpone the polls. Sharif, for his part, has maintained a hardline stand against Musharraf's continued rule, demanding that a broad-based national unity government be put in place. While conceding that the Pakistanis must determine whether or not to make changes to the election schedule, a State Department spokesman offered that the best way to honor Bhutto's memory was for the democratic process to continue, and he opined that polls should "by all means" go ahead as scheduled "if an election can be held safely and smoothly on January 8." When asked about the issue, Secretary Rice said "it's just very important that the democratic process go forward." Some analysts believe the U.S. government's apparent push for January elections may have been part of an eagerness to "graft legitimacy" onto Musharraf by anointing a successor to Bhutto. In fact, Bhutto's death appears to leave the United States even more dependent on an increasingly embattled Musharraf as the only major pro-U.S. leader in Pakistan. The Election Commission's January 2 decision to delay the polls until February 18 was met with vocal denouncement by the main opposition parties, who accuse the government of fearing a substantive loss. The State Department welcomed the setting of a firm date and urged Pakistani officials to use the interim period to ensure that an independent media is able to operate and that all restrictions on political parties are lifted. Even nongovernmental American commentators had urged a delay, arguing that Musharraf can maintain his status only by allowing for a genuine national reconciliation involving all major political parties, and that this can come about only after "a pause and then a bold regrouping." Musharraf defended the postponement as necessary given the scale of destruction in Sindh. It is as yet unclear if opposition parties will organize large-scale street protests against the decision. Islamist extremism and militancy has been a menace to Pakistani society throughout the post-2001 period and became especially prevalent in 2007. In the months since an early July commando raid on a radical Islamabad mosque, religious militants have perpetrated more than three dozen suicide bomb attacks—most of them against security personnel—taking more than 700 lives, and "neo-Taliban" militants have controlled western regions such as Waziristan and Swat, where government troops have engaged costly and, in the former case, losing battles. Despite recent apparent successes in Swat, Pakistan was plagued by at least ten suicide bombings in December alone. Despite Musharraf's ostensible motives, the imposition of a state of emergency further inflamed anti-Musharraf sentiment among the Pakistani public and aggravated already considerable civil-military tensions. Moreover, by redirecting resources toward subduing Pakistani civil society, the move may even have hindered the military's ability to combat religious extremists, who many argue are strengthened by authoritarian rule that weakens the country's moderate political forces. On the other hand, it is possible that Musharraf and the new army chief, Gen. Kiyani, are dividing their responsibilities so that the former will retain political management of the country while the latter oversees the military's counterinsurgency efforts. This might serve to make more effective Pakistan's anti-extremism efforts over time (in both their political and their militarized aspects). An International Crisis Group report on "Winding Back Martial Law in Pakistan" warned that, Martial law will only bring more violence and instability to Pakistan. The imprisonment of secular leaders of civil society boosts jihadi groups. The targeting of moderate political parties empowers the Islamists. Censorship of the media makes the mosque more potent as a means of communication. The destruction of the institutions of the rule of law opens the door wider to extremism. Indeed, Musharraf's imposition of emergency did not lead to any immediately noticeable improvement in his government's battle with the militants as Pakistan troops continued to appear on the defensive in provincial conflict regions. By one account, Islamist militants in the Swat Valley more than doubled the territory under their control in the weeks after November 3. By early December, however, following the apparent launch of major Pakistan army offensives in the region, most militant elements in the Swat were reported to be in retreat. On December 15, the Pakistani government claimed victory there, saying fighters loyal to the radical Islamist Mullah Fazlullah had been routed and driven into the hills. Many Western diplomats, including those from the United States, have expressed dismay with President Musharraf's November fixation on the Pakistani judiciary and on his arrest of civil society elements considered unthreatening to state security. Musharraf has to many observers appeared more interested in battling his domestic political adversaries than in taking on the country's religious militants. When asked about this apparent contradiction, a White House spokeswoman said, "We do not believe that any extra-constitutional means were necessary in order to help prevent terrorism in the region." Bhutto's killing at year's end led to country-wide rioting. Some 60 people were killed and the caretaker government called the damage from ensuing violence "colossal," saying "manufacturing, revenue, exports have all suffered badly." Whether deserving or not, Musharraf himself took the brunt of the blame for ensuing instability. The developments fueled already considerable concerns that, in focusing on civil strife in the cities, Pakistan's security apparatus would be distracted from what the United States considers to be crucial counterterrorism operations in Pakistan's western regions near Afghanistan. Pakistan's neighbor and long-time rival India has watched Pakistan's turmoil with great interest, but little public comment. A destabilized Pakistan represents a major security concern for New Delhi, but at the same time history shows that as Pakistan's internal difficulties grow, Pakistani interference in Indian affairs tends to decrease. Pakistan's political crises also have harmed what had been a generally strong national economy. The country's main stock market lost nearly 5% of its value when trading opened on November 5—the market's worst-ever one-day decline—and the country's attractiveness for foreign investors almost certainly has suffered with December's instability. Following Bhutto's killing, the market again fell by nearly 5%, even as it finished the year up by 40%. In the days after the emergency proclamation, rumors abounded in Pakistan that President Musharraf had himself been placed under house arrest. However, the only figures who could potentially unseat Musharraf—intelligence chiefs and corps commanders—all were handpicked by Musharraf on the assumption that they would remain loyal to him (the new Army Chief, Gen. Kiyani, is widely seen to be a moderate, professional, and pro-Western soldier). While Pakistan's influential army corps commanders appear to have fully endorsed the imposition of emergency, they may be much less approving of a power-sharing arrangement that would include Bhutto. Given its collective interest in maintaining a unified chain of command, however, most analysts see the army's top leadership staying united and thus maintaining a relative degree of order in the country. The probability of Musharraf being removed from office by force is therefore considered to be quite low. Should a major outpouring of public protest occur, however, it is possible that Musharraf's powerful military subordinates could seek his resignation in the national interest. Among the most urgent concerns of U.S. officials during Pakistan's political crisis has been the security of Pakistan's nuclear weapons and materials, which could be degraded as instability persists. While the danger of Islamist extremist gaining possession of a nuclear explosive device is considered remote, the risk of rogue scientists or security officials seeking to sell nuclear materials and/or technology is seen to be higher in a setting of deteriorating security conditions. Pentagon officials backpedaled from early expressions of concern, saying they believe Pakistan's arsenal was "under the appropriate control." According to the New York Times , the United States has spent nearly $100 million since 2001 on a classified program to help secure Pakistan's strategic weapons. Islamabad emphatically rejects suggestions that the country's nuclear arsenal is anything but fully secure, and called the Times story "distorted and exaggerated." Most analysts appear to have concluded that the security of Pakistan's nuclear weapons and facilities are much improved in recent years. More worrisome, many claim, is the possibility that Pakistan's nuclear know-how or technologies could remain prone to leakage. Even India's national security advisor—a figure not expected to downplay the dangers—has stated an opinion that Pakistan's nuclear arsenal is "largely safe." The ability of the United States to effectively exert diplomatic pressure on Pakistan is demonstrably low at present. President Musharraf's emergency decree and its attendant developments, along with widespread violence and the assassination of Bhutto, have led to widespread concerns that the Bush Administration's Pakistan policy—and perhaps its broader anti-extremism effort—had become fragile and ineffective. The Bush Administration generally has not ranked democracy at the top of its list of priorities with Pakistan: at a December 2007 Senate Foreign Relations Committee hearing on Pakistan, one senior analyst offered that, "Overall U.S. policy toward Pakistan until very recently gave no serious attention to encouraging democracy in Pakistan." On November 9, five U.S. Senators—including the Majority Leader and the Chairman of the Senate Foreign Relations Committee—signed a letter to President Bush which said Musharraf's assumption of emergency rule raised "very troubling questions" not only about the Administration's Pakistan policy, but also about its overall national security strategy. The Senators called for a broad review of Washington's Pakistan policy, including adjustments to aid programs and new steps to enhance security along the Afghanistan-Pakistan border and to defeat Al Qaeda. The Chairman of the Senate Foreign Relations Committee (SFRC), Senator Joe Biden, warned President Musharraf in December "there will be consequences" if upcoming elections are not fair and open, saying U.S. aid levels could be decreased. Following Bhutto's death, the Speaker of the House, Representative Nancy Pelosi, said Washington should address "troubling questions" about the probe into Bhutto's murder and consider withholding further foreign assistance to Pakistan unless Islamabad allowed international investigators to participate. An array of former U.S. government officials has insisted that military dictatorship in Pakistan is not in the U.S. interest and called on President Bush to use actions as well as words to push President Musharraf back on the democratic path. In a December 10 opinion article, Benazir Bhutto argued that all the countries of the world had a direct interest in Pakistani democratization, reiterating her long-held view that dictatorship had fueled extremism in her country and that credible elections there were a necessary condition for the reduction of religion militancy. As for U.S. policy, she opined that, "At the very least, America can and should prod Musharraf to give Pakistanis an independent election commission, a neutral caretaker administration, and an end to blatant vote manipulation." In December there was a sense among some in the U.S. government that Pakistan was getting back to a democratic path, especially after the mid-month lifting of the emergency. However, Bush Administration patience with Musharraf may be wearing thin; there are signs that it may be making firmer contingency plans in case Musharraf does not long survive in power. Still, and despite a sense among many independent analysts that continued U.S. support for Musharraf is detrimental to overall U.S.-Pakistan relations and to U.S. interests in the region, there is to date little outward sign that the Bush Administration is preparing to withdraw its support for his continued rule. In an interview weeks after the "second coup," President Bush offered strong support for Musharraf, saying he "hasn't crossed the line" and "truly is somebody who believes in democracy." Some independent analysts, along with SFRC Chairman Senator Biden, expressed incredulity at President Bush's continuing personal investment with the Pakistani leader. In reaction to the emergency proclamation in Islamabad, Bush Administration officials said they would review relevant U.S. law on aid to Pakistan. However, Pakistan has been under democracy-related U.S. aid sanctions for more than eight years. Musharraf's extra-constitutional 1999 seizure of power triggered automatic penalties under Section 508 of the annual foreign assistance appropriations act, which bans non-humanitarian U.S. assistance "to any country whose duly elected head of government is deposed by military coup or decree." Assistance may be resumed to such government if the President certifies to Congress that subsequent to the termination of assistance a democratically elected government has taken office. Post-September 2001 circumstances saw Congress take action on such restrictions. P.L. 107-57 (October 2001) waived coup-related sanctions on Pakistan through FY2002 and granted presidential authority to waive them through FY2003. Subsequent Congresses provided further annual waiver authority. In issuing the waiver, the President must certify for Congress that it "would facilitate the transition to democratic rule in Pakistan" and "is important to United States efforts to respond to, deter, or prevent acts of international terrorism." President Bush has exercised this waiver authority five times, most recently in July 2007. During a November House Foreign Affairs Committee hearing on Pakistan, Deputy Secretary of State Negroponte said the Bush Administration "strongly disagreed" with the emergency imposition in Islamabad, but he also called President Musharraf "an indispensable ally in the global war on terrorism" who has overseen major accomplishments in the battle against Islamist extremism and who has helped to make Pakistan a more moderate and prosperous country. The Deputy Secretary warned that cuts to U.S. aid programs for Pakistan "would send a negative signal" and that "Pakistan's future is too vital to our interests and our national security to ignore or to downgrade." Several Members in attendance called for suspending some forms of aid to Pakistan until anti-democratic developments there are reversed. In discussing the potential implications of new governance issues in Pakistan, Administration officials have emphasized the importance of not allowing Islamabad's continuing cooperation in anti-terrorism efforts to be undermined. Thus, the Administration likely will continue to see the demands of what it terms the "War on Terror" as trumping concerns about Pakistan's system of governance, as it has appeared to do since 2001. Many observers viewed President Bush's initial and overall reaction to the emergency decree and ensuing crackdown as somewhat subdued. Some see developments in Pakistan and the Administration's allegedly tepid response as evidence that President Bush's so-called Freedom Agenda is applied selectively and without principle. This perception may contribute to increased anti-American sentiments in Pakistan. Foreign Policy magazine offered a November 2007 exchange between two senior Pakistan experts which captures the main arguments of those who believe the United States must continue to support Musharraf's flawed leadership in Islamabad so as to maintain "continuity in the face of political instability" there, and those who believe Musharraf has become a liability whose rejection by the United States would signal to the Pakistani military that it must "start negotiating with the country's political parties and civil society instead of dictating to them." Many commentators continue to view Musharraf himself as the primary obstacle to both Pakistani democratization and to more effective Pakistani counterterrorism efforts. Some insist that Musharraf's resignation from the presidency is a necessary step toward democratization and national reconciliation. While President Bush has the authority to immediately halt all or some U.S. assistance to Pakistan, there are no signs that he intends to do so. In reviewing U.S. aid programs, Administration officials could place holds on certain items, such as F-16 combat aircraft being purchased by Pakistan as a Foreign Military Sale. Acute and historic Pakistani sensitivities to such U.S. policy choices—combined with repeatedly voiced concerns that Pakistan's full cooperation in counterterrorism efforts must continue—have most analysts doubting the Administration would halt delivery of defense supplies to Pakistan, in particular those useful for counterinsurgency. Congress already has placed legal conditions on future U.S. military aid to Pakistan. Pending legislation would provide for further conditionality. President Musharraf himself reached out to U.S. congressional leaders in November, telephoning the Chairs of the Senate and House Foreign Relations Committees in an apparent effort to discourage any new restrictions being placed on U.S. aid. Many analysts, including those making policy for the Bush Administration, assert that conditioning U.S. aid to Pakistan has a past record of failure and likely would be counterproductive by reinforcing Pakistani perceptions of the United States as a fickle and unreliable partner. More than $26 million in U.S. aid to Pakistan has been devoted to bilateral and multilateral democracy-related programs there, including the provision of 430,000 transparent ballot boxes purchased in tandem with the Japanese government, as well as part of an effort to computerize the country's voter rolls. Washington also plans to sponsor election observation programs in support of upcoming parliamentary elections. U.S. officials repeatedly have emphasized that the United States is neutral with regard to the outcome of Pakistan's national elections. Numerous commentators on U.S. assistance programs for Pakistan—along with some in Congress—have recommended making adjustments to the proportion of funds devoted to military versus economic aid and/or to the objectives of such programs. For most of the post-2001 period, funds have been split roughly evenly between economic and security-related aid programs, with the great bulk of the former going to a general economic (budget) support fund and most of the latter financing "big ticket" defense articles such as maritime patrol aircraft, self-propelled howitzers, and upgrades for F-16 combat aircraft. Only about one-tenth of the more than $10 billion provided to Pakistan since 2001 (including coalition support) has been specifically devoted to development and humanitarian programs. The Bush Administration and/or Congress may find it useful to better target U.S. assistance programs in such a way that they more effectively benefit the country's citizens. Numerous analysts call for improving America's image in Pakistan by making U.S. aid more visible to ordinary Pakistanis. | The year 2007 has seen Pakistan buffeted by numerous and serious political crises culminating in the December 27 assassination of former Prime Minster and leading opposition figure Benazir Bhutto, who had returned to Pakistan from self-imposed exile in October. Bhutto's killing in an apparent gun and bomb attack (the circumstances remain controversial) has been called a national tragedy for Pakistan and does immense damage to already troubled efforts to democratize the country. The assassination came just 12 days after Pakistani President Pervez Musharraf had lifted a 6-week-old emergency order. On November 3, some eight years after he overthrew the elected government in a bloodless 1999 military coup, Musharraf had suspended the country's constitution and assumed emergency powers in his role as both president and army chief. The move came as security circumstances deteriorated sharply across the country, but was widely viewed as being an effort by Musharraf to maintain his own power. His government placed numerous Supreme Court justices under house arrest, and jailed thousands of opposition figures and lawyers who opposed the abrogation of rule of law. It also cracked down on independent media outlets, many of which temporarily were shut down completely. President Musharraf sought to justify his "second coup" as being necessary to save Pakistan from Islamist extremism and from a political paralysis he blamed largely on the country's Supreme Court. The United States, which had exerted diplomatic pressure on Musharraf to refrain from imposing a state of emergency, views Pakistan as a vital ally in global and regional counterterrorism efforts, and it has provided considerable foreign assistance to Pakistan since 2001, in part with the goal of facilitating a transition to democracy in Islamabad. Washington and other world capitals pressured Musharraf to return Pakistan to its pre-November 3 political circumstances, relinquish his status as army chief, and hold free and fair elections in January 2008. Musharraf vowed to hold such elections (which, following the Bhutto assassination, were rescheduled for February 18) and he finally resigned his military commission in late November. While thousands of previously detained political activists have been released, most of the approximately 100 high court judges who refused to take a new oath of office remain under house arrest. In the months preceding the emergency declaration, Bhutto had engaged negotiations toward a power-sharing arrangement with Musharraf. The U.S. government supported such accommodation as being in the best interests of both Pakistan and the United States. Bhutto's catastrophic removal from Pakistan's political equation thus dealt a serious blow to U.S. interests. In light of this and other developments that constitute major setbacks for U.S. policy toward Pakistan, U.S. officials are reevaluating their approach, and many in Congress have called for cutting or halting certain types of U.S. assistance to Pakistan. Several bills condemning the emergency declaration were introduced in Congress (S.Res. 372, H.Res. 810, and H.Res. 823), but none has moved out of committee to date. Division J of the Consolidated Appropriations Act, 2008 (H.R. 2764) places conditions on a portion of U.S. military assistance to Pakistan and includes a call for "implementing democratic reforms" there. See also CRS Report RL33498, Pakistan-U.S. Relations. This report will be updated. |
This report provides a cumulative history of Department of Energy (DOE) funding for renewable energy compared with funding for the other energy technologies—nuclear energy, fossil energy, energy efficiency, and electric systems. Specifically, it provides a comparison that covers cumulative funding over the past 10 years (FY2009-FY2018), a second comparison that covers the 41-year period since DOE was established at the beginning of FY1978 through FY2018, and a third comparison that covers a 71-year funding history (FY1948-FY2018) for DOE and predecessor agencies. The final amount of FY2017 Energy and Water Development appropriations for DOE energy technologies was established by the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ), which was signed by the President on May 5, 2017. The act contained appropriations for all FY2017 appropriations bills, including Energy and Water Development programs (Division D). Final funding for FY2018 was set by the Consolidated and Further Continuing Appropriations Act, 2018 ( P.L. 115-141 ), which was signed by the President on May 23, 2018. Funding levels for DOE are included in Energy and Water Development programs (Division D). Figure 1 presents the fiscal year funding totals for DOE in real terms (2016 dollars) since 1978 for each technology or energy source. Table 1 shows the cumulative funding totals in real terms (2016 dollars) for the past 10 years (first column), 41 years (second column), and 71 years (third column). Table 2 converts the data from Table 1 into relative shares of spending for each technology or energy source, expressed as a percentage of total spending for each period. Figure 2 displays the data from the first column of Table 2 as a pie chart. That chart shows the relative shares of cumulative DOE spending for each technology or energy source over the 10 years from FY2009 through FY2018. Figure 3 provides a similar chart for the period from FY1978 through FY2018. Figure 4 shows a chart for FY1948 through FY2018. The availability of energy—especially gasoline and other liquid fuels—played a critical role in World War II. Another energy-related factor was the application of research and development (R&D) to the atomic bomb (Manhattan Project) and other military technologies. During the post-World War II era, the federal government began to apply R&D to the peacetime development of energy sources to support economic growth. At that time, the primary R&D focus was on fossil fuels and new forms of energy derived from nuclear fission and nuclear fusion. The Atomic Energy Act of 1946 established the Atomic Energy Commission (AEC), which inherited all of the Manhattan Project's R&D activities and placed nuclear weapon development and nuclear power management under civilian control. A major focus of the AEC was research on "atoms for peace," the use of nuclear energy for civilian electric power production. Prompted by the oil embargo declared by the Organization of Arab Petroleum Exporting Countries in 1973, the Federal Energy Administration was established in mid-1974. In early 1975, the Energy Research and Development Administration (ERDA) was established, incorporating the AEC and several energy programs that had been operating under the Department of the Interior and other federal agencies. The Department of Energy (DOE) was established by law in 1977, incorporating activities of the FEA and ERDA. All of the energy R&D programs—fossil, nuclear, renewable, and energy efficiency—were brought under its administration. DOE also undertook a small program in energy storage and electricity system R&D that supports the four main energy technology programs. From FY1948 through FY1977, the majority of federal government support for energy R&D focused on fossil energy and nuclear power technologies. Total spending on fossil energy technologies over that period amounted to about $17.1 billion, in constant FY2016 dollars. The federal government spent about $51.6 billion (in constant FY2016 dollars) during that period for nuclear energy R&D (in all the tables and figures in this report, the "nuclear" category includes both fission and fusion). The energy crises of the 1970s spurred the federal government to expand its R&D programs to include renewable (wind, solar, biomass, geothermal, hydro) energy and energy efficiency technologies. Comparatively modest efforts to support renewable energy and energy efficiency began during the early 1970s. Since FY1978, DOE has been the main supplier of energy R&D funding compared to other federal agencies. In real (constant dollar) terms, funding support for all four of the main energy technologies skyrocketed during the 1970s to a combined peak in FY1979 at about $8.6 billion (2016 constant dollars). Funding then dropped steadily, to about $2.0 billion (2016 dollars) per year during the late 1990s. Since then, funding has increased gradually—except that the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) provided a one-year spike of $13 billion (2016 dollars) in FY2009. For FY2018, DOE energy R&D funding stood at nearly $4.5 billion (2016 dollars). | Energy-related research and development (R&D)—on coal-based synthetic petroleum and on atomic bombs—played an important role in the successful outcome of World War II. In the postwar era, the federal government conducted R&D on fossil and nuclear energy sources to support peacetime economic growth. The energy crises of the 1970s spurred the government to broaden the focus to include renewable energy and energy efficiency. Over the 41-year period from the Department of Energy's (DOE's) inception at the beginning of FY1978 through FY2018, federal funding for renewable energy R&D amounted to about 18% of the energy R&D total, compared with 6% for electric systems, 16% for energy efficiency, 24% for fossil, and 37% for nuclear. For the 71-year period from 1948 through 2018, nearly 13% went to renewables, compared with nearly 5% for electric systems, 11% for energy efficiency, 24% for fossil, and 48% for nuclear. |
The decision in School District of the City of Pontiac v. Secretary of the United States Department of Education arose in response to litigation surrounding § 9527(a) of the Elementary and Secondary Education Act (ESEA), as amended by the No Child Left Behind (NCLB) Act of 2001. Section 9527(a)—the so-called "unfunded mandates" provision—states, "nothing in this Act shall be construed to authorize an officer or employee of the Federal Government to ... mandate a State or any subdivision thereof to spend any funds or incur any costs not paid for under this Act." Enacted in 2002, the NCLB Act reauthorized and revised the ESEA, which is the primary federal law that provides financial assistance to state and local school districts for pre-collegiate education. Perhaps the most notable feature of NCLB is the wide array of assessment and accountability measures that seek to improve student achievement and performance, particularly in troubled schools. For example, the act mandates that states administer annual tests in reading and mathematics for students in grades 3-8, requires that schools make adequate yearly progress toward improving student performance, establishes a series of required actions for schools that fail to meet such performance standards, and adds new requirements regarding teacher qualifications. The bulk of the new accountability requirements are tied to the Title I, Part A program for disadvantaged students, which is the largest source of federal funding for elementary and secondary education. Arguing that the costs of complying with some of the new accountability measures far outweigh what they receive in federal funds, a number of states and school districts have protested what they perceive as a lack of federal assistance for some of the act's more controversial requirements, such as the testing and school choice provisions. Other critics have questioned whether mandating that states pay for the costs associated with some of the act's requirements is even lawful, given the language of § 9527(a). Indeed, in 2005, the National Education Association (NEA), in conjunction with eight school districts in Michigan, Texas, and Vermont, filed a lawsuit claiming that the Secretary of Education was violating both the "unfunded mandates" provision and the Spending Clause of the U.S. Constitution. The NEA sought a declaratory judgment to the effect that states and school districts are not required to spend non-NCLB funds to comply with the NCLB mandates, and that a failure to comply with the NCLB mandates for this reason does not provide a basis for withholding any federal funds to which they are otherwise entitled under the NCLB. Plaintiffs also sought an injunction prohibiting the Secretary from withholding from states and school districts any federal funds to which they are entitled under the NCLB because of a failure to comply with the mandates of the NCLB that is attributable to a refusal to spend non-NCLB funds to achieve such compliance. In 2005, the United States District Court for the Eastern District of Michigan dismissed the NEA's lawsuit. In its ruling, the district court concluded that § 9527(a) should be interpreted as a prohibition against the imposition by federal officers and employees of additional, unfunded requirements beyond those provided for in the statute, rather than as an exemption from the statute's requirements when the federal government fails to fully fund the Title I program. As a result, the court dismissed the lawsuit for failing to state a claim upon which relief can be granted. The plaintiffs appealed the dismissal to the Court of Appeals for the Sixth Circuit, which reversed the district court's decision. However, the case was subsequently reheard, and the en banc Sixth Circuit divided evenly, meaning that the judgment of the district court to dismiss the case was affirmed. In School District of the City of Pontiac v. Secretary of the United States Department of Education , a three-judge panel of the Sixth Circuit, in a 2-1 vote, held that the Spending Clause, which empowers Congress to spend money for the "general Welfare of the United States," requires congressionally enacted statutes to provide "clear notice to the States of their liabilities should they decide to accept federal funding under those statutes" and that the NCLB Act "fails to provide clear notice as to who bears the additional costs of compliance." Because the court found the statute to be ambiguous in this regard, it ruled that the plaintiffs had established a claim upon which relief could be granted and therefore reversed the district court's decision and remanded the case to the district court for further proceedings consistent with the Sixth Circuit's opinion. In reaching its decision, the two-justice majority emphasized its view that the Spending Clause requires "clear notice" of a state's financial obligations. Under the clause, Congress has frequently promoted its policy goals by conditioning the receipt of federal funds on state compliance with certain requirements. Indeed, the Supreme Court "has repeatedly upheld against constitutional challenge the use of this technique to induce governments and private parties to cooperate voluntarily with federal policy." Although the Court has articulated several standards that purport to limit Congress's discretion to place conditions on federal grants under the spending clause, these standards generally have had little limiting effect: First, the conditions, like the spending itself, must advance the general welfare, but the determination of what constitutes the general welfare rests largely if not wholly with Congress. Second, because a grant is 'much in the nature of a contract' offer that the states may accept or reject, Congress must set out the conditions unambiguously, so that the states may make an informed decision. Third, the Court continues to state that the conditions must be related to the federal interest for which the funds are expended, but it has never found a spending condition deficient under this part of the test. Fourth, the power to condition funds may not be used to induce the states to engage in activities that would themselves be unconstitutional. Fifth, the Court has suggested that in some circumstances the financial inducement offered by Congress might be so coercive as to pass the point at which 'pressure turns into compulsion,' but again the Court has never found a congressional condition to be coercive in this sense. Relying on the standard that spending conditions be set forth "unambiguously," the Sixth Circuit cited two Supreme Court precedents: Pennhurst State School & Hospital v. Halderman and Arlington Central School District Board of Education v. Murphy . The Pennhurst decision involved the Developmentally Disabled Assistance and Bill of Rights Act of 1975, which contained a "bill of rights" provision stating that mentally disabled individuals "have a right to appropriate treatment, services, and habilitation for such disabilities." Unlike other requirements of the act, the bill of rights provision appeared to represent a general statement of federal policy and was not conditioned on the receipt of federal funding. As a result, the Court held that the provision did not create enforceable obligations on the state, in part because Congress had failed to provide clear notice to states that accepting federal funds would require compliance with the bill of rights provision. Meanwhile, the Arlington case involved the Individuals with Disabilities in Education Act, which authorizes a court to award "reasonable attorneys' fees" to plaintiffs who prevail in lawsuits brought under the act. Denying the plaintiffs' request for reimbursement of fees paid to a non-attorney expert, the Court held that the statute did not provide states with clear notice that their acceptance of federal funds obligated them to compensate prevailing parties for such expert fees. Applying these precedents, the Pontiac court sought to determine whether the NCLB Act provided clear notice to the states regarding their funding obligations. According to the court, because the statute "explicitly provides that '[n]othing in this Act shall be construed ... to mandate a State or any subdivision thereof to spend any funds or incur any costs not paid for under this Act,' a state official would not clearly understand that obligation to exist." Although the Sixth Circuit considered alternative interpretations under which the statute could be read to require states to comply with all NCLB requirements regardless of federal funding levels, the court ruled that "the only relevant question here is whether the Act provides clear notice to the States of their obligation." As a result, the court rejected the alternative interpretations advanced in the case, which included (1) the district court's view that the provision prevents officers and employees of the federal government from imposing additional requirements on the states, and (2) the Department of Education's (ED) argument that the provision simply emphasizes that state participation in NCLB is entirely voluntary. Although the Sixth Circuit acknowledged that ED's interpretation of the statute may ultimately be correct, the court held that neither interpretation was sufficiently evident to provide states with clear notice of their obligation to spend additional funds to comply with requirements that are not paid for under the act. As noted above, the Sixth Circuit's Pontiac decision was not unanimous. According to the dissenting judge, § 9527(a) does not render the NCLB Act ambiguous and therefore does not violate the Spending Clause. Specifically, the dissent distinguished the cases cited as precedents and contended that the text, operation, and structure of the act contradict the majority's interpretation. Asserting that state and local school officials "had a crystal clear vision of what Congress was offering them," the dissent characterized the majority opinion as "contrary to the way our nation's education has been operated and funded for centuries" and concluded that "there is no support in the text or context of the NCLB for the proposition that Congress intended such a monumental and unprecedented change in our nation's education funding." In response to the ruling, ED sought review of the Pontiac decision by petitioning the Sixth Circuit for a rehearing en banc . Typically, federal appeals are heard by a panel consisting of three judges, but the term " en banc ," which translates as "full bench," refers to a situation in which a larger number of circuit judges reconsider a decision made by the three-judge panel. Under the Federal Rules of Appellate Procedure, "[a]n en banc hearing or rehearing is not favored and ordinarily will not be ordered unless: (1) en banc consideration is necessary to secure or maintain uniformity of the court's decisions; or (2) the proceeding involves a question of exceptional importance." Although a court of appeals is not obligated to grant a rehearing, ED's petition for en banc review was successful. In a highly fractured decision, the en banc Sixth Circuit ultimately divided evenly, with eight judges voting to affirm the judgment of the district court and eight judges voting to reverse that judgment. In cases in which an evenly divided vote occurs, the usual practice is to affirm the decision of the lower court. As a result, the en banc Sixth Circuit issued an order affirming the district court's decision to dismiss the case. The en banc Pontiac decision contains four separate opinions, two of which concurred in the order affirming the district court's judgment and two of which would have reversed the district court's judgment. In the first concurring opinion, Judge Jeffrey Sutton contended that the school districts had failed to demonstrate that the NCLB Act was ambiguous because the alternative interpretation of the statute that they offered "is implausible and fails to account for, and effectively eviscerates, numerous components of the Act." Specifically, Judge Sutton argued that the school districts' interpretation was inconsistent with provisions relating to accountability, flexibility, waivers, and other requirements because excusing states from compliance with these features of the act would effectively gut the statute. Moreover, Judge Sutton noted, even if the states and school districts were uncertain about their financial obligations when they first participated in the NCLB programs, by the time they filed the lawsuit, they were clearly on notice that ED would require compliance with all of the statutory requirements in exchange for federal funds. In a separate opinion, Judge David McKeague concurred in affirming dismissal for procedural reasons. In the first opinion that would have reversed the district court's judgment, Judge R. Guy Cole argued that the NCLB Act "simply does not include any specific, unambiguous mandate requiring the expenditure of non-NCLB funds," and, as a result, the statute fails to provide clear notice to the states of their financial obligations. Acknowledging that several other interpretations of the statutory language were plausible, Judge Cole emphasized that the relevant inquiry is whether a recipient's obligations are unambiguous, and Congress failed to provide clear notice on that point. In a separate dissent, Judge Julia Smith Gibbons agreed with Judge Sutton that "NCLB does seem to require states to spend their own funds to comply with the statute's requirements," but also agreed with Judge Cole that "the language of § [9527(a)] is not clear." Judge Gibbons would therefore have focused the inquiry on whether § 9527(a) creates so much ambiguity as to cast doubt on the meaning of the rest of the statute and would have remanded the case for further development on this question. Because the school districts do not appear to have appealed to the Supreme Court, the litigation in the Pontiac case has come to an end. The Sixth Circuit's rulings in the Pontiac case have several implications. From a practical perspective, had the original ruling of the three-judge panel not been invalidated by the split vote of the en banc Sixth Circuit, the case might have significantly undermined the operation and effect of the Title I program, as well as other ESEA programs that are subject to the "unfunded mandates" provision in § 9527(a). Although that prospect did not occur, the fact that the en banc judges were evenly divided on the Spending Clause question could potentially create a degree of uncertainty across the landscape of federal funding programs by encouraging legal challenges not only to other federal education programs but also to federal funding programs operated by other federal agencies. In addition to the practical ramifications, there are several important legal implications of the Pontiac decision. First, the decision is effective only in states that fall within the jurisdiction of the Sixth Circuit. Those states are limited to Kentucky, Michigan, Ohio, and Tennessee. Because school districts and educational agencies in other states are not affected by the decision, they may decide to file similar lawsuits in other circuits. Second, if Congress is concerned that the closely divided vote of the en banc Sixth Circuit could encourage future challenges to NCLB requirements, then Congress may wish to clarify its views statutorily. For example, Congress could choose to amend the NCLB Act to clarify that states that accept NCLB funds are obligated to comply with all of the act's requirements, regardless of whether or not the costs of compliance are fully funded by the federal government. | In 2008, a panel of the Court of Appeals for the Sixth Circuit issued a decision in School District of the City of Pontiac v. Secretary of the United States Department of Education. In its decision, the court held that the No Child Left Behind (NCLB) Act failed to provide the required "clear notice" to states and school districts regarding the requirements they must fulfill as a condition of receiving federal funding. The case was subsequently reheard, but the en banc Sixth Circuit divided evenly, meaning that the judgment of the district court to dismiss the case was affirmed. This report discusses some of the practical and legal implications of the Sixth Circuit decisions. |
Under a renewable energy portfolio standard (RPS), retail electricity suppliers (electric utilities) must either provide a minimum amount of electricity from renewable energy resources or purchase tradable credits that represent an equivalent amount of renewable energy production. The minimum requirement is often set as a percentage share of retail electricity sales, which is usually expressed in terms of kilowatt-hours (kwh). Many RPS programs use tradable credits, sometimes referred to as renewable energy certificates, to increase flexibility and reduce the cost of compliance with the purchase mandate, and to facilitate compliance tracking. In the late 1990s, many states began to restructure their electric utility industries to allow for increased competition. Some of the states with this newly "restructured" system established an RPS as a way to create a continuing role for renewable energy in power production. Some states without a restructured industry also began to adopt an RPS. The total number of states with an RPS has grown steadily. In June 2007, the Federal Energy Regulatory Commission (FERC) reported that 23 states and the District of Columbia had an RPS in place, collectively covering about 40% of the national electric load. Mandatory state RPS targets range from a low of 2% to a high of 25%. However, most targets range from 10% to 20% and are scheduled to be reached between 2010 and 2025. Although this emerging "tapestry of state programs" continues to spread to more states, the majority of recent actions have been to increase and accelerate previously established standards. Most states have a similar definition of eligible renewable resources that covers wind, solar, geothermal, biomass, and several forms of water-based power, including hydropower, current, wave, tidal, and ocean power. At least 19 of the 23 states allow some form of credit trading. Non-compliance penalties range from about one cent per kwh to 5.5 cents per kwh. There are significant regional differences in resource availability. As shown in the previously cited FERC map, most states in the Southeast and Midwest regions do not have an RPS requirement. Several states have broadened their RPS provisions to allow certain energy efficiency measures and technologies to help satisfy the requirement. Most state RPS programs employ an annual renewable energy target that is set as a percentage of total projected electricity production. With a percentage requirement, the amount of mandated renewable energy will increase or decrease in proportion to changes in end-use electricity sales. In general, the targets increase gradually, in a step-wise fashion, over a period of several years. The scheduled rise of the annual target, and its peak value, are intended to create predictable long-term purchase obligations that drive new development and economies of scale. The graduated schedule is intended to allow time for competition to emerge among eligible resources. Also, to create stability that allows for long-term contracts and financing that can help keep renewable energy costs down, the peak target often is designed to remain in place for several years after it is reached. Most state targets include only generation from new renewable energy facilities, placed in service after the RPS standard is enacted. Many states have created tradable credits as a way to lower costs and facilitate compliance. Typically, the owner of a qualified renewable energy facility receives one credit for each kilowatt-hour of electricity produced. The credits are treated as a product separate from generated power. Credits are a purely financial product that represents the attributes of electricity generated from renewable energy sources. The owner may bundle the credits for sale with its electrical energy. Alternatively, the owner may sell the credits and power separately. The power would be sold in the electricity market, and the credits would be sold in a secondary credit trading market. Each year, RPS requires all retail suppliers to show that they have acquired a number of credits equivalent to the percentage target for the previous year. The retail suppliers have options for meeting this requirement. Suppliers can choose to build a renewable energy facility, purchase renewable power bundled with credits, or buy credits separately through the trading market. They are also free to choose the types of renewable energy to acquire, the price paid, and the contract terms offered. Further, they can choose whether to enter into long-term credit and/or renewable power purchase contracts or to purchase these commodities on the spot market. If a supplier cannot obtain sufficient credits through these means, it can achieve "alternative compliance" by purchasing additional credits from the state regulatory agency. For a supplier that otherwise fails to meet the credit target, most states require that it purchase additional credits at a higher penalty price. Spreading credit requirements over a longer time period can make a credit trading market more flexible. Many credit trading systems provide a "true-up" (reconciliation) period after the RPS compliance year. During this period, retailers that are short on their obligation can buy additional credits and those with excess credits can sell them. "Credit banking" can reduce retailer risk and promote economies of scale by allowing credits to be carried forward to one or more future years. "Deficit banking" allows a retailer to defer making up a credit shortage to a future year. Legislative proposals to establish a federal RPS date back to the 105 th Congress. During the 107 th , 108 th , and 109 th Congresses, the Senate passed an RPS, but it did not survive conference committee action. Several bills introduced in the 110 th Congress would create an RPS. In Senate floor action on H.R. 6 , S.Amdt. 1537 proposed a 15% RPS. The proposal triggered a lively debate, but was ultimately ruled non-germane. In House action during the 110 th Congress, H.R. 969 was introduced with a proposal for a 20% RPS target. The House Leadership indicates that H.R. 969 may be offered as a floor amendment to H.R. 3221 , the House energy independence legislation. During Senate floor debate on H.R. 6 , S.Amdt. 1537 proposed to add an RPS title to the bill. The proposal would have modified Title VI of the Public Utility Regulatory Policies Act of 1978 to establish an RPS for retail electric utilities that would be administered by the Department of Energy (DOE). For each retail supplier that sells more than four billion kwh per year, the RPS would set a minimum electricity production requirement from renewable resources. The standard would start at 3.75% in 2010, rising to 7.5% in 2013, 11.25% in 2017, and then reaching a peak of 15% in 2020. Resources eligible to meet the RPS would include wind, solar, geothermal, biomass, landfill gas, ocean (including current, wave, tidal, and ocean thermal), and incremental hydropower. Existing generation from hydroelectric and municipal solid waste facilities would not be eligible to meet the percentage standard, but could be excluded from the sales base used to calculate the RPS. To supplement direct generation, retail suppliers would be allowed to purchase power from other organizations, purchase tradable credits from suppliers with a surplus, and purchase credits from the government at an inflation-adjusted rate that would currently stand at 1.9 cents/kwh credit. Power generated on Native American lands would receive a double credit, and onsite distributed generation capacity smaller than one megawatt (mw) used to offset the requirement would receive a triple credit. An excess of tradable credits could be carried forward (banked) for up to two additional years into the future. A credit deficit would lead to a penalty that would be set as the greater of 2.0 cents/kwh or 200% of the average market value of the credits. A credit cost cap (adjusted for inflation) would be set at 2.0 cents/kwh. States would be allowed to have stronger RPS requirements. Funds gathered from alternative compliance and penalty payments would be used for state grants to support renewable energy production, particularly in states that have a low current capacity for renewable energy production. During the House Energy and Commerce Committee's markup of draft energy independence legislation, a proposed amendment would have added H.Amdt. 748 to the legislation, but it was later withdrawn. Similar to S.Amdt. 1537 , H.Amdt. 748 would modify Title VI of the Public Utility Regulatory Policies Act of 1978 to establish an RPS for retail electric utilities that would be administered by DOE. For each retail supplier that sells more than one billion kwh per year, the RPS would set a minimum electricity production requirement from renewable resources. The standard would start at 2.75% in 2010 and then rise annually until reaching a peak of 15% in 2020. Electricity savings from energy efficiency measures would be allowed to compose a maximum of 25% of the standard in any given year, rising to a peak of 4% of the 15% total in 2020. Renewable energy resources eligible to meet the RPS would include wind, solar, geothermal, biomass, landfill gas, ocean, tidal, and incremental hydropower. Existing generation from hydroelectric facilities would not be eligible to meet the percentage standard, but could be excluded from the sales base used to calculate the RPS. To supplement direct generation, retail suppliers would be allowed to purchase power from other organizations, purchase tradable credits from suppliers with a surplus, and purchase credits from the government at an initial rate of 1.9 cents/kwh credit that would be inflation-adjusted. Power generated on Native American lands would receive a double credit, and onsite generation used to offset the requirement would receive a triple credit. An excess of tradable credits could be carried forward (banked) for up to four years, and a deficit of credits could be "borrowed" from anticipated generation up to three years into the future. A credit deficit would lead to a penalty that would be set as the lesser of 4.5 cents/kwh or 300% of the average market value of the credits. A credit cost cap (adjusted for inflation) would be set as the lesser of 3.0 cents/kwh or 200% of the average market value of the credits. The governor of a state may petition DOE to allow up to 25% of a retail supplier's requirement to be met by submitting federal energy efficiency credits associated with eligible ("qualifying") electricity savings. Eligible electricity savings from end-use energy efficiency actions would include customer facility savings, reductions in distribution system losses, output from new combined heat and power systems, and recycled energy savings obtained from commercial and industrial systems. In each case, the electricity savings would have to meet the measurement and verification requirements that would be set out in DOE regulations. States would be allowed to have stronger RPS requirements. DOE would be required to engage the National Academy of Sciences to evaluate the RPS program. As Table 1 shows, S.Amdt. 1537 and H.Amdt. 748 have some similarities but differ in several important aspects. The two proposals have nearly identical conditions for overall target percentage, eligible resources, base amount, multiple credits, and state policy coordination. However, the proposals have notable differences in the exemption criterion, inclusion of 4% energy efficiency in target percentage, sunset date, tradable credit cost cap, and flexibility mechanisms. H.Amdt. 748 includes a program evaluation provision and S.Amdt. 1537 did not. Both proposals have a state grant provision. The grant provision in S.Amdt. 1537 had an additional focus on states with a low renewable energy resource capacity. The grant provision in H.Amdt. 748 allows funding to be used for grants, production incentives, and other state-approved mechanisms for renewable energy and energy efficiency. The following discussion describes some key aspects of the Senate floor debate over S.Amdt. 1537 to H.R. 6 , which proposed a 15% national RPS requirement. In the Senate RPS debate, opponents argued that regional differences in availability, amount, and types of renewable energy resources could make a federal RPS unfair. To support this point, a letter was introduced from the Southeastern Association of Regulatory Utility Commissioners that stated: The reality is that not all States are fortunate enough to have abundant traditional renewable energy resources, such as wind, or have them located close enough to the load to render them cost-effective. This is especially true in the Southeast and large parts of the Midwest.... Our retail electricity customers will end up paying higher electricity prices, with nothing to show for it. Further, a fact sheet prepared by the Edison Electric Institute (EEI) elaborated on the point about the potential impact on electricity prices: A federal RPS requirement could cost electricity consumers billions of dollars in higher electricity prices, but with no guarantee that additional renewable generation will actually be developed. Because many retail electric suppliers will not be able to meet an RPS requirement through their own generation, they will be required to purchase higher cost renewable energy from other suppliers or purchase renewable energy credits. Thus a nationwide RPS mandate will mean a massive wealth transfer from electric consumers in states with little or no renewable resources to the federal government or states where renewables happen to be more abundant. Proponents counterargued that a national system of tradable credits would enable retail suppliers in states with less abundant resources to comply at the least cost by purchasing credits from organizations in states with a surplus of low-cost production. Also, supporters pointed out that S.Amdt. 1537 provided that funds collected from payments for alternative compliance and penalties would be used to provide grants: ... to states in regions which have a disproportionately small share of economically sustainable renewable energy generation capacity.... The proponents also noted that in addition to many environmental and public interest groups, the RPS proposal was supported by some electric and natural gas utility companies as well as several corporations, including BP America and General Electric. Perhaps most importantly, RPS proponents countered by citing a study prepared by the Department of Energy's Energy Information Administration (EIA). The report examined the potential impacts of the 15% RPS proposed in S.Amdt. 1537 . Regarding resource availability, the report found that: Biomass generation, both from dedicated biomass plants and existing coal plants co-firing with biomass fuel, grows the most by 2030, more than tripling from 102 billion kilowatt-hours (kwh) in the reference case to 318 billion kwh with the RPS policy. In a follow-up fact sheet to that study, EIA noted that "the South has significant biomass potential." Compared with other regions of the country, EIA found that the South would not be "unusually reliant on purchases of allowances from other regions or the federal allowance window...." Further, EIA found that the net requirement for the core region of the South defined by the Southern Electric Reliability Corporation (SERC)—after subtracting exemptions for small retailers and adjusting the baseline generation for pre-existing hydropower and municipal solid waste facilities—was "below the national average requirement across all regions." Regarding electricity prices, RPS proponents also cited findings from the EIA study. EIA estimated that, relative to its base case projections for retail electricity prices, the 15% RPS would likely raise retail prices by slightly less than 1% over the 2005 to 2030 period. Further, the report estimated that relative to its base case projections for retail natural gas prices, the RPS would likely cause retail natural gas prices to fall slightly over the 2005 to 2030 period. EIA qualified the report's findings on potential electricity price impacts. It noted that projected impacts of an RPS on expenditures for electricity and natural gas in end-use sectors are sensitive to assumptions about the projected baseline generation fuel mix in its reference case. A higher share of natural gas in the generation mix would allow an RPS to displace proportionally more natural gas. Thus, to the extent that natural gas contributes a larger share of the future generation mix, the 15% RPS would have more economically favorable impacts. To the extent that natural gas contributes a smaller share, the opposite effect would be more likely. Opponents also contended that the proposed 15% RPS could impose indirect costs for transmission. EEI stressed that costly new high-voltage transmission lines would be needed, especially for wind turbines, which are often located far from population centers. EEI further notes that delays are likely and transmission infrastructure issues have posed significant challenges to the growth of renewable generation. Some analysts have suggested that even if plans and financing were in place now to develop the national transmission capacity needed to meet a 15% (or higher) RPS, the construction could not take place quickly enough to meet the 2020 target date. The American Wind Energy Association (AWEA) has acknowledged the transmission issue, pointing to ongoing efforts to address it. For example, the Texas RPS is driving a boom in wind development. To address transmission constraints there, the state recently established "competitive renewable energy zones," and directed the Electric Reliability Council of Texas (ERCOT) to develop transmission plans for up to 25,000 megawatts of new wind capacity. RPS proponents note that transmission may be much less of an issue for biomass power development in the South. For co-firing in existing coal plants, new biomass generation may not require any new transmission infrastructure. Even for new biomass plants, transmission needs may involve shorter distances, smaller volumes, and lower costs than that which may be required for more remote wind farm locations in the Midwest regions. Opponents of RPS brought an alternative measure to the Senate floor that they argued would address their concerns about resource hardship, transmission needs, and electricity price increases. That measure, S.Amdt. 1538 , proposed expanding the RPS concept to include energy efficiency measures and other energy production facilities. The "Clean Portfolio Standard," or CPS, would have started the requirement at 5% in 2010 and increased to 20% by 2020. Eligible resources would have been expanded beyond renewables to include energy efficiency, fuel cells, new nuclear power plants, and new coal power plants that include carbon dioxide capture and storage equipment. RPS proponents argued against the CPS proposal. They asserted that the main purpose of the RPS was to stimulate the market development of new pre-commercial and near-commercial renewable energy equipment. The CPS, they said, would not require any real change in the energy mix, and would mainly add an incentive to expand the use of conventional nuclear energy and fossil energy with carbon capture. In conclusion, RPS proponents contended that the CPS proposal would eliminate any real requirement to produce additional power from renewables. S.Amdt. 1538 was tabled by a vote of 56 to 39. In House floor action on H.R. 3221 , an RPS amendment ( H.Amdt. 748 ) was added by a vote of 220 to 190. The bill subsequently passed the House by a vote of 241 to 172. The RPS amendment would set a 15% target for 2020, and would allow up to 4 percentage points of the requirement to be met with energy efficiency measures. The issues in debate, and the constellation of proponents and opponents, were similar to the elements of the preceding Senate floor debate over S.Amdt. 1537 . The arguments in opposition to H.Amdt. 748 echoed those raised in the Senate RPS floor debate. The National Association of Manufacturers (NAM) and the Edison Electric Institute (EEI) expressed their opposition to RPS. Both NAM and EEI stated that the RPS could create hardship for states and regions with low amounts of renewable resources, impose burdens for electricity transmission and reliability, and raise electricity prices for consumers. Both also stated support for a long-term extension of federal tax credits for renewables, which they contended would be the most effective form of support. On the House floor, RPS opponents decried the absence of support for nuclear power facilities and said the RPS proposals would undermine coal facilities. They contended that it was unfair to exempt electric cooperatives, municipal utilities, and the state of Hawaii. Opponents to RPS argued further that some states with fewer resources would be burdened with additional electricity costs. Opponents also contended that biomass power technologies were not yet ready for commercial use and that certain usable forms of biomass had been left out of the definition of eligible biomass resources. The American Wind Energy Association stated that a national RPS is needed "to fully reap the benefits of renewable energy," and cited broad support for RPS. Also, the Union of Concerned Scientists (UCS) said it used EIA's computer model to examine the potential effects of an RPS and found somewhat larger savings for cumulative electricity and natural gas bills than EIA's study. An EIA report observed that in the early years after its creation in 1992, the federal renewable energy electricity production tax credit (PTC) "had little discernable effect on the wind and biomass industries it was designed to support." In a subsequent report, EIA found that, after the late 1990s, the combined effect of the PTC with state RPS programs had been a major spur to wind energy growth. On the House floor, RPS proponents argued that all states have sufficient renewable energy resources and that the RPS had been recalibrated to include energy efficiency measures to make it even more flexible. Supporters also cited a study by Wood Mackenzie Corporation that showed RPS would lead to a net reduction in natural gas an electricity prices. They contended that cooperatives and municipal utilities had been excluded in order to make the target easier to achieve. On the House floor, RPS opponents also contended that biomass power technologies were not yet ready for commercial use and that certain usable forms of biomass were excluded. Proponents acknowledged that there is a need to expand the definition of biomass resources, and offered to do so in conference committee. In November 2007, the DOE Energy Information Administration (EIA) submitted a report that describes the potential impacts of the 15% RPS provision in H.R. 3221 (Title IX, Subtitle H). The report found that the RPS provision: ... is similar in many respects to RPS proposals that have previously been analyzed by EIA. Our analysis shows that the RPS, taken alone, tends slightly to increase projected electricity prices and costs by 2030, while tending to reduce the use of natural gas for electricity generation and natural gas prices. Cumulative discounted residential energy expenditures through 2030, which are projected to total $2,874 billion in the reference case, are unchanged or fall slightly, with a reduction of approximately $400 million (.01 percent) in one of the two RPS cases modeled. The report examined a case A, which assumed that energy efficiency credits would be claimed to the maximum extent possible and would not result in significant sales reductions. Case B assumed that no claims would be made for energy efficiency credits. The results for both cases showed that RPS "tends to reduce projected natural-gas-fired electricity generation relative to the EIA reference case." EIA found that overall natural gas prices would be lower in the RPS cases and that residential expenditures would be relatively flat, until late in the period, and would grow by 0.4% to 0.8% by 2030. EIA includes a caveat about its findings: ... it should be noted that the RPS proposal was modeled on a standalone basis, so its possible interactions with other policy changes proposed in H.R. 3221 or other bills were not considered. For example, proposals to increase the use of transportation fuels derived from biomass could increase competition for the biomass supplies utilized in this analysis to comply with the RPS targets. After the House completed action on H.R. 3221 , informal bipartisan negotiations over the omnibus energy bills began between the House and Senate. The RPS provision (Title IX, Subtitle H) in the H.R. 3221 continues to be key issue. On December 1, 2007, the Ranking Member of the Senate Committee on Energy and Natural Resources stated that the House Leadership's intent to include an RPS led him to cease negotiations. Further, on December 3, 2007, the White House reportedly announced that it may veto the negotiated bill, if it includes an RPS and certain other provisions. On December 4, 2007, United Press International reported that, in a press conference, DOE Secretary Bodman warned against the inclusion of "a narrow, one-size-fits-all renewable portfolio standard." | Under a renewable energy portfolio standard (RPS), retail electricity suppliers (electric utilities) must provide a minimum amount of electricity from renewable energy resources or purchase tradable credits that represent an equivalent amount of renewable energy production. The minimum requirement is often set as a percentage share of retail electricity sales. More than 20 states have established an RPS, with most targets ranging from 10% to 20% and most target deadlines ranging from 2010 to 2025. Most states have established tradable credits as a way to lower costs and facilitate compliance. State RPS action has provided an experience base for the design of a possible national requirement. RPS proponents contend that a national system of tradable credits would enable retail suppliers in states with fewer resources to comply at the least cost by purchasing credits from organizations in states with a surplus of low-cost production. Opponents counter that regional differences in availability, amount, and types of renewable energy resources would make a federal RPS unfair and costly. In Senate floor action on H.R. 6 in the 110th Congress, S.Amdt. 1537 proposed a 15% RPS target. The proposal triggered a lively debate, but was ultimately ruled non-germane. In that debate, opponents argued that a national RPS would disadvantage certain regions of the country, particularly the Southeastern states. They contended that the South lacks a sufficient amount of renewable energy resources to meet a 15% renewables requirement. They further concluded that an RPS would cause retail electricity prices to rise for many consumers. RPS proponents countered by citing a study by the Energy Information Administration (EIA). The report examined the potential impacts of the 15% RPS proposed in S.Amdt. 1537. It indicated that the South has sufficient biomass generation, both from dedicated biomass plants and existing coal plants co-firing with biomass fuel, to meet a 15% RPS. EIA noted further that the estimated net RPS requirement for the South would not make it "unusually dependent" on other regions and was in fact "below the national average requirement...." Regarding electricity prices, EIA estimated that the 15% RPS would likely raise retail prices by slightly less than 1% over the 2005 to 2030 period. Further, the RPS would likely cause retail natural gas prices to fall slightly over that period. In House floor action on an RPS amendment (H.Amdt. 748) to H.R. 3221, key points and counterpoints of the Senate RPS debate were repeated. The RPS was added (220 to 190), and the bill passed the House (241 to 172). The RPS amendment would set a 15% target for 2020, and would allow up to 4 percentage points of the requirement to be met with energy efficiency measures. After House action, informal bipartisan House-Senate negotiations began. The House RPS provision (§9006) continues to be key issue. On December 1, 2007, the Ranking Member of the Senate Energy and Natural Resources Committee stated that the House Leadership's intent to include an RPS led him to cease negotiations. Further, the White House has reportedly announced that it would veto the bill if it includes an RPS. |
The Fair Labor Standards Act (FLSA), enacted in 1938, is the federal legislation that establishes the general minimum wage that must be paid to all covered workers. A full discussion of the coverage of the minimum wage is beyond the scope of this report, which provides only a broad overview of the topic. In general, th e FLSA mandates broad general minimum wage coverage. It also specifies certain categories of workers who are not covered by FLSA wage standards, such as workers with disabilities or certain youth workers. The act was enacted because its provisions were meant to both protect workers and stimulate the economy. The FLSA also created the Wage and Hour Division (WHD), within the Department of Labor (DOL), to administer and enforce the act. In 1938, the FLSA established a minimum wage of $0.25 per hour. The minimum wage provisions of the FLSA have been amended numerous times since then, typically for the purpose of expanding coverage or raising the wage rate. Since its establishment, the minimum wage rate has been raised 22 separate times. The most recent change was enacted in 2007 ( P.L. 110-28 ), which increased the minimum wage from $5.15 per hour to its current rate of $7.25 per hour in three steps. For employees working in states with a minimum wage different from that of the federal minimum wage, the employee is entitled to the higher wage of the two. The FLSA extends minimum wage coverage to individuals under two types of coverage—"enterprise coverage" and "individual coverage." An individual is covered if they meet the criteria for either category. Around 130 million workers, or 84% of the labor force, are covered by the FLSA. The first category of coverage is at the business or enterprise level. To be covered, an enterprise must have at least two employees and must have annual sales or "business done" of at least $500,000. Annual sales or business done includes all business activities that can be measured in dollars. Thus, for example, retailers are covered by the FLSA if their annual sales are at least $500,000. In non-sales cases, such as enterprises engaged in leasing property, gross amounts paid by tenants for property rental will be considered "business done" for purposes of determining enterprise coverage. In addition, regardless of the dollar volume of business, the FLSA applies to hospitals or other institutions primarily providing medical or nursing care for residents; schools (preschool through institutions of higher education); and federal, state, and local governments. The second category of coverage is at the individual level. Although an enterprise may not be subject to minimum wage requirements if it has less than $500,000 in annual sales or business done, employees of the enterprise may be covered if they are individually engaged in interstate commerce or in the production of goods for interstate commerce. The definition of interstate commerce is fairly broad. To be engaged in "interstate commerce," employees must produce goods (or have indirect input to the production of those goods) that will be shipped out of the state of production, travel to other states for work, make phone calls or send emails to persons in other states, handle records that are involved in interstate transactions, or provide services to buildings (e.g., janitorial work) in which goods are produced for shipment outside of the state. The FLSA covers most, but not all, private and public sector employees. Certain employers and employees are exempt from all or parts of the FLSA minimum wage provisions, either through the individual or enterprise coverage or through specific exemptions included in the act. In addition, the FLSA provides for the payment of subminimum wages (i.e., less than the statutory rate of $7.25 per hour) for certain classes of workers. The FLSA statutorily exempts various workers from FLSA minimum wage coverage. Some of the exemptions are for a class of workers (e.g., executive, administrative, and professional employees), while others are more narrowly targeted to workers performing specific tasks (e.g., workers employed on a casual basis to provide babysitting services). The list below is not exhaustive but is intended to provide examples of workers who are not covered by the minimum wage requirements of the FLSA: bona fide executive, administrative, and professional employees; individuals employed by certain establishments operating only part of the year (e.g., seasonal amusement parks, organized summer camps); individuals who are elected to state or local government offices and members of their staffs, policymaking appointees of elected officeholders of state or local governments, and employees of legislative bodies of state or local governments; employees who are immediate family members of an employer engaged in agriculture; individuals who volunteer their services to a private, nonprofit food bank and who receive groceries from the food bank; agricultural workers meeting certain hours and job duties requirements; individuals employed in the publication of small circulation newspapers; domestic service workers employed on a casual basis to provide babysitting; individuals employed to deliver newspapers; and certain employees in computer-related occupations. The FLSA also allows the payment of subminimum wages for certain classes of workers, including the following: Youth. Employers may pay a minimum wage of $4.25 per hour to individuals under the age of 20 for the first 90 days of employment. Learners. Employers may apply for special certificates from the Wage and Hour Division of DOL that allow them to pay students who are receiving instruction in an accredited school and are employed part-time as part of a vocational training program a wage at least 75% of the federal minimum wage ($5.44 at the current minimum wage). Full-Time Students. Employers may apply for special certificates from the Wage and Hour Division of DOL that allow them to pay full-time students who are employed in retail or service establishments, an agricultural occupation, or an institution of higher education a wage at least 85% of the federal minimum wage ($6.16 at the current minimum wage). Individuals with Disabilities. Employers may apply for special certificates from the Wage and Hour Division of DOL that allow them to pay wages lower than the otherwise applicable federal minimum to persons "whose earning or productive capacity is impaired by age, physical or mental deficiency, or injury." As elaborated in regulations, disabilities that may affect productive capacity include, but are not limited to, blindness, mental illness, mental retardation, cerebral palsy, alcoholism, and drug addiction. There is no statutory minimum wage required under this provision of the FLSA, but pay is to be broadly commensurate with pay to comparable non-disabled workers and related to the individual's productivity. Tipped Workers. Under Section 203(m) of the FLSA, a "tipped employee"—a worker who "customarily and regularly receives more than $30 a month in tips"—may have his or her cash wage from an employer reduced to $2.13 per hour, as long as the combination of tips and cash wage from the employer equals the federal minimum wage. An employer may count against his or her liability for the required payment of the full federal minimum wage the amount an employee earns in tips. The value of tips that an employer may count against their payment of the full minimum wage is known as the "tip credit." Under the current federal minimum wage and the current required minimum employer cash wage, the maximum tip credit is $5.12 per hour (i.e., $7.25 minus $2.13). Thus, all workers covered under the tip credit provision of the FLSA are guaranteed the federal minimum wage. The most recent data available (2016) indicate that there are approximately 2.2 million workers, or 2.7% of all hourly paid workers, whose wages are at or below the federal minimum wage of $7.25 per hour. Of these 2.2 million workers, approximately 700,000 earn the federal minimum wage of $7.25 per hour, and the other 1.5 million earn below the federal minimum wage. As the Bureau of Labor Statistics (BLS) notes, the large number of individuals earning less than the statutory minimum wage does not necessarily indicate violations of the FLSA but may reflect exemptions or misreporting. The "typical" minimum wage earner tends to be female, age 20 or older, part-time, and working in a food service occupation. The data in Table 1 below show selected characteristics of the workers earning at or below the federal minimum wage. The data are based on the universe of the estimated 2.2 million workers who earn $7.25 per hour or less. States may also choose to set labor standards that are different from federal statutes. The FLSA establishes that if states enact minimum wage, overtime, or child labor laws more protective of employees than those provided in the FLSA, the state law applies. In the case of minimum wages, this means that if an individual is covered by the FLSA in a state with a higher state minimum wage, the individual is entitled to receive the higher state minimum wage. On the other hand, some states have set minimum wages lower than the FLSA minimum. In those cases, an FLSA-covered worker would receive the FLSA minimum wage and not the lower state minimum wage. As of January 1, 2017, 29 states and the District of Columbia have minimum wage rates above the federal rate of $7.25 per hour. These rates range from $7.50 per hour in New Mexico to $11.00 in Massachusetts and Washington State and $12.50 in Washington, DC. Two states have minimum wage rates below the federal rate and five have no minimum wage requirement. The remaining 14 states have minimum wage rates equal to the federal rate. In the states with no minimum wage requirements or wages lower than the federal minimum wage, only individuals who are not covered by the FLSA are subject to those lower rates. The literature on the effects of the minimum wage is vast and represents one of the more well-studied issues in labor economics. As such, this topic has resulted in hundreds of academic and non-academic publications. It is beyond the scope of this section to summarize or synthesize this literature. Broadly speaking, there is not universal consensus on the causal relationship between changes in minimum wage and other economic outcomes. This section presents a brief summary of the primary arguments that proponents and opponents make regarding minimum wage increases. Proponents of an increase in the minimum wage often assert that raising wages can be a component in reducing poverty for individuals and families and a direct way to increase earnings for lower-income workers. Assuming the minimum wage earner does not suffer a loss of employment, hours, or other wage supplements as a result of the increase, then an increased minimum wage should close the gap between earnings and the poverty line. For example, a single parent with two children who works full-time, year-round at the current minimum wage has earnings of about 78% of the poverty line. An increase in the minimum wage to $9 per hour would raise that family's earnings to about 97% of the poverty line and an increase to $12 per hour would increase family earnings to 129% of the poverty line. Proponents of minimum wage increases also argue that additional income for individuals will result in increased aggregate demand in the economy. Adult minimum wage households have a higher marginal propensity to spend additional income than higher-income households. Therefore, to the extent that minimum wage increases raise the income of adult minimum wage households, a minimum wage increase could have a stimulative effect on the economy. Proponents of an increase in the minimum wage argue that it could help reduce earnings inequality by setting a higher floor at the lower end of the wage scale. At the level of an individual business, wage compression might occur if the minimum wage increases at the low end of the pay scale were offset by freezes or reductions in pay at higher levels of pay. That is, the spread between the lowest earners and the highest earners at a business might narrow if the business adjusted to higher pay for minimum wage earners by keeping flat or reducing pay for higher earners. Economy-wide, the size of the gap between low-wage earners and middle and high earners might decrease depending on how widely wage compression was used as a channel of adjustment to minimum wage increases. A higher wage may lead workers to choose to stay in their jobs longer than they otherwise would have under a lower wage. Because high turnover is costly to businesses, proponents of minimum wage increases argue that an increase in the minimum wage may be offset by lower turnover costs. Much of the popular discussion about the effects of a minimum wage increase focuses only on one channel of adjustment—employment. In particular, opponents of a minimum wage or of minimum wage increases assert that increases in the minimum wage will result in increased unemployment, either broadly or for particular subpopulations of the labor market (e.g., youth, less skilled or experienced workers), or a reduction in hours worked. In a standard competitive model of the labor market, the introduction of or increase in the minimum wage (a price increase) results in employment losses (demand decrease). Because the minimum wage is not targeted to workers in low-income households, it is possible that the minimum wage does not reduce poverty to the extent a targeted policy might (e.g., tax credit). The minimum wage is a relatively blunt anti-poverty policy as it may raise wages for people not in poverty such as suburban teenagers who live in a middle- or high-income household. Another way minimum wage increases might be absorbed is through changes in prices. Specifically, employers facing a higher mandated minimum wage might choose, if possible, to pass on the extra costs of labor to the consumers through higher prices. If minimum wage increases result in an increase in the aggregate price level, then the inflationary effects would erode some of the purchasing power of both those receiving raises and everyone else in the economy. A decrease in profits could be another means of adjustment to an increase in the minimum wage. The ability of any given business to lower profits to pay for mandated increases depends on the profit margins of that firm. | The Fair Labor Standards Act (FLSA), enacted in 1938, is the federal legislation that establishes the minimum hourly wage that must be paid to all covered workers. The minimum wage provisions of the FLSA have been amended numerous times since 1938, typically for the purpose of expanding coverage or raising the wage rate. Since its establishment, the minimum wage rate has been raised 22 separate times. The most recent change was enacted in 2007 (P.L. 110-28), which increased the minimum wage to its current level of $7.25 per hour. In addition to setting the federal minimum wage rate, the FLSA provides for several exemptions and subminimum wage categories for certain classes of workers and types of work. Even with these exemptions, the FLSA minimum wage provisions still cover the vast majority of the workforce. Despite this broad coverage, however, the minimum wage directly affects a relatively small portion of the workforce. Currently, there are approximately 2.2 million workers, or 2.7% of all hourly paid workers, whose wages are at or below the federal minimum wage of $7.25 per hour. Most minimum wage workers are female, are age 20 or older, work part time, and are in food service occupations. Proponents of increasing the federal minimum wage argue that it may increase earnings for lower income workers, lead to reduced turnover, and increase aggregate demand by providing greater purchasing power for workers receiving a pay increase. Opponents of increasing the federal minimum wage argue that it may result in reduced employment or reduced hours, lead to a general price increase, and reduce profits of firms paying a higher minimum wage. |
Congressional hearings, news reports over the past several years, and even the 2006 film Blood Diamond have brought increased attention to the mining and selling of conflict minerals. Generally defined, conflict minerals are "minerals mined in conditions of armed conflict and human rights abuses, notably in the eastern provinces of the Democratic Republic of the Congo [DRC].... " Resource extraction payments have also received global attention. The Extractive Industries Transparency Initiative, begun in 2002, is an organization made up of sponsoring countries (the United States is one), natural resource extractive companies, and other nongovernmental organizations. Their goal is the transparency of all payments made by resource extraction issuers to governments. Concerned about the armed conflicts in the DRC and about the need for transparency of resource extraction payments, Congress in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) added two sections to deal with these issues. Both of the sections require the issuing of regulations by the Securities and Exchange Commission (SEC or Commission) in order to make public the involvement of U.S. companies in conflict minerals and in resource extraction payments. Very briefly, Section 1502 mandates the SEC to issue rules requiring the disclosure by publicly traded companies of the origins of listed conflict minerals. Section 1504 mandates SEC rules requiring resource extraction issuers to disclose payments made to a foreign government or the federal government for the purpose of the commercial development of oil, natural gas, or minerals. The SEC has issued final rules, and court cases have challenged the rules on several grounds. Section 1502 of Dodd-Frank, codified at 15 U.S.C. Section 78m(p), mandates that the SEC issue regulations requiring publicly traded companies filing annual and other reports with the SEC to disclose annually the origins of conflict minerals necessary to its operations if the minerals originate from the Democratic Republic of the Congo (DRC) or an adjoining country. Congress enacted this requirement because of its belief that the "exploitation and trade of conflict minerals originating in the Democratic Republic of the Congo is helping to finance conflict characterized by extreme levels of violence in the eastern Democratic Republic of the Congo, particularly sexual- and gender-based violence and contributing to an emergency humanitarian situation therein.... " If the minerals originate from the DRC or an adjoining country, the company must file a report with the SEC and include such information as a description of its due diligence on the source and chain of custody of the minerals and a description of the products manufactured or contracted to be manufactured that are not DRC conflict free. (DRC conflict free products are products which do not contain minerals directly or indirectly financing or benefiting armed groups in the DRC or an adjoining country.) Dodd-Frank defines "conflict mineral" as: "(A) columbite-tantalite (coltan) [used to produce tin], cassiterite, gold, wolframite [used to produce tungsten], or their derivatives; or (B) any other mineral or its derivatives determined by the Secretary of State to be financing conflict in the Democratic Republic of the Congo or an adjoining country." On August 22, 2012, the SEC voted 3-2 to adopt final rules to require publicly traded companies to disclose information related to their use of conflict minerals. 17 C.F.R. Section 240.13p-1 requires every company filing reports with the SEC having "conflict minerals which are necessary to the functionality or production of a product manufactured or contracted by that registrant to be manufactured" to file a report on Form SD to disclose required information. In complying with the requirements of Form SD, the company must in good faith conduct a reasonable country of origin inquiry concerning its necessary conflict minerals. If the company determines that its necessary conflict minerals did not originate in the DRC or an adjoining country or if the company reasonably believes that its necessary minerals came from recycled or scrap sources, it must disclose its determination and describe the inquiry it made in arriving at its determination. If, on the other hand, the company knows or has reason to believe that any of its necessary conflict minerals originated in the DRC or an adjoining country and are not from recycled or scrap sources, it must exercise due diligence on the source and chain of custody of the minerals. Depending upon the results of the due diligence, the company may be required to file a Conflict Minerals Report as an exhibit to its specialized disclosure report. The Conflict Minerals Report must contain information about the registrant's due diligence and a product description. The company must use due diligence which conforms to a nationally or internationally recognized due diligence framework if a framework is available for the conflict mineral, including but not limited to an independent private sector audit in accordance with standards established by the Comptroller General; disclose steps that it has taken or will take if products are DRC conflict undeterminable to mitigate the risk that the minerals benefit armed groups; and exercise appropriate due diligence in determining the source and chain of custody of necessary conflict minerals if a recognized due diligence framework does not exist. The product description for products not found to be DRC conflict free or DRC conflict undeterminable must have a description of those products, the facilities used to process the necessary conflict minerals in those products, the country of origin of the necessary conflict minerals, and efforts to determine the mine or location of origin. If the necessary conflict minerals are from only recycled or scrap sources, those products may be considered DRC conflict free, thereby freeing a company from having to provide the above product information. The SEC made a number of changes from the proposed rule to the final rule, several of which were at the urging of business groups such as the Chamber of Commerce. Nevertheless, critics complained that compliance costs would be excessive and that, in many cases, companies, despite due diligence, would be unable to meet the SEC's requirements. A legal challenge to the SEC's rule occurred. The National Association of Manufacturers (NAM), the Chamber of Commerce, and the Business Roundtable filed a lawsuit to challenge the SEC rule. National Association of Manufacturers v. Securities and Exchange Commission challenged the rule on the basis of several arguments: 1. The SEC did not conduct a proper cost-benefit analysis, as required by Sections 3(f) and 23(a)(2) of the Securities Exchange Act. 2. The SEC incorrectly concluded that the statute did not allow it to adopt a de minimis exception (allowing only a trace amount of a conflict mineral) to the rule. 3. The rule improperly required due diligence and a report from a company having only a reason to believe that conflict minerals may have originated in the covered region. 4. The SEC required a company to use an extremely burdensome approach in tracing minerals back to their smelter or refiner. 5. The SEC mistakenly interpreted the statute to apply to companies which only contracted for the manufacture of products and did not actually manufacture any products. 6. The rule was inconsistent by giving small issuers four years to be able to trace conflict minerals in their supply chain but only two years for large issuers, many of whom may have to obtain information from small companies to meet their obligations. 7. The statute and the rule violated the Constitution's First Amendment guarantee of freedom of speech by requiring a company to describe its products as not DRC conflict free even when it is simply unable to trace its supply chains to determine the minerals' origins, thereby forcing a company falsely to associate itself with groups involved in human rights violations. Amnesty International intervened as defendants in the case to defend the regulations. On July 23, 2013, the United States District Court for the District of Columbia (D.C. District Court) held that the SEC complied with its cost-benefit analysis and other Administrative Procedure Act (APA) requirements and that it did not violate the Constitution's First Amendment. In its analysis, the court placed the plaintiffs' arguments into two separate categories of claims: 1. The SEC, in issuing the rule, did not adhere to the Administrative Procedure Act (APA), thereby ignoring its statutory obligations under the Securities Exchange Act and engaging in rulemaking that was arbitrary and capricious. 2. The statute and the rule violated the Constitution's First Amendment freedom of speech guarantee. In analyzing the plaintiffs' APA claims, the court started with the APA statutory language that agency action is unlawful if it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." The court then discussed cases that have ruled that the arbitrary and capricious standard is narrow and that a court cannot substitute its judgment for the agency's judgment. ("[T]he agency's action remains 'entitled to a presumption of regularity,' Citizens to Preserve Overton Park, Inc. v. Volpe , 401 U.S. 402, 414-16 (1971).") Nevertheless, the court must be satisfied that the agency's statutory interpretation has a rational connection with the choice that it has made. The Supreme Court in Chevron U.S.A., Inc. v. Natural Resources Defense Council limited a court's role in reviewing agency interpretations of statutes. The D.C. District Court discussed the two-part Chevron test in examining the SEC's interpretation of the statute. Under the Chevron test, the court must first determine "whether Congress has directly spoken to the precise question at issue" (Step One). If so, the court's inquiry ends and the statutory language controls. If the statute is ambiguous, the reviewing court must consider whether the agency's interpretation is a permissible interpretation of the statute (Step Two). The district court first examined plaintiffs' claim that the SEC did not properly analyze the costs and benefits of the rule, in violation of the requirements under the Securities Exchange Act that the SEC consider "whether the action will promote efficiency, competition and capital formation" and ensure that the rule does not "impose a burden on competition not necessary or appropriate in furtherance of the purposes of" the Exchange Act. Plaintiffs alleged that the SEC did not properly analyze the costs and benefits of the rule because it had not independently determined whether the rule was necessary or appropriate to decrease conflict and violence in the DRC. The court disagreed with this charge. According to the court, the Exchange Act provisions cited by plaintiffs (even if they applied, which is not certain, since Section 1502 of Dodd-Frank did not reference them), did not require the type of analysis that plaintiffs claimed was necessary. Instead, the provisions required only SEC consideration of such matters as promotion of efficiency and not imposing a burden upon competition. "Simply put, there is no statutory support for Plaintiffs' argument that the Commission was required to evaluate whether the Conflict Mineral Rule would actually achieve the social benefits Congress envisioned." Plaintiffs cited D.C. Circuit Court cases as precedent for SEC rule invalidation. The court responded that the cases which plaintiffs cited were based on "shortcomings on the Commission's part with respect to the economic implications of its actions—economic implications that the SEC was statutorily required to consider in adopting the challenged rules." In contrast, according to the court, those decisions could not provide support to plaintiffs' argument that the rule must be invalidated because the SEC did not consider whether the rule would actually achieve the humanitarian benefits which Congress identified. In issuing the rule, according to the court, the SEC correctly maintained that its role was not to second-guess Congress but, instead, to issue a rule that would promote the benefits that Congress identified. The court, therefore, seemed to find that, even if compliance with the cost-benefit and competition requirements of the Exchange Act were necessary, the SEC satisfied the second prong requirement of the Chevron test that the rule must be a permissible interpretation of the statute. Therefore, upon review of the record, the Court is convinced that the Commission appropriately considered the various factors that Sections 3(f) and 23(a)(2) of the Exchange Act actually require. No statutory directive obliged the Commission to reevaluate and independently confirm that the Final Rule would actually achieve the humanitarian benefits Congress intended. Rather, the SEC appropriately deferred to Congress's determination on this issue, and its conclusion was not arbitrary, capricious, or contrary to law—whether because of some statutory directive under the Exchange Act or otherwise. Plaintiffs also complained that the SEC was incorrect in not providing any type of de minimis exception from the rule's coverage. They contended that the SEC wrongly interpreted the statute to mean that it did not have the authority to determine a de minimis threshold and that, even if the SEC was correct in not providing a de minimis exception, its analysis of the issue was arbitrary and not able to survive APA review. Plaintiffs stated that the SEC could have used its general exemptive authority under the Exchange Act, allowing it to "exempt ... any class or classes of persons, securities, or transactions, from any provision or provisions [of the Exchange Act] or of any rule or regulation thereunder, to the extent that such exemption is necessary or appropriate in the public interest, and is consistent with the protection of investors." To this argument, the SEC stated that it was well aware of its exemptive authority but that its discretion in interpreting the statute allowed it not to provide a de minimis exception. The district court agreed with the SEC that it was correct in exercising its independent judgment in declining to adopt a de minimis exception, and the court believed that it could not say that the SEC's determination was unreasonable or without a rational connection in violation of the APA. Plaintiffs next contested as inconsistent with the statute the part of the rule requiring due diligence and reports when the minerals "did originate" or "may have originated" in the DRC. According to the plaintiffs, the statute required due diligence and reports only when the minerals "did originate" in the DRC. Plaintiffs further stated that, even if the statute were ambiguous, the SEC's interpretation merited no deference because the SEC acted arbitrarily and capriciously. The court replied to this argument that, because the statute did not directly speak to the specific circumstances which trigger disclosure obligations, the SEC appropriately construed the statute as ambiguous ( Chevron Step One) and interpreted the statute in a reasonable and permissible way ( Chevron Step Two). Plaintiffs argued that the SEC's extension of the rule to issuers that only contract to manufacture products with necessary conflict minerals instead of limiting the rule's coverage to issuers that themselves manufacture the products was contrary to the statute and also arbitrary and capricious. The plaintiffs argued that the SEC's interpretation failed Chevron Step One because the statute limits its coverage to issuers which manufacture products. The SEC countered that Section 1502 was ambiguous on this point. The court stated that it found no "clear and plain meaning" from the words of the statute and that, because both parties made credible arguments suggests that Congress did not make its meaning plain in the statute. The court went on to point out that the term "manufacture" is inherently ambiguous and that few authorities limit manufacturing only to fabrication. Because the court could not say that the statute was unambiguous, it could not grant plaintiffs' Chevron Step One argument. As for plaintiffs' argument that the SEC's rule was arbitrary and capricious, the court stated that the rule's application to issuers that contract to manufacture was a "perfectly permissible construction of Section 1502" and not arbitrary, capricious, or contrary to law. Plaintiffs' final argument—that the rule violated the APA—challenged the four-year phase-in period for small companies and two-year phase-in period for large companies as arbitrary and capricious. Because some small companies are part of the supply chains of large companies, plaintiffs argued, small companies do not have to provide the information that large companies must report within the two-year phase-in period, resulting in an unreasonable burden upon large companies. The court stated that the plaintiffs' concerns, though not altogether unfounded, were "overinflated" and that it was not unreasonable for the SEC to have a bifurcated phase-in period. The court went on to analyze the NAM's claims that the portion of the rules that required companies to declare on their websites that certain products were "not found to be DRC conflict free," violated their First Amendment rights. The plaintiffs did not challenge the portion of the rule that required disclosure of this information to the SEC, which may have qualified for a lower standard of review than the public disclosure requirement. The court would ultimately find that the public disclosure requirement comported with the First Amendment. The court began by discussing the proper standard of review for the rules. The SEC had argued that the rules should be analyzed under the "rational basis" standard which can be applied to certain factual disclosure requirements. Under this standard, initially announced by the Supreme Court in Zauderer v. Office of Disciplinary Counsel , "'purely factual and uncontroversial' disclosures are permissible if they are 'reasonably related to the State's interest in preventing deception of consumers,' provided the requirements are not 'unjustified or unduly burdensome.'" According to the district court at the time of the decision, D.C. Circuit precedent had further indicated that this standard may only be applied to disclosure requirements intended to prevent consumer deception. Because the SEC conceded that the conflict minerals rules were not aimed at preventing consumer deception, the D.C. District Court declined to apply the rational basis standard. Looking to circuit precedent for which standard to apply, the court ultimately decided that, given the commercial context in which the regulations arose, the court would apply the general "intermediate scrutiny" standard applied to commercial speech commonly known as the Central Hudson test. Under the Supreme Court's Central Hudson test, in order to survive review a regulation must (1) address a substantial government interest; (2) directly advance that interest; and (3) be narrowly tailored to achieve that interest. Under Central Hudson , the narrow tailoring prong is met if there is a reasonable fit between the means chosen and the interest sought to be achieved by the regulation. NAM agreed that the government has a substantial interest in promoting peace in the DRC. However, NAM contended that requiring companies to disclose whether their products were "DRC conflict free" did not directly advance that interest, nor was it a reasonable fit between means and ends. Specifically, the plaintiffs argued that Congress had provided no hard evidence that public disclosures regarding whether a product is "DRC conflict free" would actually lead to the promotion of peace in the DRC and the regulation, therefore, could not be said to directly advance the government's interest. While the court did agree that the burden of showing that a regulation directly advances a particular interest is not satisfied by mere conjecture, and that the government must demonstrate that the regulation will materially relieve the identified harm, the court also found that there are more types of permissible evidence of direct advancement than empirical evidence, particularly in the context of foreign relations. The court quoted the Supreme Court's finding that, in the foreign relations context, "conclusions must often be based on informed judgment rather than concrete evidence, and that reality affects what we may reasonably insist on from the Government." The court went on to note that Congress specifically found in the statute that the money used to purchase conflict minerals is funding the conflict in the DRC and that Congress could not "begin to solve the problem of eastern Congo without addressing where the armed groups are receiving their funding, mainly from the mining of a number of key conflict minerals." Congress relied on information from the State Department and the United Nations, among other sources, to reach the conclusion that requiring disclosure from companies that use these minerals in their products was a reasonable step toward bringing these issues out in the open. As a result, the court found that Congress's decision to enact this statute was based upon "informed judgment" that the regulation would directly advance its interests. Turning to the last prong, the plaintiff argued that there were many less restrictive means for the government to achieve its goal. The crux of the plaintiff's argument seemed to hinge upon the fact that the rules compelled companies to state on their websites that their products had not been found to be DRC conflict free. In the plaintiff's estimation, this requirement amounted to a requirement that companies brand themselves with a "scarlet letter" of complicity in the atrocities that occur in the DRC. The court did not agree that the rule was so burdensome. The rules would require companies to post their conflict mineral reports on their websites, and companies were free to do so in whatever manner they chose. They would not have to prominently feature the fact that any of their products were "not found to be DRC conflict free," and could provide any amount of context or extra information that they wished in order to explain their findings. Furthermore, the court found that the Central Hudson standard requires only that Congress choose a regulation proportionate to its goals. The regulation need not even be considered by the reviewing court to be the most reasonable option to withstand scrutiny. As a result, the court held that the regulations represented a reasonable fit between the means and the ends, and concluded that the regulations withstood constitutional scrutiny. On September 18, 2013, NAM and the other plaintiffs filed an appeal of the D.C. District Court's decision with the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit). On January 7, 2014, a D.C. Circuit panel heard oral argument. On April 14, 2014, a divided D.C. Circuit held that the SEC rule and the statute requiring the rulemaking ran afoul of the First Amendment but disagreed with the plaintiffs' arguments that the SEC violated the APA and the cost-benefit requirements of the Securities Exchange Act. Before addressing the First Amendment issue, the circuit court considered the APA and Securities Exchange Act challenges that NAM brought. The court stated that it was reviewing the "administrative record as if the case had come directly to us without first passing through the district court." The court first addressed NAM's claim that the SEC rule should have had an exception for de minimis uses of conflict minerals and that the SEC erred when it failed to create an exception and assumed that the statute foreclosed it from doing so. The court found that the SEC did not act arbitrarily and capriciously by not including a de minimis exception. The court found acceptable the SEC's reasoning that, because conflict minerals may often be used in very limited quantities, a de minimis exception might interfere with the intent of Congress in enacting the statute. The court next addressed the final rule's requirement that an issuer must conduct due diligence if it has reason to believe that conflict minerals may have originated in covered countries. NAM argued that this requirement contravened the statute, which, in NAM's view, required issuers to submit a report to the SEC only in cases in which the conflict minerals actually did originate in the covered countries. In responding to NAM's argument, the court used the Chevron reasoning that, if a statute "is silent or ambiguous with respect to the specific issue at hand," the agency has the authority to use reasonable discretion in construing the statute. Here, according to the court, the statute did not mention either a threshold for conducting due diligence or the obligations of uncertain issuers. Nothing in the statute prevented the SEC from filling in those gaps in the statute. Further, according to the court, the manner in which the SEC filled in the gaps was neither arbitrary nor capricious. In addition, NAM argued that the SEC violated the statute by deciding to apply the rule expansively to issuers that only contract to manufacture products, rather than limiting it to issuers that actually manufacture products. Once again, the court replied that the more reasonable interpretation of the statute is that Congress decided not to mandate the specifics of the rule and left its application to agency discretion and that the SEC did not act arbitrarily or capriciously. As for the rule's different phase-in periods for large and small companies, which NAM argued were inconsistent, arbitrary, and capricious, the appeals court, like the district court, was able to see the "trickledown" logic of the SEC's approach. As opposed to the district court, which examined the plaintiffs' challenges to the law under the Securities Exchange Act at the beginning of its analysis of plaintiffs' arguments, the appeals court examined the Securities Exchange Act challenges after it had examined the APA challenges. NAM alleged that the SEC rule violated 15 U.S.C. Sections 78w(a)(2) and 78c(f) because it did not adequately analyze the costs and benefits of the final rule. The court found no problem with the commission's cost-side analysis and stated that it did not understand how the commission could have done a better job with respect to determining the benefits of the rule. The court went on to emphasize that the statute required the SEC to promulgate a disclosure rule and that it (the SEC) could not second-guess Congress as to the basic premise that a disclosure rule would help to promote peace and stability in the Congo. Like the district court before it, the court of appeals determined that the regulations requiring public disclosure of the "DRC conflict" status of certain products did not qualify for rational basis review under the Zauderer standard. In the course of deciding that the rational basis standard was not appropriate, the court appeared to question whether the required disclosures were purely factual. The court wrote that "[p]roducts and minerals do not fight conflicts. The label 'conflict free' is a metaphor that conveys moral responsibility for the Congo war.... By compelling an issuer to confess blood on his hands, the statute interferes with the exercise of the freedom of speech under the First Amendment." Despite questioning whether the required disclosures were factual, the court ultimately did not decide that issue. Instead, the court refused to apply a rational basis standard because the disclosures were not required for the purpose of alleviating consumer deception. This reason was similar to the district court's analysis. Unlike the district court, the appeals court did not determine which of the remaining standards of scrutiny (i.e., intermediate or strict scrutiny) properly applied to the regulations, because the court found that the regulations did not survive even intermediate scrutiny under the Central Hudson test. After laying out the basic elements of the test, the court explained its view that "the narrow tailoring requirement invalidates regulations for which 'narrower restrictions on expression would serve [the government's] interest as well.'" Though acknowledging that the government need only show a reasonable fit between the means and ends of a regulation, the court found that "the government cannot satisfy that standard if it presents no evidence that less restrictive means would fail." The association challenging the rules had made a number of suggestions that it believed would be less restrictive than the rules adopted by the SEC, including that the companies could be required to describe their products' status in their own words. Given the other options the SEC had for implementing the disclosure requirement and the fact that the commission "failed to explain why (much less provide evidence that) the Association's intuitive alternatives to regulating speech would be any less effective," the court found that the rules were not narrowly tailored and therefore violated the First Amendment. The dissent in the case would have held the decision on the First Amendment question in abeyance until the full court of appeals, sitting en banc , had decided the question of whether a rational basis standard could be applied to disclosure requirements outside of the consumer deception context. On July 29, 2014, the United States District Court of Appeals for the D.C. Circuit, sitting en banc , overruled the panel decision in NAM v. SEC to the extent that the panel held that the rational basis standard of review set out in Zauderer could not be applied to factual commercial disclosure requirements imposed for reasons other than the prevention of consumer deception. As a result of this ruling, a rehearing of NAM v. SEC has been granted by the original appellate panel. In American Meat Institute v. USDA , the D.C. Circuit was asked to decide whether the Zauderer rational basis standard of review could be applied to a requirement for meat producers to disclose the country of origin of their products. The court ultimately decided that the Zauderer standard could be applied to factual commercial disclosure requirements, even when the government's interest in requiring the disclosure does not include preventing consumer deception. In reaching its decision, the court acknowledged that the Supreme Court had only applied the Zauderer standard to disclosure requirements aimed at preventing deception. However, when closely reviewing the Supreme Court's language articulating the Zauderer standard's application, the court found that "the language with which Zauderer justified its approach ... [swept] far more broadly than the interest in remedying deception." In deciding Zauderer , the Supreme Court had noted that commercial speakers had a minimal First Amendment interest in refraining from disclosing purely factual information that would be of interest to consumers. Noting this fact, the D.C. Circuit Court of Appeals reasoned that commercial speakers' minimal speech interest in refusing to disclose seemed "inherently applicable beyond the problem of deception." As a result, the court held that the Zauderer rational basis standard could be applied to purely factual and uncontroversial disclosure requirements that are intended to fulfill government interests beyond prevention of deception. The court also explicitly overruled the portion of NAM v. SEC that held to the contrary. Nevertheless, the court's decision in American Meat Institute had not settled the issue of whether the Zauderer rational basis standard should be applied to the SEC's conflict minerals rules. As noted above, Zauderer permits a rational basis standard of review to be applied to commercial disclosure requirements of "purely factual and uncontroversial information." The American Meat Institute court made clear that it was not deciding whether Zauderer standard could be applied to disclosure requirements where the purely factual and uncontroversial nature of the required disclosure was disputed. The court in NAM v. SEC had questioned, but did not decide, whether the information covered by the SEC's conflict mineral disclosures was, indeed, "purely factual and uncontroversial information." Therefore, there remained a lingering question regarding the application of the Zauderer standard to the DRC conflict minerals disclosure requirements that the original panel of appellate judges were asked to decide during the rehearing of the case. On November 18, 2014, the panel that originally heard NAM's case against the SEC's rules granted a rehearing of the case and requested that the parties provide supplemental information in advance of the hearing. On August 18, 2015, despite the en banc court's holding that Zauderer applies to disclosure requirements aimed at remedying circumstances beyond consumer deception, the majority of the panel again held that Zauderer does not apply to the "not DRC conflict free" disclosure requirement, but for a different reason. To begin, the panel assumed without deciding that the regulation at issue applied to commercial speech. The court expressed some skepticism as to whether the disclosure requirement was commercial speech, but declined to decide the question because the panel found that the regulations would not survive even the lesser standards of scrutiny applied to commercial speech regulations. Turning to whether the en banc opinion in A merican M eat I nstitute had any effect on the panel's previous holding in NAM , the panel majority found that, practically speaking, it did not. The majority held that the relaxed standard of review announced in Zauderer can only be applied to disclosure requirements imposed upon advertisements and point-of-sale displays and labeling. In examining Zauderer and its progeny, the panel could find no evidence that the Court had ever applied the deferential standard outside of the context of "voluntary commercial advertising." The panel found that, in Zauderer , "the Court was not holding that any time a government forces a commercial entity to state a message of the government's devising, that the entity's First Amendment interest is minimal." Instead, Zauderer , in the panel's analysis, has been cabined by the Court to disclosure requirements in commercial advertising that the advertiser had chosen to publish and to speech accompanying the product at the point of sale. Because the disclosure requirements at issue in this case did not apply to voluntary advertising or to point-of-sale labeling, and instead applied to compelled disclosures on the companies' websites, the panel found that Zauderer did not apply, and struck down the "not found to be DRC conflict-free" disclosure requirement for the same reasons announced in its previous opinion, described above. However, the panel did not end its analysis there. The panel recognized that there is confusion within the courts regarding the proper application of Zauderer , and that confusion might call its decision not to apply the Zauderer standard to the rule at issue into question. Therefore, the panel went on to note that even if the en banc court's view of Zauderer in A merican M eat I nstitute controlled the analysis, the disclosure requirement still would not survive review. In the panel's reading of A merican M eat I nstitute , when evaluating the compelled conflict mineral disclosures, the court must evaluate three issues: whether there is an adequate government interest involved, the "effectiveness of the measure in achieving it," and whether the disclosures required are "factual and uncontroversial." The panel accepted that alleviating the humanitarian crisis in the DRC was a sufficient interest. However, the panel found that the measure failed the second two prongs of the inquiry. As to the effectiveness of the measure, the panel noted that in commercial speech cases the government cannot rest on "speculation or conjecture" to justify the effectiveness of a restriction in helping to achieve the government's stated goal. However, in this case, the SEC had offered little to no evidence that the disclosure rules actually would have the effect of reducing the money flowing into the DRC, or that any reduction in funds flowing to the DRC would result in the amelioration of the conflict. When examining the available post-hoc evidence itself, the panel found conflicting accounts of whether the rules helped to achieve the government's goal in imposing the disclosure rule. The panel acknowledged that it might be possible that the disclosure rules will help, but the current evidence of its effectiveness was insufficient, in the eyes of the court, to withstand First Amendment scrutiny. The panel also found that the requirement to disclose that certain products were "not found to be DRC conflict mineral free" was not "purely factual and uncontroversial information" and therefore failed the test articulated in A merican M eat I nstitute 's interpretation of Zauderer . The A merican M eat I nstitute court did not define the terms "purely factual" and "uncontroversial" but it did indicate that the two may be separate concepts for consideration by the court. According to the panel, the A merican M eat I nstitute court had noted that "controversial" must mean something besides a dispute about the statement's factual accuracy, but provided no other definition for what might make a disclosure "controversial." The panel noted, for example, that it might be controversial for the government to require cars with internal combustion engines to be labeled as products that contribute to global warming, and appears to believe that the requirement to label a product "not conflict free" is similarly controversial, if not more so. The panel quoted its first opinion to describe why it found that to be the case. "Products and minerals do not fight conflicts. The label 'not conflict free' is a metaphor that conveys moral responsibility for the Congo war.... By compelling an issuer to confess blood on its hands, the statute interferes with [the] exercise of freedom of speech under the First Amendment." As a result, the panel found that even under A merican M eat I nstitute ' s interpretation of Zauderer , the disclosure requirements did not withstand scrutiny. Judge Srinivasan dissented again and would have upheld the disclosure requirements under Zauderer . The dissent also would have found that the rules passed muster under the more exacting Central Hudson standard as well. The SEC has asked the D.C. Circuit to rehear this case en banc . In its petition for rehearing, the SEC notes that the case may have "far-reaching implications for governmental disclosure requirements, including those in the securities laws." Consequently, this case may have broader implications than the fate of the disclosure rule at issue here. It may provide important clarification regarding the standard to be applied when the government requires commercial entities to disclose information to the public. In light of the decision by the court of appeals, on April 29, 2014, the SEC issued guidance on what covered companies must file with respect to the disclosures required by the conflict minerals rule. The commission expects companies to file reports and address those parts of the rule that the court upheld. Specifically, the Division of Corporate Finance stated, [C]ompanies that do not need to file a Conflict Minerals Report should disclose their reasonable country of origin inquiry and briefly describe the inquiry they undertook. For those companies that are required to file a Conflict Minerals Report, the report should include a description of the due diligence that the company undertook. If the company has products that fall within the scope of Items 1.01(c)(2) or 1.01(c)(2)(i) of Form SD, it would not have to identify the products as "DRC conflict undeterminable" or "not found to be 'DRC conflict free,'" but should disclose, for those products, the facilities used to produce the conflict minerals, the country of origin of the minerals and the efforts to determine the mine or location of origin. Section 1504 of Dodd-Frank, codified at 15 U.S.C. Section 78m(q), requires resource extraction issuers to disclose to the commission payments made to a foreign government or federal government for the purpose of the commercial development of oil, natural gas, or minerals. The resource extraction issuer, a subsidiary of the issuer, or an entity under the control of the issuer must include this information in an annual report filed with the SEC. Information to be disclosed shall include the type and total amount of the payments made for each project of the resource extraction issuer concerning the commercial development of oil, natural gas, or minerals and the type and total amount of the payments made to each government. The statute mandates that the rules, to the extent practicable, shall support the commitment of the United States to international transparency promotion efforts concerning the commercial development of oil, natural gas, or minerals. The commission must, to the extent practicable, make a compilation of the information available online to the public. On August 22, 2012, the SEC issued final rules (later challenged and vacated by a court decision discussed in the following section) to implement Section 1504. 17 C.F.R. Section 240.13q-1 required every resource extraction issuer engaged in the commercial development of oil, natural gas, or minerals to file a report on Form SD within the period specified in the form and to disclose the information specified by the form. "Commercial development of oil, natural gas, or minerals includes exploration, extraction, processing, and export of oil, natural gas, or minerals, or the acquisition of a license for any such activity." The rule required that the reports be made publicly available. In October 2012, the American Petroleum Institute, the U.S. Chamber of Commerce, the Independent Petroleum Association of America, and the National Foreign Trade Council filed suit against the SEC. Plaintiffs challenged the SEC rule on the basis that it violated the First Amendment guarantee of freedom of speech, that it was arbitrary and capricious under the APA, and that the SEC, as with Section 1502, had made an inadequate cost-benefit analysis before promulgating the rule. With respect to the First Amendment challenge, the plaintiffs alleged that, because the SEC rule required disclosures that would arguably allow business competitors access to sensitive commercial information, they would be compelled to engage in speech that would have "disastrous effects on the companies, their employees, and their shareholders" in violation of their First Amendment rights. With respect to the inadequate cost-benefit analysis challenge, the plaintiffs alleged that the SEC violated its statutory duty under Section 23(a)(2) of the Securities Exchange Act to consider the public interest and refrain from adopting a rule that would impose a burden upon competition. Oxfam International, an international human rights organization, was granted permission to intervene in the case in support of the rules. The case, American Petroleum Institute v. Securities and Exchange Commission, was decided on July 2, 2013, by the U.S. District Court for the District of Columbia. The court ruled in favor of the plaintiffs and granted the plaintiffs' motion for summary judgment, vacated the rule, and remanded the rule to the SEC for further proceedings. The court did not reach the plaintiffs' First Amendment challenge or most of their Administrative Procedure Act arguments "because [it determined that] two substantial errors require[d] vacatur: the Commission misread the statute to mandate public disclosure of the reports, and its decision to deny any exemption was, given the limited explanation provided, arbitrary and capricious." In its analysis of the validity of the rule, the court applied " Chevron 's well-worn framework." As described before, the court first must ask whether Congress directly spoke to the precise question at issue and, if Congress has done so, an agency must in its rule adhere to the unambiguously expressed intent of Congress. If the statute is silent or ambiguous concerning the specific issue, a court moves to the second step and must defer to an agency's interpretation of the statute so long as the interpretation is "based on a permissible construction of the statute." The court went on to quote from a D.C. Circuit case that "deference is only appropriate when the agency has exercised its own judgment." If the agency's rule is based on an inaccurate interpretation of the law, its rule cannot stand. The first basis upon which the court vacated the SEC rule concerned the SEC's requirement that the reports be made publicly available. The court stated that the SEC clearly believed that it was bound to make the annual reports publicly available. With this decision, the commission stopped its Chevron analysis at Step One and believed that it did not have discretion to reach another result. The district court concluded that, therefore, no deference to the SEC's statutory interpretation is warranted because the SEC did not exercise its own judgment; rather, it believed that the interpretation was compelled by Congress. The court then faced the task of determining whether the statute compelled the public disclosure of full payment information, or in Chevron terms, "whether Congress has directly spoken to the precise question at issue." The court found that the SEC wrongly concluded that Section 1504 of Dodd-Frank required reports of resource extraction issuers to be made publicly available and cited the language in the statute requiring the SEC to make public only a "compilation of the information required to be submitted" to the SEC "to the extent practicable." The statute required the disclosure of annual reports but did not indicate whether the disclosures must be public or whether they may be made only to the SEC. The statute also expressly addressed the public availability of the information and established a more limited requirement for what must be made publicly available than, for example, what must be made publicly available in an annual report. According to the court, the SEC offered no persuasive arguments that the statute unambiguously required that the full reports be publicly disclosed. The court stated, The Commission did not indicate in the Rule the form that a compilation would take, opting instead to assure public availability by requiring public filing of the annual reports themselves. Nonetheless, the Commission's briefs confirm that it misinterprets the word "compilation." With this statement, the court concluded that the agency's remaining arguments for mandating public disclosure of the annual reports derived from this error. The court went into a lengthy discussion of the meaning of "compilation of information," looking at such sources as judicial opinions and Shakespeare's sonnets, and found that the term can have a wide variety of meanings and a combination of elements. After this discussion, the court stated that the commission was not required by the statute to make all of the information available on an annual basis but, rather, a "significant responsibility" to evaluate the information to determine whether disclosing it in a compilation is practicable and then use the information to make a compilation. The court then turned to intervenor Oxfam's arguments in support of the rule and found them similarly unpersuasive. For example, Oxfam argued that Congress intended public disclosure when it inserted Section 1504 of Dodd-Frank into Section 13 of the Securities Exchange Act, which created the public reporting requirements for filing issuers. The court refuted this argument by stating that the Securities Exchange Act does not define a report as something that must be publicly filed and does not preclude the confidential treatment of reports that are filed. The court also disagreed with Oxfam's argument that the SEC's decision was reasonable and reiterated "black letter law" that an agency's regulation has to be declared invalid if the regulation was not based upon the agency's own judgment but, instead, upon the unjustified assumption that Congress indicated that such a regulation was desirable or required. The second basis upon which the court vacated the SEC rule concerned the SEC's rejection of any exemption where disclosure is prohibited. The court found that the denial of any exemption for countries in which resource extraction payment disclosures are prohibited was arbitrary and capricious. According to the court, commentators expressed concern that, because Angola, Cameroon, China, and Qatar prohibit disclosure of payment information, there could be added billions of dollars to issuers dealing in resource extraction that would have a significant impact upon their profitability and ability to compete. The court found these concerns warranted, but the SEC argued that, although it understood the concerns, adopting an exemption would be "inconsistent with the structure and language" of the statute. The Securities Exchange Act provided the SEC with the authority to make exemptions from some of its provisions, including the section in which the resource extraction provision is codified. Although the exemption authority is discretionary, exercising it could, according to the court, be required in some circumstances by the SEC's competing statutory obligations, such as the requirement that the SEC "shall not adopt any ... rule or regulation which would impose a burden on competition not necessary or appropriate in furtherance of the purposes of this chapter." In addition, the court stated, an agency decision concerning exemptions must be based upon reasoned decision-making. With these principles in mind, the court rejected the SEC's reasoning for not providing an exemption from the disclosure requirements, stating, The Commission's primary reason for rejecting an exemption does not hold water. The Commission argues that an exemption would be "inconsistent" with the "structure and language of Section 13(q).... " But this argument ignores the meaning of "exemption," which, by definition, is an exclusion or relief from an obligation, and hence will be inconsistent with the statutory requirement on which it operates. Nor does it help to argue that section 13(q)'s transparency objectives "are best served" by permitting no exemptions.... That an exemption is inconsistent with a statutory provision or that the provision's purpose is "best" served by allowing no exemptions is hence no answer at all. As for the SEC's second explanation—that an exemption might undermine the statute by encouraging countries to adopt laws that would prohibit the disclosure required by the rule—the court stated that a court will typically not permit any of the rationales used by an agency when one of the multiple rationales that an agency has relied upon is deficient. The SEC could have limited the exemption to the four countries that the commentators cited, for example, in order to address this concern. Because the agency did not provide an exemption of this limited type but, instead, focused on what it believed to be the statute's apparent purpose, it showed itself averse to sacrificing any of the statute's aims despite the cost, thereby "abdicating its statutory responsibility to investors." The court therefore concluded that the SEC's exemption analysis was arbitrary and capricious and invalidated the rule. The SEC has stated that it will not appeal the case and will, instead, "undertake further proceedings" concerning issuing another rule that is in keeping with the court's decision. The SEC has not yet issued a new rule. As a result of the SEC's inaction, Oxfam America has filed a lawsuit against the SEC in the U.S. District Court for the District of Massachusetts over the agency's delay in issuing a new resource extraction disclosure rule. The SEC asked the court to deny Oxfam's motion for a summary judgment to issue a new rule within a prescribed time and "instead allow the Commission to report on its progress in promulgating the proposed rule no later than October 31, 2015, the time by which it expects to consider a revised proposed rule." On September 2, 2015, the U.S. District Court for the District of Massachusetts ruled that SEC delays in issuing a final rule violated the APA because more than four years have passed the statutory deadline for issuing the rule. The judge has required the SEC to publish an "expedited Schedule" for issuing the rule. The SEC's rules implementing Sections 1502 and 1504 of Dodd-Frank have clearly been controversial. The D.C. District Court upheld the rules for Section 1502, but, although it upheld the bulk of the rules and the SEC's administrative authority to promulgate them, the D.C. Circuit struck down as a violation of the First Amendment the part of the rules requiring issuers to describe certain products as having been "not found to be DRC conflict free." On July 29, 2014, the U.S. District Court of Appeals for the D.C. Circuit, sitting en banc , overruled the panel decision in NAM v. SEC to the extent that the panel held that a rational basis standard of review could not be applied to the requirements because the requirements were imposed for reasons other than the prevention of consumer deception. Upon rehearing the case in light of the en banc court's decision, the panel again struck the rule down under the First Amendment. The SEC has asked the D.C. Circuit Court of Appeals to rehear the case en banc . With respect to the Section 1504 rules, the D.C. District Court vacated the rules. The SEC has decided not to appeal the decision but, instead, to work on rules which will meet the court's objections. The SEC has not yet issued a new rule. As a result of the SEC's inaction, Oxfam America has filed a lawsuit against the SEC in the U.S. District Court for the District of Massachusetts. The SEC has stated that complying with Oxfam's timeframe demand for issuing a new rule is not achievable. The U.S. District Court for the District of Massachusetts has ordered the SEC to publish an "expedited schedule" for issuing the rule. The final outcome concerning rules for both Sections 1502 and 1504 of Dodd-Frank is unknown as of the date of this report. | Two sections of the Dodd-Frank Wall Street Reform and Protection Act (Dodd-Frank) require that the Securities and Exchange Commission (SEC or Commission) issue regulations to make public the involvement of U.S. companies in conflict minerals and in resource extraction payments. Both sections have been subject to litigation. As of the date of this report, the rules pursuant to Section 1502 are in effect, with the exception of the disclosure requirements being reviewed by the Court of Appeals for the D.C. Circuit. The SEC continues its rulemaking proceedings under Section 1504. Key Takeaways of This Report: Section 1502 requires that the SEC issue rules mandating the disclosure by publicly traded companies of the origins of listed conflict minerals, which it did. The National Association of Manufacturers and other plaintiffs challenged this rule on the bases of several arguments, two of which claimed that the SEC did not conduct an appropriate cost-benefit analysis before promulgating the rule and that the rules violated the Constitution's First Amendment freedom of speech guarantee. The U.S. District Court for the District of Columbia upheld the rules, but the Court of Appeals for the D.C. Circuit, while largely upholding the SEC's authority to implement the rules, struck down the portion of the rules requiring issuers to describe certain products as having been "not found to be DRC conflict free." The court found that the rule was unconstitutional because narrower alternatives were available to achieve the government's goals. Recently, the D.C. Circuit Court of Appeals, sitting en banc, overruled an important aspect of the panel's decision finding that part of the DRC conflict mineral disclosure requirements violated the First Amendment. The en banc court opened up the possibility that a less restrictive test might be applied to the disclosure requirements. Upon rehearing, the panel issued a decision finding that, even after the decision of the en banc court, the requirement to label certain products as "not found to be DRC conflict free" was unconstitutional. The panel held that the lower standard of scrutiny did not apply to the rule, and argued that even if it did the rule still would not survive review. These decisions highlight an important question in First Amendment jurisprudence. The government more easily may require commercial disclosures in certain circumstances under the Constitution. This case raises important questions about when and how a regulation might qualify to receive that lower standard of scrutiny. Section 1504 of Dodd-Frank requires the SEC to issue rules mandating resource extraction issuers to disclose payments made to a foreign government or the federal government for the purpose of the commercial development of oil, natural gas, or minerals, which it did. The American Petroleum Institute brought suit, arguing, among other things, that the SEC acted arbitrarily and capriciously in promulgating the rules, as well as that the rules violated the First Amendment. The U.S. District Court for the District of Columbia vacated the rules on administrative law grounds and did not reach most of the Administrative Procedure Act arguments and the First Amendment issues. The SEC is not appealing this decision and is, instead, working on Section 1504 rules that will take into consideration the court's decision. However, in response to a lawsuit filed by Oxfam, the U.S. District Court recently ordered the SEC to publish an "expedited schedule" for issuing a resource extraction rule. |
I n the wake of the 2016 election, concerns have been raised with respect to the legal regime governing foreign influence in domestic politics. The central law concerning the activities of the agents of foreign entities acting in the United States is the Foreign Agents Registration Act (FARA or the Act). FARA generally requires "agents of foreign principals" undertaking certain activities on behalf of foreign interests to register with the U.S. Department of Justice (DOJ); to file copies of informational materials that they distribute for a foreign principal; and to maintain records of their activities. The Act contains several exemptions to these registration, disclosure, and recordkeeping requirements. Although FARA has not been litigated extensively, courts have recognized a compelling governmental interest in requiring agents of foreign principals to register and disclose foreign influence in the domestic political process, resulting in a number of constitutional challenges being rejected over the decades since FARA's initial enactment. This report examines the nature and scope of the current regulatory scheme, including the scope of FARA's application to agents of foreign principals; what the statute requires of those covered under the Act; exemptions available under the statute; and methods of enforcement. The report concludes by discussing various legislative proposals to amend FARA in the 115th Congress. Enacted originally in 1938 to promote transparency with respect to foreign propaganda, FARA has evolved in its breadth and application over the course of subsequent decades. Consistently throughout its history, however, the statute has not prohibited representation of foreign interests (or other related activities) or limited distribution of foreign propaganda. Instead, the Act provides only for public disclosure of any such activities. FARA's legislative history indicates that Congress believed such disclosure would best combat foreign influence by informing the American public of the actions taken and information distributed on behalf of foreign sources. Thus, FARA addresses the concerns of foreign influence by " bring[ing] the activities of persons engaged in disseminating foreign political propaganda in this country out into the open ... mak[ing] known to the Government and the American people the identity of any person who is engaged in such activities, the source of the propaganda and who is bearing the expense of its dissemination in the United States." The impetus for FARA was the global political dynamics of the 1930s. Specifically, in 1935, the House of Representatives convened a special committee tasked with investigating the existence and effects of Nazi and other propaganda efforts in the United States and the use of "subversive propaganda" distributed by foreign countries. At that time, Congress perceived a need to oversee efforts to influence the American government by foreign sources in light of threats that had been posed to governments elsewhere in the world due to the political and economic unrest during the interwar era. In particular, legislators highlighted concerns about the unfettered distribution of Nazi and communist propaganda in the United States by foreign entities. Congress has since amended the statute, shifting its focus toward the promotion of transparency of an agent's lobbying activities on behalf of its foreign client. As a report issued by the Senate Committee on Foreign Relations explained when considering amendments to the Act in 1965: The original target of foreign agent legislation—the subversive agent and propagandist of pre-World War II days—has been covered by subsequent legislation, notably the Smith Act. The place of the old foreign agent has been taken by the lawyer-lobbyist and public relations counsel whose object is not to subvert or overthrow the U.S. Government, but to influence its policies to the [satisfaction] of his particular client. In the 1990s, Congress again amended FARA as part of a broader effort to reform lobbying disclosure laws known as the Lobbying Disclosure Act (LDA). The amendments generally limited FARA's registration requirements to agents of foreign governments and foreign political parties and allowed agents of other foreign entities to register under the LDA's disclosure requirements. Because FARA prohibits a "person" from acting as an "agent of a foreign principal" without first registering with DOJ, and because FARA's disclosure and recordkeeping requirements are imposed on those "persons" required to register under the Act, the central issue when considering the application of FARA to foreign lobbying is whether a person qualifies as an agent of a foreign principal for purposes of the statute. FARA expressly defines the term person for purposes of the statute to include individuals, partnerships, associations, corporations, organizations, or any other combination of individuals. Identifying whether such individuals or entities are agents of foreign principals involves two determinations: whether that person is acting as an agent and whether the agent is acting for a foreign principal . FARA generally defines the term agent to mean "any person who acts as an agent, representative, employee, servant, or any person who acts in any other capacity at the order, request, or under the direction or control" of a foreign principal. DOJ regulations have not provided further clarification on the scope of the agency requirement under FARA, resulting in some confusion about the requirements by the few courts that have interpreted what agency requires under the Act. Case law interpreting FARA suggests that the agent-foreign principal relationship identified by the statute does not appear to require that the parties expressly enter into a contract establishing the relationship. Additionally, it appears that financial support from a foreign principal standing alone is insufficient to establish a relationship subject to FARA. Courts, however, have disagreed on the precise standard by which an agent-foreign principal relationship is established. In 1945, the U.S. Court of Appeals for the Third Circuit (Third Circuit) applied a common law standard to determine agency, holding that agency should be based on whether the intended agent and the foreign principal consent to a relationship in which the agent will act on the foreign principal's behalf and subject to its control. In 1981, however, the U.S. Court of Appeals for the Second Circuit (Second Circuit), without referencing the Third Circuit's decision, rejected the common law standard for determining agency under FARA. The Second Circuit instead favored a standard that contemplated the nature of the agency relationship intended for regulation under FARA, explaining that "[i]n determining agency for purposes of [FARA, the] concern is not whether the agent can impose liability upon his principal but whether the relationship warrants registration by the agent to carry out the informative purposes of the Act." The Second Circuit cautioned against broadly construing the agency relationship to include instances in which a person merely acts at the "request" of a foreign principal, explaining that "[s]uch an interpretation would sweep within the statute's scope many forms of conduct that Congress did not intend to regulate." Rather, according to the Second Circuit, agency depends upon whether a specific person has been asked to take a specific action on behalf of a foreign principal. To illustrate, the Second Circuit offered two examples. First, with regard to whether a specific person was requested to act, if a foreign government requested donations to aid victims of a natural disaster, members of a large group who respond with contributions or support do not become agents of the foreign government for the purposes of FARA. On the other hand, if a particular individual or limited group of individuals were solicited, the surrounding circumstances might indicate the possibility that FARA would require registration. Second, with regard to whether a specific action was requested, the court explained that if the government issued a "general plea for political or financial support," such a request would be less likely to require registration than "a more specific instruction." FARA requires registration even if the individual or entity is not yet acting as an agent but "agrees, consents, assumes or purports to act as [ ... ] or holds himself out to be [ ... ] an agent." However, the Act does not require that agents be compensated for their action on the foreign principal's behalf, meaning that the registration requirement applies to both paid and volunteer agents. Furthermore, unlike other lobbying disclosure statutes, FARA does not include any threshold requirements and, thus, requires any individual or entity acting as an agent of a foreign principal to register regardless of whether the time or expenses involved are de minimis. For example, the federal statute regulating disclosure of advocacy activities for domestic interests does include threshold requirements, generally requiring lobbyists to disclose their activities only if they are compensated for their services; make more than one lobbying contact; and spend at least 20% of their time over a three-month period lobbying. Embedded within the Act's definition of the term "agent," agents of foreign principals are subject to FARA if they engage in any of the enumerated actions under FARA within the United States. Specifically, an agent must comport with the Act if he or she takes the following actions in the United States on behalf of the foreign principal: engages in political activities; acts as public relations counsel, publicity agent, information-service employee, or political consultant; solicits, collects, or disburses things of value (i.e., contributions, loans, money); or represents the foreign principal's interest before federal agencies or officials. As noted in Table 1 below, Congress expressly defined many of the terms used to establish the broad scope of activities for which agents must register. Relevant to the definition of "political activities," DOJ regulations indicate that "formulating, adopting, or changing" policy also includes "any activity which seeks to maintain any existing domestic or foreign policy of the United States." Furthermore, DOJ has explained that routine inquiries of government officials are not "political activities" and therefore are outside the scope of FARA if the agent's inquiries relate to matters in which existing domestic or foreign policy is not in question. Because FARA requires registration by agents who act on behalf of any individual or entity "any of whose activities are directly or indirectly supervised, directed, controlled, financed, or subsidized in whole or in major part by a foreign principal," a significant question that arises in relation to the scope of FARA's application involves what entities qualify as foreign principals. The statutory definition of foreign principal includes: governments of foreign countries; foreign political parties; individuals outside of the United States who are not U.S. citizens domiciled in the United States; and entities organized under the laws of a foreign country or having their principal place of business in a foreign country. Regulation of the influence of foreign principals within the United States, therefore, is not limited only to foreign states or foreign state actors. Rather, any individual or entity acting as an agent for a foreign private entity may also be subject to FARA, unless that agent is covered by an applicable exemption. In its current form, FARA includes three key provisions that generally apply to agents of foreign principals: registration requirements, disclosure requirements, and recordkeeping requirements. The primary mechanism of FARA's regulatory scheme is its requirement that agents of foreign principals register with the U.S. government. FARA's registration requirement requires agents of foreign principals to file a registration statement with DOJ within 10 days of becoming such an agent. The registration statement must include information about: the agent and the agent's business; the agreement to represent the foreign principal; and income and expenditures related to the activities performed. Specifically, the registration statement must include inter alia: names, contact information, and nationality of the agent; "comprehensive" descriptions of the nature of the agent's business, including a list of employees and every foreign principal for whom the agent acts; copies of agreements regarding the terms and conditions of the agent's representation of the foreign principal and detailed statements of any activity undertaken or agreed to that would require registration; nature and amounts of any income received by the agent in the preceding 60 days from each foreign principal, whether received as compensation or for disbursement; and detailed statements of expenditures during the preceding 60 days made in connection with activities requiring registration or in connection with elections for political office. Following initial registration, agents of foreign principals covered by FARA must submit supplemental information updating the original filing at six-month intervals. Such information must be filed generally within 30 days of the six-month period, except changes to information under some categories must be filed within 10 days after such changes occur. According to several reports, agents of foreign principals as a matter of practice have registered under the Act retroactively in some cases. Any agent of a foreign principal who is required to register and who distributes "informational materials" on behalf of a foreign principal must also file copies of those materials with DOJ within 48 hours of beginning the process of distribution. This disclosure requirement applies to any such materials that are distributed through interstate or foreign commerce and that take a form that would reasonably be expected to be distributed to two or more persons. In addition to disclosing the existence of such materials to DOJ, the agent must also include "a conspicuous statement that the materials are distributed by the agent on behalf of the foreign principal" when the materials are transmitted in the United States. Relatedly, FARA also requires agents representing foreign principals who transmit political propaganda or solicit information related to political interests from U.S. agencies or officials to include with such transmittals or solicitations "a true and accurate statement" identifying the person as an agent of a foreign principal. FARA also requires agents of a foreign principal who are required to register to maintain records with respect to their activities and make any such records available for government inspection to ensure compliance. Agents must maintain such records for three years after terminating their representation of their foreign principal, and the records must be available for inspection at any reasonable time. Concealment or destruction of any records required to be kept under the act constitutes an express violation of FARA. Certain categories of individuals or entities that would otherwise be recognized as agents of foreign principals under FARA are not subject to the statute under a series of exemptions adopted by Congress since FARA's enactment. N ews organizations . By definition, FARA excludes from regulation as an agent of a foreign principal "any news or press service or association organized" under domestic laws or any publication that is distributed for "bona fide news or journalistic activities." To qualify for this exemption, the ownership stake of U.S. citizens in the news organization must be at least 80% and its officers and directors must be U.S. citizens as well. Furthermore, the organization or publication cannot be "owned, directed, supervised, controlled, subsidized, or financed, and none of its policies are determined by any foreign principal [as defined under FARA]." Otherwise, the news organization in question must register under and otherwise comply with FARA. Officials of f oreign g overnments , diplomatic or consular officers, and members of diplomatic and consular staff . FARA includes several exemptions for officials, diplomatic officers, and certain staff of foreign governments if those individuals are acting exclusively within their official capacities. Officials of foreign governments may be exempt if the foreign government is one that is recognized by the United States. To qualify for this exemption, the official cannot be acting as a public-relations counsel, publicity agent, information-service employee, or be a U.S. citizen. Diplomatic and consular officers of a foreign government may be exempt if he or she is "duly accredited" and the U.S. State Department has recognized the individual as such an officer. Additionally, members of diplomatic and consular officers' staff may be exempt if they are not serving as public-relations counsel, publicity agents, or information-service employees. Agents engaged in p rivate and nonpolitical activities , including commerce, charitable solicitations, and religious, scholastic or scientific pursuit . Individuals and entities may be exempt from registration requirements if the activities in which they engage are either (1) private and nonpolitical activities that further bona fide commercial interests of a foreign principal; (2) other activities that do not predominantly serve a foreign interest; or (3) solicitations of contributions that are used only for certain charitable purposes such as food, clothing, and medical aid. Additionally, agents of foreign principals who engage only in activities to further bona fide interests in religion, academia, science, or the fine arts are not subject to the registration requirement. The scope of these exemptions is unclear and has not been further defined in administrative guidance. For example, some commentators have argued that there is "considerable uncertainty regarding the reach and boundaries of [the] commercial exemption." Agents representing foreign countries with defense interests vital to the defense of the United States . Agents who represent governments of foreign countries deemed to be vital to the defense of the United States are exempt from the registration requirement during the time that the individual or entity engages in activities that serve the joint interests of the countries and do not conflict with U.S. policies. This exemption requires that communications disseminated by such agents relate to such activities and that the agent believes the information contained within those communications is truthful and accurate. It is unclear whether any entity has relied on this exemption. Practicing attorneys acting in the course of legal representation . Individuals or entities that are qualified to practice law are exempt from the registration requirements in the course of their legal representation of a foreign principal before a court of law or a federal agency. FARA, however, expressly states that this exemption does not extend to any such lawyer's "attempts to influence or persuade agency personnel or officials other than in the course of judicial proceedings, criminal or civil law enforcement inquiries, investigations, or proceedings, or agency proceedings required by statute or regulation to be conducted on the record." At least one court has examined the potential tension between (1) FARA's disclosure requirement with respect to information about the relationship between an attorney and a foreign client and (2) the attorney-client privilege, which is an evidentiary privilege that generally prevents the disclosure of communications between an attorney and client involving legal advice. In that case, the court, while recognizing that FARA's exemption for practicing attorneys "does not include all communications that have been traditionally protected by an attorney-client privilege," highlighted that the scope of the legal representation exemption would likely protect confidential communications related to the representation at issue in that case. Agents o therwise r egistered under the Lobbying Disclosure Act . FARA currently includes an exemption that permits agents of certain foreign principals who register under the Lobbying Disclosure Act of 1995 (LDA) —a disclosure statute designed to regulate the influence of domestic lobbyists—to not have to register under FARA. The LDA established certain criteria and thresholds for determining when a lobbyist must register its activities, and its registration requirements are not as broad in scope as the requirements under FARA. To qualify for this exemption, agents of foreign principals first must represent foreign principals other than foreign governments and foreign political parties. Second, those agents must have engaged in lobbying activities for purposes of the LDA and registered under that statute. Any person who willfully violates FARA—including failure to register as an agent of a foreign principal, making false statements of material fact, or omitting material facts or documents—may be subject to civil and criminal penalties upon conviction. Violations may result in fines of up to $10,000 or imprisonment for no more than five years, depending on the violation. Additionally, the Attorney General may seek injunctive relief to enjoin actions in violation of the Act. Destruction or concealment of an agent's records during the time period for which such recordkeeping is required is unlawful under the statute. Enforcement actions may be undertaken only at the discretion of the Attorney General, because the statute does not confer a private right of action for enforcement by private parties. In 2016, the Office of the Inspector General at DOJ issued a report on DOJ's enforcement of FARA, finding that the agency lacked a comprehensive strategy for enforcement. Among the criticisms highlighted in that report were the lack of enforcement actions brought by DOJ as well as issues of vagueness in the terms and breadth of the statute. The report highlighted what DOJ characterized as a sharp decline in registrations under the Act beginning in the mid-1990s. Some Members of Congress have introduced legislation to amend FARA following the Inspector General's report and other allegations that potential misconduct by foreign agents is not currently policed under the statute. Amendments proposed in the 115th Congress have addressed a range of issues, including: Future Representation of Foreign Principals by Political Appointees. H.R. 484 would prospectively bar any individual who has served as a political appointee from serving as an agent of a foreign principal. In other words, any individual whose political appointment terminates after the bill would be enacted would be subject to a lifetime ban on representing foreign principals in the United States. Breadth of the Disclosure Requirement . S. 1679 would expand the applicability of FARA's disclosure requirement by requiring agents to file copies of materials transmitted to "any other person." Furthermore, S. 1679 would require agents to provide additional information when filing any distributed materials with DOJ, including the name of each original recipient and the original date of distribution. Separately, H.R. 2811 / S. 625 generally would apply the disclosure requirement to electronic transmittals (e.g., email and social media) and align the filing deadlines of the disclosure requirement with those of the registration requirement. Repeal of the Exemption for Agents Registering Under the LDA . H.R. 4170 / S. 2039 would repeal the exemption that currently allows agents of foreign principals in the private sector to register under the LDA instead of under FARA. Repeal of the exemption for agents representing foreign principals in the private sector would require all activities covered under FARA to be subject to the standards of that Act, regardless of whether the foreign principal is a government, political party, or individual or entity in the private sector. For agents of foreign principals whose activities may require registration under FARA and the LDA, H.R. 4170 / S. 2039 would also align all filing deadlines after the initial registration for FARA to coincide with the deadlines of the LDA. Provision of Civil Investigative Demand Authority . Both the Foreign Agents Registration Modernization and Enforcement Act (FARMEA; H.R. 2811 / S. 625 ) and the Disclosing Foreign Influence Act (DFIA; H.R. 4170 / S. 2039 ) would authorize the Attorney General to compel individuals or entities to produce documents relevant to a FARA investigation before initiating civil or criminal enforcement proceedings. Such authority would augment DOJ's authority to investigate potential violations of agents of foreign principals who may be required to register under FARA. Availability of Civil Fines . S. 1679 would authorize the Attorney General to enforce FARA violations by means of civil fines based on the number of offenses, as well as providing the Attorney General discretion to consider the severity and frequency of the violations. Reporting Requirements. H.R. 2811 / S. 625 would expand the categories of information that DOJ must submit in its semiannual reports to Congress. FARA currently requires DOJ's reports to identify FARA registrations and the nature, sources, and content of materials distributed by agents of foreign principals. Under H.R. 2811 / S. 625 , DOJ would also report the number of investigations of potential violations involving officers and directors of any entity serving as an agent of a foreign principal and the number of those investigations that were referred to the Attorney General for prosecution. Oversight of FARA Enforcement and Administration . H.R. 4170 / S. 2039 would require the Attorney General to "develop and implement a comprehensive strategy to improve the enforcement and administration of [FARA]," which would be subject to review by the Inspector General of DOJ and Congress. Additionally, it would require the Comptroller General to analyze the effectiveness of enforcement and administration of FARA within three years of enactment of the legislation. | In the wake of the 2016 election, concerns have been raised with respect to the legal regime governing foreign influence in domestic politics. The central law concerning the activities of the agents of foreign entities acting in the United States is the Foreign Agents Registration Act (FARA or Act). Enacted in 1938 to promote transparency with respect to foreign influence in the political process, FARA generally requires "agents of foreign principals" undertaking certain activities on behalf of foreign interests to register with and file regular reports with the U.S. Department of Justice (DOJ). FARA also requires agents of foreign principals to file copies of informational materials that they distribute for a foreign principal and to maintain records of their activities on behalf of their principal. The Act contains several exemptions, including exemptions for news organizations, foreign officials, and agents who register under domestic lobbying disclosure laws. Failure to comply with FARA may subject agents to criminal and civil penalties. Although FARA has not been litigated extensively, courts have recognized a compelling governmental interest in requiring agents of foreign principals to register and disclose foreign influence in the domestic political process, resulting in a number of constitutional challenges being rejected over the decades since FARA's initial enactment. In 2016, the Office of the Inspector General at DOJ issued a report on DOJ's enforcement of FARA, finding that the department lacked a comprehensive strategy for enforcement. Among the criticisms highlighted in that report were the lack of enforcement actions brought by DOJ, as well as issues of vagueness in the terms and breadth of the statute. Some Members of Congress have introduced legislation to amend FARA following the Inspector General's report and other allegations that potential misconduct by foreign agents is not currently policed under the statute. For example, the Disclosing Foreign Influence Act (H.R. 4170; S. 2039) would repeal the FARA exemption that allows foreign agents to file under domestic lobbying regulations in lieu of the Act; would provide DOJ with authority to make civil investigative demands to investigate potential FARA violations; and would require DOJ to develop a comprehensive enforcement strategy for FARA, with review of its effects by the agency's Inspector General and the Government Accountability Office. The bills' sponsors have explained that the bills are intended to address "ambiguous requirements for those lobbying on behalf of foreign governments," which "has, over the years, led to a sharp drop in the number of registrations and the prospect of widespread abuses." This report examines the nature and scope of the current regulatory scheme, including the scope of FARA's application to agents of foreign principals; what the statute requires of those covered under the Act; exemptions available under the statute; and methods of enforcement. The report concludes by discussing various legislative proposals to amend FARA in the 115th Congress. |
Under U.S. immigration law, foreign nationals are legally admitted into the United States as immigrants to live permanently or as nonimmigrants to stay on a temporary basis. The terms "immigrant" and "nonimmigrant" are not used in the Internal Revenue Code (IRC). Instead, a foreign national, whether in the United States as an immigrant, nonimmigrant or unauthorized (illegal) alien, is classified as a resident or nonresident alien for federal tax purposes. For federal tax purposes, alien individuals are classified as resident or nonresident aliens. The classification has important consequences for determining whether income is subject to U.S. taxation, what is the appropriate tax rate, and whether an individual is covered by a tax treaty. In general, an individual is a nonresident alien unless he or she meets the qualifications under either residency test: Green card test: the individual is a lawful permanent resident of the United States at any time during the current year, or Substantial presence test: the individual is present in the United States for at least 31 days during the current year and at least 183 days during the current year and previous two years. For computing the 183 days, a formula is used that counts all the qualifying days in the current year, 1/3 of the qualifying days in the immediate preceding year, and 1/6 of the qualifying days in the second preceding year. There are several situations in which an individual may be classified as a nonresident alien even though he or she meets the substantial presence test. For example, an individual will be treated as a nonresident alien if he or she has a closer connection to a foreign country than to the United States, maintains a tax home in the foreign country, and is in the United States for fewer than 183 days during the year. Another example is that an individual in the United States under an F-, J-, M-, or Q-visa may be treated as a nonresident alien if he or she has substantially complied with visa requirements. Other individuals that may be treated as nonresident aliens even if they meet the substantial presence test include employees of foreign governments and international organizations, regular commuters from Canada or Mexico, aliens who are unable to the leave the United States because of a medical condition, foreign vessel crew members, aliens in transit through the United States, and athletes participating in charitable sporting events. A residency definition in an income tax treaty will override these residency rules. If an individual is defined as a resident of a foreign country under a treaty, then he or she is a nonresident alien for purposes of determining his or her U.S. tax liability regardless of whether the "green card" or "substantial presence" test is met. The Internal Revenue Code (IRC) does not have a special classification for individuals who are in the United States without authorization (commonly referred to as "illegal aliens"). Instead, the Code treats these individuals in the same manner as other foreign nationals—they are subject to federal taxes and classified for tax purposes as either resident or nonresident aliens. An unauthorized individual who has been in the United States long enough to qualify under the "substantial presence" test is classified as a resident alien; otherwise, the individual is classified as a nonresident alien. This classification is for tax purposes only and does not affect the individual's immigration status. While most taxpayers file tax returns using their Social Security number (SSN) as an identifier, individuals who are ineligible to receive an SSN file their returns using an individual taxpayer identification number (ITIN). Thus, unauthorized aliens who file tax returns will generally use an ITIN. One consequence of this is that they will be ineligible to claim the earned income tax credit (EITC) since the IRC requires that taxpayers claiming the EITC provide SSNs for themselves, their spouses (if filing a joint return), and their qualifying children. A similar rule applied to the temporary refundable tax credit ("recovery rebate") provided under the Economic Stimulus Act of 2008. Furthermore, in the 112 th Congress, legislation has been introduced that would impose, with some differences, an SSN requirement for claiming the additional child tax credit, any part of the child tax credit, or any credit or refund (e.g., H.R. 1196 ). Two of these bills— H.R. 3630 and H.R. 5652 —have been passed by the House; however, H.R. 3630 was enacted into law ( P.L. 112-96 ) without the SSN provision. The mechanism of using an SSN requirement for restricting the eligibility of unauthorized aliens to claim tax credits may be imprecise. There remains the possibility that attempts to claim a credit could be made by resident aliens who legally received SSNs but are currently not legally present in the United States, in addition to unauthorized aliens using fraudulent SSNs. At the same time, the SSN requirement may deny the credits to families that do not include any unauthorized aliens but have at least one member without an SSN. For example, after it came to light that overseas military members with foreign spouses would be ineligible for the 2008 recovery rebate, Congress exempted military members from the SSN requirement. Resident aliens are generally subject to the same federal income tax laws as citizens of the United States. Like U.S. citizens, resident aliens are subject to tax on all income earned in the United States and abroad. Resident aliens file a tax return using the Form 1040 series, may claim deductions and credits, and are taxed at the same graduated rates as U.S. citizens. They are also subject to income tax withholding. Nonresident aliens are taxed on income from sources within the United States but generally not on income from foreign sources. Sections 861, 862, 863, 864, and 865 of the Internal Revenue Code define income that is from sources within and outside the United States. Compensation for services performed in the United States is U.S. source income. A nonresident alien's U.S. source income is taxed at different rates depending on whether it is "effectively connected" with a trade or business in the United States. An individual must generally be engaged in a trade or business in the United States to have "effectively connected" income. The term generally includes compensation for the performance of personal services in the United States. Nonresident aliens with F-, J-, M-, or Q-visas are considered to be engaged in a trade or business in the United States. Income that is effectively connected with a trade or business in the United States is generally taxed by the same rules and at the same graduated rates as the income of U.S. citizens and resident aliens. In general, income that is not effectively connected may not be reduced by deductions and is subject to tax at a flat rate of 30%. Nonresident aliens file a return using the Form 1040NR series and are subject to the same collection procedures as U.S. citizens and resident aliens. Furthermore, they are generally subject to withholding on personal service compensation and non-effectively connected income. There are limited circumstances in which a nonresident alien's U.S. source income is not subject to U.S. taxation. For example, some interest income that is not connected with a U.S. trade or business (e.g., portfolio interest) is exempt from U.S. tax. Another example is that compensation for services performed in the United States is not subject to U.S. tax if the services are for a foreign employer or office, the alien is in the United States for not more than 90 days during the tax year, and the compensation does not exceed $3000. A nonresident alien with an F-, J-, or Q-visa is not taxed on compensation received from a foreign employer. Employees of foreign governments and international organizations and crew members of foreign vessels and aircraft may qualify to exempt their compensation from tax. Additionally, income may be exempt from U.S. tax under a treaty (see below). Aliens leaving the United States usually must obtain a certificate of compliance ("sailing permit") from the IRS that shows he or she "has complied with all the obligations imposed upon him by the income tax laws." The IRS may subject aliens who attempt to leave without one to examination at the point of departure and require payment of any taxes whose collection would be jeopardized by the departure. Tax treaties provide benefits to nonresident aliens and, in certain situations, resident aliens. Benefits vary by treaty. Typical provisions include the reduction of the 30% flat rate applied to non-effectively connected U.S. source income and the exemption of gain from the sale of personal property. Treaties often exempt personal service compensation from taxation if a nonresident alien is in the United States for less than a stated period of time (e.g., 90, 180, or 183 days) or the compensation is less than a specified amount (generally between $3,000 and $10,000) and paid by a foreign employer. Treaty provisions may also exempt the compensation of specific groups of employees (e.g., students, teachers, athletes, and employees of foreign governments). The United States has income tax treaties with Armenia, Australia, Austria, Azerbaijan, Bangladesh, Barbados, Belarus, Belgium, Bulgaria, Canada, China, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Jamaica, Japan, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Luxembourg, Malta, Mexico, Moldova, Morocco, the Netherlands, New Zealand, Norway, Pakistan, Philippines, Poland, Portugal, Romania, Russia, Slovak Republic, Slovenia, South Africa, South Korea, Spain, Sri Lanka, Sweden, Switzerland, Tajikistan, Thailand, Trinidad, Tunisia, Turkey, Turkmenistan, Ukraine, the United Kingdom, Uzbekistan, and Venezuela. Resident aliens are subject to Social Security and Medicare taxes on wages (FICA taxes) and on self-employment income (SECA taxes) in the same manner as U.S. citizens. In general, nonresident aliens are subject to FICA taxes on compensation from work within the United States under the rules applicable to U.S. citizens and resident aliens, but are not subject to SECA taxes. A list of exempted services in IRC §3121(b) is generally applicable to all who work in the United States. Examples include services performed by foreign workers temporarily admitted to the United States to perform agricultural labor and services performed by employees of foreign governments and qualifying international organizations. Also exempted are services performed by individuals with F-, J-, M-, or Q-visas that meet the purpose of admittance and services performed in Guam by H-2 visa holders who are residents of the Philippines. The United States has entered into totalization agreements with numerous countries that have social security programs. The intent of these agreements is to provide individuals who work in two countries with the opportunity to qualify for social security benefits in one country and to avoid double coverage and taxation. With respect to the issue of double coverage and taxation, agreements generally provide that individuals are only covered by the social security program (and therefore only subject to the program's taxes) in the country where they are working, although individuals who are covered in their home country and temporarily assigned by their employer to work in the other country are exempt from coverage in that country. A self-employed individual generally is covered and pays social security taxes in the country where he or she resides. The United States has entered into totalization agreements with Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, the Netherlands, Norway, Poland, Portugal, Spain, South Korea, Sweden, Switzerland, and the United Kingdom. In 2004, the United States signed an agreement with Mexico, which has been controversial. It has not yet been transmitted to Congress. The Consolidated Appropriations Act, 2012 prohibits the Social Security Commissioner or Social Security Administration (SSA) from using any of the funds appropriated by the act to pay compensation to SSA employees to administer Social Security benefit payments under any U.S.-Mexico totalization agreement that would not otherwise be payable. Other legislation has been introduced, the Loophole Elimination and Verification Enforcement Act (or LEAVE Act), that would state it is the sense of the House that the U.S.-Mexico totalization agreement "is inappropriate public policy and should not take effect." Another bill introduced in the 112 th Congress would address a constitutional issue with the existing totalization agreement process. Under current law, once an agreement is transmitted to Congress, it becomes effective at the end of the period during which at least one house has been in session 60 days, unless either house adopts a resolution of disapproval. This is a legislative veto, and the Supreme Court held such vetoes to be unconstitutional. The Social Security Totalization Agreement Reform Act of 2011 (or STAR Act) would, among other things, address the legislative veto problem by implementing a new approval process. | A question that often arises is whether unauthorized aliens and other foreign nationals working in the United States are subject to U.S. taxes. The federal tax consequences for these individuals are dependent on (a) whether an individual is classified as a resident or nonresident alien and (b) whether a tax treaty or totalization agreement exists between the United States and the individual's home country. In general, an individual is a resident alien if he or she is a lawful permanent U.S. resident or is in the United States for a substantial period of time during the current and past two years (the "substantial presence" test). Otherwise, he or she will typically be classified as a nonresident alien. Resident aliens are generally taxed in the same manner as U.S. citizens. Nonresident aliens are subject to different treatment, such as generally being taxed only on income from U.S. sources. Exceptions exist for aliens with specific types of visas or employment. An individual who is in the country unlawfully is, like any other alien, classified as either a resident or nonresident alien. This classification is for tax purposes only, and it does not affect the individual's immigration status. These individuals' eligibility to claim the earned income tax credit is restricted because the tax code requires that taxpayers claiming the credit provide their Social Security number (SSN), as well as those of their spouse and dependents. Unauthorized aliens are ineligible for SSNs, and therefore file their tax returns using an individual taxpayer identification number (ITIN). In the 112th Congress, legislation has been introduced that would, with some differences, impose an SSN requirement for claiming the additional child tax credit (e.g., H.R. 3630, H.R. 5652, H.R. 3275, and H.R. 1956), for claiming any part of the child tax credit (H.R. 3444 and S. 577), or for claiming any credit or refund (e.g., H.R. 1196). Two of these bills—H.R. 3630 and H.R. 5652—have been passed by the House; however, H.R. 3630 was enacted into law (P.L. 112-96) without the provision. Finally, the provisions of an income tax treaty or totalization agreement may reduce or eliminate taxes owed to the United States. An income tax treaty is a bilateral agreement between the United States and another country that addresses the income tax treatment of each country's residents while in the other country, primarily with the intent of reducing the incidence of double taxation. Totalization agreements are bilateral treaties that address social security taxes. In 2004, the United States signed a totalization agreement with Mexico, but it has not yet been transmitted to Congress for review. In the 112th Congress, the Consolidated Appropriations Act, 2012 prohibits the Social Security Commissioner or Social Security Administration (SSA) from using any of the funds appropriated by the act to pay compensation to SSA employees to administer Social Security benefit payments under any U.S.-Mexico totalization agreement that would not otherwise be payable. Other legislation has been introduced that would state it is the sense of the House that the U.S.-Mexico totalization agreement "is inappropriate public policy and should not take effect" (H.R. 1196), or address a constitutional issue with the manner in which totalization agreements are disapproved by Congress (S. 181). |
U.S. greenhouse gas (GHG) emission levels remain a topic of interest among policy makers and stakeholders. On June 25, 2013, President Obama affirmed his commitment to reduce U.S. GHG emissions by 17% below 2005 levels by 2020 if all other major economies agreed to limit their emissions as well. In addition, during a November 2014 trip to China, President Obama and President Xi of China made a bilateral announcement concerning GHG emissions. President Obama announced a new policy target to reduce U.S. net GHG emissions by 26%-28% by 2025. President Xi agreed to "peak" Chinese carbon dioxide (CO 2 ) emissions around 2030, perhaps earlier, and to increase the non-fossil share of China's energy to around 20% by 2030 compared to 2005 levels. A question for policy makers is whether U.S. GHG emissions will remain at current levels, decrease to meet the President's 2020 and 2025 goals, or increase to former (or even higher) levels. Multiple factors, including socioeconomics, technology, and climate policies, may impact GHG emission levels. The human-related GHG emission and related data in this report are from publicly available sources, particularly reports and tables produced regularly by the Environmental Protection Agency (EPA) and the Energy Information Administration (EIA). This first section of this report provides current levels and recent trends in U.S. GHG emissions. The second section takes a closer look at some of the key factors that influence emission levels. The third section discusses the challenges in making GHG emission projections by comparing observed emissions with preobserved emission estimates. As Figure 1 illustrates, U.S. GHG emissions increased during most of the years between 1990 and 2007, and then decreased substantially in 2008 and 2009. Although emissions increased in 2010, levels decreased again in 2011 and 2012, eventually reaching levels comparable to those in 1995. In terms of the President's 2020 emissions target (17% below 2005 levels), U.S. GHG emissions in 2012—the most recent year with available GHG emission data—were approximately 10% below 2005 levels. GHG emissions are generated throughout the United States by millions of discrete sources: smokestacks, vehicle exhaust pipes, households, commercial buildings, livestock, etc. Figure 2 illustrates the breakdown of U.S. GHG emissions by gas and type of source. The figure indicates that CO 2 from the combustion of fossil fuels—petroleum, coal, and natural gas—accounted for 78% of total U.S. GHG emissions in 2012. The next section examines CO 2 emissions from fossil fuel combustion. In the context of GHG emission reduction programs and legislative proposals, CO 2 emissions from the combustion of fossil fuels have received the most attention. CO 2 emissions are fairly easy to verify from large stationary sources, like power plants. For almost 20 years, measurement devices have been installed in smokestacks of large facilities, reporting electronic information to EPA and the appropriate state. For smaller sources, CO 2 emissions are a relatively straightforward and accurate calculation based on the carbon content of fossil fuels consumed. In addition, according to EPA, "changes in emissions from fossil fuel combustion have been the dominant factor affecting U.S. emission trends." Figure 3 illustrates the CO 2 emission contributions by sector from the combustion of fossil fuels. The largest contribution (40%) is from electricity generation. The generated electricity is distributed almost equally to the residential, industrial, and commercial sectors. Multiple variables impact U.S. GHG emission levels. One approach often taken in climate change analysis is to examine several broad energy-related factors that influence GHG emission levels, including population, income—measured here as per capita gross domestic product (GDP), energy intensity—measured here as energy use per gross domestic product, and carbon intensity—measured here as CO 2 emissions per energy use. As illustrated in the equation below, GHG emission levels can be approximated by multiplying together these four factors. Although decreases in population and/or per capita income would contribute to lowering U.S. GHG emissions, policies that would seek to directly limit these emissions drivers are essentially outside the bounds of U.S. public policy. Thus the most relevant factors in terms of climate change policy are energy intensity and carbon intensity, which are discussed below. Energy intensity is the amount of energy consumed—often measured in metric tons of oil equivalent (toe) or British thermal units (Btus)—per a level of economic output such as GDP. Figure 4 illustrates the U.S. total energy consumption and GDP between 1990 and 2013. The figure indicates that energy use increased from 1990 to 2000 at an annual average rate of 1.6%, and then remained relatively constant (excepting some annual fluctuations) through 2013. In contrast, U.S. GDP (in 2009$) has increased at an average annual rate of approximately 2.5% from 1990 through 2013. Thus, U.S. energy intensity declined between 1990 and 2013. Figure 5 compares the energy intensities of the United States, the European Union (28 nations), and China between 1990 and 2011. As the figure illustrates, U.S. energy intensity has been declining by about 2% each year for two decades: the U.S. energy intensity in 2011 was 31% lower than it was in 1990. However, the energy intensity in the United States was 42% higher in 2011 than in the European Union. The degree to which the U.S. economy is composed of industries with relatively high energy intensities likely plays a role in determining the energy intensity of United States. Figure 6 indicates that the percentage contribution to the U.S. GDP from selected energy-intensive industries decreased from 4.2% in 1998 to 3.2% in 2011. Figure 6 includes 44 industries in the six-digit North American Industry Classification System (NAICS). These industries have an energy intensity of at least 5%, measured by dividing energy expenditures by the value of an industry's shipments. In this report, carbon intensity measures the amount of CO 2 emissions generated during energy use, which includes fuel combustion for electricity generation and transportation purposes. Energy sources (e.g., coal, natural gas, petroleum, nuclear, and renewables) vary dramatically in the amount of carbon released per unit of energy supplied. As indicated in Table 1 , coal generates approximately 80% more CO 2 emissions per unit of energy than natural gas, and approximately 28% more emissions per unit of energy than crude oil. Moreover, other energy sources, such as nuclear or specific renewable sources, do not directly generate any CO 2 emissions. Figure 7 illustrates the U.S. carbon content of energy use—CO 2 emissions per Btu—between 1990 and 2013. This includes energy used (i.e., consumed) in the electricity, industrial, transportation, commercial, and residential sectors. The figure indicates that this measure remained relatively constant from 1990 to 2005, when it began to decline. By 2013, the carbon content of energy use was approximately 8% lower than it was in 2005. This decline is largely related to the recent change in the portfolio of fuels consumed for energy purposes. Figure 8 compares the consumption percentage of different energy sources in the United States. The figure indicates that the trajectories of coal and natural gas have diverged in recent years. Since 2008, coal's percentage contribution has decreased from 23% to 19%. In contrast, natural gas's percentage contribution has increased from 24% to 27% during that time frame. In addition, renewable energy's share of total energy consumption has increased substantially over the past decade. The recent changes in energy consumption are partially explained by changes in the energy sources used to generate electricity, because the electric power sector accounts for approximately 40% of total energy use. As an illustration of recent changes in the electricity sector, Figure 9 compares electricity generation by energy source between 2004 and 2013. The figure indicates a substantial decrease in coal use with a simultaneous increase in natural gas. Moreover, the percentage share of renewable sources increased from 2% to 6%, and petroleum decreased from 3% to less than 1%. Accurately forecasting future GHG emission levels is a complex and challenging, if not impossible, endeavor. Consequently, analysts often provide a range of emissions based on different scenarios or assumptions. As discussed above, several broad energy-related factors influence emission levels. In addition, other variables have impacts in ways that cannot be accurately predicted. Such variables may include technological developments, energy price fluctuations, availability of less carbon-intensive energy sources (e.g., hydroelectric, other renewables, and nuclear power), seasonal weather and temperature patterns, and policy changes in the United States and abroad. EIA provides annual forecasts of CO 2 emissions in its Annual Energy Outlook (AEO) publications. Regarding its various estimates, EIA states the following: The projections in the AEO are not statements of what will happen but of what might happen, given assumptions and methodologies. The AEO Reference case projection assumes trends that are consistent with historical and current market behavior, technological and demographic changes, and current laws and regulations. The potential impacts of pending or proposed legislation, regulations, and standards are not reflected in the Reference case projections. Figure 10 compares actual CO 2 emissions between 1990 and 2012 with selected EIA emission projections made in past years. In general, actual emissions have remained well below projections, particularly the projections made in 2008 or earlier. For example, the AEO from 2000 projected CO 2 emissions would be almost 6.7 billion metric tons in 2012, about 20% higher than has been observed. By comparison, the more recent projections (AEO 2012 and 2014) indicate that CO 2 emissions will remain relatively flat over the next decade. | On June 25, 2013, President Obama affirmed his commitment to reduce U.S. greenhouse gas (GHG) emissions by 17% below 2005 levels by 2020 if all other major economies agreed to limit their emissions as well. In addition, during a November 2014 trip to China, President Obama announced a new policy target to reduce U.S. net GHG emissions by 26%-28% by 2025. Whether these objectives will be met is uncertain, but emission levels and recent trends remain a topic of interest among policy makers. U.S. GHG emissions increased during most of the years between 1990 and 2007, and then decreased substantially in 2008 and 2009. Although emissions increased in 2010, levels decreased again in 2011 and 2012, eventually reaching levels comparable to those from 1995. In terms of the President's 2020 emissions target, in 2012, U.S. GHG emissions were approximately 10% below 2005 levels—more than halfway toward the 2020 target. In the United States, GHG emissions are generated by millions of discrete sources, including smokestacks, vehicle exhaust pipes, commercial buildings, and households. However, carbon dioxide (CO2) emissions from the combustion of fossil fuels—petroleum, coal, and natural gas—have received the most attention because they account for the vast majority of human-related GHG emissions: 78% of total U.S. GHG emissions in 2012. In addition, (1) CO2 emissions from large stationary sources are easy to measure and have been tracked for almost 20 years, and (2) CO2 emissions from smaller sources can be estimated through relatively straightforward calculations. In 2012, the percentage contributions of CO2 emissions by sector were as follows: 40% from electricity, 35% from transportation, 15% from industrial, 6% from commercial, and 4% from residential. Although multiple factors have some level of influence on U.S. GHG emission levels, it may be instructive to examine several broad energy-related factors including population, income, energy intensity (energy use per economic output such as gross domestic product, or GDP) and carbon intensity (CO2 emissions per unit of energy use). Although decreases in population and/or income would contribute to reducing U.S. GHG emissions, policies that would seek to directly limit these emissions drivers are essentially outside the bounds of U.S. public policy. Therefore, this report focuses on the impacts of energy intensity and carbon intensity on GHG emission levels. As energy use has grown at a slower rate than the economy, U.S. energy intensity declined by about 2% each year for more than two decades. Between 1990 and 2013, U.S. GDP (in 2009$) increased at an average annual rate of approximately 2.5%. Energy use, in contrast, increased from 1990 to 2000 at an annual average rate of 1.6%, but then remained relatively constant (excepting some annual fluctuations) through 2013. The U.S. carbon content of energy use remained relatively constant from 1990 to 2005, but by 2013, it was approximately 8% lower than in 2005. In this report, carbon intensity measures the amount of CO2 emissions generated per unit of energy used. Energy sources—coal, natural gas, petroleum, nuclear, renewables—vary dramatically in the amount of carbon released per unit of energy supplied. For example, coal combustion accounts for almost twice the carbon content per unit of energy than natural gas, and some energy sources, when consumed, do not directly generate any emissions. This recent decrease in the carbon content of energy use is partially explained by changes in the energy sources used to generate electricity, because the electric power sector accounts for approximately 40% of total energy use. For example, between 2004 and 2013, the percentage of electricity from coal generation decreased from 50% to 39%, while the percentage of electricity generated using natural gas increased from 18% to 28%. In addition, renewable energy use increased by 100%, and the use of petroleum to generate electricity decreased by approximately 100%. |
This report analyzes Supreme Court nominee Elena Kagan's co-authored article, written with David Barron, on the nondelegation doctrine and the seminal administrative law case, Chevron U.S.A., Inc. v. Natural Resource s Defense Council, Inc . The article, which was written in 2001 while Kagan was a professor at Harvard Law School, covers a range of concepts in administrative law. Administrative law may be described as the body of law governing agency procedures, structure, and powers, as well as how citizens interact with the government. Administrative law and process encompass the implementation and interpretation of policies and programs enacted by Congress, the deference that should be accorded to different types of agency decisions and actions, and who ultimately decides whether agency interpretations of statutory ambiguities are permissible. The question of whether and when agencies or courts should take the predominant role in resolving statutory ambiguities through their interpretations raises classic separation of powers issues. While agencies generally fall within the executive branch of government, it is Congress that determines, in an act establishing the agency or subsequent statutes, the powers of the agency. Courts both interpret statutes and grant varying levels of deference to agency interpretations when examining questions such as whether an agency's action is in excess of its delegated statutory authority. According to Barron and Kagan, judicial deference to agency interpretations of legislative gaps presently depends on the formality of the procedures used by the agency and whether the agency's decision has general or particular applicability. Barron and Kagan find that the Supreme Court's focus on these dichotomies of proceduralism and generality "fail[s] to generate the most appropriate distribution of interpretive power." Instead, the authors advocate drawing the line between administrative and judicial power to resolve statutory ambiguities on the basis of the position and authority of the agency actor who makes the decision, rather than the agency's use of formal procedures or the agency's issuance of a generally applicable decision. After providing background on the administrative law concepts discussed in the article, this report discusses the article itself and provides reactions to and considerations of its propositions. The Administrative Procedure Act (APA) applies to all agencies, including independent regulatory agencies such as the Federal Trade Commission. The APA prescribes procedures for agency actions such as rulemaking and adjudication. Barron and Kagan's Chevron nondelegation theory would shift the applicable type of judicial deference away from a focus on the agency's use of formal procedures, such as those set forth in the APA, or informal procedures. The authors' Chevron nondelegation doctrine would similarly discount whether the rule or order issued by the agency has general applicability or only applies to the particular parties to the proceeding. Agencies issue rules pursuant to delegated authority from Congress. The APA imposes several procedural requirements on the issuance of substantive rules, which are also known as legislative rules. Substantive rules have the force of law and may create new rights or duties. Under a process known as informal or notice-and-comment rulemaking, the APA generally requires that all agencies publish a notice of proposed rulemaking in the Federal Register , after which interested persons and the public may submit comments that may affect the resulting final rule. Final rules must be published 30 days before they become effective as substantive rules. However, these requirements do not apply to nonlegislative rules, which include "interpretive rules, general statements of policy, or rules of agency organization, procedure, or practice." The procedural distinction between substantive, or legislative, rules and nonlegislative rules underlies the type of deference that a reviewing court may grant the rule at issue. The APA also provides procedures for formal adjudications, which are also referred to as "on the record" hearings. The APA provides that when a statute requires an agency adjudication to be determined "on the record," an Administrative Law Judge (ALJ) or the agency head must preside over the hearing. In general, ALJs hear cases that fall into four different categories: (1) enforcement cases, (2) entitlement cases, (3) regulatory cases, and (4) contract cases. The subject matter of the hearing or proceeding varies among the agencies and includes disability determinations as well as licensing, sanctions, and civil penalty determinations. Informal adjudications do not necessarily apply APA procedures and, as a result, an agency may create its own procedures and use non-ALJ hearing officers to adjudicate disputes before the agency. The Supreme Court has stated that "an administrative agency's power to regulate in the public interest must always be grounded in a valid grant of authority from Congress." With regard to the standards of judicial review of agency action that a court will use to evaluate whether an agency's action is valid, the relevant APA provision for purposes of Barron and Kagan's article states that "[t]he reviewing court shall ... hold unlawful and set aside agency action, findings, and conclusions found to be ... in excess of statutory jurisdiction, authority, or limitations, or short of statutory right." This standard of judicial review concerns congressional delegations of legislative authority to administrative agencies. Courts grant varying levels of deference to agency interpretations of statutes when examining questions such as whether an agency's action is in excess of its delegated statutory authority. Judicial deference is the degree to which a court will uphold and respect the validity of an agency's interpretation of a statutory provision during judicial review of the agency's decisions. The amount of deference that an agency interpretation of its own statute will receive from a reviewing court "has been understood to vary with the circumstances." This section briefly outlines two types of deference that a court may accord to an agency's administration of a statutory provision— Chevron (substantial deference) and Skidmore (weak deference)—that Barron and Kagan discuss in their law review article. While the law review article focuses primarily on Chevron deference, it also discusses Skidmore deference in cases where Chevron deference would be inapplicable. Chevron is the leading case on judicial review of agency interpretations of statutes. This case involved the Environmental Protection Agency's rules defining "stationary source" for purposes of nationwide regulation of emissions under the Clean Air Act. In Chevron , the Court enunciated a two-step test for judicial review of an agency's interpretation of its own statute: (1) Has Congress "directly spoken to the precise question at issue?" and (2) if Congress has not done so and "the statute is silent or ambiguous with respect to the specific issue," is the agency's answer "based on a permissible construction of the statute?" Under Chevron step one, if Congress has spoken directly to the question at issue, then Chevron deference is not due and the Court "must give effect to the unambiguously expressed intent of Congress." If Congress's intent is unclear or if Congress is silent, the Court's role at Chevron step two is to defer to any reasonable agency interpretation of the pertinent statutory language. Chevron thus entered the heart of, and continues to factor in, the debate as to whether agencies or courts should address questions of statutory interpretation, when courts should defer to agency interpretations, and what level of deference courts should apply. The 2001 case United States v. Mead Corporation focused on a tariff classification ruling by the Customs Service and held that the ruling "fail[ed] to qualify" for Chevron deference. The Court qualified its decision in Chevron by holding that Chevron deference to an agency's interpretation of an ambiguous statute was "warranted only 'when it appears that Congress delegated authority to the agency generally to make rules carrying the force of law, and that the agency interpretation was promulgated in exercise of that authority.'" These threshold determinations of whether Congress delegated authority and whether the agency has exercised its authority to act with the force of law, such as in notice-and-comment rulemaking or formal adjudication, has been referred to as Chevron step zero. The Mead Court held that congressional delegation of authority to an agency to make rules with the force of law "may be shown in a variety of ways, as by an agency's power to engage in adjudication or notice-and-comment rulemaking, or by some other indication of a comparable congressional intent." As the Court had explained earlier in Christensen v. Harris County , policy statements, agency manuals, enforcement guidelines, and interpretive opinion letters do not warrant Chevron -level deference. In the 2002 case Barnhart v. Walton , which was decided after the publication of Barron and Kagan's article, the Court focused on the longstanding nature of the agency's interpretation and found that Chevron deference may apply to agency interpretations reached "through means less formal than 'notice-and-comment' rulemaking." The Barnhart Court pointed to factors that highlighted "the interstitial nature of the legal question, the related expertise of the Agency, the importance of the question to administration of the statute, the complexity of that administration, and the careful consideration the Agency has given the question over a long period of time." With regard to the level of judicial deference that should be accorded to informal procedures, courts appear to be required to make a "threshold determination: whether to apply the criteria for determining Chevron worthiness from Mead or those from Barnhart ... Thus, Chevron deference appears to depend on whether the court evaluating a particular interpretive procedure favors Mead -style factors or Barnhart -style factors." If the agency's interpretation does not qualify for Chevron deference, it is otherwise "'entitled to respect' only to the extent it has the 'power to persuade'" under the standard of deference set forth in Skidmore v. Swift & Co . If Chevron deference does not apply to the agency's interpretation—such as in cases when the agency interprets a statute that also applies to other agencies or when the agency has issued an opinion letter—"courts ordinarily will give some deference or weight to an agency's interpretation of a statute that it administers." Under Skidmore v. Swift & Co ., a court may defer to such agency interpretations, as they are entitled to a "respect proportional to [their] 'power to persuade.'" The Skidmore Court stated that "[t]he weight [granted an administrative] judgment in a particular case will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control." In other words, courts will often give weight to an agency's interpretations, due to the agency's "specialized experience" in the administration of its given functions. The nondelegation doctrine concerns the delegation of legislative power to administrative or executive branch agencies. The premise of the nondelegation doctrine is that Article I of Constitution vests legislative power in Congress to make the laws that are necessary and proper, and "the legislative power of Congress cannot be delegated" to other branches of government. There are two rationales for the nondelegation doctrine—a separation of powers argument and a checks and balances argument—in addition to several policy justifications. Before the New Deal, the nondelegation doctrine consisted of several Supreme Court rulings that pronounced that Congress may not delegate its legislative powers. In each of these cases, and others as well, the delegations were in fact, if not in name, approved under various theories. Modern delegation doctrine may trace its inception to J.W. Hampton, Jr. & Co. v. United States , where the Court noted that in order to govern effectively Congress must seek the assistance of other branches and observed that the extent of the assistance "must be fixed according to common sense and the inherent necessities of the governmental co-ordinaton." A congressional delegation of legislative authority would be sustained, the Court announced, whenever Congress provides an "intelligible principle" that executive branch officials must follow and that their actions may be evaluated against. Stated otherwise, it is "constitutionally sufficient if Congress clearly delineates the general policy, the public agency which is to apply it, and the boundaries of this delegated authority. Private rights are protected by access to the courts to test the application of the policy in the light of these legislative declarations." The Court has struck down two legislative delegations as lacking an "intelligible principle" under the nondelegation doctrine. In Panama Refining Co. v. Ryan , the Court found no "intelligible principle" when Congress provided the President with the authority to prohibit the interstate transfer of petroleum without providing any standards or limits constraining when such authority was to be exercised. Similarly, in A.L.A. Schechter Poultry Corp. v. United States , Congress was found to have created an unauthorized delegation of legislative authority when it gave the President the authority to enact "codes of fair competition." In support of its decision in Schechter , the Court noted both that "fair competition" was not a term which could easily be defined and that the breadth of the President's authority was markedly different from other cases in which executive officials had been delegated solely the authority to establish prices or issue licenses. The Court has not struck down a congressional delegation to an executive agency since these two New Deal cases in 1935. After these cases, the Court has continued to discuss the nondelegation doctrine, while upholding congressional delegations of legislative power to executive agencies, and has sanctioned many delegations that lacked optimal legislative specificity. The Court also has construed legislation to impose more requirements than is textually required in order to avoid constitutional nondelegation issues. After the Court's 2001 decision in Whitman v. American Trucking Associations, Inc. , which did not find a violation of the nondelegation doctrine, the nondelegation doctrine has been declared by several commentators to be, if not "dead," at least "on life support, with the Supreme Court neither willing to pull the plug nor prepared to revive it." The Chevron nondelegation doctrine proposed by Barron and Kagan would apply Chevron deference to agency decisions based on internal agency decisionmaking processes. Under their Chevron nondelegation doctrine, Chevron deference would be accorded to lawful agency decisions that are made by the individual to which the relevant statute has delegated the decisionmaking authority, who would typically be the agency head. Chevron deference would be due if this congressionally-designated agency official met two conditions: (1) the statutory delegatee (or her senior advisors ) formally adopted the agency's decision as her own and issued the decision under her name, and (2) the statutory delegatee (or her immediate advisors) conducted a meaningful review of the agency's decision. If the statutory delegatee subdelegates her decisionmaking authority, or if a decision is made by a lower-level agency official, that agency interpretation would not be eligible for Chevron deference, but could instead still potentially receive Skidmore deference. Barron and Kagan's law review article compares its proposal for a new method of judicial deference to agency decisionmaking, which the authors refer to as the Chevron nondelegation doctrine, to the congressional nondelegation doctrine. As discussed above, the Supreme Court has already elucidated several types of judicial deference to agency action, including Chevron and Skidmore deference. Under the Chevron nondelegation doctrine proposed in the article, whether an agency decision receives Chevron or a lesser type of deference for its actions depends on whether one or two delegations have occurred. The first delegation is the delegation of legislative power from Congress to a particular agency official. The second delegation is of decisionmaking power from the designated agency official to others within the agency. Issues that may arise with the first delegation are addressed under the congressional nondelegation doctrine: Congress may delegate authority if it provides an "intelligible principle" that agency officials must follow and that their actions may be evaluated against. Issues that may arise with the second delegation would be addressed through the principles of the Chevron nondelegation doctrine outlined in the article: if the individual designated by Congress makes the decision that fills in a legislative gap, courts should defer to the agency decision under Chevron , but if a lower-level agency official provides the interpretation, courts should exercise their interpretive authority to resolve statutory ambiguities. The article refers to this choice between whether agencies or courts will resolve ambiguities in statutory interpretation as "institutional choice." The Chevron nondelegation doctrine would make this institutional choice between the agencies and the courts dependent on "institutional design." Institutional design is a question of who within the agency exercises the interpretive authority to resolve a statutory ambiguity: the individual designated by Congress, who would usually be a high-level agency official, or a lower-level agency official. The article discusses two "dichotomies" of administrative law on which the Supreme Court relies to make the institutional choice or, in other words, to determine "the most appropriate distribution of interpretive power," between agencies and courts—(1) formal versus informal procedures and (2) general versus particular applicability of agency decisionmaking and rulings. The article then introduces a third calculation—the centralized versus decentralized nature of agency action or "institutional design." As an example of the first dichotomy, formal versus informal procedures, the article compares the major rule issued after notice-and-comment rulemaking in Chevron with the tariff classification ruling issued in Mead after more "streamlined" processes. Barron and Kagan critique the Court's preference for formal procedures for "fail[ing] to acknowledge the costs" of using formal APA procedures. As an example of the second dichotomy, general versus particular decisionmaking, the rule in Chevron applied generally to all "new or modified major stationary sources," while the Mead tariff classification ruling had particular effect in that the tariff classification ruling applied to the "particular transaction" of three-ring binder day planners. The authors note the Supreme Court's suggestion that general agency decisions "should receive greater judicial deference" and remark that agencies have valid reasons to choose between making decisions with either general or particular effects. Instead of relying on these two dichotomies, Barron and Kagan would examine whether the agency decision was centralized or decentralized, by focusing on the whether the statutory delegatee or a lower-level agency official took responsibility for the agency decision. Agencies would receive Chevron deference for resolutions of statutory ambiguity personally made by statutory delegatees. Courts would resolve questions of legislative ambiguities if lower-level agency officials made the agency decision. For example, the Chevron rule was issued by a high-level official at the center of the agency hierarchy—the Administrator of the Environmental Protection Agency—and that rule received what became known as Chevron deference from the Supreme Court. The initial Mead tariff classification ruling was issued by a Customs Service official in one of the 46 port-of-entry offices, in other words, a lower-level agency official, while the two subsequent rulings were issued by the director of the Commercial Rulings Division at Customs Headquarters. The Court held that Chevron deference was not applicable to Customs Service tariff classification rulings. According to Barron and Kagan, their Chevron nondelegation doctrine would have the advantages of political accountability and disciplined agency decisionmaking and would avoid the reported disadvantages of the congressional nondelegation doctrine—excessive centralization and the infeasibility of judicial enforcement. Due to the Court's differing views on when agency decisions should receive Chevron deference, the authors "see some potential for the Court to move toward, and even converge on," their Chevron nondelegation doctrine. The background section of the article provides an overview of Chevron and then discusses the questions that courts and commentators grappled with post- Chevron – such as what types of agency decisions (those in formal or informal adjudications, those exempt from notice-and-comment rulemaking procedures) should receive Chevron deference. The authors then offer statistics comparing the volume of regulations promulgated with notice-and-comment procedures to agency decisions issued without notice and comment; they state that the "mass of agency action" takes place outside of notice-and-comment procedures. The authors frame as one of the "principal questions of administrative law" whether (1) courts will accept agency interpretations of ambiguous statutes that appear in forms other than notice-and-comment rulemaking (such as administrative adjudications that do not follow formal APA procedures) or (2) courts will use independent judgment to resolve statutory ambiguities. It would appear that this is a reformulation of the question of "institutional choice" between agencies and courts resolving statutory ambiguities that the authors discussed earlier in the article. Barron and Kagan then discuss Christensen v. Harris County and United States v. Mead Corporation as cases that address this question. In Christensen , the Supreme Court did not accord Chevron deference to an agency interpretation issued in an opinion letter. As the opinion letter lacked the force of law, like other agency "policy statements, agency manuals, and enforcement guidelines," it could only qualify for Skidmore deference. In Mead , the Supreme Court also held that Chevron deference did not apply to the Custom Service tariff classification rulings that purported to be "binding ... until modified or revoked" and that were supposed to represent the agency's official position on a specific transaction. The Mead Court reasoned that, in the statute at issue, the "terms of the congressional delegation give no indication that Congress meant to delegate authority to Customs to issue classification rulings with the force of law." Rather, the Court said that the Customs classification rulings were "best treated like 'interpretations contained in policy statements, agency manuals, and enforcement guidelines'" and that such rulings may merit Skidmore deference. The article then discusses the role of congressional intent in the Mead majority and dissent and analyzes Mead through the lens of the two dichotomies of administrative law the authors outlined earlier: formality of procedures and generality in administrative decisionmaking. In the case when the statute was ambiguous, the Court said that various "indicators" could be used to decide if Congress wanted the agency's decision to have the force of law and if Chevron deference was due. Such indicators of congressional intent for the agency's actions to have the force of law include the use of formal procedures, such as notice-and-comment rulemaking and formal adjudication, as well as the general applicability of the agency's action—in other words, that it binds more than the parties to the ruling. The authors view formal procedures as establishing a safe harbor for agency actions to receive Chevron deference, although the court reserved the right to grant Chevron deference to agency actions taken without formal procedures. Chevron deference would appear to be least likely to be granted in particular, as opposed to general, cases. Justice Scalia, dissenting, focused instead on whether, assuming that Congress had not spoken to the question at issue, Chevron deference should be granted because the agency's interpretation was "authoritative." According to Barron and Kagan, the type of judicial review that should apply to different agency actions and the amount to which courts defer to agency decisions cannot be determined by looking at actual congressional intent, because Congress rarely states what type of judicial deference (e.g., Chevron , Skidmore ) should apply to different types of agency decisions. Instead, the authors suggest a type of "constructive" or "fictional" congressional intent that should apply when determining whether courts should defer to agency decisions under Chevron . This constructive congressional intent "should arise from and reflect candid policy judgments" about institutional choice—whether, with regard to different types of agency action, agencies or courts should resolve questions of statutory interpretation and fill in legislative gaps. According to the authors, in the Chevron decision and the years afterward, Chevron deference to agencies was explained and justified through several different theories: (1) the "institutional competencies" theory, which could be viewed as the Court's establishment of "a common law of judicial review responsive to institutional competencies" such as agencies' "accountability and deliberativeness" in interpretive decisionmaking; (2) the statutory theory, which connected deference to agencies with congressional delegation of responsibilities to agencies—ambiguities in statutes could be viewed as congressional delegations to agencies to explain such ambiguities in regulations; and (3) separation of powers principles, which would grant deference to agencies rather than courts for decisions that interpret ambiguous statutes. Lately, mostly as a result of the influence of Justice Scalia, the predominant theory for granting Chevron deference to agencies is the statutory theory. According to the authors, in a law review article, Justice Scalia focused on the statutory theory as a "valid theoretical justification" for Chevron deference because the statutory theory connects congressional intent to deference to agency interpretations, even if congressional intent is "presumed." However, the authors assert that Justice Scalia's emphasis on congressional intent in the statutory theory as the proper justification for Chevron backfired with the Court's decision in Mead . While the statutory theory concerned a "presumed" or "fictional" congressional intent that when Congress delegated the power of statutory implementation to an agency, that Congress also granted the agency interpretive power, the Mead Court's decision focused on actual congressional intent. According to the authors, Mead 's emphasis on actual congressional intent reaffirms congressional control over "whether and when Chevron deference should operate." The authors outline and then rebut two opposing constitutional arguments questioning whether Congress has the final say over the operation of Chevron deference: (1) " Chevron arises from the Constitution because courts must refrain from 'policymaking'" and (2) " Chevron violates the Constitution because courts must possess dispositive power over 'legal interpretation.'" With regard to the first argument, the authors state that policymaking and legal interpretation could not be exclusively assigned to the agencies or the courts because they are "intertwined" in areas of statutory ambiguities. With regard to the second argument, despite any constitutional separation of the policymaking and legal interpretation functions, once Congress makes an institutional choice between agencies and courts for the resolution of statutory ambiguities, that congressional choice should lead "other constitutional interpreters," presumably the agencies and courts, to "assume" that that congressional choice "involves the exercise of appropriate authority." In the context of Congress's lack of specification as to whether Chevron should apply, the authors then critique Mead as clouding the role of the courts in determining when Chevron applies, particularly when Congress does not make the decision (and it most often does not) about whether Chevron should apply. When Congress has considered the issue, the authors note that Congress has altered Chevron deference to grant interpretive power to the courts instead of the agencies. The authors believe that Congress's silence on whether Chevron should apply is more attributable to Congress not considering the issue of whether interpretive power should be placed within agencies or courts than congressional agreement with Chevron deference to agency interpretations. Barron and Kagan next discuss a theory about congressional delegations to agencies to make decisions with the "force of law" that would provide the agencies with authority to interpret the law as well. The theory holds that congressional delegations to an agency to take actions that have a binding effect, such as statutory commands to promulgate rules or adjudicate, should be viewed as Congress's allocation of power to the agency, as opposed to the courts, to resolve statutory ambiguities. The authors then proceed to rebut this theory by: (1) stating that Congress may want judicial review of agency resolutions of statutory ambiguities, (2) offering pre- Chevron examples of when Congress and the courts separated agencies' ability to make laws from agencies' authority to interpret laws, and (3) proposing and offering examples of the opposite scenario—that Congress may grant an agency the authority to interpret laws without giving the agency the authority to make decisions with the force of law until courts review the agency's decision. The authors state that whether an agency action has formal procedures and general effect is not relevant to the question of actual congressional intent as to whether and when Chevron deference should apply. They point out that Congress allows agencies to forego procedural formalities and choose between issuing general or particular decisions and state that "Congress never has suggested a differential scheme of judicial review." Rather, they assert that the APA's judicial review provision "cuts across all these distinctions," which would appear to include whether the agency acts with procedural formalities or issues a general or particular decision. Barron and Kagan then use Mead as an illustration of their assertion that actual congressional intent is an unreliable means of determining whether Chevron deference should apply. They note that "[t]he statute at issue in [ Mead ] contains unusual indicia of legislative intent regarding judicial review of agency decisions" in that the "most natural understanding" of a presumption of correctness for a tariff classification decision would be that the court should defer to the Customs determination regarding a specific statutory term unless the agency's determination was unreasonable under step two of Chevron . However, according to the authors, the Mead Court did not view this statutory provision in the same way and reached the opposite conclusion of what the statute appeared to require. Therefore, they find that the Mead Court's "failure" to examine statutory language "in any sustained or coherent way bodes ill for a method of defining [when Chevron deference applies] that focuses on statutory interpretation." Since the authors view actual congressional intent as an unreliable method of determining whether Chevron deference should apply, the authors state that the Court must create a "constructive substitute" for actual congressional intent. Barron and Kagan outline three options for this "constructive substitute" for actual congressional intent: (1) an "appeal to constitutional principles," such as separation of powers; (2) an assumption of congressional self-interest; and (3) an assessment by the courts of "policy judgments based on institutional attributes." The authors believe that the third choice, which focuses on the Court's "own sense of sound administrative policy," is the "only workable approach" with regard to the placement of interpretive power in the hands of the agencies or the courts. The first option, an appeal to constitutional principles, indicates that Congress decides whether to grant power to resolve statutory ambiguities to the courts or agencies. If Congress does not allocate this authority, the Court would be "force[d]" to look to constitutional principles, which, in turn, lead back to Congress and merely "restate the dilemma." The second option, an examination of implicit congressional intent "reflecting legislative self-interest" or congressional aggrandizement, lacks theoretical and practical support and would be "impossible" to implement as a "scheme of judicial review of interpretive decisions." The third option tracks Chevron 's approach—courts would address congressional silence on the matter of judicial review by "focus[ing] on the policy consequences" of allowing agencies or courts to make different kinds of decisions. If Congress has not determined whether agencies or courts should possess interpretive authority, then, under the third option, courts would "assess how and when different institutions promote accountable and considered administrative governance," in other words, political accountability and disciplined agency decisionmaking. Returning to the formality of procedures and general versus particular applicability dichotomies, Barron and Kagan then assert that the third option underlies the Court's approach in Mead . They view congressional intent to grant Chevron deference to agency actions that arise out of formal procedures as the Court's "own determination of when agencies should be 'assumed generally' to make better interpretive decisions than [the] courts." They also see the Court's question of whether an agency decision is generally applicable, in that it binds more than the parties to the proceeding, as the Court's determination of when agencies should receive Chevron deference from courts. The authors offer three potential rationales for the Court attributing its own policy judgments on agency actions to congressional intent: (1) highlighting Congress's ability to reverse the Court's judgment, (2) underscoring the "'judicial' nature" of the Court's actions, and (3) obscuring an attempt by the Court to increase its own power. In the next section, Barron and Kagan evaluate the Mead Court's policy judgments that were based on institutional attributes. The authors examine two views of the Mead Court's policy judgments: (1) as "case-by-case inquiry" as to whether Chevron deference applies, with unpredictable results, and (2) as a function of the two dichotomies of administrative law—the use of formal or informal procedures and general or particular decisionmaking—with Chevron deference granted to "more formal and general forms of decision making." First, the authors discuss a view of the Mead Court's lack of a bright line rule for when Chevron deference should apply as a type of "partial reversion" to the pre- Chevron era of judicial deference to agency decisionmaking. The authors analogize this view of Mead as an after-the-fact balancing decision to the pre- Chevron deference era's examination of factors including "the scope and nature of the delegation, the importance and complexity of the interpretive question, the degree of the agency's expertise, and the thoroughness and history." This view of Mead as an unstructured or unpredictable case-by-case inquiry into whether Chevron deference applies would present problems for agencies and the public in that uncertainty as to Chevron 's application would lead agencies to use "excess caution and wasted effort" and impact agencies' decisionmaking processes. However, the authors do not agree with this view of the Mead decision. Next, the authors examine a second view of Mead as establishing a structured safe harbor for when Chevron deference applies to agency interpretations of ambiguities in statutes. Although the APA permits the use of less formal procedures for certain types of rulemaking and adjudication, if the agency uses notice-and-comment rulemaking procedures or formal adjudication procedures, the court will apply Chevron deference. Additionally, the more particular (or less general) an agency's decisions are, the less likely the agency is to retain the "possibility of interpretive control" or receive Chevron deference. The authors refer to the consequences of choosing formal procedures and general decisionmaking as "judicial channeling"—the agency's discretion in choosing formal or informal procedures for its decisionmaking would be affected by the lesser level of judicial deference that would apply if the agency uses informal procedures. The authors then evaluate the negative consequences of Mead 's "judicial channeling" by returning to a discussion of the two dichotomies of formal versus informal procedures and general versus particular agency actions. With regard to procedural formality, Barron and Kagan explore two arguments in favor of granting Chevron deference to agency decisions made using formal procedures that they define as (1) prophylactic and (2) preferential. The first prophylactic, or protective, argument holds that by not granting Chevron deference for agencies' use of informal procedures, courts will guarantee that agencies will use formal procedures when required by law. The second preferential argument posits that if agencies use formal procedures, they should receive Chevron deference as a benefit for more accountable and deliberative decisionmaking. The authors find that the arguments in favor of applying Chevron deference to agency decisions undertaken using formal procedures do not justify Mead , but rather (a) respond to a problem that could be solved by the courts directly examining whether an agency did not follow the proper procedures, (b) encourage the use of formal procedures when they are not mandated or when inappropriate, (c) discount the provisions of the APA that do not require formal procedures, (d) increase the chance that agencies will not delineate their views on a matter before undertaking an enforcement action, (e) fail to recognize the values of informal procedures, and (f) add to the ossification of the rulemaking process because formal procedures "consume significant agency time and resources and thereby inhibit needed regulatory (or ... deregulatory) initiatives." Finally, Barron and Kagan question the inherent value of notice-and-comment procedures, noting that the increased effort that agencies place in their rulemaking proposals may lead agencies to be less responsive to concerns expressed during the rulemaking process and that the notice-and-comment process has become "a forum for competition among interest groups, rather than a means to further the public interest." Barron and Kagan then discuss Mead 's "suggest[ion] that informal agency action should get Chevron deference only (though not necessarily) when that action ... formally binds parties outside the proceeding" as an apparent assumption that general agency decisionmaking merits more deference than particular or limited agency decisionmaking. The authors view the Mead Court's suggestion about Chevron deference for informal agency action as potentially supported by two reasons: that general rules (1) "force[] an agency to engage in more comprehensive analysis" or (2) "show[] a firmer commitment by the agency to the decision." They then appear to rebut the first reason by finding that case-by-case decisionmaking "may reflect a deeply reasoned judgment" that proceeding case-by-case would "promote the sensible development of the law" because the issues at hand may be of a "specialized and varying" nature or too novel for a general decision. With regard to the second reason, the authors indicate that case-by-case decisionmaking "shows no more uncertainty" than a court would show if it decided to confine its holding in a particular case to narrower grounds. Barron and Kagan find that Mead 's focus on general decisionmaking would lead to "overbroad, premature, or otherwise ill-advised judgments." Barron and Kagan would discard Mead 's emphasis on formal procedures and general decisionmaking because its proposed shift to such decisionmaking could be more time-consuming and expensive and because it may lead to "worse results" that do not take into account the potential for future variances. Instead, they favor their alternative approach, the Chevron nondelegation doctrine, in which Chevron deference is applicable if the statutory delegatee bears responsibility for and issues the agency's decision. Barron and Kagan assert that courts should apply Chevron deference based on who the agency actors are, rather than how the administrative process (with its formal procedures or generalities) occurred. Presently, courts do not focus on internal agency decisionmaking and internal agency structure, but rather treat decisions from upper and lower-level officials in the same manner. As a result, courts do not have a "doctrine that appropriately responds to and influences critical methods and norms of agency decision making." Barron and Kagan's Chevron nondelegation doctrine would change the Chevron focus to the decisionmaking official within the agency, which Barron and Kagan refer to a question of "institutional design." The agency's interpretation would receive Chevron deference from the courts, if the statutory delegatee issues the decision under her name. The agency's interpretation would receive Skidmore deference from the courts if the statutory delegatee subdelegated her decisionmaking authority to another agency official (other than her close advisors). Thus, under the Chevron nondelegation doctrine, the institutional choice between whether agencies or courts should interpret and resolve ambiguous statutes would depend on the question of institutional design. According to Barron and Kagan, the relevant "institutional design characteristics that should trigger Chevron deference" are: (1) the decisionmaker's identity, (2) the mode of the decision, and (3) the timing of the decision. Thus, to receive Chevron deference under the authors' proposed Chevron nondelgation doctrine: (1) the decisionmaker must be the statutory delegatee, (2) the decision must be formally adopted by statutory delegatee after a meaningful review by the delegatee or her close advisors, and (3) the delegatee's decision to adopt an agency interpretation must occur before the issuance of the agency decision. With regard to the decisionmaker's identity, the authors believe that policy considerations justify limiting Chevron deference to only decisions made by the statutory delegatee, as opposed to a lower-level agency official. The authors would allocate Chevron deference in this manner even though most agency statutes allow for subdelegations and "the vast majority of agency action taken outside of notice-and-comment or good-cause rulemaking or formal adjudicative processes" is issued via these lower-level agency officials. They provide two reasons for focusing on the statutory delegatee: (1) that individual will likely be an upper level policy official who's "participation in administrative action will promote ... accountable and disciplined policymaking" and (2) the individual will be an "easily identifiable actor." With regard to the mode of the decision, the statutory delegatee's decision can receive Chevron deference if the interpretation (1) is authored by the delegatee or is adopted and issued under her name and (2) is adopted by the delegatee after a meaningful review by the delegatee or her close advisors. Barron and Kagan note that meaningful review would most likely occur any time an agency issues a decision under the name of an upper-level official, but make this review requirement explicit to ensure that the statutory delegatee is substantively involved, in order to "promote[] sound administration." However, in a point that would appear to undercut their argument, the authors do not limit meaningful review to review by the statutory delegatee only, but rather include review by "members of the delegatee's immediate staff" and "members of other offices with general supervisory responsibility." The authors allow for these "senior advisors" to conduct the required meaningful review due to the "extensive responsibilities and time commitments of most statutory delegatees." Barron and Kagan believe that there is "a sizable distinction between" the delegatee's use of senior advisors and the subdelegation of authority to a lower-level agency official. The authors assert that the involvement of senior advisors would not undermine their arguments about political accountability or disciplined policymaking because the delegatee "operates less as a person than an office," with a small and loyal staff that performs many functions for the delegatee and has interests that usually coincide with the delegatee. The authors analogize the statutory delegatee's staff to congressional staff. With regard to the congressional nondelegation doctrine, "[n]o one would say that the existence of legislative staffs undermines the doctrine; no one would say that congressmen's decisions do not remain congressmen's decisions in a way that matters." With regard to the timing of the decision, the delegatee's decision to adopt an agency interpretation must occur before the agency issues its interpretation in final form. The statutory delegatee cannot ratify the final agency decision after its issuance, such as in litigation. After providing their assessment of these institutional design characteristics, the authors make a normative case for their Chevron nondelegation doctrine by comparing it with the congressional nondelegation doctrine. The authors state that the congressional nondelegation doctrine also "focus[es] on the identity of the decision maker"—in that case, Congress—and that both doctrines are concerned with the delegation of decisionmaking power. According to Barron and Kagan, the two bases for the congressional nondelegation doctrine are (1) political accountability and (2) the "discipline of administrative action" (agency behavior) or, in other words, the coordinated or disciplined consideration and implementation of agency policy. The authors assert that their Chevron nondelegation doctrine also would emphasize these "values of accountable and disciplined decision making." The authors view these values as underlying both Chevron and Mead. With regard to political accountability, Barron and Kagan argue that agencies are only politically accountable to the public, and thus capable of meriting Chevron deference for their decisions, if high-level officials are involved in decisionmaking. The authors list ways in which high-level agency officials are more politically accountable because their decisions are more responsive and transparent: statutory delegatees are usually appointed by the President and confirmed by the Senate, statutory delegatees are subject to presidential and congressional oversight, and statutory delegatees are publicly visible in that they are covered by the press and "attended to" by interested or regulated parties. Barron and Kagan also provide another rationale for using identifiable agency actors who may not be presidential appointees—transparency. Identifying the agency officials with final responsibility for an agency interpretation offsets agencies' attempts to "diffuse and cloak responsibility" and will lead such officials to pay more attention to the politics and the public when making decisions. With regard to the discipline of agency action, the Chevron nondelegation doctrine's application of judicial deference to only decisions made by the statutory delegatee would result in centralized decisionmaking as well as more thoroughly considered agency decisions and enhanced coherence in the consideration of agency policy. The authors believe that meaningful review by the statutory delegatee will place "greater significance" on work performed at the lower levels in the agency, cause lower-level agency employees to be more prepared, and result in improved agency actions due to increased deliberation and consideration. Barron and Kagan also believe that upper-level agency review leads to consistency or coherence in agency actions because such review would ensure agency decisions do not deviate from agency policies. Deference based on meaningful review and decisionmaking by top agency officials would also "promote the integration of diverse agency actions into a coordinated stream of policy aimed at achieving set objectives." After comparing their Chevron nondelegation doctrine to the congressional nondelegation doctrine, Barron and Kagan next outline two arguments against the congressional nondelegation doctrine. Viewing these arguments as two potential arguments against their own Chevron nondelegation doctrine, they rebut each assertion: (1) the nondelegation doctrine centralizes decisiomaking authority and (2) courts are unable to enforce the nondelegation doctrine. An argument against the centralization of decisionmaking authority is that it is impracticable in the congressional nondelegation doctrine context because Congress cannot decide all matters itself, and if it did, "its decisions often would reflect deficient knowledge and experience." But when centralization of decisionmaking authority is examined in the Chevron nondelegation doctrine context, it has different effects than the congressional nondelegation doctrine for two reasons. First, the Chevron nondelegation doctrine does not prevent internal delegations, but rather affects the type of deference ( Chevron or Skidmore ) that such delegations are afforded by courts. Second, high-level agency officials can more easily comply with a nondelegation doctrine than can Congress, while at the same time "leaving most of the effort associated with policymaking in the bureaucracy." In other words, while the nondelegation doctrine would place a greater burden on Congress to take actions or "do nothing" due to the constitutional requirements for legislative action, Barron and Kagan argue that under the Chevron nondelegation doctrine it is more feasible for the delegatee to monitor the agency. The authors point to the agency's more limited decisions and functions, the delegatee's ability as a single administrator or a board or commission to act "with greater expedition," and the delegatee's choice of various processes to meet the Chevron nondelegation doctrine's requirement for meaningful review of agency action. Additionally, Barron and Kagan argue that centralization of decisionmaking authority would not "diminish[] the quality of agency decisionmaking by subordinating the knowledge, experience, and professionalism of lower-level employees." The authors acknowledge that agency decisionmaking may become more political as a result of increased political accountability, but find that the benefits of centralization outweigh agencies' bureaucratic qualities—"excesses of tradition and inertia" that may "blind them to new and beneficial policy approaches." The authors also view their Chevron nondelegation doctrine as a method of deference that would encourage exchanges between upper and lower-level agency perspectives because statutory delegatees will still rely on lower-level agency employees to provide options for agency policies and decisions. Even if the Chevron nondelegation doctrine's centralization of decisionmaking authority did "suppress expertise in a way more hazardous than [the authors] acknowledge," they find that their approach would be "self-limiting." By "self-limiting," the authors mean that the agency's need to issue timely decisions and the burdens imposed by conducting upper-level review would preclude all agency decisions from undergoing such review. The authors conclude that the Chevron nondelegation doctrine's centralizing effects will impact cases "for which judicial deference seems most important," which likely involve agency expertise. The argument against the congressional nondelegation doctrine, in terms of feasibility of judicial enforcement, is that courts "cannot distinguish in a principled way between permissible and impermissible delegations" and, as a result, should not apply the doctrine. However, the authors assert that the Chevron nondelegation doctrine could be more effectively implemented than its congressional counterpart for two reasons. First, courts can mandate that the statutory delegatee formally adopt the agency's action by publishing the decision and its rationale as her own interpretation. The authors state that courts can enforce this requirement by checking for the delegatee's name on the agency's decision and "all its supporting materials." Second, courts would not need to enforce the meaningful review requirement because the authors believe it is "self-enforcing." Barron and Kagan acknowledge that court enforcement of the meaningful review requirement would present difficulties and would appear to cause courts to (1) evaluate the quality of the delegatee's meaningful review without measurable standards of what would constitute a sufficient review or (2) avoid enforcement of the meaningful review requirement altogether, which could lead statutory delegatees to rubberstamp agency interpretations. However, the authors find that institutional and political incentives will ensure that the statutory delegatee does not rubberstamp the agency's action, but rather conducts the required meaningful review. The authors believe that the statutory delegatee would be more likely to fail to rubberstamp the agency's decision than adopt the interpretation after conducting a meaningful review. One of the reasons they offer for this proposition is that the statutory delegatee's "sense of professional responsibility" may counsel her against indiscriminately adopting agency interpretations. Another reason that the statutory delegatee would choose not to adopt an agency interpretation is that a subdelegatee's decision may still be upheld by a court, albeit without Chevron deference. Additionally, the statutory delegatee would face political risks if she formally adopted an "ill-considered, aberrant, or unpopular decision," such as criticism from the President, Congress, interest groups, or the media, because adoption would make it more difficult for the delegatee to deny involvement in the interpretation's issuance. Finally, different branches of an agency may pressure the statutory delegatee not to formally adopt an interpretation that then would receive Chevron deference from the courts without meeting the meaningful review requirement. In this last scenario, internal divisions of the agency may either not want to follow the processes necessary to receive Chevron deference or may want to distance their own division from the agency's interpretation in later litigation. The authors then discuss how the courts should address attempts by statutory delegatees to rubberstamp agency decisions. If a court finds that the statutory delegatee "consistently has approved low-level decisions without providing for their review," the court should withhold Chevron deference. However, the authors believe that the courts should not "investigat[e] and dissect[] an agency's decision-making processes with respect to particular decisions." The authors attempt to strike a balance between protecting the Chevron nondelegation doctrine from "claims of wholesale evasion" and a case-by-case review of decisionmaking by the courts. In sum, the Chevron nondelegation doctrine would be a standard that would make a court's grant of Chevron deference contingent on the meaningful review of and the responsibility assumed for agency decisionmaking by a high-level agency official. Courts would not need to intensively review the "internal agency decision-making processes" in each case but could rather depend on political and institutional incentives to enforce the Chevron nondelegation doctrine. The authors argue that courts would shape agency decisionmaking by relying on and recognizing the nonlegal (the political and institutional) attributes that impact agency decisionmaking. The authors then apply their Chevron nondelegation doctrine to Mead and note that both the majority and dissenting opinions discuss the position of the agency's internal decisionmaker. The majority opinion examines the decentralized nature of the 46 Customs offices and their ability to tariff classification rulings. However, the majority opinion takes the opposite approach of what the Chevron nondelegation doctrine would suggest, as it "strongly indicates that formal decisions issued by diverse, low-level officials are more worthy of deference than informal decisions of a single high-level official." The dissenting opinion seems to find this result "quite absurd," as "decisions specifically committed to ... high-level officers," such as a Secretary of a department, would not receive Chevron deference but "decisions by an administrative law judge" would receive Chevron deference. The dissent would instead grant Chevron deference to "authoritative" agency interpretations, where the authoritativeness of an agency decision depends on the subsequent defense of the agency's interpretation in litigation. The authors argue that such after-the-fact ratification of an agency decision would not "substitute for predecision participation in advancing the values of accountability and consideration in agency decisionmaking." Rather, postdecisional ratification would (1) almost always occur, (2) be unlikely to influence the agency's interpretation, (3) make it harder to change an agency's decision due to greater resistance in the agency or a decline in employee morale, and (4) result in greater "procedural costs and litigation risks." The authors find that the dissent's apparent focus on agency structure also does not meet the Chevron nondelegation test they set forward. Barron and Kagan then outline how Mead would have been decided under the Chevron nondelegation doctrine. Although they "concede[] there is some uncertainty about who this decisionmaker is," they would attribute the statutory delegation to the head of Customs. As the Customs Commissioner did not issue the tariff classification ruling or adopt it after a meaningful review, the agency's decision lacks "the necessary high-level input to qualify the ruling for Chevron deference." The authors state that the decision "still may qualify for Skidmore deference." As the authors acknowledge, their Chevron nondelegation doctrine "would preclude most rulings" of the ""numerous" and "mundane" kind issued in Mead from receiving Chevron deference. Some of these rulings could warrant Chevron deference if the statutory delegatee chose to become involved or addressed the issue after it was referred to her attention. Barron and Kagan indicate such involvement by the statutory delegatee may occur if the issue (1) "is especially nettlesome or sensitive," (2) impacts several areas of the agency, (3) "calls for a creative decision-making process," or (4) merits her involvement in order to receive Chevron deference from a court under the Chevron nondelegation doctrine. Barron and Kagan's approach would apply regardless of the two traditional administrative law dichotomies—the use of formal or informal procedures and the general or particular applicability of the decision. However, agency actions would still need to comport with required APA procedures in order to be valid agency actions and receive Chevron deference. Barron and Kagan conclude that the Court's present focus on formal procedures and general decisionmaking, rather than promoting political accountability and disciplined agency action, actually "threatens to increase the ossification and inflexibility of the agency process." Further, the Court denies Chevron deference to agency interpretations that "properly should reside in agency hands," as opposed to the Court's, and grants deference to agency interpretations that "should be subject to independent scrutiny." The authors believe that their Chevron nondelegation doctrine approach would promote accountability and disciplined agency decisionmaking without succumbing to the congressional nondelegation doctrine's flaws of overcentralization and the inability to be judicially enforced. Barron and Kagan believe that "[a]ny full understanding of the agency process must take into account ... institutional elements" such as the distribution of authority between different divisions of the agency, budgetary resources, and the agency's relationship with the President. This section explores select discussions and citations of Barron and Kagan's article. The article has been cited 80 times according to a search on LexisNexis: twice by courts, 77 times in law reviews and journals, and two times in an amicus brief for Cuomo v. Clearing House Association filed on behalf of several Members of the House of Representatives. The article has been referred to as an example of the "voluminous normative literature on how courts should allocate interpretive authority between themselves and administrative agencies." The article's focus on the decisionmaker's identity as one trigger for Chevron deference has been called "a significant departure from, and extension of," the Court's decisions in Chevron and Mead . The piece also has been cited along with other literature for the proposition that "presumptions of congressional intent are simply judicially created proxies or fictions." Two of the most substantive discussions of Chevron's Nondelegation Doctrine evaluate it as one of several proposals that would alter the Court's current application of Chevron and Mead . A 2003 law review article by University of Chicago law professor Adrian Vermeule called Barron and Kagan's proposal "notable" and "a potentially important reframing of the Mead Court's project." However, Vermeule finds that "the normative case for the [ Chevron nondelegation doctrine] is undertheorized." He believes that the Chevron nondelegation doctrine presents the same "conundrums" as the congressional nondelegation doctrine because it "appeals to the same norm of political accountability." Specifically, Vermeule takes issue with the very notions that the authors assert the Chevron nondelegation is designed to promote—political accountability and disciplined policymaking. With regard to political accountability, he says that "ordinary" (presumably congressional) politics is viewed as sufficiently accountable to allow for the use of policy tools other than delegation, and so he does not see the need for a special Chevron nondelegation rule in the agency context. Vermeule states that "legislators and agency heads may be held accountable for the very decision to make the delegation," and indeed, Barron and Kagan discuss an instance where both the Secretary of Labor and the Administrator of the Occupational, Safety, and Health Administration (OSHA), which is located in the Department of Labor, responded to "a firestorm of protest from individuals, companies, members of Congress, and even the White House" that was generated by a legal interpretation in a letter signed by a lower-level OSHA employee. Vermeule also finds no empirical support for Barron and Kagan's claim that agency decisions issued by low-level employees are less transparent than "substantive policy decisions"—those presumably issued by high-level agency officials under Barron and Kagan's theory. Vermeule addresses the Chevron nondelegation doctrine's promotion of disciplined agency policymaking in the context of judicial enforceability. He asserts that agency heads will easily skirt the Chevron nondelegation doctrine by delegating decisionmaking authority but continuing to retain legal authority. He finds that courts will be unable to determine when the agency head has rubberstamped a lower-level official's decision and, as a result, the agency will receive Chevron deference for those delegated decisions. Noting that Barron and Kagan acknowledge this potential for rubberstamping by agency officials, but that they believe agency heads choose "to avoid nominal responsibility" for decisions of lower-level officials rather than receive Chevron deference, Vermeule finds that Barron and Kagan "undermin[e] the significance of their own proposal." That is, if Chevron deference for agency interpretations is not desirable, then why are the authors concerned with providing a substitute for Mead ? Yet if Chevron deference for agency interpretations is desirable enough that agency officials would rubberstamp lower-level decisions in contravention of the Chevron nondelegation doctrine, then review of those decisions by the courts would be "just as costly and unmanageable a judicial inquiry as the excessively refined Mead inquiry it is designed to replace." A later 2006 law review article by Amy Wildermuth commented on both Chevron's Nondelegation Doctrine and Vermeule's assessment of it. Wildermuth finds Vermeule's "most important critique" of Barron and Kagan's article to be that the Chevron nondelegation doctrine may lead to rubberstamping by the statutory delegatee of decisions made by lower-level agency officials, thus "circumventing the requirement of personal responsibility for the larger benefit afforded by triggering Chevron deference." Wildermuth then discusses Barron and Kagan's proposed solution to address this "bad behavior," the denial of Chevron deference in cases where there has been a "wholesale evasion" of the statutory delegatee's required conduct of a meaningful review of the agency action prior to formally adopting it as her own. Wildermuth finds that their solution "would not require much in terms of a court's resources," as it "sets the bar very high." However, she posits that their solution "suffers from its simplicity" in that statutory delegatees could easily "create what appears to be more review in order to avoid a finding of misbehavior," such as a system where the agency head signed a particular number of opinion letters each day instead of adopting a significant number of opinion letters in a short time. Another law review article briefly compares Barron and Kagan's article with her other 2001 law review article, Presidential Administration . The authors of that law review view her Chevron 's Nondelegation Doctrine article as "retracting" the limitation that she had argued for in Presidential Administration . In Presidential Administration , she would apply Chevron deference to "issues for which there has been significant White House input." In Chevron's Nondelegation Doctrine , the authors view her as asserting "a much broader application for Chevron ," as she and Barron would apply " Chevron to any interpretation adopted by an agency head appointed by the President." There does not appear to be much analysis of Chevron's Nondelegation Doctrine on legal blogs. One posting on The Volokh Conspiracy , which is generally viewed as a libertarian or conservative blog, called Barron and Kagan's approach "one that shares some commonalities with Justice Scalia's approach to Chevron deference questions—but also one that is in tension with principles underlying the Court's recent (and, in [the author's view], generally sensible) administrative law jurisprudence." A subsequent posting by the same author further explained that he viewed Barron and Kagan's theory as sharing some of the same concerns as Justice Scalia regarding separation of powers: "The desire to have policy-laden questions of statutory interpretation made by politically accountable officials rather than judges." The author views the rest of the present Court as "ground[ing] Chevron deference in Congressional intent, and [as] more process oriented." Another posting on an environmental law firm's blog discussed the possible effects of Barron and Kagan's approach, if it were to be adopted by the Supreme Court: (1) a "strengthen[ing of] the presumption that a head administrator's decision, based on legitimate exercise of their authority, is sound"; (2) a "weaken[ing of] the authority of lower agency officials, holding them to a higher standard"; (3) an "increase [in] the administrative workload for higher-level decisionmakers in the agency"; and (4) "the beneficial effect of reducing the potential for ad-hoc decisionmaking at lower levels within an agency, when clear interpretations have not been provided from higher officials." The change proposed by Barron and Kagan would be significant, the author argues, since "the vast majority of agency action" that is presently issued by lower-level agency officials would potentially be "second-guess[ed]" by courts under the Skidmore deference standard. It is worth noting that while the Chevron nondelegation doctrine addresses the levels of deference that decisions issued by high- and lower-level agency officials may be granted, Barron and Kagan do not address how their doctrine would respond to a vacancy in the position of the statutory delegatee or the level of deference that a court may grant to an officer who is acting as the head of an agency in a temporary capacity (for example, pursuant to the Vacancies Reform Act of 1998). The ability of an agency to receive Chevron deference may differ in the case of a vacancy in a position filled by a single statutory delegatee, to which the Vacancies Act would apply, as opposed to vacancies on multi-member boards or commissions, to which the Vacancies Act does not apply and which typically require a quorum and simple majority of members to issue binding decisions. A vacancy in an advice and consent position, such as the head of a single administrator agency, may be filled temporarily by an acting official. Under Barron and Kagan's Chevron nondelegation doctrine, one argument for such an official receiving Chevron deference for her decisions would be that the temporary official could presumably perform the same functions as the statutory delegatee (formally adopting an agency decision after meaningful review). Another potential argument for granting Chevron deference to such temporary officials under the Chevron nondelegation doctrine would be that there are a limited number of individuals that could be appointed pursuant to the Vacancies Act. These individuals are "higher level officers," some of whom have gone through the confirmation process for their position, and they are authorized to perform the functions and duties of the office, albeit temporarily. A potential argument for denying Chevron deference under the Chevron nondelegation doctrine and potentially granting only Skidmore deference is that acting official would only serve in the position of the statutory delegatee for the limited time of the appointment. Vacancies on multi-member boards that result in the lack of a quorum generally would prevent the agency from issuing binding decisions at the board or commission level. For example, the Federal Election Commission (FEC), which has six commissioners, had five vacancies for approximately a six-month period in 2008, and, as a result, lacked a quorum. These vacancies prevented the agency from issuing advisory opinions and beginning audits of political committees. The FEC was also unable to move forward on enforcement matters because each stage of an enforcement matter (reason to believe, investigation, probable cause, and conciliation) requires the votes of four Commissioners. In another example, the operations of the five member National Labor Relations Board (NLRB) were impacted in a 27-month period spanning from 2008 to 2010 due to the vacancies in three of the five seats. Before the Board's membership was reduced from four to three members, the Board delegated its authority to a three-member group. The recess appointment of one of the three members then expired, and the Board only had two members who, the Board argued, constituted a quorum of the three member group; these two members decided almost 600 cases. In New Process Steel, L.P. v NLRB , the Supreme Court said that while it was neither "insensitive to the Board's understandable desire to keep its doors open despite vacancies," nor "unaware of the costs that delay imposes on the litigants," the proper reading of the Board's quorum requirements and the delegation clause "requires that a delegee group maintain a membership of three in order to exercise the delegated authority of the Board." One result of such vacancies may be that all agency decisions issued by lower-level employees at multi-member boards or commissions during this time would be eligible for Skidmore deference. One potential way to avoid such a scenario would be to allow Chevron deference for agency decisions issued by other upper level individuals, who would include, according to Barron and Kagan, senior advisors to the statutory delegatees, such as chiefs of staff or special assistants, as well as officials with supervisory authority, such as the agency general counsel. Yet enabling senior advisors or supervisory officials to issue decisions that could receive Chevron deference while the board or commission itself could not issue binding decisions, would seem counterintuitive, as such officials may be less politically accountable. The Chevron nondelegation doctrine would appear to take the focus away from an agency's use of formal procedures that involve the public in the process, such as notice-and-comment rulemaking, in favor of a shift to the political accountability of the statutory delegatee after-the-fact for agency decisions that have already been issued. In one sense, this shift could arguably make the agency as a whole less responsive to the public and more reliant on its own expertise since the majority of agency decisions would be issued by lower-level officials. Additionally, if the statutory delegatee repeatedly declines to formally adopt agency interpretations as her own, the decisions that the statutory delegatee does adopt may be limited in scope and/or effect, as the statutory delegatee may avoid taking responsibility for controversial decisions. This shift also could raise the question of the beneficial value of assigning Chevron deference to decisions issued following formal procedures (although this arguably leads to the ossification of the rulemaking process) as opposed to granting Chevron deference based on the decisionmaker's identity under the Chevron nondelegation doctrine. Would an agency be more accountable to the public when it has solicited input prior to a binding decision or when the statutory delegatee or her close advisors have conducted their own meaningful review and are called before the White House or Congress to justify their decision after the fact? The Court is arguably the decisionmaker under Skidmore , "independently interpret[ing] the statute[] with the agency's interpretation as one factor among many that will affect [the court's] conclusion." Barron and Kagan's theory applying Chevron deference, in which the agency is arguably the decisionmaker, only to agency actions formally adopted after meaningful review by the statutory delegatee would arguably result in a major reformulation of the Court's jurisprudence regarding which agency actions receive Chevron deference. However, their theory arguably allows for the agency, rather than the courts, to control when it remains the decisionmaker under Chevron if the statutory delegatee meets the tests they set forth. This would appear to be the case if only courts do not undertake a case-by-case review of when the statutory delegatee has conducted a seemingly standardless meaningful review prior to formally adopting an agency decision. For example, a court could find that the delegatee has not undertaken an adequate review and instead consider the agency's interpretation under Skidmore 's less deferential standard. One possible implication of the "mass of agency action[s]" issued by lower-level employees only potentially receiving Skidmore deference could be that the courts may decide more cases without deferring to the agency's interpretation. This could theoretically lead to more uncertainty among regulated parties and the agency as to how much deference courts will accord particular decisions. An increase in the number of court decisions on agency decisions by lower-level officials that could potentially receive Skidmore deference could occur at the same time that the courts potentially lessen their scrutiny of high-level agency decisions if, as Barron and Kagan argue, courts should only act to address rubberstamping if the statutory delegatee has always failed to conduct a meaningful review of the agency's action. Another potential issue of the Chevron nondelegation doctrine concerns the timing of the decision. As the delegatee's decision to adopt an agency interpretation must occur before the agency issues its interpretation in final form, this may raise a question of what level of deference a statutory delegatee's adoption of an "interim final rule," which is issued pursuant to a good cause finding but without notice and comment, would receive. Barron and Kagan state that the statutory delegatee cannot ratify the final agency decision after its issuance. Interim final rules have binding effect if validly promulgated, although agencies may modify such rules to take into account post-promulgation comments from the public. Although Congress is a more democratic and politically accountable institution than an administrative agency, it may decide to delegate its legislative power to an executive branch agency for a variety of reasons, for example: (1) Efficiency—Congress may decide that it would take too long to draft a bill with all of the particulars required for a program or rule or that agencies may be better equipped to resolve issues or address changing needs that arise with implementation of a law; (2) Expertise—Congress may not necessarily have the specialized or technical expertise that the agency would have at its disposal; (3) Ability to modify the law—Congress can overturn agency rulemakings and make other changes to the law if it does not agree with the agency's actions taken pursuant to the delegation; (4) Transfer of responsibility and potential for blame—Congress may decide that politically difficult, unpopular, or untenable decisions are better left to an agency; and (5) Inability to Reach Consensus—Congress may experience greater difficulty in achieving consensus among its Members than would an agency headed by a single administrator or a multi-member board or commission. Congress may decide against delegating interpretive authority to agencies for myriad reasons: (1) agencies may give greater attention to special interests because these groups may be more organized than the general public, particularly in the notice-and-comment rulemaking process; (2) agencies may affect the marketplace or act in ways that may be viewed as attempts to retain or increase their power; and (3) required rules and procedures may make agency action slow and inefficient. If Congress decides to delegate its legislative authority to an agency to interpret a statute, Congress can control the delegation of such authority by writing broad or narrow statutes, eliminating procedural requirements, and maintaining a supervisory role over the power it has given to the agencies. If the Chevron nondelegation doctrine were adopted, its emphasis on granting Chevron deference to high-level agency decisions, which the statutory delegatee has adopted as her own after a meaningful review, could potentially lead Congress to become more specific in its delegations, to ensure that the voluminous amount of agency decisionmaking that occurs at the lower levels of an agency also receives Chevron deference. For example, rather than delegate a decision that requires input from the Food and Drug Administration's Center for Drug Evaluation and Research (CDER) to the Secretary of Health and Human Services, Congress could consider delegating authority to the Commissioner of Food and Drugs, or even the head of CDER. | This report discusses and analyzes Supreme Court nominee Elena Kagan's 2001 article, Chevron's Nondelegation Doctrine, which she coauthored with David J. Barron, an assistant professor at Harvard Law School, during her time as a professor there. The article provides an overview of two traditional dichotomies in administrative law on which courts rely in choosing between whether to accord deference to agency interpretations of statutory provisions: (1) the use of formal or informal procedures, such as the procedures set forth in the Administrative Procedure Act (APA), and (2) the general or particular applicability of agency decisions, such as whether an agency action binds more than one party. The authors propose a new method of determining what type of judicial review should apply to agency actions. They term this approach the Chevron nondelegation doctrine and emphasize its roots in ideas of political accountability and discipline of agency action. Under Barron and Kagan's Chevron nondelegation doctrine, the agency's interpretation would receive a type of substantial deference from the courts, known as "Chevron deference," if the individual designated by Congress to carry out the statute (the statutory delegatee) has formally adopted the agency's decision after a meaningful review and issued the decision under her name. The agency's interpretation would receive a weaker type of judicial deference, known as Skidmore deference, if the statutory delegatee subdelegated her decisionmaking authority to a lower-level agency official (other than her close advisors). Thus, under the Chevron nondelegation doctrine, the choice between whether agencies or courts should interpret and resolve ambiguous statutes would depend on the question of who in the agency makes the interpretation—a high- or low-level agency employee. If adopted by the Supreme Court, the Chevron nondelegation doctrine would appear to result in a major reformulation of the Court's jurisprudence regarding which agency actions receive Chevron deference. Courts generally do not focus on the identity of the agency decisionmaker, but rather view agencies as a single entity and do not differentiate in the levels of deference that they grant to decisions issued by civil servants or political appointees, branch chiefs or headquarters officials, agency heads or low-level employees. Barron and Kagan's proposed Chevron nondelegation doctrine would address a phenomenon of "judicial channeling" that the authors call "unfortunate"—that an agency's discretion in choosing from the multitude of legitimate modes of agency decisionmaking is both influenced and limited by the courts' application of the more substantial Chevron deference to decisions undertaken with greater procedural formality or that apply more generally. Their Chevron nondelegation doctrine appears to address this problem by relegating the procedural requirements of the APA to a threshold determination of whether the agency's decision or interpretation is a lawful, or valid, action. |
U.S. elections are highly decentralized, with much of the responsibility for election administration residing with local election officials (LEOs). There are thousands of such officials, many of whom are responsible for all aspects of election administration in their local jurisdictions—including voter registration, recruiting pollworkers, running each election, and choosing and purchasing new voting systems. These officials are therefore critical not only to the successful administration of federal elections, but also to the implementation of the Help America Vote Act of 2002 (HAVA, P.L. 107-252 ), the Uniform and Overseas Citizens Absentee Voting Act (UOCAVA, P.L. 99-410 , as amended) and other federal statutes. Nevertheless, there has been little objective information on the perceptions and attitudes of LEOs about election reform. Such information may be useful to Congress in deliberations about federal election reform activities. This report discusses the results of three scientific opinion surveys that were designed to help fill that gap in knowledge about principal local election officials. The surveys were performed pursuant to projects sponsored by the Congressional Research Service (CRS). The projects were developed in collaboration with and the surveys performed by faculty and students at the George Bush School of Government and Public Service at Texas A&M University, and the Center for Applied Social Research at the University of Oklahoma. The university teams developed and administered the surveys, in consultation with CRS, to samples of LEOs from all 50 states, with a response rate of approximately 40% for each survey. The responses were analyzed by CRS for purposes of this report. See the Appendix for information on the methods used in the surveys and analyses. The surveys were administered following the 2004, 2006, and 2008 federal elections. While they were not identical, many of the questions were the same, and comparisons of the results are discussed where appropriate. The findings may be useful to Congress as it considers funding for HAVA, oversight of its implementation, and possible revisions to current law. The report begins with a description of some characteristics of local election officials and their jurisdictions. That is followed by a discussion of perceptions and attitudes of LEOs about the different kinds of voting systems used in different jurisdictions—lever machines, punchcard ballots, hand-counted paper ballots, central-count optical scan (CCOS), precinct-count optical scan (PCOS), and direct-recording electronic (DRE) systems such as "touchscreens." The report then describes how HAVA has affected local jurisdictions and the opinions LEOs expressed about the law. The section after that discusses other election administration topics covered in the 2006 and 2008 surveys—preparations for election day, election-day incidents, characteristics of pollworkers, and attitudes about nonpartisan election administration. The final sections discuss caveats to consider in interpreting the results, and potential policy implications of the findings. There are about 9,000 local election jurisdictions in the United States. In most states, they are counties or major cities, but in some New England and Upper Midwest states, they are small townships—for example, more than 1,800 townships in Wisconsin. The number of registered voters and polling places in a jurisdiction reported by LEOs also varies greatly ( Figure 1 and Figure 2 ). The reported number of registered voters ranged from fewer than 100 to more than 1 million, with a median of about 12,000 in 2006 and 13,000 in 2008. That 8% increase was consistent with the reported 7%-10% increase in the number of registered voters nationwide during that period. Although LEOs were not asked to report the number of voters in their jurisdictions in the 2004 survey, in 2008 they were asked how the number changed from 2004 to 2008. About two-thirds reported that the number of registered voters had increased between 2004 and 2008, and about one-fifth reported a decrease ( Figure 3 ). The number of polling places in a jurisdiction averaged about a dozen, ranging from 0 to 1,000 or more, with about 15% of jurisdictions in each election having only one polling place and a similar percentage having more than 50. The number of election personnel working in a jurisdiction, in addition to the local election official, also varied greatly, from none to more than 10,000, including pollworkers. The 2008 survey also asked about the number of employees other than pollworkers. The median was 5, with a mean of 17 and a maximum of 800. The number of registered voters, polling places, and pollworkers was about 10 times greater in county jurisdictions than in townships. LEOs from counties reported an average of about 56,000 registered voters, while those from townships averaged 6,000. There were 40 polling places per county on average, and 3 per township. Counties had about 290 pollworkers and townships 30. Given such diversity and other differences among states—such as wealth, population, and the role of state election officials—responsibilities and characteristics of LEOs are likely to vary greatly. Nevertheless, some patterns emerged from the surveys. According to the survey results, the typical LEO is a white woman between 50 and 60 years old who is a high school graduate. She was elected to her current office, works full-time in election administration, has been in the profession for about 10 years, and earns under $60,000 per year. She belongs to a state-level professional organization but not a national one, and she believes that her training as an election official has been good to excellent. As with any such description, the one above does not capture the diversity within the community surveyed: About one-quarter of LEOs are men, about 5% belong to minority groups, about 40% are college graduates, and about 10% have graduate degrees (see Table 1 ). LEOs range from under 25 to more than 80 years of age, and have served from 1 to 50 years. More than half were elected rather than appointed to their posts. Reported salaries range from under $10,000 to more than $120,000. Most belong to at least one professional organization. The demographic profile of LEOs is unusual, especially for a professional group. They differ from those of other local government employees. For example, according to U.S. Census figures, while women comprise a higher proportion of the local government workforce than men overall, men comprise a higher proportion of local government general and administrative managers. About 20% of those managers are members of minorities. The patterns do not appear to be a result of the fact that most LEOs are elected, as the demographic characteristics of legislators appear to be largely similar to those for local government managers. The average tenure in the current position declined by about one year from 2004 to 2008, with the proportion of LEOs who had served for two years or less in their current positions rising to 18% in 2008 from 11% in 2004 (see Figure 4 ). Thus, there appeared to be a small increase in job turnover over the three elections. However, there was no significant change in average age ( Figure 5 ). Other trends across the surveys included a decrease in the proportion of LEOs who were elected, an increase in both the percentage who worked full time and in the amount of time they spent working on elections, an increase in salary, and a decrease in the proportion who expressed a slightly to strongly conservative ideology. The survey was not designed to identify the causes of such changes, but at least some appear to be consistent with the impacts of federal and state election reform on local jurisdictions. That reform led to increased funding for election administration, changes in voting systems used by many jurisdictions, and an increased workload for many election officials. For example, the survey found that those who reported that they worked full-time on election administration increased from 66% in 2004 to 72% in 2008, while those who reported that they spent more than twenty hours per week on election duties increased from 41% to 49%. The increasing complexity of elections and the increased federal role after the passage of HAVA have focused more attention on the role of professionalism in election administration. Given that change, it might be expected that election officials who began serving more recently would have more formal education than those who have served for longer periods. Such a pattern could yield a statistical association between the highest education level attained and the number of years in service as an election official. In fact, there was a small but significant relationship, with LEOs who did not have a college degree averaging 11-12 years of service and those with graduate degrees averaging 8-9 years. However, there was no significant change in the overall distribution of maximum education level over the three surveys ( Figure 6 ). Reported salaries of LEOs increased about 7% per year, from an estimated average of $45,000 in 2004 to $51,000 in 2008 ( Figure 7 ). LEOs in jurisdictions with larger numbers of voters tended to have somewhat higher salaries and education levels, and were more likely to be male. In 2008, the median salary for LEOs in jurisdictions below the median size in numbers of voters was $40-50,000; it was $50,000-$60,000 for LEOs in larger jurisdictions. More than 20% of LEOs in larger jurisdictions had attended graduate school, while 10% of those from smaller jurisdictions had. LEOs were male in about 20% of jurisdictions below the median size, and in 30% of those above. The survey also examined other factors related to election administration as a profession. More than two-thirds (70%-74%) of LEOs reported belonging to at least one professional association. Of those, more than three-fourths belonged to a state association, 30% to a regional one, and about 20% to the three major national or international associations (see Figure 8 ). Altogether, about 40% of LEOs who belonged to at least one association were members of a national or international one, with more than half belonging only to a state or regional association. In 2006, the percentage of LEOs reporting that they had a written job description was 43% for those who had been elected and 70% for those who had been appointed. Most LEOs reported a broad range of election-administration responsibilities beyond solely running elections. Most are also responsible for budgeting, personnel, and purchasing, for example ( Table 2 ). Most LEOs received some initial training specifically designed to prepare them for their duties, but for most that training was less than 20 hours, and only one-fifth of LEOs were required to pass an examination ( Table 3 ). Most have also received additional training beyond that initially provided. More than two-thirds of LEOs assessed that their training was good to excellent and resulted in moderate to substantial improvement in their effectiveness and ability to solve problems. More than four-fifths believed that training and experience are equally important in ensuring a successful election. This result, shown in Figure 9 , might reflect the impact of HAVA requirements, most of which went into effect in 2006. For example, election officials might have felt less well prepared by their training to implement HAVA in 2006 than in 2004, but the survey did not address that possibility. Other possible factors include increasing public attention to problems in election administration, and recent controversies about the reliability and security of voting systems. Two-fifths of respondents to the 2006 survey, and a third of 2008 respondents, commented on what kinds of additional training would be useful. The most common suggestions were for more training in technical and legal aspects of elections, and more "hands-on" training. Given the increasing role of technology in elections, the surveys asked LEOs questions about their attitudes toward technology ( Figure 10 ). Respondents believed that technology can be useful for government services, but were cautious about implementation. In 2004, more than half of jurisdictions used lever machines, punchcards, hand-counted paper ballots, or central-count optical scan (CCOS) as their primary voting systems. By 2008, that percentage had fallen by almost half, with lever machines decreasing by almost two-thirds, paper ballots by half, CCOS by one-quarter, and punchcards virtually disappearing by 2006 (see Figure 11 ). The proportion of jurisdictions using central-count optical scan (CCOS) decreased by almost half from 2004 to 2006, but that decline reversed in 2008. Jurisdictions using PCOS and DREs increased substantially from 2004 to 2008, with a 50% increase for PCOS and more than two-thirds for DREs. From 2006 to 2008, respondents reported a 5% increase in PCOS and a similar decrease in DREs, although those changes were not statistically significant. The observed patterns are consistent with results from other sources. The trends conform with expectations arising from HAVA requirements that emphasized improved usability, including prevention and correction of errors by voters in marking ballots, and accessibility of voting systems. The increase in use of CCOS from 2006 and 2008 appears to run counter to that explanation, because unlike PCOS and DRE systems, CCOS does not provide assistance to voters in preventing errors. The cause of the increase is not clear, but two possible factors are the increase in "no-excuse" absentee voting (see the section on " Election Administration Issues ") and the controversy about the security and reliability of DREs that have led many states to adopt paper-ballot requirements. The average length of time jurisdictions have been using a particular kind of voting system varies greatly with the kind of system ( Figure 12 ). The average length of use varies with the length of time a voting system has been available for use. At one extreme, jurisdictions with hand-counted paper ballots have used them for 80 to 100 years, on average. At the other, jurisdictions with DREs have had them under 10 years, on average. The pattern of use shown in Figure 12 suggests that jurisdictions do not readily change the kinds of voting systems they use. Before the 1990s, fewer than 10% of jurisdictions used optical scan and DRE voting systems. On the one hand, such reluctance to change creates stability that may be beneficial to voters and administrators. On the other hand, it may mean that a particular kind of technology is used far longer than it should be, with increasing risks of negative consequences. For example, many of the problems associated with the 2000 presidential election were attributed to the continued use of outmoded or flawed technology, such as the punchcard systems in widespread use at the time. The causes of such long-term use patterns are complex and may include factors such as legal and budgetary constraints and various forms of transaction costs that would be incurred with any change. Such factors, if they continue to be important, may impede jurisdictions from taking advantage of the kinds of improvements that are likely to occur in voting technology over the next decade. In 2008, LEOs were asked about the voting systems they used to meet the HAVA accessibility requirement. The options presented were (1) an electronic ballot marking device (BMD), which uses a touchscreen or other computer interface to mark an optical-scan ballot; (2) a DRE; (3) a vote-by-phone voting system, in which the voter uses an automated telephone system to fill out the ballot; and (4) some other system, which the LEO was asked to describe. As Figure 13 shows, the kinds of accessible voting systems used varied depending on the kind of primary voting system used in the jurisdiction. About 40% of responding jurisdictions reported using DREs as their accessible systems. Not surprisingly, most of those also used them as their primary systems. A slightly lower percentage of respondents, 37%, reported using BMDs for accessibility, and it was most commonly used in lever-machine jurisdictions. While most optical-scan jurisdictions might be expected to use BMDs, only about half reported doing so. About 12% of jurisdictions used vote-by-phone, with the majority of those having hand-counted paper ballots as their primary system. Three-quarters of jurisdictions reported having one accessible machine per polling place. About one-fifth used two, and about one in 20 used three. Most LEOs reported that voters without disabilities used accessible machines less than other machines, and about 40% reported that they used them much less. In jurisdictions using DREs as the accessible machines, the differences were less on average than in those using other technology (see Table 4 ). Some observers have argued that accessible voting systems should not be limited to use by voters with disabilities, because that would provide a way for election officials to determine the ballot choices made by that class of voters; it would therefore deprive them of the same degree of ballot secrecy that other voters have. Most LEOs play a role in decisions on what voting systems to use in their jurisdictions (see Table 2 ). Many other stakeholders may also influence those decisions. To help provide an understanding of how LEOs assess the appropriateness of the roles other stakeholders play, the survey asked respondents to what extent they agreed or disagreed with statements about the influence of those stakeholders on the decision-making process. Two examples are "The federal government has too great an influence," and "Local level, elected officials should have greater influence." The results are presented in Figure 14 . On average, in fact, LEOs felt more strongly about the role of local elected officials than any other stakeholder. LEOs were largely neutral about the level of influence of state election officials and the public, and did not believe that nonelected officials, professional associations, and independent experts should have greater influence than they do now. Some of the differences among the surveys are notable. As Figure 14 shows, in 2004, LEOs were largely neutral about the influence of the media, political parties, and various advocacy groups. In 2006 and 2008, they thought those groups had too much influence. Also, in 2004 LEOs did not believe on average that vendors had too great an influence. That changed in 2006, when most believed that vendor influence was too high, and that number increased again in 2008. In contrast, in 2008 LEOs were much less convinced than in 2004 and 2006 that professionals, experts, and nonelected state and local officials should not have greater influence. Their views did not change significantly on the roles of the federal government, elected state officials, local elected officials, and the public over the three surveys. In 2008, LEOs were also asked whether cost has too great an influence on the process of selecting voting systems. They agreed on average that it did, and the strength of that view was about the same as for the media, advocates, political parties, and vendors. Overall, the observed patterns of response are not surprising. Support for greater influence by local elected officials is expected, because LEOs generally either report to elected local officials or are elected themselves. However, for some questions, elected LEOs and appointed ones had somewhat different views. The support of elected LEOs for greater influence by local elected officials was 20% higher than that of appointed LEOs; support for greater influence by state elected officials and the public was 5%-10% higher. Elected LEOs were 20% less supportive of influence by unelected officials, and 5%-10% less supportive of influence by the federal government, professional associations, and independent experts. The concerns of local officials about the influence of the federal government are well-known in many areas, not just election administration, and many local officials may have resented the HAVA requirements that led to changes in long-used voting systems. The concerns of LEOs about federal influence have not abated, despite improvements in the attitudes of LEOs about HAVA (see " The Help America Vote Act (HAVA): Impacts and Attitudes " below). Also, it is not surprising that LEOs have become more concerned about the roles of stakeholders such as the media, advocates, and political partisans, who are closely associated with the recent controversies about the reliability and security of voting systems. There has also been debate and uncertainty specifically about the role and influence of voting system manufacturers and vendors in the selection of voting systems by local jurisdictions. Some observers have argued that vendors have undue influence in what voting systems jurisdictions choose. Others believe that such concerns are unwarranted. But little has been known previously of how LEOs actually view vendors and their relationships with them. The results of the 2004 survey were mixed with respect to the importance of vendors. (These results are from more detailed questions on factors influencing the acquisition of voting systems that were not included in the 2006 or 2008 surveys.) LEOs in 2004 appeared to have high trust and confidence in vendors but did not rate them as being especially influential with respect to decisions about voting systems—a view that changed over the next two surveys. Fewer than 10% in 2004 believed that there was insufficient oversight of vendors by the federal government and states, but about one in six believed that local governments did not exercise enough oversight. Most jurisdictions using computer-assisted voting reported in 2004 that they had interacted with their voting-system vendors within the last four years. More than 90% of LEOs considered their voting system vendors responsive and the quality of their goods and services to be high. They felt equally strongly that the recommendations of those vendors could be trusted. However, about a fifth of respondents thought that vendors were willing to sacrifice security for greater profit, although 60% disagreed. Also, a quarter felt that vendors were used for too many elements of election administration. When LEOs were asked in 2004 what sources of information they relied on with respect to voting systems, state election officials received the highest average rating, with about three-quarters of LEOs indicating that they rely on state officials a great deal. Next most important were other election officials, followed by the federal Election Assistance Commission (EAC) and advocates for the disabled. About one-third of LEOs stated that they relied on vendors a great deal, a level similar to their stated reliance on professional associations. Only 2% of LEOs rated vendors higher than any other source, whereas 20% rated state officials highest. Interest groups were rated lower than vendors, and political parties and media received the lowest ratings. When LEOs were asked in 2004 about the amount of influence different actors had on decisions about voting systems, the overall pattern of response was similar to that for information sources. Once again, state, local, and federal officials were judged the most influential, and political parties and the media the least, with vendors in between. An exception was that local nonelected officials were considered less influential on average than vendors. Both voters and advocates for the disabled were rated as more influential on average than vendors. No LEOs rated vendors as more influential than any other source. Those results contrast with the views of LEOs described above about whether the levels of influence of stakeholders were too little or too great in 2004 ( Figure 14 ). Of the three actors considered most influential, LEOs believed that local elected officials should have more influence and the federal government has too much, and they were neutral about state officials. They did not believe on average that those considered least influential should have more influence. LEOs had strong opinions about the different kinds of voting systems used in the United States. Those whose jurisdiction used a particular kind of system, whatever it was, supported its use more strongly than any other system (see Figure 15 ). Thus, users of lever machines strongly supported their use, were fairly neutral about DREs and optical scan systems, and were opposed to the use of punchcard and hand-counted paper ballot systems. In general, except for those using them, LEOs opposed the use of lever machines, punchcard systems, and paper ballots; supported the use of optical scan systems; and were neutral about DREs. Those views changed little across the three surveys. However, support of nonusers for DREs declined across the three surveys, from supportive to neutral. For other voting systems, the levels of preference were fairly consistent. From 2004 to 2006 there was a slight but significant decrease in the level of support for DREs among users of those systems. DREs were the only voting system for which support of users dropped across the first two surveys, although it still remained very high. It was not possible to determine if the change in support for users of DREs resulted from changes in the views of long-time users or from lower initial support among those who used DREs for the first time in the 2006 election. Whatever the cause, the decline reversed with the 2008 survey. In 2008, LEOs were also asked about their support for vote-by-phone systems, which are used in several states to meet HAVA's accessibility requirements. Overall, three-quarters of LEOs opposed the use of such systems, and under 10% supported their use. However, opposition was not as strong in states using such systems, where about half of LEOs opposed their use and one-quarter supported it. These systems were only recently adopted, and it was not possible to determine to what extent experience with them influenced the attitudes of LEOs toward them. Overall, and consistent with the above results, LEOs reported a high level of satisfaction with their voting systems in all three surveys and assessed that the systems performed very well during the election preceding each survey. On a scale of 0-10, average ratings were 8 or higher for each of those questions in all three surveys ( Figure 16 ). However, ratings for satisfaction with and performance of all systems except lever machines were significantly lower in 2006 but rebounded in 2008 to levels that were closer to the ratings in 2004. LEOs still rated DREs lower in 2008 than they had in 2004. There was no difference in ratings across the surveys for lever machines in either satisfaction or performance. In 2008, LEOs were asked to assess their degree of satisfaction with the performance of their accessible voting systems. Those ratings, with an average rating of 6.5 on a scale of 0-10, were lower than the ones for satisfaction with the primary voting system ( Figure 17 ). Among the different kinds of accessible system (DRE, ballot-marking device, vote-by-phone, and other), users of DREs were the most satisfied, with an average rating of 7.2. However, even LEOs who also used DRE as their primary voting system were less satisfied with their system in its accessibility performance (7.9) than in its overall performance (8.5). LEOs who used DREs and precinct-count optical scan systems were more satisfied with them in 2004 than LEOs who used lever machines, paper ballots, or central-count optical scan, but in 2006 and 2008, there were no significant differences in satisfaction among users of different voting systems. However, users of PCOS systems were slightly more satisfied overall than users of either CCOS or DRE systems. There were also no significant differences in rated performance of different voting systems in any of the three surveys. To assess more directly how LEOs rated their own voting systems in 2006 and 2008, they were asked whether their current system is the best available, and what voting system they believed is best overall. About 80% agreed with the statement that their current voting system is the best available. The level of agreement among users of hand-counted paper ballots was lower than average and that of PCOS users was higher than average ( Figure 18 ). The same percentage believed that their current voting system was the best overall in 2006, with a significantly higher percentage of PCOS users holding that view than users of other systems. In 2008, LEOs were asked to rank different types of voting systems in order of preference. Not surprisingly, the highest average preference by far was for the current voting system used in the jurisdiction—about three-quarters of LEOs chose that as their top preference—and the lowest was for Internet voting. More than half of PCOS users chose CCOS as their second preference, and more than half of CCOS users ranked PCOS second. To further assess voting system preferences, the surveys asked LEOs to assess their primary voting systems on fifteen specific characteristics ( Figure 19 ). The high ratings for accuracy, security, reliability, and usability varied little among the different kinds of voting systems in each survey and changed little across the three surveys. Ratings for usability were slightly lower in 2006 and 2008 than in 2004, although those for multilingual capacity, which is a component of usability, were higher. As the figure shows, for other characteristics, there were substantial differences in many cases both among voting systems in a survey and for a given voting system across the surveys. For most of those characteristics, LEOs were less happy with the performance of their voting system in 2006 and 2008 than in 2004, especially with respect to optical scan and DRE systems, which they rated lower for cost, size, storage requirements, and machine error in the second and third surveys. Optical scan systems, both central- and precinct-count, were rated higher for accessibility in 2006 and 2008 than in 2004. The reasons for this change are not clear. All systems were rated poorer for machine and voter error in 2006 and 2008—LEOs switched from positive to more neutral about these performance characteristics. It was not surprising that DREs received the highest ratings of any system for accessibility and ability for use in multiple languages, or that hand-counted paper ballots were rated lowest for counting speed. Some of the comparisons among voting systems, however, did yield surprising results. In particular, the ratings for reliability, security, accuracy, and ease of use by voters were very high and were similar for all voting systems. Given media reports about problems with the reliability and security of electronic voting, somewhat different outcomes might have been expected—namely, that DREs would have been rated lower in reliability and security. Also, given that modern DREs are often described as more voter-friendly than other systems, and certainly have the capability of providing higher levels of usability than other types, the lack of difference in ratings for usability is somewhat surprising. With respect to accuracy, a lower rating might have been expected for punchcards, given the difficulties with recounts that were prominent during the 2000 presidential election. It is possible that such confidence exists because few jurisdictions use punch cards now, and those that still use them declined to replace them after 2000. Those jurisdictions kept the system, despite intense negative media coverage of system limitations, and opted not to take part in the punchcard buyout program offered through HAVA. The relative lack of difference in ratings of optical scan and DRE systems for acquisition and maintenance costs, and size and storage requirements, appears to run counter to widely held views. Many observers regard DREs as the most expensive voting systems, given that several machines may be needed for each polling place, whereas optical scan systems usually require one machine per polling place (PCOS) or none (CCOS). These differences from expectation suggest that LEOs' perceptions of how their voting systems perform may differ substantially in some ways from views about those systems that have often been depicted by the news media and activists. If the perceptions of election officials are accurate, then several of the criticisms leveled at specific voting systems could lead, if acted upon, to unnecessary and even counterproductive regulation and expenditure. For example, if in fact there is little difference in security between an optical scan system and a DRE, then the requirements for voter-verified paper records of votes that many states have imposed may be unnecessary. If, however, LEOs' perceptions are inaccurate, then understanding and addressing the causes of those inaccuracies may be beneficial. Unfortunately, the survey data do not permit an assessment of which interpretation is correct. Much of the recent controversy about election reform has focused on electronic voting systems. Questions about the security and reliability of those systems were a relatively minor issue until 2003. Two factors led to a sharp increase in public concerns about them: (1) HAVA promoted the use of both PCOS and DREs through its provisions on preventing voter error and making voting systems accessible to persons with disabilities; and (2) the security vulnerabilities of electronic voting systems, especially DREs, were widely publicized as the result of several studies released beginning in 2003. The surveys asked several questions designed to elicit the views of LEOs about aspects of that controversy. When asked in 2006 whether current federal and state guidelines and standards about electronic voting systems (both optical scan and DRE systems) are at the right degree of strictness, most LEOs—about 60%—replied in the affirmative. Those who did not were fairly evenly split among officials who believed that the current standards are too strict and those who believed they were not strict enough. There was no significant difference in the average assessment between users and nonusers of electronic voting systems, but nonusers were slightly more likely than users to believe that the standards were either too strict or not strict enough ( Figure 20 ). In all three surveys, LEOs were asked to what extent they agreed with several statements about DRE and optical scan systems. In 2004 those questions were asked of all LEOs, but in later surveys they were asked only of those who used DREs and optical scan as their primary voting systems. Also, two questions asked in 2004 were not asked in 2006 (see Figure 21 and Figure 22 ). Not surprisingly, the opinions of nonusers of either kind of system were generally less strong than those of users. Nonusers were neutral on average with respect to several statements about DREs, including their level of knowledge about the systems, vulnerability to tampering, and the need for more public trust. LEOs whose primary voting systems were precinct-count optical scan were more neutral about DREs than were users of other voting systems. Users of DREs, in contrast, generally agreed that they had sufficient knowledge about the voting system, that certification procedures were adequate, that DREs are not vulnerable to tampering and security concerns can be addressed with good procedures, that the public should have greater trust in DREs, and that the media report too many criticisms of that voting system. Those views were similar in both surveys. Nonusers were less neutral about optical scan (OS) systems, but users nevertheless held stronger views than nonusers about these systems, except for the statement about media criticism, about which both users and nonusers were neutral on average in 2004. User beliefs about the media were similarly neutral in 2006, but in 2008, they believed that the media were overly critical. LEOs whose primary voting systems were DREs were less neutral about OS systems than users of other voting systems. The controversy about the security and reliability of DREs has led to widespread calls for the adoption of a paper trail of the ballot choices that a voter can verify before casting the ballot. These paper trails, printed as separate ballot records that the voter can examine, are usually called voter-verified paper audit trails, or VVPAT. LEOs whose primary voting system is a DRE were asked several questions in the surveys about VVPAT. The percentage who used them increased from 18% in 2004 to 36% in 2006 and 46% in 2008. In 2006, about 36% of LEOs whose jurisdictions used DREs as their primary voting system stated that voters who did not wish to use a DRE had the option of using a paper ballot instead. That number increased to 44% in 2008. However, it was not possible to determine which of those jurisdictions permitted that choice in the polling place rather than through the use of "no excuse" absentee balloting. Given concerns about the auditability of ballots recorded on DREs, users of DREs and OS systems were also asked in 2008 whether they agreed that in close elections the system they used was more open to questions about accuracy than other systems. DRE users were neutral on average about that statement, but OS users disagreed. About 100 LEOs reported in 2008 that they had recently switched from DREs to another voting system, mostly PCOS. About half of those who switched were more satisfied with their current than their previous voting system, a quarter preferred the DREs, and the rest were neutral about the switch. The most common reasons given for the change were a mandate from the state and the lack of a paper ballot with DREs. About two-thirds of LEOs who did not use DREs supported a VVPAT requirement in 2004 and 2008, whereas one-third or fewer of users did. Fewer than one in five LEOs who used DREs in 2004 believed they should have VVPAT. That number increased to one in three in 2008. The views of nonusers, however, did not change ( Figure 23 ). The views of DRE users varied depending on whether the machines used VVPAT ( Figure 24 ). Not surprisingly, LEOs who used DREs with VVPATs were more supportive of them than other DRE users, except in 2004, when there was no significant difference between the two groups. In 2006 and 2008, LEOs were also asked if they would be willing to use a VVPAT if reimbursed for the costs by the federal government, and about 60% answered in the affirmative. However, even those respondents (DRE users and nonusers) who expressed support for VVPAT in 2006 were generally willing (65%) to spend only $300 or less for the feature. LEOs were asked to choose one or more of several reasons for disagreeing or agreeing that DREs should produce a VVPAT. The results for DRE users are presented in Figure 25 . The most frequent reasons chosen varied across the surveys, but the risk of printer failure, the complexity of implementation, and risks to voter privacy were consistently among the most frequently chosen disadvantages, with about half of DRE users choosing them on average. Those LEOs appeared least concerned about risks of tampering. The degree of concern about potential disadvantages was highest in the 2006 survey and lowest in 2008. Only about one-third of LEOs chose any of the three potential advantages listed for this question in the 2006 and 2008 surveys—recounts, checks on accuracy, and improved voter confidence. DRE users and nonusers differed strikingly in their views on the disadvantages and benefits of VVPAT. In 2008, DRE users expressed far greater concern about the disadvantages and far less agreement with the potential advantages than did nonusers ( Figure 26 ). The only exception was that neither group believed on average that risk of tampering was a significant concern in 2008. That was not the case in 2004, when concerns about tampering among users had been four times as high as among nonusers, consistent with differences in views for other potential disadvantages in that survey. In 2008, LEOs with experience using VVPATs were less likely to express concerns about their disadvantages than were other DRE users and were more likely to agree with the potential advantages ( Figure 27 ). Their views were closer to those of LEOs who did not use DREs (see Figure 26 ). About three-quarters of LEOs who used a VVPAT were somewhat to very satisfied with it. About one-fifth were dissatisfied in 2006, and fewer than one in ten in 2008. More than four-fifths of LEOs had confidence in the accuracy of VVPAT, with fewer than one-tenth expressing concerns. More than two-thirds thought that voters reacted positively to them in 2006, but only half in 2008 ( Figure 28 ). Most LEOs, about 90%, considered themselves familiar with and knowledgeable about HAVA's requirements in the surveys. Those who were "not familiar at all" with HAVA decreased from 4% in 2004 to less than 0.1% in 2008. About 90% of respondents believed that almost all jurisdictions in their state were in full compliance with HAVA provisions in 2006. The strength of this view varied somewhat across the surveys ( Figure 29 ). The most favorable assessment was in 2008, and the least favorable in 2006. Also, in the first two surveys, about twice as many LEOs believed that the law resulted in no improvements than in major improvements, but the percentage choosing "no improvement" fell by more than half in 2008, while the percentage choosing "major improvement" was unchanged. The views of LEOs in 2008 about the extent to which HAVA had improved elections nationally were similar to their views about local impacts. It might be expected that larger jurisdictions would find HAVA more beneficial than smaller ones, but in fact there was no association between the number of voters in a jurisdiction and how LEOs answered this question. However, the kind of voting system used did have an effect. In each of the surveys, DRE users rated improvements from HAVA highest, followed by users of PCOS, CCOS, and other systems. Most LEOs regarded the major provisions of HAVA as advantageous. However, the average level of support varied among both the provisions and the surveys. LEOs were most supportive of federal funding and least supportive of the requirement for provisional voting and the creation of the EAC ( Figure 30 ). Provisional voting received substantially higher negative ratings than any other provision in the surveys, but the proportion of LEOs rating it as a disadvantage declined more than 40% from 2004 to 2008 ( Table 5 ). While remaining positive overall, the level of support decreased for seven provisions across the surveys, especially from 2004 to 2006. They were provision of federal funds, error-correction requirements, the certification process for voting systems, codification of voting-system standards in law, accessibility requirement, the requirement for state matching funds, and the creation of the EAC. However, even for the EAC, which, along with provisional ballots, had the lowest rating in 2008, half of LEOs regarded it as an advantage and fewer than one in seven as a disadvantage in that survey. Decreased support for funding might have been caused simply by the decrease in availability of federal funds over the course of the three elections. Controversies about the security and reliability of different voting systems might have contributed to the decline in support for provisions relating to voting systems and the EAC. There was no significant change for four provisions: facilitating participation for military and overseas voters, the requirement for centralized voter registration, the provision of information to voters, and identification requirements for certain first-time voters. Support for one provision—the requirement for provision voting—actually increased with each survey. Support for HAVA's provisions also varied to some extent with the primary voting system used in the jurisdiction. DRE users exhibited the strongest support for the requirement on accessibility, provisional ballots, and military and overseas voters, and for the codification of standards. DRE and PCOS users expressed the strongest support for the error correction requirement. Users of hand-counted paper ballots exhibited lower support than users of other systems for the provisions on federal funding, provisional ballots, facilitation of military and overseas voting, and the codification of standards. Nevertheless, all were regarded as advantages except provisional ballots, toward which users of paper ballots were neutral on average. In general, LEOs reported in all three surveys that implementation of HAVA provisions was moderately difficult ( Figure 31 ). The level of difficulty for three provisions declined from 2004 to 2008: provisional voting, accessibility, and provision of information for voters. For one, the process for certification of voting systems, the reported difficulty of implementation increased. The other provisions exhibited no net change, although for voter identification and error correction, the perceived difficulty was lower in 2006 than in the presidential election years. Not surprisingly, LEOs were less likely to support a provision they found difficult to implement. That is, there was an inverse relationship between the reported level of difficulty and the reported advantageousness of a provision. That pattern held for all provisions, but was most pronounced for provisional ballots, and least for the provision of information to voters. Optical scan users found the accessibility requirement more difficult than did users of other voting systems. Perhaps surprisingly, DRE users did not find this provision significantly less difficult to implement than did users of hand-counted paper ballots, punch cards, or lever machines. PCOS and DRE users found the voter error-correction requirement easier to implement than did users of other voting systems. That finding is consistent with the greater error prevention and correction features of those systems, although lever machines also possess error prevention features. Users of paper ballots perceived the certification provision as less difficult to implement than users of other systems, as would be expected, given the acquisition of certified voting systems would likely be less important for them than for users of optical scan and DRE systems and lever machines in the process of being replaced. However, it is not clear why PCOS users reported similar levels of difficulty for that provision. Similarly, it is not clear why CCOS users found the voter registration requirement more difficult to implement than did users of other voting systems. Users of different kinds of systems did not differ in their assessments of the difficulty of implementing the provisions on military and overseas voters, provisional ballots, and voter identification. The decrease in support for most HAVA provisions across the three surveys may have resulted in part from perceptions about costs and funding. The importance of these factors is also supported by the responses to three questions in the 2006 and 2008 surveys: How has HAVA affected the cost of elections in your jurisdiction? To what degree is the funding your jurisdiction has received to implement HAVA requirements sufficient for their implementation? How concerned are you that limited funding in the future will leave you unable to comply with HAVA requirements for election administration? The results are presented in Figure 32 . About 90% of respondents in 2006 and 75% in 2008 believed that HAVA has increased the cost of elections, and only 2% believed the costs have decreased. LEOs were fairly evenly divided in both surveys on whether current funding is sufficient to implement the requirements, but most expressed concerns about the sufficiency of future funding, with 25%-30% stating that they were "extremely concerned." LEOs were also concerned about the impact on election administration of the financial crisis that arose in 2008, with more than 60% indicating that they were moderately to very concerned, and only 4% reporting that they were not concerned at all. LEOs were also asked in 2006 and 2008 to respond to a set of statements about the impacts of HAVA ( Figure 33 ). Their views changed significantly across the two surveys. They agreed on average in both that HAVA has made elections more accessible for voters, and they held that view more strongly in 2008. In 2006, they disagreed that the law has made elections fairer or more reliable, but agreed with those views on average in 2008. In 2006, they did not believe that HAVA requirements were inconsistent with state requirements, and they were neutral on average about that statement in 2008. Their most strongly held view in both surveys was that HAVA has made elections more complex to administer. As Table 6 shows, responses to the statement on complexity of elections were the least evenly distributed, with about one-quarter to one-half of respondents expressing a neutral position. In 2008, LEOs were asked how much attention they thought Congress will pay to their views when considering legislation regarding election administration. In general, they appeared skeptical that their views would be heard ( Figure 34 ). About one in seven believed that Congress would pay no attention at all, and fewer than 3% believed that a great deal of attention would be paid. It could not be determined whether these views arose from their experiences relating to the development of HAVA or from some other source, such as a more general skepticism about government responsiveness. When HAVA created the Election Assistance Commission, the law gave it several specific responsibilities. The EAC carries out grant programs, provides for voluntary testing and certification of voting systems, studies election issues, and issues voluntary guidelines for voting systems and guidance for the requirements in the act. The EAC has no rule-making authority (other than very limited authority under the National Voter Registration Act, the "motor-voter" law, P.L. 103-31 ) and does not enforce HAVA requirements. In the 2006 and 2008 surveys, LEOs were asked about the EAC's responsibilities, helpfulness, and benefits. They were asked to rank the importance of the following four EAC responsibilities: Provide guidance to local election officials, Research issues related to election administration, Certify voting systems, and Ensure that local jurisdictions are in compliance with federal law. The results are presented in Figure 35 . LEOs regarded guidance to them as the most important of the listed responsibilities and ensuring compliance by them as the least. Research and certification were rated in the middle, and the ratings for them did not differ significantly. The results were consistent across both surveys. When asked in 2006 how many times the EAC had helped them understand or perform their duties during the previous year, about one third indicated that the EAC had helped at least once, and about 10% ten or more times. The degree to which LEOs found the EAC helpful improved substantially from 2006 to 2008 ( Table 7 ). In 2006, almost half of LEOs had found the EAC not very helpful, with 13% finding it "not helpful at all." In 2008, the proportion of more negative ratings dropped by more than half, with only about one-fifth finding the EAC not very helpful, and only 3% choosing "not helpful at all." The proportion finding the EAC moderately helpful doubled, from about one-third to two-thirds. However, the proportion who found the EAC very helpful did not increase, but remained at about one-fifth. LEOs were also asked how they had benefitted from the four functions listed above plus the distribution of federal funds for use by local jurisdictions. The ratings ( Figure 36 ) generally reflect the pattern seen in the responses on overall helpfulness. On average, LEOs responded that they had benefitted only moderately overall, but the average level of benefit for each category was higher in 2008 than in 2006. However, while they considered local guidance as the most important responsibility (see Figure 35 ), they rated it lowest in benefit, along with local compliance, which they regarded as the least important responsibility. About a quarter rated EAC guidance as "not beneficial at all," with about 7% rating it "extremely beneficial." Perceived benefits from research and certification were somewhat higher, and funding, not surprisingly, was rated highest. There might be several possible explanations for the discrepancy in the ratings for importance versus benefits of EAC guidance to local jurisdictions. For example, it could reflect frustration with the delays in the initial start-up of the EAC, an explanation that is consistent with the increase in ratings in 2008. It could reflect difficulties in understanding the guidance that the EAC issued. It might reflect the fact that the purpose of the guidance stated in HAVA is to assist states, not local jurisdictions, in meeting the title III requirements (§311(a)). Consistent with that explanation, when LEOs were asked in 2008 about guidance and compliance at the state level, they perceived each of those as being more beneficial than at the local level ( Figure 36 ). Or it could simply be an expression of opposition to or uncertainty about the requirements themselves. Individual comments from LEOs in 2006 and 2008 suggest a diversity of views about the EAC: - They need to move faster, the new system or changes to old systems need to get certified in a reasonable amount of time. - Much of the information received from the EAC either did not apply … or was already in practice for many years. - The EAC's information on their website can be very helpful. - My local jurisdiction does not really see anything from the EAC because the state usually takes care of it and then passes it on to us to comply. - EAC commissioners and staff are very well aware of their situation and environment. I work closely with them on a regular basis and know they are doing the best they can, as a federal agency with no enforcement powers…. - I would like for the EAC to work more with states to have equipment certified and power to enforce that certification. I also wish the EAC members did not change so often—it takes a long time to learn…. - Exempt cities or other entities with less than 2,000 voters from the very expensive HAVA equipment requirements. - Get rid of it. Elections … should be free of federal control. - I believe they need more power to correct election problems. HAVA required each state to implement a statewide, computerized voter registration list before the 2006 election. A few states were unable to meet that deadline, and that is reflected in the survey, with 6% of respondents indicating that their states had not yet met the requirement in 2006, and 4% in 2008. Most LEOs were familiar with their state's database, with about a third assessing themselves as "very familiar" in 2006. Given the concerns expressed in the first survey about the burdens of HAVA implementation, the second survey asked LEOs whether the implementation of the computerized list had required the hiring of additional staff in the local jurisdiction. Four-fifths responded that it had not. Those that did hire additional staff were asked to identify all sources of funds. More than three-quarters received funding from local governments ( Figure 37 ), with about 70% receiving only local funding. To explore perceptions about the effectiveness of the computerized statewide voter registration database, LEOs were asked about security, accuracy, and contingency plans in case of failure on election day. Respondents were very confident about each ( Table 8 ). LEOs were also asked about their agreement or disagreement with a series of statements about the voter registration database. The responses ( Figure 38 ) are generally consistent with the responses to the questions on accuracy and security. Most LEOs did not believe that the database could be accessed by unauthorized people or manipulated improperly. They did not believe it created problems for legitimately registered voters, and did not see challenges from political parties and others as a significant problem. They were less concerned about reliability, administrative burden, matching problems, inadvertent removal of voters, and identity theft. Their views on security were unchanged. They continued to believe that the new databases were to some degree an improvement over the previous systems and were somewhat more accurate and fair. They remained neutral on average about whether the new systems would reduce the need for provisional ballots. However, for this statement, although not for any of the others, the number of voters in the jurisdiction had a significant impact. LEOs with larger jurisdictions were more likely to believe that the new databases reduced the need for provisional ballots than were those with small jurisdictions. In 2008, LEOs were asked about their use of electronic pollbooks, which provide immediate electronic access to the state's voter registration database at the polling place. About one in six reported that they used them. About two-thirds of those reported that electronic pollbooks were better than paper registers in resolving issues about voter eligibility ( Figure 39 ). About 10% considered them worse, and the rest were neutral. Issues relating to voter identification have been controversial. HAVA requires that first-time voters who register by mail must present a specified form of identification, either when registering or when voting. The law does not require photographic identification, although a few states have such requirements, and many states require some form of identification document. About two-thirds of LEOs reported that their jurisdictions required some form of document identification from all voters. About one-third of jurisdictions used signature comparisons. Roughly one-quarter permitted the voter to provide identification verbally via some form of personal information, such as name and address ( Figure 40 ). One of the principal policy arguments often cited for tightening voter-identification requirements is concern about the risk of significant levels of voting by ineligible voters. Opponents counter that those risks are small and that requiring identification, especially photo IDs, would effectively disenfranchise many eligible voters who would have difficulty obtaining such documents. To help determine the views of LEOs about this issue, the surveys asked several additional questions about voter identification: As a local election official, how supportive are you of requiring all voters in your jurisdiction to provide valid photo identification? How often do non-eligible persons attempt to vote in your jurisdiction, either in person or by absentee ballot? Do you agree or disagree that deliberate voter fraud is a serious problem in your jurisdiction? Do you believe that requiring photo identification of all voters would make elections more secure, less secure, or have no impact on election security? Do you believe that asking for photo identification of all voters would increase turnout, decrease turnout, or have no impact on turnout? The results are presented in Figure 41 . On average, LEOs mildly supported a requirement for photo identification. However, about 30% of respondents chose "extremely supportive," 5%-10% "do not support at all," and the choices of the other 60% were spread across the scale of possible responses. LEOs whose jurisdictions used hand-counted paper ballots were somewhat less supportive of photo ID than other jurisdictions, perhaps because those jurisdictions had many fewer voters on average than other jurisdictions (see Figure 49 below), and those LEOs therefore might be more likely to know voters personally. DRE users, who tended to have large jurisdictions, were more supportive on average of photo ID than were users of other systems. Two-thirds of LEOs also believed that requiring photo identification would make elections more secure. DRE users were more likely than users of other systems to believe that, but users of other systems did not differ significantly. The support of LEOs for photo ID and their views about its impacts on security do not, however, appear to be based on concerns about ineligible voters or voter fraud, which few believed were problems in their jurisdictions. Furthermore, while about half of LEOs believed that requiring photo identification would have no impact on voter turnout, more than 40% believed that it would depress turnout. Views did not change greatly from 2006 to 2008. LEOs were slightly more supportive of photo ID in 2008 and somewhat more concerned about fraud, but they were significantly less confident that photo ID would improve the security of elections. The results appear to suggest an apparent discrepancy between, on the one hand, the overall support of LEOs for photo ID and their average views about its effects on security, and, on the other hand, their views about impacts on turnout and the risk of voter fraud—that is, they tended to support photo ID and believed it would increase security but at the same time they tended to believe that fraud was not a problem and that requiring photo ID would depress turnout. It is possible that however low the risk of fraud, LEOs believe reducing it outweighs any negative impact on turnout. Also, LEOs who supported photo ID were less likely than those who did not to believe that requiring photo ID would depress turnout, and they were more likely to believe that fraud was a problem and that photo ID would increase security. In any case, the range of perspectives in the responses to the questions shows that the controversy is not settled, even among local election officials. The 2006 election was the first under which all HAVA requirements were in effect. Consistent with the perception of LEOs that HAVA has made elections more complex to administer ( Figure 33 ), three-quarters found that they spent more time preparing for the 2006 than the 2004 election, and almost 90% reported spending more time in 2008 than 2006. For 2004 versus 2006, this perception was supported by comparing the number of hours per week LEOs reported spending on election duties. On average, the time spent increased 15%, from 21 to 24 hours. This difference may be especially significant given that 2006 was not a presidential election year, during which additional work may be required than in intervening elections. However, the time spent did not change from 2006 to 2008—it was 24 hours in 2008 as well. There are several possible explanations for this discrepancy, and it was not possible to determine the cause. In 2008, LEOs were asked about voter education. About half reported that their jurisdictions had voter education programs intended to increase voters' knowledge of election rules and procedures. About 90% agreed that voter education about rules and procedures is important, and two-thirds that it is the responsibility of LEOs. About 60% believed that lack of voter knowledge creates problems in elections, and 80% that better voter education would improve the election-day process ( Figure 42 ). Support was somewhat weaker for all those statements, although still positive on average, among LEOs whose jurisdictions did not have voter education programs. The percentage of jurisdictions with voter-education programs varied with the kind of voting system ( Table 9 ). Fewer than 20% of those using hand-counted paper ballots had such programs, whereas most using DREs did. Similarly, paper-ballot users indicated lower support than users of other systems for the statements in Figure 42 , and they were neutral about whether educating voters is important or the responsibility of LEOs. There have been several prominent issues of concern reported by the media in recent elections, such as voting-system malfunctions and problems with pollworkers, vendors, long lines, media coverage, and timely and accurate reporting of results. The surveys therefore presented a list of 16 potential problems and other events in 2006 and 2008 and asked LEOs to indicate which, if any, had occurred. The results are presented in Table 10 . About 65% of survey respondents in 2006 and 50% in 2008 reported experiencing at least one of the events listed in the table. In 2006, more than 100 LEOs reported five or more kinds of incidents, with a maximum of 11, and in 2008, more than 50 experienced five or more, with a maximum of 10. Not surprisingly, LEOs in more populous jurisdictions reported more events than those in less populous ones. In 2008, about 1 in 15 LEOs reported an "uncontrollable" event such as a fire or a power outage. In 2008 LEOs were asked to assess how successful the election process was in their jurisdictions. More than one-quarter reported a very successful process, and none considered it unsuccessful. However, the degree of success perceived was inversely related to the number of different types of incidents reported. Given that 2008 was a presidential election, higher turnout was expected, and some variation in incidents might be related to whether a jurisdiction had higher turnout in 2008 than 2006. Seventy percent of LEOs reported higher turnout in 2008 ( Figure 43 ), and LEOs in jurisdictions using hand-counted paper ballots reported a greater increase in turnout than those using other kinds of systems. However, those reporting higher turnout were not more likely to experience incidents. About 65% of LEOs using DREs or PCOS as the primary voting system reported this problem. About 55% of CCOS users and about 40% of lever machine users reported this problem, with the lowest incidence, 20%, among LEOs using hand-counted paper ballots. There was no significant difference between the surveys in the incidence of this problem. The reason for the low incidence among paper ballot users is not clear. It might be explained in part by the high proportion of those jurisdictions, about half, that used vote-by-phone to meet HAVA accessibility requirements (see Figure 13 above). While DRE users reported a slightly higher incidence of malfunction (67% of those reporting at least one event and about 50% of all DRE users) than PCOS users (63% of those reporting at least one event and about 48% of all users), a larger difference might have been expected. In jurisdictions where DREs are the primary voting system, several might be used in each polling place, whereas in PCOS jurisdictions, typically only one OS machine is used. Therefore, the chance of at least one malfunction would be expected to be higher on average in jurisdictions using DREs. However, if DREs had lower failure rates per machine than optical scan systems, the difference would be correspondingly lower. The results suggest that current optical scan systems may not be significantly more reliable than DREs. They also contrast strikingly with the uniformly high ratings all users gave for the reliability of their voting systems (see Figure 19 above). LEOs did not appear to assess the malfunctions as being the result of tampering. In fact, only one reported a system being hacked, in 2006, and that was a precinct-count optical scan user. About 10% of LEOs were disappointed in the level of support provided by vendors. Those LEOs were more than twice as likely to have experienced malfunctions of their voting systems as LEOs who were not disappointed with vendor support. In 2008, ballots were slightly longer on average than they had been in 2004, but half of LEOs reported no difference. More than half reported that confusing ballots were a problem for voters in their jurisdictions in 2008 ( Figure 44 ). About three-quarters believed that it would be beneficial to devote additional resources to ballot design. Not surprisingly, LEOs who were more concerned about ballot confusion were also more likely on average to believe that additional resources should be devoted to ballot design. About 40% of LEOs reported that they had little or no familiarity with ballot-design studies and best practices, about half were moderately familiar, and only about 10% reported a high level of familiarity. Another notable result was the fairly high incidence of LEOs who reported excessively long lines at the polling place. About 11% of all respondents reported long lines in 2006, and 7% in 2008. The prevalence was much higher in jurisdictions using DREs primarily, occurring in about one quarter in 2006 and 14% in 2008. In those using other kinds of voting systems, long lines were reported by only about 5% of respondents in both surveys. Jurisdictions using DREs also reported more unfair media coverage (19% in 2006 and 7% in 2008) than users of other systems (5% in 2006 and 2% in 2008). The incidence of problems with accurate and timely reporting of election results was low. It did not differ among users of the different kinds of voting systems, except for lever machine users. They reported a much higher incidence, about 10%, of failure of polling places to report accurately in both surveys. That was about five times the rate of users of other voting systems. Reports of deliberate election fraud of any kind were also few—8 LEOs in 2006 and 14 in 2008, under 1% of jurisdictions. Such a rate might nevertheless be considered unacceptably high, depending on such factors as the seriousness of the offense, the impact on the election of such attempts at fraud, and the degree to which election officials are able to detect all such attempts. In 2006, the number of elections requiring recounts that LEOs reported was much higher (264, which was 18% of all survey respondents and 27% of LEOs reporting incidents) than in 2008 (156, 12% of respondents and 23% of those reporting incidents). Not surprisingly, recounts were much more likely to be reported when a race was close. They were also more likely in jurisdictions using lever machines and hand-counted paper ballots than optical scan or DRE systems. LEOs noticed no change on average in residual votes (overvotes plus undervotes plus spoiled ballots) from 2004 to 2006. About 60% reported no change, and about 20% each reported an increase or a decrease. This result suggests that the decreased confidence LEOs had in 2006 in the ability of voting systems to reduce voter error was not a result of a noticeable increase in such error. Alternatively, the decrease in confidence might have resulted from sources such as changes in media coverage of voting-system problems. The number of provisional ballots used varied greatly among jurisdictions in 2006. About 30% of that variability was explainable by the number of voters in the jurisdiction. Thus, jurisdictions with fewer than 1,000 registered voters used about 10 provisional ballots on average and those with more than 100,000 voters used 1,500. Across all jurisdictions, one provisional ballot was used for every 140 registered voters on average. About a quarter of jurisdictions, mostly small, used no provisional ballots, and about 4% used more than 1,000, with a maximum of 15,000 reported by a jurisdiction with about half a million voters. In 2008, LEOs were asked for the percentage of ballots cast that were provisional, rather than the number cast. About one-third used no provisional ballots. In about half of jurisdictions, some were cast but accounted for 1% or fewer of all ballots. In about 15%, they accounted for 1%-5% of all ballots, and in about 6% of jurisdictions, they accounted for more than 5%. About 2% of jurisdictions stated that at least one polling place had run out of provisional ballots during the election. The percentage of provisional ballots cast did not vary with the size of the jurisdiction. Also, 36% of LEOs reported an increase in the use of provisional ballots in comparison to 2006, while 26% reported a decrease. When asked whether provisional ballots were easier to use than they had been in the previous election, LEOs found them slightly easier to use on average in 2006 and again in 2008. However, there was far more variability in the 2008 results, with higher proportions of LEOs finding them both easier and more difficult than in the previous election ( Table 11 ). The reasons for the increased variation are not clear. The percentage of jurisdictions offering early voting increased from about half in 2006 to nearly two-thirds in 2008, and most LEOs reported that the number of early voters increased in 2008. In 2006, about a third each of jurisdictions offering early voting reported using optical scan, a third DREs, and fewer than one in ten paper ballots. In 2008, more than half used optical scan, with about a third offering CCOS and a quarter PCOS, while almost half used DREs and about one in six paper ballots. In 2008, a quarter of jurisdictions used two different kinds of voting systems for early voting, and a few offered three. Among those using more than one system, only about 10% did not use DREs. About half used CCOS and DREs, a quarter PCOS and DREs, and a fifth paper ballots and DREs. In 2008, a higher proportion of votes were cast early in jurisdictions using DREs as their main voting system (27%) than in those using other systems (14%) (see Figure 46 ). The rate of absentee voting has been increasing nationally over the last several elections, as the number of states offering early and "no excuse" absentee voting has increased. In both 2006 and 2008, 85%-90% of jurisdictions used only one kind of voting system for absentee ballots, with most of the rest using two, and a few three. About three-quarters of jurisdictions used optical scan systems, and about one-quarter used paper ballots. About 10% reported using DREs. In most cases these were for "in-person absentee ballots," but in some cases, LEOs reported that election officials entered choices submitted on paper ballots into DREs. The survey asked LEOs to provide information on the percentage of all votes cast by absentee voting in 2006 and 2008. The average reported was about 15% in each election, with 1%-5% being most common in both elections ( Figure 47 ). However, most LEOs reported that the number of absentee ballots increased in 2008. In contrast to early voting, CCOS jurisdictions had a higher proportion of ballots cast via absentee (26%) than did jurisdictions using other systems (13%) ( Figure 46 ). The overall average rate is very similar to the ones reported in the EAC's election day surveys (14.2% for 2006 and 17.3% for 2008). In 2008, more than 95% of LEOs reported receiving requests for ballots from military and overseas voters. However, 62% also reported receiving voted ballots from such voters after the deadline for receiving ballots. Many LEOs provided suggestions for ways to improve participation by such voters, which varies by state. The most common by far was to permit greater use of electronic methods—fax, e-mail, and Internet. Other common suggestions were more time for preparing, distributing, and processing ballots for such voters, improved training and awareness of voters and military personnel, and ways of improving the currency of address information. Some observers have expressed concerns about early and "no excuse" absentee voting, arguing, among other things, that they do not increase turnout and that they pose some security risks. These concerns were largely not shared by LEOs ( Figure 48 ). About three-quarters agreed that absentee voting should be considered a voter's right, and about half that early voting should be. Most also agreed that absentee voting is worth the costs, and that verification of authenticity is not difficult for those ballots. LEOs were equivocal about whether early voting was worth the costs in 2006 but supported it on average in 2008. Among users of different kinds of voting systems, lever-machine users were somewhat negative, DRE users were positive, and those using paper ballots and optical scan were neutral. All except lever-machine users believed on average that early voting should be a right, and users of all systems believed that absentee voting should be a right. About 10% of jurisdictions experienced one or more instances of pollworkers not reporting for duty (see Table 10 above). Since the average jurisdiction used more than 150 pollworkers, the impact may be small on average (although not necessarily in the affected polling places). Nevertheless, absenteeism among pollworkers has been cited as a significant problem on election day. Factors that might contribute include long hours, low pay, poor training, and age or illness, but analysis of pay and training data from the survey did not point to those factors as being significant. About 20% of LEOs reported instances of pollworkers who did not understand their jobs. The lowest rate was in jurisdictions using hand-counted paper ballots. Results from LEOs using other kinds of voting systems were substantially higher, but did not differ significantly from one another. It seems unlikely that the differences between the results for paper and those for other voting systems arose purely from differences in the roles of technology in the different voting systems, since the technology-related tasks of pollworkers in jurisdictions using CCOS are unlikely to be much greater than those in jurisdictions using paper ballots. There are several other possible factors. For example, the average total number of pollworkers, polling places, and registered voters reported by LEOs is far lower for jurisdictions using paper ballots than for any other voting system (see Figure 49 ). Also, the quality of training and the background and experience of pollworkers are likely to vary among jurisdictions. The 2006 and 2008 surveys included several additional questions about pollworkers. More than 95% of LEOs reported using one or more pollworkers, with a mean number of more than 200 in a jurisdiction and a maximum of more than 10,000. The number of pollworkers in the jurisdictions was strongly correlated with the number of registered voters reported, as was the total number of polling places. The kind of voting system used also varied with the number of registered voters. Overall, jurisdictions using hand-counted paper ballots had the smallest number of registered voters, polling places, and pollworkers, and those using DREs and lever machines the highest ( Figure 49 ). On average, there were 5-10 pollworkers per polling place. Jurisdictions using lever machines and DREs had the lowest number, and those using other voting systems did not differ significantly from each other. There were about 1,000 voters per polling place on average, with jurisdictions using paper ballots having the fewest, about 600. The pattern was similar for the number of registered voters per pollworker, with an overall average of 160, and 100 for paper-ballot jurisdictions. While Figure 49 suggests that the number of registered voters, polling places, and pollworkers increased in 2008, the large variation among jurisdictions meant that the only statistically significant increase was for pollworkers per polling place, which increased slightly for PCOS jurisdictions. Compensation of pollworkers also varied substantially. Respondents reported paying pollworkers $100 on average for work on election day. The results suggest that there is significant variation among the states, with averages ranging from a low of about $30 to a high of more than $200. Very few respondents reported paying nothing to pollworkers. Rates of pay did not vary significantly with the number of registered voters or type of voting system used, and it did not change significantly from 2006 to 2008. Pay also did not vary with performance. LEOs who reported problems with pollworker performance paid them no less per day on average than those who did not. However, the survey did not explore potentially influential demographic factors such as age of pollworkers or average cost of living. Perhaps more surprisingly, the amount of training pollworkers received was also not associated statistically with reports of performance problems, in either survey. However, more LEOs than not believed that inadequate training was responsible for problems with election administration ( Figure 50 ), with DRE users expressing the most concern and paper-ballot users the least. Most also believed that training needs significant improvement ( Figure 51 ), with lever machine and DRE users expressing the most concern and paper-ballot users the least. The overall level of concern about the impact of inadequate training and the need to improve it was somewhat lower in 2008 than 2006. Not surprisingly, in both surveys LEOs who believed more strongly that inadequate training caused problems also tended to believe more strongly that improvements in training were needed. In both surveys, 93% of LEOs reported that pollworkers received training, about two to three hours on average ( Figure 52 ). Seventy percent of LEOs considered pollworker training "extremely important," and only a few considered it "not important at all." The amount of training was about 20% lower on average for jurisdictions using paper ballots than other kinds of voting systems. In just under 10% of jurisdictions, training was 1 hour or less. In three quarters, it was 2-4 hours, and in only 5% was it one day or more. In 2008, LEOs were asked their views about the best method for training pollworkers. Nine out of 10 believed that classroom training was most effective, with the rest preferring reading materials, Internet, or other methods, such as instruction at the polling place. There appeared to be substantial uniformity among jurisdictions in the areas in which pollworkers were trained ( Figure 53 ), with more than 90% being trained in voter check-in, accessibility, election laws, operation of voting machines, and election integrity. LEOs were not asked what areas of training should be improved, but another study that surveyed pollworkers in New Mexico found that many desired more training in voting-machine operation and election laws. Interestingly, that finding reflects the views of many LEOs about their own training, as discussed earlier in this report. LEOs also believed that HAVA is changing the nature of pollworker training, with 20% reporting that the changes were "substantial." As reported earlier (see Table 6 and Figure 33 above), most LEOs believed that HAVA has made elections more complex to administer. In 2006, most also expressed concern that the increased complexity of elections would have a negative impact on recruitment of pollworkers, and more than a third of respondents were "extremely concerned" ( Figure 54 ). In 2008, most agreed with the statement that recruiting pollworkers was difficult, but nevertheless felt equally strongly that the number of pollworkers in their jurisdictions was adequate, and that the pollworkers had the necessary knowledge and skills to perform effectively. LEOs were also neutral about whether the increased technological complexity of voting systems has made it difficult for pollworkers to perform their election-day duties ( Figure 55 ). Users of hand-counted paper-ballot systems expressed the most positive views about their pollworkers. They felt most strongly that the number of pollworkers they had was adequate, and they were the only set of users who were neutral about the difficulty of recruiting pollworkers. DRE users might have been expected to have the highest concerns about pollworker knowledge and skills, but in fact lever-machine users expressed the most concern. HAVA established two programs to provide incentives for student participation in election administration, one for high school and the other for college students. To help identify what impacts those programs might have had, LEOs were asked in 2008 whether they had experienced an increase in high-school and college student volunteers. About one-quarter reported an increase ( Figure 55 ), but it could not be determined for this report which respondents were in jurisdictions that may have benefited from those programs. However, DRE users were the most likely to report an increase, and lever-machine and paper-ballot users the least likely. Some observers have suggested that the environment in which election officials operate is too politically contentious and that steps should be taken to make election administration more nonpartisan. For example, some believe that state election officials should not be permitted to be involved in political campaigns other than for their own positions. The 2006 and 2008 surveys asked LEOs several questions about this issue. In general, LEOs were satisfied with election administration at the state level ( Figure 56 ), with only about 10% expressing significant dissatisfaction. More LEOs than not also believed that election administration in their state was independent of partisan politics. Those views did not change significantly from 2006 to 2008 and they did not vary depending on whether a LEO was elected or appointed. In 2008, LEOs were asked whether the state role in local elections had changed in the last five years. Not surprisingly, three-quarters believed the state role had increased. About 60% of those who believed the state role had changed considered the effects of that change beneficial in their jurisdictions. There was more variation in the views of LEOs about the political contentiousness of the election-administration environment, with more believing it contentious in 2008 than 2006. LEOs who were appointed were more likely to find the environment contentious than those who were elected, although that difference was not significant in 2008. In 2008, LEOs were asked if the degree of contention had increased since the last election. While more than half believed there had been no change, a greater percentage believed it had increased than that it had decreased. About 40% believed that the political environment had made election administration more difficult, while half believed it had made no difference. In 2006, LEOs were also asked whether election administration should be a civil service function in their state. About half had no opinion, but significantly more elected LEOs were opposed to the idea than favored it. Appointed LEOs were evenly divided ( Figure 57 ). As with all surveys, care needs to be taken in drawing inferences from the results. One question that could arise is whether the sample is representative of LEOs as a whole. For example, simply drawing the sample at random from the nationwide pool of election administrators would have resulted in a disproportionately large number of jurisdictions from New England and the upper Midwest, where elections are administered by townships rather than counties. Steps were taken in the design of the studies to minimize the risk that the sample would not be representative (see the Appendix ). Overall, neither the sample design nor the characteristics of the responses suggest that the results are unrepresentative of the views and characteristics of local election officials. Another potential caution for interpretation relates to the inherent limits of surveys such as these. In particular, there is no way to guarantee that the responses of the election officials correspond to their actual beliefs. In addition, there is no way to be certain that any particular belief corresponds to reality. The question on voting-system characteristics (see Figure 19 ) provides an illustration of the possibility for disparity. For several reasons, LEOs might be reluctant to rate their voting systems low in reliability, accuracy, and security, despite the anonymity of the results. Alternatively, they might truly believe that their voting systems are highly reliable, accurate, and secure, even if independent evidence does not support that view. Also, some caution is needed in assigning cause and effect. The mere existence of an association or correlation between a factor and an effect does not necessarily mean that the factor caused the effect. For example, the survey showed a strong association between the kind of voting system used in a jurisdiction and the number of pollworkers (see Figure 49 ). However, while the kind of voting system may have some independent effect, a more important factor is likely to be the number of registered voters. A final caution involves how survey results might be used to inform policy decisions. On the one hand, the results could be used to support the shaping of policy in directions expressed by LEOs in their responses. In many cases, such policy changes might be appropriate. On the other hand, it is possible that at least some of those desired changes would not in fact yield the most effective or appropriate policies. In such cases, the results might more constructively be used to help policymakers identify issues for which improvements in communication and understanding are needed. The survey results may have policy implications for several issues at the federal, state, and local levels of government. Some issues that may be relevant for congressional deliberations are highlighted below. Many observers have commented favorably on the experience and dedication of the nation's local election officials. Survey results are consistent with that view. At the same time, other observers, including some election officials, have called for increased professionalism in election administration. Some survey results suggest areas of potential professional improvement, such as in education and in professional involvement at the national level. Congress could address this potential need by several means, for example facilitating educational and training programs for LEOs and promoting professional certification of election officials by entities accredited through the EAC or a professional association. The seemingly unique demographic characteristics of LEOs as a group of government officials may have other policy implications, but they are not altogether clear. However, some observers may argue that efforts should be undertaken to ensure that LEOs reflect the diversity of the workforce or voting population as a whole, especially with respect to minority representation. The issue of partisanship among election officials has been controversial for several years. Most national attention has been on state officials, but, given that most LEOs are elected and only about half the local jurisdictions in the United States are administered on a nonpartisan or bipartisan basis, policymakers may wish to consider the influence of partisanship among LEOs. Since the enactment of HAVA, controversy has arisen over whether DRE voting systems are sufficiently secure and reliable. The survey revealed that LEOs who have experience with DREs are very confident in them, consider them superior for accessibility, and do not generally support the addition of a voter-verified paper audit trail (VVPAT) to address security concerns, although those who use a VVPAT are satisfied with its performance. However, LEOs using other systems are much less confident in DREs and more supportive of VVPAT. The strongly dichotomous results suggest that as Congress considers whether to require changes in the security mechanisms used in voting systems, it might be useful to determine whether DRE users are overconfident in the security of their systems and procedures in practice, or, alternatively, whether nonusers might be misinformed about the reliability and security of DRE systems. The survey results suggest that HAVA is in the process of achieving several of its policy goals. The general and increasing support of most HAVA provisions—including those such as the creation of the EAC and the provisional ballot requirement that have been somewhat controversial—implies that most LEOs are in agreement with the goals of the act and are active partners in its implementation. The overwhelming selection by jurisdictions of new voting systems that assist voters in avoiding errors indicates that the HAVA goal of reducing avoidable voter error is in the process of being met. The areas of concern expressed by LEOs—such as how to meet the costs of ongoing implementation of HAVA requirements—raise issues that Congress may wish to address as it considers HAVA appropriations and reauthorization. The close relationship between LEOs and the vendors of their voting systems seems unlikely to change as a result of HAVA. However, with the codification by HAVA of the voting system standards and certification processes, the influence of the federal government in decisions about new voting systems might be expected to increase in relation to that of vendors and others. The increased concerns of LEOs in 2006 that vendors, media, political parties, and advocacy groups have too much influence on such decisions may bear consideration. Scientific opinion surveys of local election officials are rare, and additional research may be useful to address some of the matters raised by these studies. For example, a survey of state election officials might provide useful information and might additionally be helpful in assessing the most appropriate federal role in promoting the effective implementation of HAVA goals at all levels of government. One common suggestion of LEOs for improving HAVA was to provide a means of adjusting requirements to fit the needs of smaller jurisdictions. To determine what, if any, such adjustments would be appropriate, it may be useful to have specific information on how the needs and characteristics of different jurisdictions vary with size—something that was beyond the scope of these surveys. It could also be useful to identify how the duties of LEOs vary with size and other characteristics of the jurisdiction. In many jurisdictions, election administration is only part of the LEO's job. It is not known to what degree these other responsibilities might affect election administration—negatively or positively. Finally, these surveys have provided only snapshots of LEO characteristics and perceptions over three election cycles. It might be beneficial to perform similar surveys periodically to identify trends and explore new questions and issues. The results presented and analyzed in this report are from three surveys sponsored by CRS as part of its Capstone program and performed by graduate students and faculty at the George Bush School of Government and Public Service at Texas A&M University in 2004 and 2006, and the Department of Political Science at the University of Oklahoma in 2008. For both studies the CRS project manager was Eric Fischer and the project liaison was Kevin Coleman. The topics for the surveys were developed collaboratively by CRS and Texas A&M and University of Oklahoma participants. The major factor in choosing the topics was potential usefulness of the results for Congress. The Bush School and University of Oklahoma teams developed and administered the survey instruments in consultation with CRS and provided the authors with the data used in performing the analyses. The three surveys were conducted after the November 2004, 2006, and 2008 federal elections, between December and the following April. For each survey, a sample of approximately 3,800 LEOs was drawn from the roughly 9,000 election jurisdictions in the 50 states. To ensure that LEOs from all states were included, but that states with large numbers of LEOs were not disproportionately represented (see Figure A-1 ), a modified random-sampling regime was used, as follows: Surveys were sent to all LEOs in states with 150 or fewer local jurisdictions. For the ten states with more than 150 LEOs, a sample of 150 was chosen at random from the local jurisdictions, and surveys were sent to those LEOs. Each survey was initially distributed in the month following the election (December). Administration was mostly electronic, with respondents visiting a website to enter their responses. In cases where electronic administration was not possible, LEOs were sent paper surveys via the U.S. Postal Service. Those who did not respond were sent reminders or contacted by telephone, with the survey response period closing in March or April following the election. For each survey, the overall final response rate was about 40% of the sample, or about 17% of all jurisdictions in the United States. Respondents answered 85%-90% of questions, on average. The response was sufficiently high to permit statistical analysis and comparison of the results among the surveys. The distribution of responses among states was similar across the surveys (see Figure A-2 ). Individual response rates per state were between 25% and 50% for about three-quarters of states. The remainder were evenly split between those for which under 25% of LEOs responded, and those for which the rate was greater than 50%. Response rates did not vary significantly for any survey with the number of local election jurisdictions in a state or its voting age population. About 70% of respondents worked in county election jurisdictions, with most of the remainder working in townships ( Figure A-3 ). The small difference among the surveys in those choosing "town/township" and in those choosing "other" was almost certainly a result of a small change in the structure of the question after the 2004 survey. However, as the figure implies, the proportion of respondents from county jurisdictions increased slightly over the course of the three surveys. All the results presented in this report are from analyses by CRS of data provided from the surveys by researchers at Texas A&M University (2004 and 2006) and the University of Oklahoma (2008). The raw data were first examined for errors, and corrections were made where necessary, in a few cases, such as if a LEO claimed to work more hours per week than is physically possible. Where the correct answer could be reasonably discerned, the response was corrected. Otherwise it was discarded. Once cleaned, the data were analyzed using standard parametric methods, mainly analysis of variance, linear regression, and Student's t-tests as appropriate. Three kinds of hypotheses were tested: differences between groups, such as whether results differed across the three surveys; differences from a hypothetical value, such as whether LEOs were neutral about, agreed with, or disagreed with a particular statement; and tests for associations, such as whether the number of pollworkers in a jurisdiction was correlated with the number of registered voters. Statistical significance was determined using a significance level (α) of .01. However, for display purposes, graphs with error bars were drawn showing 95% confidence intervals for the means. Most tests for which results are presented in this report yielded highly statistically significant results—p-values much lower than the significance level (p << .01). For reported data where statistically significant effects were not found, the lack of effect is noted in the text, for example, by stating that no change was found between 2004 and 2006 for a particular survey item. Additional methodological details can be provided upon request. | Local election officials (LEOs) are critical to the administration of federal elections and the implementation of the Help America Vote Act of 2002 (HAVA, P.L. 107-252). Three surveys of LEOs were performed by academic institutions in collaboration with the Congressional Research Service. Although care needs to be taken in interpreting the results, they may have implications for several policy issues, such as how election officials are chosen and trained, the best ways to ensure that voting systems and election procedures are sufficiently effective, secure, and voter-friendly, and whether adjustments should be made to HAVA requirements. Major results include the following: The demographic characteristics of LEOs differ from those of other government officials. Almost three-quarters are women, and 5% are minorities. Most do not have a college degree, and most were elected, although those characteristics appear to be changing. Some results suggest areas of potential improvement such as in training and participation in professional associations. LEOs believed that the federal government has too great an influence on the acquisition of voting systems, and that local elected officials have too little. Their concerns increased from 2004 to 2006 about the influence of the media, political parties, advocacy groups, and vendors. Concern about the influence of these groups increased again, slightly, from 2006 to 2008. LEOs were highly satisfied with whatever voting system they used but were less supportive of other kinds. Their satisfaction declined from 2004 to 2006 for all systems except lever machines, but rebounded in 2008. They also rated their primary voting systems as very accurate, secure, reliable, and voter- and pollworker-friendly, no matter what system they used. However, the most common incident reported by respondents in both the 2006 and 2008 elections was malfunction of a direct recording (DRE) or optical scan (OS) electronic voting system. The incidence of long lines at polling places was highest in jurisdictions using DREs. Most DRE users did not believe that voter-verified paper audit trails (VVPAT) should be required, but nonusers believed they should be. However, the percentage of DRE users who supported VVPAT increased from 2004 to 2008, and more VVPAT users were satisfied with them in 2008 than in 2006. On average, LEOs mildly supported requiring photo identification for all voters and believed it would make elections more secure, even though they strongly believed that it will negatively affect turnout and did not believe that voter fraud is a problem in their jurisdictions. In all three surveys, LEOs believed that HAVA is making moderate improvements in the electoral process. The level of support declined from 2004 to 2006 but increased to its highest point in 2008. LEOs reported that HAVA has increased the accessibility of voting but has made elections more complicated and has increased their cost, though fewer believed so in 2008 than in 2006. LEOs spent much more time preparing for the election in 2008 than in 2004. They also believed that the increased complexity of elections is hindering recruitment of pollworkers. Most found the activities of the Election Assistance Commission (EAC) that HAVA created moderately important, and that its helpfulness improved from 2006 to 2008. Their assessment of the statewide voter-registration database was neutral in 2006 but positive in 2008. They believed that it was more accurate and fair than their previous registration system. |
Since its inception, Congress has used commemoratives to express public gratitude for distinguished contributions; dramatize the virtues of individuals, groups, and causes; and perpetuate the remembrance of significant events. The first commemoratives were primarily in the form of individually struck medals. During the 19 th century, Congress gradually broadened the scope of commemoratives by recommending special days for national observance; funding monuments and memorials; creating federal holidays; authorizing the minting of commemorative coins; and establishing commissions to celebrate important anniversaries. In the 20 th century, it became increasingly commonplace for Congress to use commemorative legislation to name buildings and other public works, scholarships, endowments, fellowships, and historic sites. This report provides a discussion of commemorative options available to Congress. These commemorative options are divided into those that require legislation and those that do not. Types of commemoratives requiring legislative action include naming federal buildings, including post offices; creating postage stamps; minting commemorative coins; awarding of Congressional Gold Medals; authorizing monuments and memorials, both in the District of Columbia and on federal land in other parts of the United States; establishing commemorative commissions; authorizing commemorative observances and federal holidays; and requesting presidential proclamations. Nonlegislative options include sending certificates of recognition, making floor speeches, and sending flags flown over the Capitol Building to constituents. Beginning in the 1960s, several initiatives were undertaken to reduce the number of commemoratives proposed through legislation. These initiatives were in response to concern that the legislative time spent on commemorative measures was excessive. Efforts to curb commemoratives can be divided into two categories: creating an advisory commission to recommend appropriate commemorations and amending congressional rules on the introduction and consideration of commemorative legislation. Between the 89 th Congress (1965-1966) and the 104 th Congress (1995-1996), several proposals were introduced to shift the responsibility of recommending commemorative celebrations to a presidential commission. First introduced in 1966, the proposed Commission on National Observances and Holidays would have served to review proposals for national observances and "report to the President with respect to any proposal for a national observance which, in the opinion of the Commission, is of national significance." In both the 89 th Congress and the 90 th Congress (1967-1968), measures were passed by the House, but no further action was taken by the Senate. In the 104 th Congress (1995-1996), the House adopted a new rule to reduce the number of commemorative bills and resolutions introduced and considered by the chamber. House Rule XII, clause 5, prohibits the introduction and consideration of date-specific commemorative legislation. Additionally, Republican Conference Rule 28 generally prohibits the Republican leader from scheduling honorific legislation, including commemoratives under suspension of the rules , a practice also addressed in a committee rule of the House Oversight and Government Reform Committee. As part of the rules adopted by the 104 th Congress, House Rule XII was amended to preclude the introduction or consideration of any bill, resolution, or amendment that "establishes or expresses a commemoration." The rule, which is still in effect, defines a commemoration as any "remembrance, celebration, or recognition for any purpose through the designation of a specified period of time." Further, in the House Rules Committee's section-by-section analysis of the House Rules resolution ( H.Res. 6 , 104 th Congress), the following explanation was provided of the rule's intent: The new ban on date-specific commemorative measures or amendments applies to both the introduction and consideration of any measure containing such a commemorative. This is intended to include measures in which such a commemorative may only be incidental to the overall purpose of the measure. Such measures will be returned to the sponsor if they are dropped in the legislative hopper. The prohibition against consideration also extends to any measures received from the Senate which contain date-specific commemorative [sic]. While it does not block their receipt from the other body, it is intended that such measures would not be referred to the appropriate committee of the House or be considered by the House. Instead, they would simply be held at the desk without further action. Should such a commemorative be included in a conference report or Senate amendment to a House bill, the entire conference report or Senate amendment would be subject to a point of order. While the ban does not apply to commemorative [sic] which do not set aside a specified period of time, and instead simply call for some form of national recognition, it is not the intent of the rule that such alternative forms should become a new outlet for the consideration of such measures. Thus, while they could be referred to an appropriate committee, it is not expected that such committees should feel obligated or pressured to establish special rules for their release to the House floor. Nor should it be expected that the Rule [sic] Committee should become the new avenue for regular waivers of the rule against date specific commemorative [sic]. Such exceptions should be limited to those rare situations warranting special national recognition as determined by the Leadership. In relation to the current operation of House Rule XII, clause 5, the House Republican Conference adopted a rule (Rule 28 (6)) that generally prohibits the Republican leader from scheduling "any bill or resolution for consideration under suspension of the Rules which ... expresses appreciation, commends, congratulates, celebrates, recognizes the accomplishments of, or celebrates the anniversary of, an entity, event, group, individual, institution, team or government program; or acknowledges or recognizes a period of time for such purposes.... " Additionally, the House majority party leadership has issued protocols "intended to guide the majority leadership in the scheduling and consideration of legislation on the House floor." Included in the protocols is guidance on possible exemptions to Conference Rule 28. A resolution of bereavement, or condemnation, or which calls on others (such as a foreign government) to take a particular action, but which does not otherwise violate the provisions of Rule 28 is eligible to be scheduled under suspension of the Rules. Party conference rules and protocols, however, are not enforceable by points of order on the House floor, although they may reflect a general reluctance on the part of the majority party to schedule any legislation with commemorative intent. In addition, in the 114 th Congress, the House Committee on Oversight and Government Reform (which has jurisdiction over holidays and celebrations) adopted a new committee provision (which was retained in the 115 th Congress). Its Rule 13(c) states, The Chairman shall not request to have scheduled any resolution for consideration under suspension of the Rules, which expresses appreciation, commends, congratulates, celebrates, recognizes the accomplishments of, or celebrates the anniversary of, an entity, event, group, individual, institution, team or government program; or acknowledges or recognizes a period of time for such purposes. The committee has issued additional guidance that "in accordance with the intent of this rule, it will be the policy of the Committee that resolutions deemed to fit these criteria shall not be considered by the Committee." Since House Rule XII, clause 5, was adopted in the 104 th Congress, it has been waived by unanimous consent on at least one occasion. Specifically, the "House by unanimous consent waived the prohibition against introduction of a certain joint resolution specified by sponsor and title proposing a commemoration," to allow for the consideration of H.J.Res. 71 (107 th Congress, 2001-2002), legislation establishing Patriot Day as a day of remembrance for September 11, 2001. Congress's commemorative options fall into two general categories: legislative options and nonlegislative options. All legislative options require passage of a bill or resolution by the House, the Senate, or both chambers, while nonlegislative options can be accomplished by individual offices without legislative approval. Legislative options include naming federal buildings, designing postage stamps, minting commemorative coins, awarding congressional gold medals, creating monuments and memorials, designating commemorative observances, establishing federal holidays, and requesting presidential proclamations. Nonlegislative options include creating individual office awards, giving floor speeches, sending official letters, and ordering flags. Since House Rule XII, clause 5, was adopted in the 104 th Congress, it has been waived by unanimous consent on at least one occasion. Specifically, the "House by unanimous consent waived the prohibition against introduction of a certain joint resolution specified by sponsor and title proposing a commemoration," to allow for the consideration of H.J.Res. 71 (107 th Congress, 2001-2002), legislation establishing Patriot Day as a day of remembrance for September 11, 2001. Several legislative options exist to honor individuals, groups, and historic events. For each of these commemoratives, action requires passage of a bill or resolution by the House, the Senate, or both chambers. In some cases, House and Senate committees, or the majority party, have specific rules or guidance associated with commemoratives. These include requiring a minimum number of cosponsors before the bill can be considered by the relevant committee, prohibitions against commemorating sitting Members of Congress, and some restrictions on commemorating living persons. In each Congress, many bills are introduced to name a post office or other federal building in honor or in memory of locally esteemed individuals, deceased elected officials, fallen military personnel, and celebrities. To name a post office or other federal building after an individual an act of Congress is required. This section details congressional involvement in the naming of post offices and other federal buildings. Legislation naming post offices for persons has become a very common practice. Between the 110 th Congress (2007-2008) and the 114 th Congress (2015-2016), almost 18% of all statutes enacted were post office naming acts. Legislation has named post offices for a variety of persons, including locally esteemed individuals (e.g., Sister Ann Keefe), deceased elected officials (e.g., President Ronald Reagan), fallen Armed Forces personnel (e.g., Army Specialist Matthew Troy Morris), and celebrities (e.g., Bob Hope). Post office naming statutes commonly identify the address of the postal facility and provide for naming ("designating") the facility. Renaming a post office through legislation, however, does not result in the new name being etched or painted on the facade of the building or signs. Further, for operational and logistical reasons, a post office that has been dedicated or renamed will keep its original name and geographical designation within USPS's addressing system. Instead, to commemorate the designation, a small plaque noting the designee and designation is installed within the post office. Over the years, both the House and Senate have adopted policies and practices for considering and enacting post office naming bills. These policies and practices, sometimes expressed in "Dear Colleague" letters or committee rules, have varied from Congress to Congress. Currently, the House Oversight and Government Reform Committee has adopted a policy that the committee will not consider legislation designating post office buildings for living persons, expect: bills naming facilities after former U.S. Presidents or Vice Presidents, former Members of Congress over 70 years of age, former state or local elected officials over 70 years of age, former judges over 70 years of age, or a wounded veteran of any age. will not consider legislation designating post office buildings for a person for whom Congress already named a post office building. Postal facility naming bills should have the co-sponsorship of the entire state delegation wherein the post office is located. Members sponsoring postal facility naming bills must provide to the Committee documentation summarizing the designee's background. Postal facility naming bills will be considered by the Committee only after the required criteria are met in full. Similarly, the Senate Homeland Security and Governmental Affairs Committee (HSGAC) adopted practices for considering and reporting post office naming legislation. For example, under its current rules, HSGAC [will] not consider any legislation that would name a postal facility for a living person with the exception of bills naming facilities after former Presidents and Vice Presidents of the United States, former Members of Congress over 70 years of age, former State or local elected officials over 70 years of age, former judges over 70 years of age, or wounded veterans. Once post office naming legislation is reported by the House and Senate Committees, the legislation, if considered on the floor, tends to pass the House under suspension of the rules and the Senate via unanimous consent. For more information on naming post offices, including sample legislation, see CRS Report RS21562, Naming Post Offices Through Legislation , by [author name scrubbed]. Bills to name other federal buildings or facilities may be considered and reported in any committee, typically in relation to the agencies under each committee's jurisdiction. Legislation naming a veterans medical facility, for example, would normally originate in the Veterans' Affairs (VA) committees in the House and the Senate. Legislation naming courthouses—which are constructed and maintained by the General Services Administration (GSA)—is considered by the committees with jurisdiction over GSA, the House Transportation and Infrastructure Committee (T&I) and the Senate Environment and Public Works Committee (EPW). Historically, the large majority of nonpostal facilities are named through legislation originating in these four committees: VA and T&I in the House, and VA and EPW in the Senate. Occasionally, legislation is introduced to name buildings held by other agencies, such as National Aeronautical and Space Administration (NASA) training facilities. NASA is under the jurisdiction of the Science, Space and Technology Committee in the House (SST) and the Commerce, Science, and Transportation Committee in the Senate (CST), so naming legislation for NASA facilities is considered by these committees. Committees vary as to whether they have specific rules regarding the introduction of naming legislation. Some have written naming rules. In the 115 th Congress, for example, the Senate and House Veterans' Affairs committees have adopted identical language in their committee rules that identifies specific criteria for naming legislation. These rules prohibit naming a VA facility after an individual unless the individual is deceased and is a veteran who (i) was instrumental in the construction of the facility to be named, or (ii) was a recipient of the Medal of Honor, or, as determined by the chairman and ranking minority member, otherwise performed military service of an extraordinarily distinguished character; a Member of the U.S. House of Representatives or Senate who had a direct association with such facility; an Administrator of Veterans Affairs, a Secretary of Veterans Affairs, a Secretary of Defense or of a service branch, or a military or other federal civilian official of comparable or higher rank; or an individual who, as determined by the chairman and ranking minority member, performed outstanding service for veterans. In addition, each Member of the congressional delegation representing the state in which the designated facility is located must indicate, in writing, his or her support of the bill. Finally, the pertinent state department or chapter of each congressionally chartered veteran's organization with a national membership of at least 500,000 must indicate, in writing, its support of the bill. By contrast, the committees with jurisdiction over courthouse naming in the 115 th Congress—T&I in the House and EPW in the Senate—do not have identical written rules. Currently, T&I does not have a formal rule pertaining to naming legislation, although it did have written policies regarding naming legislation in previous Congresses. While no longer part of the committee's written rules, some or all of these requirements may still be in place—albeit informally—and enforced. Contacting the committee is the only way to determine what informal rules are in place, if any. EPW, on the other hand, has its requirements in committee rules. According to Rule 7(d) the committee may not name a building for any living person, except a former President or Vice President of the United States; a former Member of Congress over 70 years of age; a former Supreme Court Justice over 70 years of age; a federal judge who is fully retired and over 75 years of age; or a federal judge who has taken senior status and is over 75 years of age. As with T&I, neither SST in the House nor CST in the Senate has written rules pertaining to naming legislation. Each year, the U.S. Postal Service (USPS) issues commemorative stamps to celebrate persons, anniversaries, and historical and cultural phenomena. For example, USPS has issued stamps for Lena Horne, President John F. Kennedy, the Chinese Lunar New Year, and Star Trek. The USPS issues these stamps at its own statutory discretion and operates the program as a profit-making enterprise. Legislation to direct USPS to issue a stamp to commemorate persons, historical occurrences, and groups is occasionally introduced. CRS has been able to identify one instance when a special series commemorative stamp was issued pursuant to legislation. In 1947, Congress directed the Postmaster General to issue a special series of commemorative stamps in honor of Gold Star Mothers. Additionally, on selected occasions Congress has enacted legislation directing USPS to issue a semipostal stamp, which is a stamp sold at a premium to raise funds for a particular cause. For example, the Save the Vanishing Species Semipostal Stamp was created pursuant to H.R. 1454 , Multinational Species Conservation Funds Semipostal Stamp Act of 2010 . The House Committee on Oversight and Government Reform has a rule against considering legislation that proposes the issuance of commemorative stamps. Committee Rule 13 states, in part, "[t]he determination of the subject matter of commemorative stamps and new semi-postal issues is properly for consideration by the Postmaster General." Recently, the Postmaster General used his discretionary authority to create a semipostal stamp to help raise funds to fight Alzheimer's disease. For more information on commemorative postage stamps, see CRS Report RS22611, Common Questions About Postage and Stamps , by [author name scrubbed]. Commemorative coins are produced by the U.S. Mint pursuant to an act of Congress. These coins celebrate and honor American people, events, and institutions. The first commemorative coin was authorized in 1892 for the Columbia Exposition in Chicago. Since 1892, Congress has authorized more than 140 new commemorative coins. Between 1954 and 1981, no new commemorative coins were authorized. In 1982, Congress restarted the commemorative coin program when it authorized a commemorative half dollar to recognize George Washington's 250 th Birthday. In 1996, the Commemorative Coin Reform Act (CCRA) was enacted to (1) limit the maximum number of different coin programs minted per year; (2) limit the maximum number of coins minted per commemorative coin program; and (3) clarify the law with respect to the recovery of Mint expenses before surcharges are disbursed and to conditions of payment of surcharges to recipient groups. The CCRA restrictions took effect in 1998. In past Congresses, the House Committee on Financial Services has adopted a committee rule to prohibit (1) the scheduling of a subcommittee hearing on commemorative coin legislation unless it was "cosponsored by at least two-thirds of the Members of the House," or (2) reporting a "bill or measure authorizing commemorative coins which does not conform with the minting regulations under 31 U.S.C. § 5112." This rule was not adopted as part of the committee rules for the 115 th Congress. In the 115 th Congress, the Senate Banking, Housing, and Urban Affairs Committee rules require that a commemorative coin bill or resolution have at least 67 Senators as cosponsors before being considered by the committee. For more information on commemorative coins, see CRS In Focus IF10262, Commemorative Coins: An Overview , by [author name scrubbed], and CRS Report R44623, Commemorative Coins: Background, Legislative Process, and Issues for Congress , by [author name scrubbed]. Although Congress has approved legislation stipulating requirements for numerous other awards and decorations, there are no permanent statutory provisions specifically relating to the creation of Congressional Gold Medals. When a Congressional Gold Medal has been deemed appropriate, Congress has, by legislative action, provided for the creation of a medal on an ad hoc basis. In the 115 th Congress, Rule 28(a)(7) of the House Republican Conference, however, generally prohibits the Republican leader from scheduling any bill or resolution for consideration under suspension of the rules which directs the Secretary of the Treasury to strike a Congressional Gold Medal unless the recipient is a natural person; the recipient has performed an achievement that has an impact on American history and culture that is likely to be recognized as a major achievement in the recipient's field long after the achievement; the recipient has not have received a medal previously for the same or substantially the same achievement; the recipient is living or, if deceased, has not been deceased for less than 5 years or more than 25 years; and the achievements were performed in the recipient's field of endeavor, and represent either a lifetime of continuous superior achievements or a single achievement so significant that the recipient is recognized and acclaimed by others in the same field, as evidenced by the recipient having received the highest honors in the field. The rules of the House Republican Conference may also place an indirect restriction on the number of gold medals that may be awarded annually. Rule 28(a)(7) prohibits the Republican leader from scheduling, or requesting to have scheduled, any bill for consideration under suspension of the rules which "directs the Secretary of the Treasury to strike a Congressional Gold Medal ... [that causes] the total number of measures authorizing the striking of such medals in that Congress to substantially exceed the average number of such measures enacted in prior Congresses." A waiver on the restriction can be granted by the majority of the elected leadership of the conference. In addition, because the restriction only applies to bills considered under suspension of the rules, it appears that an otherwise-prohibited bill could be brought to the floor under an alternative procedure, such as a special rule. In the Senate, the Banking, Housing, and Urban Affairs Committee in the 115 th Congress requires that at least 67 Senators must cosponsor any Congressional Gold Medal bill before being considered by the committee. For more information on Congressional Gold Medals, see CRS Report R45101, Congressional Gold Medals: Background, Legislative Process, and Issues for Congress , by [author name scrubbed]. On many occasions, Congress has authorized the creation of monuments and memorials to commemorate historic figures, events, and movements. Whether the monument or memorial is intended to be built in the District of Columbia determines the process for placement, design, and approval of the commemorative work. In 1986, the Commemorative Works Act (CWA) was enacted to provide standards for the consideration and placement of monuments and memorials in areas administered by the National Park Service (NPS) and the General Services Administration (GSA) in the District of Columbia. The CWA provides that no "commemorative work may be established in the District of Columbia unless specifically authorized by Congress." Legislation proposing a new commemorative work in the District of Columbia generally consists of three main sections: a short title, definitions, and authorization for establishing the memorial. First, most authorizing legislation has a short title. This is the name of the authorizing legislation, which often includes the name of the memorial. Second, the definitions section contains terms used in further sections of the legislation. These can include "memorial," "association," "foundation," or other relevant terms. Finally, the authorization generally consists of four parts: 1. Authorization to establish a commemorative work. This designates a specific third party entity as the "sponsor group," which is the party responsible for the establishment of the new monument or memorial. 2. Compliance with the Commemorative Works Act. This applies the CWA to the monument or memorial or exempts the monument and memorial from the CWA or certain CWA provisions. 3. Prohibition of Federal Funds. This section generally prohibits the designated sponsor group from using federal funds on the monument or memorial. 4. Deposit of excess funds. This provision specifies the use of funds raised by the sponsor group in excess of those necessary for the design, construction, and dedication of the monument or memorial. Following introduction, CWA-related legislation is generally referred to the House Committee on Natural Resources and the Subcommittee on Public Lands and Environmental Policy, and the Senate Committee on Energy and Natural Resources. Either one or both of the committees (or subcommittees) will hold hearings on the proposal, inviting testimony from representatives of the National Park Service and the organization seeking approval for the monument or memorial. Important considerations will include historical importance of the commemorative work, estimated cost, and how private funds needed for construction are to be raised. Additionally, the National Capital Memorial Advisory Commission will often provide advice to the committees on the proposed memorial. For more information on the process after a commemorative work is authorized by Congress, see CRS Report R41658, Commemorative Works in the District of Columbia: Background and Practice , by [author name scrubbed]. For a list of commemorative works authorized since the enactment of the CWA in 1986, see CRS Report R43743, Monuments and Memorials Authorized and Completed Under the Commemorative Works Act in the District of Columbia , by [author name scrubbed]; and CRS Report R43744, Monuments and Memorials Authorized Under the Commemorative Works Act in the District of Columbia: Current Development of In-Progress and Lapsed Works , by [author name scrubbed]. Congressional involvement in monuments and memorials outside of the District of Columbia is not governed by the Commemorative Works Act. Instead, the process for creating the monument or memorial is determined based on whether the work will be placed on existing federal land. Recently, Congress has handled the creation of monuments and memorials outside the District of Columbia in two ways: by directly authorizing a new commemorative or by making an existing commemorative a "national" monument or memorial. New Commemorative . Periodically, Congress authorizes a new memorial outside of the District of Columbia. On these occasions, legislation is required to statutorily authorize a group—either federal or nonfederal—to design, construct, and maintain the memorial. For example, during the 107 th Congress (2001-2002), legislation was enacted to authorize a memorial at the crash site in Shanksville, PA, for "a national memorial to commemorate the passengers and crew of Flight 93 who, on September 11, 2001, courageously gave their lives thereby thwarting a planned attack on our Nation's Capital." During debate on the bill ( H.R. 3917 ), Representative William Shuster summarized the importance of Congress creating a national memorial and making it part of the National Park Service. As we debate this measure, in this most revered of halls, I cannot help but contemplate the possibility that Flight 93 was headed to a target here in the Nation's Capitol—quite possibly right here to the Capitol itself. We will, however, never know for sure where that doomed flight was headed. We will never know, because men and women, put love of country ahead of self preservation. These were not super heros [sic], but individuals just like you and me. Individuals with families and loved ones anxiously awaiting their return, who put aside their own desirers [sic] and stood up to combat terrorism and save countless lives.... The legislation before us today lays out a fair and balanced approach for construction of a memorial for these brave individuals. The legislation calls for the creation of the Flight 93 Advisory Commission which would be composed of representatives from the families of victims, the local community, the state of Pennsylvania and the United States Government. The Commission would then submit their recommendations to the Secretary of the Interior. In authorizing the Flight 93 Memorial, Congress also created an advisory committee to make recommendations to the Secretary of the Interior and Congress on the design, construction, and management of the memorial. Creation of such a commission is not uncommon and can aid government agencies with the planning and execution of commemorations. Official Recognition of Existing Commemoratives . Instead of authorizing the creation of a completely new memorial, Congress has also considered legislation to recognize existing works as national monuments or memorials. Enacting legislation to provide national recognition of a monument or memorial, but maintaining local operation and maintenance, generally requires no federal oversight or funds. For example, P.L. 113-132 designated a memorial in Riverside, CA, as the "Distinguished Flying Cross National Memorial." The memorial honors military aviators who have received the "Distinguished Flying Cross [which] is the oldest military award for aviation" with a national memorial, which does not already exist. Commemorative commissions are entities established to oversee the commemoration of a person or event. These commissions typically coordinate celebrations, scholarly events, public gatherings, and other activities, often to coincide with a milestone anniversary. For example, the Christopher Columbus Quincentenary Jubilee Commission was created "to prepare a comprehensive program for commemorating the quincentennial of the voyages of discovery of Christopher Columbus, and to plan, encourage, coordinate, and conduct observances and activities commemorating the historic events associated with those voyages." Bills creating commemorative commissions are introduced regularly in Congress. For example, in the 114 th Congress (2015-2016), multiple bills were introduced to establish commemorative commissions. Most of these bills, however, were not enacted. A statute establishing a commemorative commission generally includes the commission's mandate, provides a membership and appointment structure, outlines the commission's duties and powers, and sets a termination date. A variety of options are available for each of these organizational choices, and legislators can tailor the composition, organization, and working arrangements of a commission, based on the particular goals of Congress. As a result, the organizational structure and powers of individual commissions are often unique. In fulfilling their duties, most commemorative commissions have encouraged, worked closely with, and provided coordination for private groups, state and local governments, and other federal government entities taking part in the general commemoration of the person or event. Because of these cooperative efforts, federally created commissions are often only a portion of planned celebratory events. Therefore, federal funds appropriated to a commemorative commission are generally only a portion of the total funding ultimately expended nationwide for commemorative activities and events. Commemorative commissions have been funded in two ways: through appropriations or through solicitation of nonfederal money. At times, commissions are authorized both for appropriations and to fundraise or accept donations. In addition, some commemorative commissions are not provided with explicit authorization to solicit funds or accept donations. Commissions without the statutory authority to solicit funds or accept donations are generally prohibited from engaging in those activities. For more information on commemorative commissions, see CRS Report R41425, Commemorative Commissions: Overview, Structure, and Funding , by [author name scrubbed]. As discussed above in the section " House Ban on Commemorative Legislation ," House Rule XII, clause 5 prohibits the introduction or consideration of commemorative legislation that includes a "remembrance, celebration or recognition for any purpose through the designation of a specified period of time." Additionally, House Republican Conference rules, as well as House Oversight and Government Reform Committee rules, restrict the scheduling of such bills under suspension of the rules in the House. Consequently, the number of commemorative observances and days designated by bills, concurrent resolutions, joint resolutions, and House resolutions is small. The House prohibition on commemorative observances and days, however, does not preclude the Senate from using Senate measures to honor individuals, groups, and events. In the past, the Senate Judiciary Committee has had unpublished guidelines on the consideration of commemorative legislation. These guidelines were not officially part of the committee's rules and may not be currently applicable. Past guidance restricted consideration of commemorative legislation without a minimum number of bipartisan cosponsors and prohibited commemoration of specific categories. For more information on commemorative observances and days, see CRS Report R44431, Commemorative Days, Weeks, and Months: Background and Current Practice , by [author name scrubbed] and [author name scrubbed]. The United States has established 11 permanent federal holidays. They are, in the order they appear in the calendar: New Year's Day, Martin Luther King Jr.'s Birthday, Inauguration Day (every four years following a presidential election), George Washington's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day. Although frequently called public or national days, these celebrations are only legally applicable to federal employees and the District of Columbia, as the states individually decide their own legal holidays. To create a new federal holiday, legislation is required. In recent Congresses, legislation has been introduced to create holidays such as "Cesar E. Chavez Day," or to formally establish Election Day as such. Recent legislation to create a new federal holiday has suggested adding the day to the list of holidays at 5 U.S.C. §6103. For more information on federal holidays, see CRS Report R41990, Federal Holidays: Evolution and Current Practices , by [author name scrubbed]. On many occasions, Congress has requested that the President issue a proclamation recognizing an event or individual. Usually associated with the creation of a patriotic and national observance, statutory language requests that the President issue a proclamation each year to commemorate an event or group. For example, the National Pearl Harbor Remembrance Day statute requests that the President issue a yearly proclamation "calling on ... the people of the United States to observe National Pearl Harbor Remembrance Day with appropriate ceremonies and activities.... " Commemorative proclamations can also be issued by Presidents without any congressional action, and have been regularly issued throughout American history. Since 1789, when President George Washington issued the first proclamation declaring November 26 of that year a National Day of Thanksgiving, there have been hundreds of such designations. In addition to the legislative options for commemoration listed above, several nonlegislative options exist to commemorate individuals, groups, and events. These include certificates of recognition, floor speeches, and the purchasing of American flags. Certificates of Recognition are "awards" given by individual Member offices to constituents or groups to acknowledge accomplishments. Members are generally free to create and distribute certificates of recognition to individuals or groups to constituents. In the House, official funds can be used for the creation and distribution of certificates that recognize "a person who has achieved some public distinction" provided that the certificates comply with Franking Regulations and do not contain political or partisan references, solicit support of a Member's position on an issue, or advertise or endorse benefits not available to all constituents. Additionally, the House Ethics Manual reminds Members that all constituents are to be treated equally, regardless of "political support, party affiliation, or campaign contributions ..." when deciding to provide assistance to constituents. This would likely extend to the sending of certificates of recognition as well. In the Senate, the Standing Orders of the Senate place restrictions on reimbursable expenses payable from a Senator's Official Office Account. S.Res. 294 (96 th Congress) and S.Res. 176 (104 th Congress) specifically prohibit the use of official funds for "expenses incurred for the purchase of holiday greeting cards, flowers, trophies, awards, and certificates " (emphasis added). Further, pursuant to 39 U.S.C. §3210(a)(3)(F), the Senate Ethics Manual provides guidance that "[m]ail expressing congratulations to a person who achieved some public distinction may be franked only when the occasion involves a public distinction, rather than a personal distinction." Many Members have honored individuals and groups of constituents by giving a floor speech, and then sending copies of the Congressional Record to the individual or group that was honored. This activity can include a single Member or a group of Members that want to jointly honor constituent(s) either with a group of special order speeches or a series of individual—perhaps one minute—speeches. To inquire about floor time for a commemorative speech, Members may contact their party's leadership. In 1937, a Member of Congress made the first request to fly a U.S. flag over the U.S. Capitol building. Since that time, the Architect of the Capitol (AOC) has managed the flag program for the House and Senate. Generally, U.S. flags flown over the Capitol can be purchased by a constituent through his or her Representative's or Senator's offices. In both the House and Senate, the Member office collects flag requests from constituents and facilitates the purchase of flags from the House or Senate office supply store and coordinates with the Architect of the Capitol for the flying of flags over the Capitol building. For more information on the Architect of the Capitol's flag program, see http://www.aoc.gov/trades-and-areas-practice/capitol-flag-program . Members may obtain flags from the Office Supply Service (OSS). "Initially, the costs of the flags will be charged to the [Member Representational Allowance] MRA. "Once payment for a flag is received by the Member office, the office may submit the check to OSS. OSS will credit the MRA. If a request is made to have a U.S. flag flown over the Capitol, an additional flag flying fee must be paid by the individual purchasing the flag." Additionally, Members may use official funds to pay for a flag flown over the Capitol that will be used for an official gift. For more information on the House of Representatives flag program, see https://housenet.house.gov/campus/service-providers/aoc-flag-office. Senators may obtain flags from the Senate Stationary Room. Senators collect the cost of the flag, shipping fees, and flag flying and certification fees from the constituent, obtain the flag from the stationary room, and then work with the Packaging and Flags division of the Printing, Graphics, and Direct Mail (PG&DM) office to arrange for the flag to be flown over the Capitol. Additionally, pursuant to S.Res. 294 (96 th Congress), "Senate offices can use official funds to purchase flags. The legislation limits the groups to which a gift of a flag may be made to public organizations only, such as churches, schools, and patriotic service groups." For more information on the Senate flag program, see http://webster.senate.gov/pdgm/flag-packaging-services . | Since its inception, Congress has used commemorative legislation to express public gratitude for distinguished contributions; dramatize the virtues of individuals, groups, and causes; and perpetuate the remembrance of significant events. During the past two centuries, commemoratives have become an integral part of the American political tradition. They have been used to authorize the minting of commemorative coins and Congressional Gold Medals; fund monuments and memorials; create federal holidays; establish commissions to celebrate important anniversaries; and name public works, scholarships, endowments, fellowships, and historic sites. Current congressional practice for commemoratives includes a House Rule (Rule XII, clause 5, initially adopted during the 104th Congress [1995-1996]) that precludes the introduction or consideration of legislation that commemorates a "remembrance, celebration, or recognition for any purpose through the designation of a specified period of time." Such a rule does not exist in the Senate. This House Rule, together with the passage of more restrictive laws, rules, and procedures governing the enactment of several other types of commemoratives, has substantially reduced the time Congress spends considering and adopting such measures. This report summarizes the evolution of commemorative legislation as well as the laws, rules, and procedures that have been adopted to control the types of commemoratives considered and enacted. Included in the discussion of commemorative options for Congress are those that require legislation, such as naming federal buildings, including post offices and other federal structures; postage stamps; commemorative coins; Congressional Gold Medals; monuments and memorials, both in the District of Columbia and elsewhere; commemorative commissions; commemorative observances; federal holidays; and requesting presidential proclamations. Also included are commemorative options that do not require legislation. These include certificates of recognition; floor speeches; and flags flown over the U.S. Capitol. |
Hurricane Katrina struck Florida and the Gulf Coast states in the last days of August 2005, followed within weeks by Hurricanes Rita and Wilma. These disasters will long be remembered for disrupting families, changing and ending lives, and forcing Americans to rethink vulnerability and risk assumptions. In addition to these impacts, the hurricanes served as catalysts for significant changes in federal policy and the organization of responsible federal entities, notably within the Department of Homeland Security (DHS). Most of those changes were included in Title VI of the DHS appropriations legislation for FY2007. Among other provisions, Title VI, officially titled the "Post-Katrina Emergency Management Reform Act of 2006" (hereafter referred to as the Post-Katrina Act), established new leadership positions and position requirements within the Federal Emergency Management Agency (FEMA), brought new missions into FEMA and restored some that had previously been removed, and enhanced the agency's authority by directing the FEMA Administrator to undertake a broad range of activities before and after disasters occur. The Post-Katrina Act contains provisions that set out new law, amend the Homeland Security Act (HSA), and modify the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford Act). In addition to the Post-Katrina Act, Congress enacted five other statutes that have long-term implications for the administration of federal emergency policies. These include: Sections of P.L. 109-347 ( H.R. 4954 ), the Security and Accountability for Every Port Act of 2005, known as the SAFE Port Act; P.L. 109-308 ( H.R. 3858 ), the Pets Evacuation and Transportation Standards Act of 2006; P.L. 109-63 ( H.R. 3650 ), the Federal Judiciary Emergency Special Sessions Act of 2005; P.L. 109-67 ( H.R. 3668 ), the Student Grant Hurricane and Disaster Relief Act; and Sections of P.L. 109-364 ( H.R. 5122 ), the John Warner National Defense Authorization Act for Fiscal Year 2007. Through these enactments the 109 th Congress acted on findings and conclusions reached by House and Senate investigators, White House staff, offices of federal Inspectors General (especially those published by the DHS office) and the Government Accountability Office (GAO), among others, who evaluated the consequences of and response to Hurricane Katrina. The investigators and their studies presented findings on major shortcomings, and most urged a reconsideration of existing policies and practices. This CRS report summarizes information on the emergency management modifications adopted by Congress in response to the widespread calls for change. This report summarizes provisions from legislation enacted by the 109 th Congress with regard to federal emergency management authorities but does not cover all legislation enacted in response to Hurricanes Katrina, Rita, and Wilma. Information on legislation that provided funds, extended benefits, or authorized temporary waivers of statutory or administrative requirements solely for the victims of Hurricane Katrina or other specific disasters is available elsewhere. The focus here is on far-reaching and potentially permanent change in federal approaches to emergency management. Also, the emergency communications provisions in the Post-Katrina Act (Subtitle D, cited as the "21 st Century Communications Act of 2006") and the bioterrorism legislation enacted in the closing day of the 109 th Congress are not summarized in this report. The content of this report is limited to congressional action. The Bush Administration has taken steps since Hurricane Katrina to revise practices and policies. For example, the framework that guides federal agency activities after a major disaster, the National Response Plan , is under review. Preparation for other hazards, notably a pandemic influenza outbreak, continues. Officials, and their leadership duties, have been reconsidered and replaced or reassigned. This report does not reference such administrative actions. This CRS report is not analytical; its sole purpose is to summarize selected provisions of legislation enacted during the 109 th and the 110 th Congresses. In order to provide some context, the report does include background information on the relevant policy areas. This report comprises ten sections, as follows: the location and status of FEMA and the agency's authorities; the capabilities, responsibilities, and requirements associated with leadership positions; modifications to the statutory provisions relevant to the workforce charged with implementing emergency management policies; changes in national preparedness system components and requirements (those not specifically included in FEMA's mission); new emergency management education and training requirements; amendments to the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford Act) that provide additional or modified assistance authority to the President; changes in procedures governing federal contracting and procurement; oversight and review requirements that are expected to reduce fraud and waste practices in emergency response; requirements for the production of reports and guidelines; and miscellaneous provisions. Since 1979, when the agency was first established, FEMA has been charged with carrying out activities that enable the federal, state, and local governments to address a broad spectrum of emergency management functions. In carrying out its mission, FEMA has (1) funded and coordinated emergency preparedness activities, (2) provided and coordinated immediate federal response to save lives and property, (3) funded the reconstruction of damaged homes and infrastructure to help stricken families and communities recover, and (4) supported hazard mitigation activities to ensure that future disasters do not recur, or are less destructive in the future. These four elements of preparedness, response, recovery, and hazard mitigation constitute what has been generally referred to as the comprehensive emergency management (CEM) system. As a small independent agency from 1979 through 2000, FEMA exercised responsibility for federal implementation of the CEM concept. For part of that time, from 1993 through 2000, agency officials also used those concepts to organize the agency. Beginning in the spring of 2001 (before the September terrorist attacks), the Bush Administration reorganized FEMA reportedly to take "the agency in a new direction by refocusing its efforts on civil defense and counterterrorism." After the terrorist attacks, through enactment of the Homeland Security Act of 2002 (HSA), the 107 th Congress and the Bush Administration continued the reorganization of the agency by divesting it of certain CEM responsibilities. Of particular relevance to this examination, the HSA transferred emergency preparedness functions related to terrorism from FEMA to the Border and Transportation Security (BTS) Directorate. The reassignment of certain CEM responsibilities, and concomitant organizational changes, continued in 2005, both before and after Hurricane Katrina. Pursuant to the HSA, which authorizes the Secretary to reorganize most parts of the department, Secretary Chertoff initiated what he called the Second Stage Review, or 2SR initiative, in the winter of 2005. After roughly six months, Secretary Chertoff recommended, and Congress approved, the division of responsibility for CEM functions. Since October 1, 2005, CEM functions have been divided between two components of the department—FEMA and the new Preparedness Directorate (PD). The FEMA Director, who also held the title of Under Secretary for Federal Emergency Management, has reported directly to the Secretary and has overseen three divisions (Response, Mitigation, and Recovery), ten regional offices, and numerous other components. Emergency preparedness functions have been vested in PD, which has been headed by an under secretary who has reported to the Secretary. Major components in this directorate have included the Assistant Secretary of Homeland Security for Infrastructure Protection; the Chief Medical Officer of DHS; the Office of Grants and Training; the U.S. Fire Administration; the Office of the National Capital Region Coordination; the Center for Faith-Based and Community Initiatives; and the Office of Cyber and Telecommunications, which includes the National Communications System and the National Cybersecurity Division. Of note, however, is the exclusion of one preparedness function from the PD portfolio. FEMA has continued to exercise a limited role in coordinating and guiding the efforts of federal agencies to prepare, maintain, and exercise contingency plans to ensure that essential government functions continue after catastrophes. In examining the lessons learned from Hurricane Katrina, the 109 th Congress considered this dynamic history of functional and organizational changes. It appears that Congress concluded that while the HSA vested responsibilities of leading and supporting a national, risk-based CEM program in FEMA, the assignment of authorities and the organization of the agency indicated otherwise. Some contended that, as a result of these mission and organizational shifts, FEMA's capabilities deteriorated as functions, resources, and responsibilities moved to other DHS units. Others argued that an emphasis on terrorist-caused incidents within DHS dominated planning and allocation decisions and contributed to FEMA's diminished capabilities for all hazards. These findings led to congressional enactment of significant revisions to FEMA's structure and mission in the Post-Katrina Act, as summarized below. The Post-Katrina Act reorganizes DHS with a reconfigured FEMA (effective March 31, 2007) with consolidated emergency management functions, elevated status within the department, and enhanced organizational autonomy. The organization and many of the authorities and responsibilities assigned to FEMA under the act are summarized in this section of the report, except for authorities specific to preparedness activities. Many of those responsibilities are vested in the President (and are to be carried out by the FEMA Administrator), so they are summarized in the " National Preparedness " section of this report. Under the Post-Katrina Act, the new FEMA will comprise the Preparedness Directorate and all of the functions of the existing FEMA. This includes, for each of the entities, personnel, assets, components, authorities, grant programs, liabilities, and the functions of their respective Under Secretaries. Several entities from the Preparedness Directorate, noted below in the " Other DHS Entities " sub-section, are excepted from transfer to the newly configured FEMA. In addition, the act provides for 10 regional offices with specified responsibilities and features. It also provides, in statute, for the National Integration Center, specifying the center's responsibilities and role with regard to incident management. In addition to these existing elements, the new FEMA will include two positions and one entity, both newly established by the Post-Katrina Act—a Disability Coordinator, a Small State and Rural Advocate, and a National Advisory Council. At the regional level, the Post-Katrina Act provides for the creation of Regional Advisory Councils, Regional Office Strike Teams, and regional Emergency Communications Coordination Working Groups. The act also permits the Administrator to establish Hurricane Katrina and Hurricane Rita recovery offices in Mississippi, Louisiana, Alabama, and Texas. In addition to the aggregation of these offices and entities into FEMA, the Post-Katrina Act gives FEMA more organizational autonomy than it has had since becoming part of DHS. Like the U.S. Coast Guard and the U.S. Secret Service, FEMA is now classified as a distinct entity within DHS. In addition, the agency is no longer subject to the Secretary's broad reorganization authority under HSA. The act authorizes the FEMA Administrator, as of March 31, 2007, to provide emergency-management-related recommendations directly to Congress after informing the Secretary. (Additional provisions strengthening FEMA's organizational autonomy, related to funding and functions, are noted in the next section.) As of March 31, 2007, the Post-Katrina Act will restore to FEMA the responsibility to lead and support efforts to reduce the loss of life and property and protect the nation from all hazards through a risk-based system that focuses on expanded CEM components. The statute also adds a fifth component—protection—to the four CEM components, but does not define the term. The act transfers to the new FEMA all functions previously administered by FEMA, specifically emergency alert systems, continuity of operations, and continuity of government activities, as well as those functions administered by the Preparedness Directorate, as they were administered, effective June 1, 2006. The legislation exempts from the transfer the functions of four Preparedness Directorate units—Office of Infrastructure Protection, National Communications System, National Cybersecurity Division, and the Office of the Chief Medical Officer. In addition, the Post-Katrina Act includes activities and responsibilities for FEMA beyond those first included in the HSA in 2002. The act also explicitly prohibits substantial or significant reductions, by the Secretary, of the authorities, responsibilities, or functions of FEMA, or FEMA's capability to perform them. Furthermore, the Post-Katrina Act prohibits most transfers of FEMA assets, functions, or missions to other parts of DHS. With regard to reprogramming or transfer of funds, the act requires that the Secretary comply with any applicable appropriations act provisions. Among the specific activities given to FEMA in the Post-Katrina Act are the following: leading the nation's CEM efforts (including protection) for all hazards, including catastrophic incidents; partnering with non-federal entities to build a national emergency management system; developing federal response capabilities; integrating FEMA's CEM responsibilities; building robust regional offices to address regional priorities; using DHS resources under the Secretary's leadership; building non-federal emergency management capabilities, including those involving communications; and developing and coordinating the implementation of a risk-based all hazards preparedness strategy that addresses the unique needs of certain incidents. The Post-Katrina Act added 13 responsibilities to those originally set out for FEMA in the HSA, including ensuring first responder effectiveness, supervising grants, administering and implementing the National Response Plan, preparing and implementing federal continuity of government and operations plans (see " Continuity of Government and Operations " below), and maintaining and operating the response coordination center, among others. While implementation of these activities and responsibilities is to build "common capabilities" that will enable the agency to address all hazards through a risk-based management system, the statute also calls for the development of "unique capabilities" that would be needed for events that pose the greatest risk to the nation. In addition to the general responsibilities noted above, the Post-Katrina Act places new authorities intended to address administrative problems identified in the response to Hurricane Katrina within FEMA. The FEMA Administrator is charged with developing a logistics system that will enable officials to track the location of goods and services throughout the transfer process from FEMA to the affected state. The Administrator must also establish a pre-positioned equipment program in at least eleven locations to support state, local, and tribal government disaster assistance operations. To support agency activities, the Administrator must update and improve FEMA's information technology systems to achieve objectives specified in the statute. Also, the Administrator is authorized to disclose information to law enforcement agencies on individuals sheltered or evacuated in order to identify illegal conduct or address public safety concerns, including those involving sex offender notification requirements. The disclosure of this information must be consistent with Privacy Act requirements. The FEMA Administrator has been given new authority that will specifically facilitate disaster response operations. He or she is charged with reaching a formal understanding with non-federal officials on standards for the credentialing of personnel and "typing of resources" needed for the response to a disaster. In addition, the Post-Katrina Act seeks to bolster several of the response teams and related resources through the legislation. Emergency Response Teams are recognized and called on to meet target capability levels, be properly staffed, and in a state of readiness. The Post-Katrina Act also formally authorizes the Urban Search and Rescue teams and sets an authorized level of funding for the system. The act also creates the Metropolitan Medical Response Grant Program and establishes an authorized funding level for the program. A significant addition to the Stafford Act mission in the Post-Katrina Act is the focus on the reunification of families following an event in the form of the National Emergency Family Registry and Locator System and the Child Locator Center. The Post-Katrina Act calls for the establishment of a family registry and locator system within 180 days after enactment. This would be a voluntary system that would be established by FEMA, in collaboration with the Department of Justice, the National Center for Missing and Exploited Children, the Department of Health and Human Services (HHS), and the American Red Cross. It would be accessible by Internet and a toll-free number and would assist family members and law enforcement in reuniting families. A memorandum of understanding of the working group is to be agreed upon within 90 days of enactment. The Post-Katrina Act also calls on the Administrator of FEMA to assemble a group of federal and non-governmental players to develop a recovery strategy that will summarize existing programs and assess their utility in the post-disaster environment and discuss key issues of funding and authorities in determining the best use of such programs in meeting unique disaster requirements. The strategy should also address rebuilding, particularly those considerations that will lead to more "disaster-resistant" construction and reconstruction. For requirements see the " Report and Guideline Development Schedule " section of this report. To enhance the steady recovery process for the huge event, the Post-Katrina Act also authorizes the establishment of recovery offices in Mississippi, Louisiana, Alabama, and Texas (a Florida office is already in place since the hurricanes of 2004). These offices are intended to encourage the delivery of necessary assistance in a timely and effective manner. The act calls for performance measures including public assistance worksheet completion rates and public assistance reimbursement times. The timing of when these offices will close is left to the discretion of the Director. The Post-Katrina Act also calls for a "Housing Strategy" separate from but related to the "Recovery Strategy" previously noted. The group membership developing this strategy will be similar to that of the housing strategy but will also include advocates for the disabled and their housing needs. This strategy should include a review of housing resources, including those departments and agencies with existing housing stock and also a compilation of housing resources available for disaster victims from governments and non-governmental entities. The strategy should also address the low income and special needs populations as well as housing group sites and the repair of rental housing in the affected area to increase the available stock. For requirements see the " Report and Guideline Development Schedule " section of this report. P.L. 109-295 mandates that the COOP and COG authorities of FEMA "as constituted on June 1, 2006," be transferred to the new agency. The law also requires that the FEMA Administrator prepare and implement "the plans and programs of the federal government for COOP, COG, and "continuity of plans" responsibilities. In addition to these legislative mandates that specifically refer to COOP and COG, the legislation also includes provisions that might arguably be related to or affect implementation of the COOP and COG requirements. For example, one of the four specific missions assigned to the new agency includes the requirement to "integrate the Agency's emergency preparedness ... responsibilities to confront effectively the challenges of a natural disaster, act of terrorism, or other man-made disaster." Also, the Disability Coordinator to be appointed by the FEMA Administrator will be required to interact with specified entities, including "other agencies of the federal government" on "the needs of individuals with disabilities in emergency planning requirements...." While not specifically linked to federal COOP and COG activities, these and other provisions in the legislation might require a reconsideration or evaluation of current procedures. The National Integration Center, established within FEMA, will be responsible for a range of duties concerning emergency preparedness capabilities. NIC is charged with the management and maintenance of both the National Incident Management System (NIMS) and the National Response Plan (NRP). In addition, NIC is responsible for the coordination of volunteer activity with the Corporation for National and Community Service and coordination with state, local and tribal governments concerning the deployment of first responders to disaster sites. The NIC is also charged with the revising and releasing of the Catastrophic Incident Annex and the Catastrophic Incident Supplement to the NRP. The Post-Katrina Act also requires that ten regional offices operate within FEMA, each to be headed by a Regional Administrator. Each Administrator must do the following: work with non-federal partners in the region to ensure that the five CEM components are coordinated and integrated, develop regional capabilities for a "national catastrophic response system," coordinate the establishment of emergency communications capabilities, staff and oversee regional strike teams that comprise the initial response efforts for a disaster and must meet specified criteria and perform specified duties, designate one person responsible for developing regional plans that support the National Response Plan, foster the development of mutual aid agreements in the region, identify gaps in the region concerning the response to individuals with special needs, and maintain and operate a Regional Response Coordination Center. Each Regional Administrator must establish a Regional Advisory Council to provide advice on emergency management issues, identify challenges to any CEM component in the region, and identify gaps or deficiencies. Also, the FEMA Administrator must report to Congress on additional statutory authorities needed to enhance the capabilities of regional strike teams. The statute also establishes area offices for the Pacific and Caribbean jurisdictions as well as for Alaska in the appropriate regional offices. The FEMA Administrator also is responsible for the selection of a Disability Coordinator. This selection is to be made following consultation with appropriate groups including disability interest groups as well as state, local and tribal groups. The Coordinator is charged with assessing the coordination of emergency management policies and practices with the needs of individuals with disabilities, including training, accessibility of entry (both physical and virtual), transportation, media outreach, and general coordination and dissemination of model best practices, including the area of evacuation planning. A related responsibility given to the Director concerns the establishment of a Remedial Action Management Program (RAMP) to be coordinated with both the National Council on Disability and the National Advisory Council. RAMP is to be used to analyze programs and generate after-action reports that are to be distributed to participants in both exercises and real-world events. The RAMP is also responsible for tracking remedial actions as well as long-term trend analysis. In addition, the Coordinator is to work with the FEMA Administrator on the development of guidelines to accommodate individuals with disabilities in emergency response facilities and communications capabilities. The Post-Katrina Act makes other changes to the DHS organization by rearranging certain existing offices, establishing others, and modifying responsibilities. The Preparedness Directorate, with the exception of certain offices, will be transferred to the reconfigured FEMA. The offices now in the Preparedness Directorate that will not be transferred to FEMA include the Office of Infrastructure Protection, the National Communications System, the National Cybersecurity Division, and the Office of the Chief Medical Officer (CMO). The Post-Katrina Act does not indicate whether these four units will constitute a new organizational unit, will become stand-alone offices reporting to the Secretary, or will be subsumed by another organizational entity. The office headed by the Assistant Secretary for Cyber Security and Telecommunications was administratively created by Secretary Chertoff as part of the 2005 DHS reorganization. Entities within this office have included the National Communications System and the National Cybersecurity Division. The Post-Katrina Act establishes a similarly titled office, Assistant Secretary for Cybersecurity and Communications, in statute. The statute does not specify whether or not the National Communications System and National Cybersecurity Division are to be part of this office. The act does establish an Office of Emergency Communications whose director will report to the Assistant Secretary for Cybersecurity and Communications. The office of the CMO was also administratively created by Secretary Chertoff as part of the 2005 DHS reorganization. The Post-Katrina Act establishes the CMO in the department but it does not specify the organizational location of the office within DHS. The CMO will have the primary responsibility within the Department for medical issues related to natural disasters, acts of terrorism, and other man-made disasters. The National Infrastructure Simulation and Analysis Center (NISAC), established by the USA PATRIOT Act, was transferred to the Directorate for Information Analysis and Infrastructure Protection, the precursor to the Directorate of Preparedness, when DHS was established. With the relocation of the Preparedness Directorate to FEMA, the Post-Katrina Act has established NISAC within DHS, without further specification of its organizational location. The act also expands NISAC's authority to include "support for activities related to ... a natural disaster, act of terrorism, or other man-made disaster," and it mandates that federal entities with critical infrastructure responsibilities under Homeland Security Presidential Directive 7 establish a formal relationship with NISAC. The National Operations Center (NOC) is part of the Office of Operations Coordination, an office within DHS separate from FEMA. The Post-Katrina Act establishes NOC, in statute, as "the principal operations center for the Department," but does not specify the organizational location of the center within DHS. The Post-Katrina Act also provides for two other entities not specifically located in DHS. The President is directed to establish a National Exercise Simulation Center, with no specified organizational location. In addition, the act establishes an Emergency Communications Preparedness Center. The center is to be jointly operated by DHS, the Federal Communications Commission, the Department of Defense, the Department of Commerce, the Department of Justice, and "the heads of other Federal departments and agencies or their designees." The new statute also directs the Administrator to establish two emergency locator and reunification services: the National Emergency Child Locator Center, to be located within the National Center for Missing and Exploited Children, and the National Emergency Family Registry and Locator System, at an unspecified organizational location. Most of the organizational developments described above become effective as of March 31, 2007. Others, including the following, became effective upon the enactment of the Post-Katrina Act on October 4, 2006: the increase in organizational autonomy for FEMA; the establishment of a National Integration Center; the establishment of a National Infrastructure Simulation and Analysis Center; the establishment of a Disability Coordinator; the establishment of a National Operations Center; the establishment of a Chief Medical Officer; and the designation of a Small State and Rural Advocate. It could be argued that a provision of the act also eliminated the position of Under Secretary for Preparedness at the time of enactment, but other provisions of the act, and of existing law, cast doubt on this interpretation. (See " Abolished Positions ," below.) Several dozen political appointees and career senior executives head the Preparedness Directorate and FEMA. Four leadership positions in these organizations have been established in statute: the Under Secretary for Federal Emergency Management (also known as the FEMA Director), the Under Secretary for Preparedness, the Assistant Secretary for Grants and Training, and the U.S. Fire Administrator. The provisions establishing these positions do not specify any qualifications that must be met by appointees. The new law abolishes certain statutory positions, establishes several new statutory positions, makes changes to some existing positions, and attaches qualifications to several top leadership positions. These developments are shown, in detail, in Table 1 , and are discussed below. The Post-Katrina Act abolishes the position of Under Secretary for Federal Emergency Management, as of March 31, 2007, and replaces it with the position of FEMA Administrator. It could be argued that the act also abolished the position of Under Secretary for Preparedness, upon the statute's enactment, on October 4, 2006, by striking a subsection of HSA that established the Under Secretary for Information Analysis and Infrastructure Protection (IAIP). This argument rests on an understanding of the evolution of the Under Secretary for IAIP into the Under Secretary for Preparedness. During the reorganizations of DHS undertaken by Secretary Chertoff in 2005 and 2006, the portfolio of the Under Secretary for IAIP was changed, and the position was renamed as Under Secretary for Preparedness. According to this argument, striking the provision establishing the underlying position—Under Secretary for IAIP—would eliminate the position into which it evolved, the Under Secretary for Preparedness. However, a provision of HSA, an appropriations act provision, and another provision of the Post-Katrina Act draw into question whether or not it was the intention of Congress to eliminate this position. The Under Secretary for IAIP was established as an advice and consent position by two provisions of HSA, and one of these is unaffected by the new law. Arguably the position continues to exist by virtue of this provision, even if the other provision is stricken. In addition, it could be argued that a provision of the Department of Homeland Security Appropriations Act for 2007, within which the Post-Katrina Act is nested, envisions a continuation of that office. It provides for "salaries and expenses of the immediate Office of the Under Secretary for Preparedness ...." Finally, the Post-Katrina Act charges the Under Secretary of Preparedness with taking "such actions as are necessary to provide for the orderly implementation of any amendment under" the subtitle reorganizing FEMA. If the position of Under Secretary for Preparedness had been eliminated upon enactment, it seemingly would not be possible to follow the dictates of this section. Under the Post-Katrina Act, the status of the Administrator position as head of the newly configured FEMA will be greater than the Under Secretary for Federal Emergency Management or the Under Secretary for Preparedness. Consequently, the agency will have greater status within DHS than it did prior to the act. Whereas the under secretaries have been compensated at Level III of the Executive Schedule, the Administrator's compensation will be at Level II, the deputy secretary level. In addition, the Administrator will report directly to the Secretary, rather than through another department official, such as the Deputy Secretary of DHS. The new statute also provides that the Administrator is to be "the principal advisor to the President, the Homeland Security Council, and the Secretary for all matters relating to emergency management in the United States," and he or she is to present, to these parties, the range of options when presenting such advice. The act also permits the President to designate the Administrator as a Cabinet member in the event of "natural disasters, acts of terror, or other man-made disasters." Individuals who are selected for the position of Administrator, who are to be appointed by the President, by and with the advice and consent of the Senate, must meet certain qualifications. (See " Qualifications ," below.) The Post-Katrina Act establishes not more than four deputy administrator positions to assist the Administrator, without specified responsibilities. Appointments to these positions are to be made by the President by and with the advice and consent of the Senate. The act also establishes, within FEMA, the positions of Disability Coordinator and National Advisory Council members, to which appointments are to be made by the Administrator. At the regional level, the act provides for the selection of Regional Advisory Council, Regional Office Strike Team, and Regional Emergency Communications Coordination Working Group members. The act also provides for the establishment of specified Gulf region recovery offices, each with an executive director appointed by the Administrator. In addition, the President is to designate, in FEMA, a Small State and Rural Advocate, newly established by the Post-Katrina Act. The Advocate is to participate in the disaster declaration process and assist small states in the preparation of their emergency or disaster requests, among other activities at the Administrator's discretion. The act also establishes a director of the newly created Office of Emergency Communications, but does not specify the appointing authority for the position. The Post-Katrina Act changes several positions that have already been administratively or statutorily established in DHS. FEMA Regional Administrators were first established when FEMA was created in 1978. The Post-Katrina Act amends HSA to establish 10 Regional Administrators who are to carry out specified responsibilities and to incorporate certain features into the regional offices. The Regional Administrators are to be appointed by the FEMA Administrator, and they must meet specified qualifications. (See " Qualifications ," below.) As previously noted, an Assistant Secretary for Cyber Security and Telecommunications position was administratively created by Secretary Chertoff as part of the 2005 DHS reorganization. The Post-Katrina Act establishes, in statute, a similarly titled Assistant Secretary for Cybersecurity and Communications, without specifying the appointing authority for this position. A Chief Medical Officer, also administratively created during the 2005 DHS reorganization, was established in statute as an advice and consent position upon enactment of the Post-Katrina Act. The act also provides that the U.S. Fire Administrator "shall have a rank equivalent to an assistant secretary of the Department." Some of the Post-Katrina Act provisions that establish positions specify qualifications that appointees must meet. Three of the provisions include qualifications related to the appointee's background and experience. Five provisions list geographic, professional, or other characteristics that must be considered when filling the positions. The person who serves as FEMA Administrator must now meet specific background and experience requirements. The Administrator is to be appointed by the President "from among individuals who have ... a demonstrated ability in and knowledge of emergency management and homeland security; and ... not less than 5 years of executive leadership and management experience in the public or private sector." The President's signing statement for the Post-Katrina Act regarding this requirement indicates a certain degree of contention, as the provision "purports to limit the qualifications of the pool of persons from whom the President may select the appointee in a manner that rules out a large portion of those persons best qualified by experience and knowledge to fill the office." The statement goes on to say that "The executive branch shall construe [the provision] in a manner consistent with the Appointments Clause of the Constitution." The appointee to the position of Chief Medical Officer will also be required to meet certain professional requirements. The new law stipulates that this individual "shall possess a demonstrated ability in and knowledge of medicine and public health." The provision establishing the Regional Administrators positions also sets out specific background and experience requirements. Regional Administrators are to be appointed by the Administrator "after consulting with State, local, and tribal government officials in the region." They are to be appointed "from among individuals who have a demonstrated ability in and knowledge of emergency management and homeland security.... [T]he Administrator [is to] consider the familiarity of an individual with the geographical area and demographic characteristics of the population" served by the office. The five positions that list geographic, professional, or other characteristics that must be considered when filling the positions are the Disability Coordinator, and members of the National Advisory Council, Regional Advisory Councils, Regional Office Strike Teams, and Regional Emergency Communications Coordination Working Groups. The specific requirements for these and other new positions set out in the statute are shown in Table 1 . The Post-Katrina Act includes various statutory authorities to enhance the management and capability of FEMA's workforce, some of which are arguably similar or parallel to federal policies in place long before Hurricane Katrina struck. Among other provisions, the statute directs the FEMA Administrator to develop a strategic plan on human capital for shaping the agency's workforce. The Post-Katrina Act also authorizes the Administrator to pay recruitment and retention bonuses to individuals in positions that are difficult to fill or for which the retention of an employee's considerable skills is essential and to provide for the professional development of employees by rotating them through various positions within DHS. Additionally, the act provides for the establishment of a Surge Capacity Force composed of individuals who will be deployed to respond to natural disasters, acts of terrorism, and other man-made disasters, including catastrophic incidents. These personnel authorities that enhance general federal personnel statutes principally result from the inadequacies in the number, deployment, and qualifications and training of FEMA employees that were exposed during the agency's response to the Hurricane Katrina and Rita disasters. In addition to these enhancements, new personnel or workforce authorities are summarized below. For information on homeland security education, training, and exercise programs, see the " Homeland Security Education Program " section of the report. The FEMA Administrator is to develop a strategic plan on human capital that will be used to shape and improve the agency's workforce. The plan must be submitted to the Senate Committee on Homeland Security and Governmental Affairs and those committees of the House of Representatives that the Speaker of the House determines are appropriate within six months of enactment. The plan must include three elements: an analysis of gaps in the workforce, plans to address the gaps in critical skills and competencies, and a discussion of FEMA's Surge Capacity Force. The analysis of workforce gaps will assess the following three matters. First, the critical skills and competencies that FEMA will need to support its mission and responsibilities and to effectively manage the agency over the next 10 years. Second, the skills and competencies that the workforce currently possesses and projected trends given expected retirements and other attrition, Third, the staffing levels for each category of employee, including gaps that must be addressed to ensure that FEMA's workforce continues to possess the critical skills and competencies needed. The strategic plan must also include the following four components: (1) goals and program objectives for recruiting and retaining employees including the use of recruitment and retention bonuses; (2) specific strategies and program objectives to develop, train, deploy, compensate, motivate, and retain employees; (3) specific strategies to recruit staff with experience from serving in multiple state agencies responsible for emergency management; and (4) specific strategies to develop, train, and coordinate and rapidly deploy a Surge Capacity Force. The plan of the Force must provide details on the number and qualifications or credentials of DHS and non-DHS employees serving in the Force; the training the members of the Force experienced the previous year; assessments as to whether the Force is able to perform its responsibilities in all disasters, including catastrophic incidents; and descriptions of additional authorities or resources needed to address Surge Capacity Force deficiencies. The strategic plan on human capital must be updated annually by May 1 of each year, 2007 through 2012, and submitted to the appropriate congressional committees. The Administrator's assessment, based on results-oriented performance measures, of the department's and agency's progress is to be included in the plan. The Administrator must ensure that appropriate career paths for the agency's employees are identified. The education, training, experience, and assignments required for employees to progress within FEMA must be included in the information that the Administrator is required to publish on the career paths. All employees must be provided with the opportunity to acquire the education, training, and experience, and as appropriate, participate in the Rotation Program (established under §622(a), discussed below) that will allow them to qualify for promotion. The policy that the Administrator is required to establish on assigning employees to positions must balance the needs of personnel to serve in positions that enhance their careers and those of the agency to have employees serve in a position for a period of time that is sufficient to carry out their duties and to be held responsible and accountable for actions taken. The FEMA Administrator is authorized to pay a bonus of up to 25% of basic pay to recruit individuals for positions that would otherwise be difficult to fill in the absence of such a payment. Bonuses will be paid in accordance with the strategic human capital plan. The Administrator is to determine the amount of the bonus which is not part of basic pay and will be paid in a lump sum. An employee receiving a bonus must enter into a written service agreement with FEMA that must include the required period of service to be completed, the conditions under which the agreement may be terminated before completion of the service period, and the effect of the termination. Individuals in any of three specified types of positions [those appointed by the President and confirmed by the Senate, those in the Senior Executive Service as noncareer appointees, or those excepted from the competitive service on the basis of being confidential, policy-determining, policy-making, or policy-advocating] are not eligible to receive recruitment bonuses. The authority to pay bonuses ends five years after the enactment of Chapter 101. FEMA must submit annual reports to the Senate Committee on Governmental Affairs and those committees of the House of Representatives that the Speaker of the House determines appropriate on the operation of the bonus program for each of the five years that it will be in effect. Each report is to include the number and dollar amount of bonuses paid to individuals holding positions with each pay grade, pay level, or other pay classification, and a determination of the extent to which the bonuses fulfilled their purpose. The FEMA Administrator is authorized to pay a bonus of up to 25% of basic pay to retain an employee whose qualifications or a special need of FEMA makes retention of that person essential. The bonus will be paid on a case-by-case basis and the Administrator must determine that the employee would be likely to leave federal service or take a different position in the federal service in the absence of such a payment. The Administrator is to determine the amount of the bonus, which cannot be part of basic pay and is to be paid in a lump sum. A retention bonus may not be based on any period of service which is the basis for a recruitment bonus. An employee receiving a bonus must enter into a written service agreement with FEMA that includes the following provisions: the required period of service to be completed, the conditions under which the agreement may be terminated before completion of the service period, and, the effect of the termination. Individuals in three types of positions [those appointed by the President and confirmed by the Senate, those in the Senior Executive Service as noncareer appointees, or those excepted from the competitive service on the basis of being confidential, policy-determining, policy-making, or policy-advocating] are not eligible to receive retention bonuses. The authority to pay bonuses ends five years after enactment. The Office of Personnel Management must submit annual reports to the Senate Committee on Homeland Security and Governmental Affairs and those committees of the House of Representatives that the Speaker of the House determines appropriate on the operation of the bonus program for each of the five years that it will be in effect. Each report is to include the number and dollar amount of bonuses paid to individuals holding positions with each pay grade, pay level, or other pay classification, and a determination of the extent to which the bonuses fulfilled their purpose. The Administrator must prepare a report on vacant positions within FEMA and submit, within three months of enactment, the report to the Senate Committee on Homeland Security and Governmental Affairs and those committees of the House of Representatives that the Speaker of the House determines appropriate. The report must include data on vacancies by category of positions, the number of applicants for positions which have been announced publicly, the length of time the positions have been vacant, and the time required to fill vacancies. It will also include a plan for reducing both the time required to fill positions and the number of vacant positions, or those anticipated to be vacant. Updates of the report must be submitted to the committees every three months over the next five years and include the Administrator's assessment of FEMA's progress in filling vacant positions. The Secretary is authorized to establish a program that will rotate employees through various DHS positions. The program is to be in accordance with the department's Human Capital Strategic Plan and established within 180 days after enactment. Under the program, DHS employees in mid-level and senior-level positions will have the opportunity to broaden their knowledge by being exposed to various components of the department. The program is to build professional relationships and contacts throughout the department, provide employees with professional opportunities, incorporate the department's human capital strategic plans and activities, address critical deficiencies, and describe efforts to recruit and retain employees and build succession planning. Rotational programs already in effect are to be incorporated, not replaced, by this new initiative. The program will apply best practices, including those suggested by the Chief Human Capital Officers Council and will be administered by the Chief Human Capital Officer (CHCO) of DHS who is to exercise the following eight responsibilities: oversee the programs' establishment and implementation; establish a framework that supports the program's goals and promotes rotations across disciplines; establish eligibility requirements and select participants; establish incentives, including promotions and employment preferences, to encourage employees to participate; ensure that the program provides professional education and training; ensure that the program develops employees who are qualified and capable of being future leaders with broad experience within DHS; provide for greater interaction among DHS employees; and coordinate this initiative with rotational programs already operational in the department. Employees participating in the program are to retain their allowances, privileges, rights, seniority, and other benefits. The Secretary must submit a report on the program's implementation to the Senate Committee on Homeland Security and Governmental Affairs and those committees of the House of Representatives that the Speaker of the House determines appropriate within 180 days after its establishment. The report is to describe the program, including its use in succession planning and leadership development, and document the number of participants. The Administrator is directed to prepare a plan to establish and implement a Surge Capacity Force to be deployed to disaster sites, including those classified as catastrophic incidents. The plan must be submitted to the Senate Committee on Homeland Security and Governmental Affairs and those committees of the House of Representatives that the Speaker of the House determines appropriate within six months of enactment. Generally, individuals in the Force will be trained and deployed under Stafford Act authority. If the Administrator determines, however, that these existing authorities are inadequate, he or she will report to Congress on additional and necessary authorities. DHS employees (who are not employees of FEMA) and employees of other federal departments and agencies will be designated by the Secretary to serve on the Force. Individuals capable of deploying rapidly and efficiently to disasters, and others who are full-time employees who are highly trained and credentialed to lead and manage, must be represented on the Force in sufficient numbers. Personnel serving on the Force must receive appropriate and continuous training on FEMA's programs and policies. Force members are not counted against any personnel ceiling applicable to FEMA and may receive travel expenses (including per diem in lieu of subsistence, at rates authorized for other civilian federal employees) when participating in training related to their service on the Force. As soon as practicable after enactment, the Administrator is to develop and implement the procedures for designating employees who are DHS employees (but not employees of FEMA) and non-DHS federal employees to serve on the Force, along with other elements of the plan needed to establish that portion of the Force consisting of these individuals. As enacted by Congress in November 2002, the HSA directed the Secretary of Homeland Security, through the FEMA Director, to improve the Nation's emergency preparedness and response capabilities. Two of the responsibilities set out in the statute were (1) "building a comprehensive national incident management system" to enable federal and non-federal agencies to respond to emergencies, and (2) "consolidating existing federal government emergency response plans into a single, coordinated national response plan." Within months of the enactment of the HSA, President Bush issued Homeland Security Presidential Directive-5 (HSPD-5), which required the DHS Secretary to develop and administer a National Incident Management System (NIMS) and a National Response Plan (NRP). Soon thereafter, the President issued HSPD-8 as a "companion" to HSPD-5 in order to identify the procedures to be followed by federal agencies in preparing for a terrorist attack or significant disaster. HSPD-8 directed the Secretary to develop a national preparedness goal (NPG) applicable to catastrophes regardless of cause ("all-hazards") and to establish readiness priorities and targets that balance the risk of the threats against the resources needed to prevent or respond to catastrophic events. The directive also required that the NPG include readiness metrics and support components that would facilitate assessment of the preparedness efforts for "major events, especially those involving acts of terrorism." Taken together, the requirements for these documents, plans, and components constituted an attempt to guide construction of a national preparedness system (NPS). Roughly one year later, DHS released some of the elements of the nascent NPS. In March 2004, then-Secretary Ridge announced completion of the NIMS document, which established a framework to guide interagency and intergovernmental responses to complex emergencies. The following December, DHS issued the National Response Plan , which assigns specific emergency response functions and activities to federal agencies and the American Red Cross. During 2004 and 2005, DHS released draft, interim, and amended versions of the component documents that provide specific directions or expectations for the NPS. These components included: National Preparedness Goal (not finalized as of 2006), National Preparedness Guidance, Planning Scenarios (15), Universal Task List, and Target Capabilities List. These federal mandates, plans, and directives comprise essential elements of the national system or approach for emergency preparedness and response. In addition, state governments have authorized a range of activities and practices to improve their preparedness capabilities; non-governmental groups have developed assessment systems and preparedness standards towards which agencies aspire. As a supplement to these non-federal efforts, DHS and other federal entities provide financial and technical assistance to state, local, and tribal governments. The Office for Grants and Training (G&T) within DHS (to be transferred from the Preparedness Directorate to FEMA, as summarized in the first section of this report) administers the majority of grants and training provided by DHS. These include such grants as the State Homeland Security Grant Program, the Law Enforcement Terrorism Prevention Program, the Urban Area Security Initiative. All of these efforts, federal and non-federal, are intended to enhance the Nation's preparedness capability for emergency response to terrorist attacks, natural disasters, and accidental events caused by human error or inattention. The Post-Katrina Act requires that the President establish a national preparedness goal and national preparedness system (NPS) and complete, revise, and update (as necessary) the goal to ensure the nation's ability to prevent, respond to, recover from, and mitigate against disasters of all kinds, including acts of terrorism. The goal must be consistent with NIMS and the NRP. Additionally, the President, through the FEMA Administrator, is to establish a National Preparedness System that will enable the nation to meet the National Preparedness Goal. Components of the NPS must include: target capabilities and preparedness priorities, equipment and training standards, training and exercises, comprehensive assessment systems, a remedial action management program, a federal response capability inventory, reporting requirements, and federal preparedness. Existing documents, planning tools, and guidelines are to be used by the FEMA Administrator in establishing the NPG and the NPS to the extent practicable. In implementing the NPS, the FEMA Administrator is to establish an assessment system to continually evaluate the preparedness capabilities of the nation. As part of this system, NPS elements must contain performance metrics and outcome measures. The President, through the Administrator, is authorized (but not required) to include planning scenarios that reflect the risks presented by all-hazards in the NPS. The scenarios, if developed, are to provide a foundation for the development of target capabilities to meet the NPG and must reflect the full range of "representative hazards" that require the identification and definition of tasks required to respond accordingly. The Post-Katrina Act requires the FEMA Administrator, in coordination with others, to complete and update guidelines that are "specific, flexible, and measurable" to define risk-based target capabilities for federal, state, local, and tribal governments. As part of this process, DHS is to conduct terrorism risk assessments that include: variables of threat, vulnerability, and consequences related to population, areas of high population density, critical infrastructure, coastline, and international borders; and current threat assessments available from the DHS Chief Intelligence Officer. The guidelines used in establishing the target capabilities are to include preparedness priorities that balance all-hazard risks with federal, state, local, and tribal resources to prevent, respond to, recover from, and mitigate against the hazards, and requires DHS to support the development of mutual aid agreements between states. In addition, the statute requires that the federal response capabilities inventory be accelerated and that a database be established. The statute also sets out the required contents of the inventory. With specific reference to Department of Defense (DOD) resources, the FEMA Administrator is to coordinate with the Secretary of Defense preparation of a list of organizations and functions within DOD that may be used to support civil authorities. The Post-Katrina Act amends the Stafford Act by requiring that emergency preparedness grants awarded by FEMA to the states be based upon plans that include a catastrophic incident annex modeled after the comparable annex in the NRP. In addition, the state plan annexes must be consistent with the NPG, NIMS, and other plans and strategies. Such state annexes must be developed in consultation with local officials, including regional commissions. Also, the statute requires that within 15 months of enactment, and annually after that, the states that receive DHS preparedness assistance must report on the state's preparedness level. The SAFE Ports Act authorizes the DHS Secretary to make available a risk assessment tool to be used to update required Maritime Security Plans, and correspondingly modifies existing law by directing that grants be distributed based on risk rather than distribution parity. The statute also adds new eligible activities for which such grants may be used, including training or exercises for the prevention of and response to terrorist attacks, establishing terrorist threat information sharing mechanisms, and purchasing equipment needed to manage classified information. The DHS Secretary is to ensure that each grant is used to supplement and support the applicable Area Maritime Transportation Security Plan, and is coordinated with any applicable state or urban area homeland security plan. Any entity subject to an Area Maritime Transportation Security Plan would be an eligible applicant. The act establishes that the bases of the new port security grants will include national economic, energy, and strategic defense concerns identified through the most current risk assessments available. DHS is not the only federal agency responsible for the development, maintenance, and execution of the National Preparedness System (and its components). The Post-Katrina Act requires that the President ensure that each federal agency with NRP responsibilities have capabilities to: meet operational responsibilities of the national preparedness goal, including retaining personnel with decisionmaking authority, creating organizational structures that meet NRP missions, holding sufficient resources, and maintaining command and control communications; comply with NIMS; develop, train, and exercise response personnel; and develop operational plans and corresponding capabilities to respond to all-hazard incidents to ensure a coordinated federal response. The act identifies requirements for NRP operational plans and requires the President to ensure that the FEMA Administrator develops "prescripted NRP mission assignments" for federal agencies. Finally, the President is required to certify compliance of NRP requirements for every federal agency with NRP responsibilities. This provision does not limit the authority of the Secretary of Defense in command, control, or allocation of Department of Defense resources. Although evacuation planning and exercises are not specifically identified as National Preparedness System components, they constitute an integral part of overall national preparedness. The Post-Katrina Act authorizes DHS to approve states' and localities' use of State Homeland Security Grant Program (SHSGP) and Urban Area Security Initiative (UASI) funding for establishing evacuation programs and plans, preparing for the execution of evacuation plans, and conducting evacuation exercises. The act also authorizes the FEMA Administrator to establish evacuation standards and requirements, and the Administrator is required to provide assistance (upon request) to a state, local, or tribal government to assist in the planning of evacuation of hospitals, nursing homes, and other institutions that house individuals with special needs. In another provision, the statute requires that the FEMA Administrator, in coordination with appropriate federal departments, provide evacuation preparedness technical assistance to state, local, and tribal governments. Not only does the Post-Katrina Act address evacuation planning, but the Pets Evacuation and Transportation Standards Act of 2006 (PETS Act) amends the Stafford Act by requiring FEMA to ensure state and local emergency preparedness operational plans (including evacuation plans) take into account the needs of individuals with household pets and service animals prior to, during, and following a major disaster or emergency. The PETS Act also authorizes the FEMA Administrator to provide funding to state and local governments for animal emergency preparedness purposes, including the procurement, construction, leasing, or renovating of emergency shelter facilities and materials that would accommodate people with their pets and service animals that would be used following an evacuation. National preparedness includes homeland security education and training and the associated standards. Federal homeland security education and training programs are varied and are provided by numerous federal agencies and departments. Among these departments and agencies are the Departments of Defense, Energy, Homeland Security, Health and Human Services, Justice, and Transportation, and the independent Environmental Protection Agency. Each department and agency provides specific homeland security education and training targeted to given categories of recipients. Training recipients include federal, state, and local government personnel, emergency responders, and private and public critical infrastructure personnel. The programs train individuals to prepare for, respond to, and recover from terrorist attacks. Some of the training programs are designed for personnel working in critical infrastructure sectors. Others are intended for personnel who are not identified with specific critical infrastructure but respond to terrorist attacks, regardless of location or target. Given the DHS mission to secure the nation from terrorist attacks, the department arguably has primary federal responsibility for providing homeland security education and training to federal, state, and local emergency responders. Accordingly, DHS provides education and training to a wide range of critical infrastructure personnel, law enforcement and other emergency responders, government (federal, state, and local) personnel, and medical personnel. DHS uses numerous agencies, offices, institutes, and partners to provide homeland security education and training for federal, state, and local government personnel. DHS training is provided at such facilities as the Federal Law Enforcement Training Center (FLETC), National Fire Academy (NFA), and Emergency Management Institute (EMI). FLETC is an interagency law enforcement center that provides training for federal law enforcement agencies. The Federal Emergency Management Agency (FEMA) administers EMI and NFA training activities. NFA trains fire and emergency response personnel to enhance their abilities to respond to fires and related emergencies. EMI's training program consists of resident and non-resident courses aimed at enhancing emergency management practices. The Office of Grants and Training (G&T) has the primary responsibility within DHS for preparing for potential terrorist attacks against the United States. G&T provides terrorism and WMD training through DHS training institutions and partners that include the Training and Data Exchange Group (TRADE), the National Domestic Preparedness Consortium (NDPC), federal departments, and private and professional organizations. The Post-Katrina Act transfers the Noble Training Center to the Center for Domestic Preparedness, which is part of NDPC. The Noble Training Center trains emergency managers and public health professionals to respond to mass casualty events resulting from natural and man-made disasters. The act also directs the President to establish a National Exercise Simulation Center that will provide catastrophic event modeling and simulation training to elected officials, emergency managers, and emergency response providers at all levels of government. The Post-Katrina Act directs the FEMA Administrator to carry out training programs to implement the national preparedness goal, National Incident Management System, National Response Plan, and other related plans and strategies. This mandate is to be carried out "in coordination with the heads of appropriate federal agencies, the National Council on Disability, and the National Advisory Council." Moreover, when developing and implementing the national program, the FEMA Administrator is to "work with government training facilities, academic institutions, private organizations, and other entities that provide specialized, state-of-the-art training for emergency managers or emergency response providers;" and to "utilize, as appropriate, training courses provided by community colleges, State and local public safety academies, State and private universities, and other facilities." The act also directs FEMA Administrator to carry out a national exercise program "to test and evaluate the national preparedness goal, National Incident Management System, National Response Plan, and other related plans and strategies;" and it sets forth a number of requirements for the national exercise program. The program is to be "as realistic as practicable, based on current risk assessments, including credible threats, vulnerabilities, and consequences, and designed to stress the national preparedness system." It is to be designed, to the extent practicable, "to simulate the partial or complete incapacitation of a State, local, or tribal government." The program is to be carried out, as appropriate, "with a minimum degree of notice to involved parties regarding the timing and details of such exercises, consistent with safety considerations." It is to be designed so as to "provide for systematic evaluation of readiness" and "to address the unique requirements of populations with special needs." The national exercise program is to "provide assistance to State, local, and tribal governments with the design, implementation, and evaluation of exercises" that conform to the requirements noted above; that are "consistent with any applicable State, local, or tribal strategy or plan"; and that "provide for systematic evaluation of readiness." Finally, the act requires the Administrator to perform periodic national level exercises "to test and evaluate the capability of Federal, State, local, and tribal governments to detect, disrupt, and prevent threatened or actual catastrophic acts of terrorism, especially those involving weapons of mass destruction" and "to test and evaluate the readiness of Federal, State, local, and tribal governments to respond and recover in a coordinated and unified manner to catastrophic incidents." These national level exercises are to be performed at least biennially. The FEMA Administrator is also directed to carry out a national exercise program to test and evaluate the plans and systems. The program must be as realistic as practical, based on current risk assessments, and is to be designed to stress the National Preparedness System and to simulate the partial or complete incapacitation of a state, local, or tribal government. Other elements of the exercise program are that it is to be carried out with a minimum degree of notice to replicate a true emergency, be designed to provide for a systematic evaluation of preparedness, address the unique requirements of populations with special needs, be consistent with non-federal strategies or plans, and facilitate an evaluation of systematic preparedness. The statute also requires that DHS conduct a national level exercise biennially to test and evaluate federal, state, local, and tribal government preparedness capabilities. The Post-Katrina Act also requires that the FEMA Administrator enter into agreements with organizations to provide funding to emergency response providers to provide education and training in life support first aid to children. For information on a training program focused on the prevention of fraud, waste, and abuse, see the " Oversight and Accountability " section of this report. In addition to these exercise and training efforts to be carried out by FEMA, the Coast Guard is required to administer training and exercise programs. The SAFE Ports Act requires the DHS Secretary, in coordination with the Coast Guard Commandant, to establish a Port Security Training Program. This training program is to enhance the emergency preparedness capabilities of facility owners who are required to submit an Area Maritime Transportation Security Plan. The SAFE Port Act establishes training standards, and requires that the program be consistent with, and support, NIMS, NRP, the National Infrastructure Protection Plan, the National Preparedness Goal, the National Maritime Transportation Security Plan, and other national preparedness initiatives. Finally, the SAFE Ports Act requires that vessel and facility security plans provide a strategy and time line for conducting training, and that the Coast Guard consult with other DHS agencies and federal departments. In conjunction with the Port Security Training Program, the DHS Secretary, in coordination with the Coast Guard Commandant, is to establish a Port Security Exercise Program. The purpose of this exercise program is to test and evaluate the capabilities of federal, state, and local governments, commercial seaport personnel and management, emergency response providers, and the private sector for all types of hazards. The DHS Secretary is to ensure that, on a periodic basis, port security exercises are conducted at facilities that are required to submit an Area Maritime Transportation Security Plan. Following an exercise, these facilities are to prepare an improvement plan. The statute also sets out a requirement that exercises be scheduled and held at high-risk facilities. In addition to the aforementioned programs, as well as those presently administered by DHS, the Post-Katrina Act directs the DHS Secretary to establish a graduate-level Homeland Security Education Program in the National Capitol Region. This program is to provide homeland security education and training for senior federal, state, and local officials with homeland security and emergency management responsibilities. The program administrator is to use existing DHS homeland security educational resources, and attendees must meet commitment requirements in the statute. The Post-Katrina Act requires that DHS, in coordination with other federal departments and the National Advisory Council, support the development, promulgation, and updating of national consensus voluntary standards for homeland security equipment and training. The national voluntary consensus standards for equipment must meet certain specifications (consistency with the NPG and existing voluntary standards, consider threats not previously contemplated, and focus on attributes such as maximizing operability, efficiency, and safety, among others), while those for training are to be developed by the FEMA Administrator and be consistent with the training actually provided. The Stafford Act authorizes federal assistance for state and local governments, certain nonprofit organizations, and families or individuals after state and local governments are overwhelmed by natural disasters and fires, floods, or explosions, regardless of cause. The statute gives the President the discretion to issue a major disaster or an emergency declaration in response to a gubernatorial request for assistance. Once the President issues a major disaster declaration, the following are among the types of assistance that may be provided (generally by FEMA in conjunction with support provided by other federal agencies) depending upon the scope of the disaster and the needs of the stricken community: technical assistance that saves lives and protects health; public assistance grants to repair or replace public infrastructure and facilities; cash grants to help families and individuals meet immediate and personal needs; financial aid for those made homeless by the disaster, or direct housing assistance in the form of trailers if temporary housing is unavailable; unemployment assistance; loans to communities suffering a loss of tax revenue; crisis counseling; and legal aid for low income victims. The Homeland Security Act of 2002 designates FEMA as the federal entity responsible for administering the Stafford Act. The Post-Katrina Act, along with other laws enacted by the 109 th Congress, significantly amends the Stafford Act by clarifying some sections, waiving previous requirements, and re-working or creating new authorities. The changes to the act reflect experiences gained after Hurricane Katrina and the perceived need for legal remedies to make Stafford Act programs more flexible and responsive to events of a catastrophic nature. While expanding federal assistance authorities, the amendments seek to maintain state, local, and individual emergency management responsibility and accountability. In short, the Post-Katrina Act expands federal disaster assistance authority, but leaves the basic tenets of the Stafford Act (such as Presidential discretion, need for state requests, restrictions on eligibility) unchanged. The Post-Katrina Act authorizes the President to support precautionary evacuation measures and accelerate the delivery of federal emergency response and recovery aid after the President has issued a major disaster or emergency declaration. The amendments expand areas for technical and advisory assistance to address problems of delay and communication identified in Katrina response efforts. The President may provide federal assistance in the absence of a specific request from state officials. If unrequested federal assistance is provided, federal officials must attempt to coordinate the delivery of such aid with state officials; but they must not delay the delivery of needed aid because of the coordination efforts. The Post-Katrina Act addresses several policy areas that direct federal disaster assistance to individuals and families that encounter special circumstances or unique needs in the disaster environment. For example, the act provides authority for the provision of assistance to and accommodation for individuals with disabilities by including the definition of "individual with a disability" from the Americans With Disabilities Act of 1990 in the Stafford Act. The statute also provides that durable medical equipment, such as that needed by those who are disabled, is an eligible form of essential assistance. The statute also requires that the FEMA Administrator develop guidelines within 90 days of enactment concerning the accommodation of individuals with disabilities with regard to emergency facilities and equipment. The Post-Katrina Act also addresses concerns about federal aid to individuals by adding two new population classes—those disabled and those with limited English proficiency—to the discrimination prohibition provisions of the Stafford Act. A related section of the statute amends the Stafford Act by directing FEMA to work with state and local governments to identify groups with limited English proficiency as well as individuals with disabilities or other special needs. The Director of FEMA must ensure that information is made available to such groups before and during a disaster, and must develop and maintain an informational clearing house of model language assistance as well as best practices for the state and local governments working with these individuals. The statute authorizes new types of assistance for those adversely affected by a major disaster. The President is authorized to provide transportation assistance to those displaced from their residences because of a major disaster or emergency, including that needed to move among alternative temporary shelters or to return to their original residence. The President is also authorized to provide case management services to state, local, or qualified private organizations that provide assistance to victims. Also of note, the FEMA administrator is charged with taking specified actions to reunite separated families and help agencies locate missing family members; see the " The New FEMA Missions (Generally) " section of this report. The Post-Katrina Act expands FEMA authority to provide housing assistance after a major disaster through amendments to the Individual and Household Program (IHP) authorized by Section 408 of the Stafford Act. First, in order to be considered eligible for housing assistance, victims of major disasters or emergencies who are disabled now must be unable to access or inhabit their homes, as opposed to the previous provision which required that residences generally be "rendered uninhabitable." Second, alternative housing sites provided to victims must meet physical accessibility requirements. Third, the statute eliminates the statutory ceilings on financial aid to be provided for housing repair and replacement, but does not eliminate the overall cap of $25,000 that may be provided to each individual or household under Section 408. Fourth, the amendments strike the reference to remote areas for FEMA's authority to construct "permanent" housing and adds the phrase "semi-permanent." Fifth, the statute includes as newly eligible housing assistance costs both utility costs (excluding telephone service) and security deposits. The disposal of temporary housing units (generally referred to as "FEMA trailers") is authorized by the statute if the trailers were owned by FEMA on October 4, 2006 (the date of enactment). Such disposal activities are to be coordinated with the Department of the Interior or other federal agencies to facilitate the transfer of the units to tribal governments. The act also established a new initiative to improve the delivery of housing assistance to disaster victims. The Individuals and Households Pilot Program authorizes the President, through the FEMA Administrator, to increase the use of existing rental housing to provide temporary housing for victims of major disasters. Through the pilot program, which expires December 31, 2008, the Administrator is to provide for the repair and improvement of multi-family rental properties in disaster areas to increase the rental stock available to disaster victims in the immediate area. The FEMA Administrator may enter into lease agreements with the owners of multi-family units to achieve FEMA's housing goals, with specified restrictions. Public Assistance (PA) is the Stafford Act term that covers debris removal, public safety activities, emergency protective measures, and infrastructure repair in the wake of a disaster. The Post-Katrina Act expands the universe of non-governmental institutions potentially eligible for assistance by amending Stafford Act definitions provisions and expanding the discretion of the President to determine whether a private nonprofit facility is eligible for Stafford Act Assistance. First, the statute deletes the requirement that eligible private non-profit facilities that serve specified functions (education, utility, irrigation, emergency, medical, rehabilitation, and temporary custodial care) provide "essential services of a governmental nature to the general public." The President now has the discretion to define the facilities that provide such services and the services do not necessarily have to be available only to the general public. Second, the Post-Katrina Act adds the allowance for a second tier of private nonprofit facilities potentially eligible for assistance (museums, zoos, performing arts facilities, community arts centers, libraries, homeless shelters, senior citizen centers, rehabilitation facilities, shelter workshops, and those that "provide health and safety services of a governmental nature") as long as they provide "essential services of a governmental nature to the general public, as defined by the President." The second tier facilities identified in the statute are similar to those set out in the definitions of private nonprofit facilities identified in regulations, not the statute. Another definition change is the addition of the word "education" to the listing in the section that defines critical services, which enables private non-profit organizations to apply directly for a FEMA PA grant without having to apply for a Small Business Administration loan. Another amendment in the Post-Katrina Act concerns the "in-lieu" grants authorized if a state or local government determines that a damaged facility should not be repaired or replaced. The SAFE Ports Act deletes the clause that authorized a 90% in-lieu grant (that is, 90% of the federal share of the estimate of repairing or replacing the facility) solely to areas with soil instability, and increased the amount of the grant that may be provided to any jurisdiction to 90%. Also, the SAFE Ports Act amends the Stafford Act to authorize the President to expedite payments for debris removal to state or local governments or owners of qualified private non-profit facilities. Another form of Stafford Act assistance available to units of local government has been amended. The Community Disaster Loan (CDL) program provides loans to local governments that, because of a major disaster, suffer significant losses in tax revenue. Perhaps most significantly, the legislation authorizes the FEMA Administrator to conduct a PA pilot program intended to provide incentives for local and state government involvement in debris removal and the acceleration of repair work. This program increases the federal share for alternate projects, provides for an increased federal share for debris removal for those local governments that have pre-approved debris and wreckage removal plans and contractual agreements in place prior to the event, and reimburse base wages for state and local and extra hires involved in this work. The pilot project calls on the Director to establish new procedures that provide a financial incentive for the recycling of debris. FEMA must report to the appropriate Congressional Committees on the effectiveness of this program by March 31, 2009. The Post-Katrina Act provides new authority for the FEMA Administrator with regard to state emergency assistance mutual aid agreements. For one, the Administrator is authorized to support the development of mutual aid agreements within the states. Second, the Administrator has new authority to award grants to administer provisions of the Emergency Management Assistance Compact (EMAC). The grants must be used for specified purposes, including implementing recommendations from recent hurricane after-action reports, credentialing and typing emergency responders, administering compact operations, and coordinating with federal and non-federal entities. Also, the FEMA Administrator is required to consult with the EMAC administrator to enhance coordination when assistance is requested. The Hazard Mitigation Grant Program (HMGP), authorized by Section 404 of the Stafford Act, authorizes the President to provide grants to states in which major disasters have been declared. These funds must be used for activities that prevent future disasters or reduce their impact if they cannot be prevented. The Post-Katrina Act adjusts the percentage amounts for HMGP awards by establishing a scale that authorizes a higher percentage (15% of the total Stafford Act assistance in a state) for major disasters in which no more than $2 billion is provided, to 10% for assistance that ranges from more than $2 billion to $10 billion, and 7.5% for major disasters that involve Stafford Act assistance from more than $10 billion to $35.3 billion. The Post-Katrina Act provides the President discretion to appoint one Federal Coordinating Officer (FCO) for a multi-state event. The President also has the authority to appoint deputy FCO's as needed. Traditionally, one FCO has been named for each separate disaster declaration in each respective state. The statute also amends the Stafford Act by requiring that the President designate a Small State and Rural Advocate in FEMA, who is to ensure that rural community needs are met in the declaration process and help small states prepare declaration requests, among other duties. The FEMA Administrator must report to Congress within 180 days of enactment on whether regulations for declarations meet the needs of smaller states and comply with Stafford Act prohibitions on the use of formulas in the declaration process. Other administrative changes concern the authority and capabilities of organizations charged with the response to the major disaster site. The Post-Katrina Act authorizes the President to establish at least three national response teams and others as deemed necessary (including regional response teams) and requires that FEMA team members possess essential capabilities, training skills, and equipment. The SAFE Ports Act amends the Stafford Act by adding a new definition, "essential service providers" to the Stafford Act. Persons who are affiliated with municipal governments or private (profit and non-profit) entities who will help restore essential services to a stricken area are not to be impeded when they seek access to a disaster site. Federal agency heads must comply with applicable federal laws and regulations in implementing this provision. The Post-Katrina Act amends the IHP provisions of the Stafford Act by authorizing search, rescue, care, and shelter of pets and service animals as a type of essential assistance to be provided after a major disaster declaration. Congress is considering legislation that would affect the implementation of two Stafford Act provisions by creating exceptions to standard policy. H.R. 1144 , the Hurricanes Katrina and Rita Federal Match Relief Act of 2007, would ease financial burdens on the states affected by the two named hurricanes by waiving cost share requirements in the Stafford Act and striking a loan repayment provision. While the legislation does not include amendments to the Stafford Act, it might arguably serve as a precedent for future congressional actions or might be modified to include Stafford changes. First, the legislation would waive the Stafford Act cost share requirements for disaster assistance grants awarded because of damages caused by Hurricanes Katrina and Rita in Louisiana and Mississippi. The Stafford Act requires that the federal share of public assistance, debris removal, and emergency assistance grants be at least 75% of eligible costs. The President exercises discretionary authority on whether the federal share will be as much as 100% of eligible costs or in between 75% and 100%. Presidents have historically issued waivers of cost share requirements for the most severe catastrophes; Congress has not previously legislated such waivers. In addition, the Stafford Act mandates that states provide 25% of the cost of the assistance provided to individuals and families. Again, Congress has not previously waived this cost share requirement. H.R. 1144 would result in the waiver of all major disaster cost share requirements for the specified states. Second, besides the cost share waiver provision, H.R. 1144 would amend language previously approved by the 109 th Congress ( P.L. 109-88 ) which authorized higher levels of community development loans (CDL) than normally provided to stricken communities. The statute does not limit the CDL expansion to particular states or disasters. Such loans are provided to help communities provide essential services to citizens and are meant to replace taxes and revenues lost because of major disasters. As originally enacted by the 109 th Congress, the statute required repayment of those loans. Under H.R. 1144 the repayment requirement would be stricken. Contractors played an essential role in the government's response, relief, and reconstruction activities following Hurricane Katrina. However, in the aftermath of the hurricane, several procurement practices came to the attention of Members of Congress, as well as the public. Chief among the issues raised were the dearth of advance (or pre-existing) contracts; the federal government's use of noncompetitive contracts; the proliferation of subcontracting tiers to five or six levels; and the concern that, despite a Stafford Act requirement that a preference be given to local firms for disaster recovery activities following an emergency or disaster, local companies were largely overlooked in Hurricane Katrina contracting. Legislation enacted by the 109 th Congress addressed these procurement issues. The head of FEMA is required to prepare and submit a report to the appropriate congressional committees on recurring disaster response requirements (that is, goods and services) that can be contracted for in advance and those that cannot be contracted for in advance. The Administrator is to use the information compiled for this report in developing and implementing a contracting strategy for FEMA that involves advance contracts and that takes into consideration the local preference set out in Section 307 of the Stafford Act, as amended by P.L. 109-295 . The Secretary of Homeland Security is required to promulgate regulations designed to limit the use of subcontractors or subcontracting tiers on any cost-reimbursement contract, task order, or delivery order that exceeds the simplified acquisition threshold and that facilitates response to or recovery from a natural or man-made disaster, or a terrorist incident. At a minimum, the regulations are to preclude a contractor from using subcontracts for more than 65% of the cost of the contract, unless the Secretary determines the requirement is not feasible or practicable. Agencies that use non-local firms for debris removal, distribution of supplies, and other recovery or reconstruction activities must justify, in writing, the use of non-local companies. Additionally, following the declaration of an emergency or a major disaster, agencies involved in response, relief, and reconstruction activities are required, unless it is neither feasible nor practicable, to transition such work from existing contracts to contracts with local firms, organizations, and individuals. This provision does not require an agency to breach or renegotiate a contract in effect before a disaster or emergency occurs. Agency heads are required to develop requirements to facilitate compliance with Section 307. "Noncompetitive contracts," which are popularly known as "sole source" or "no-bid" contracts, are contracts that have been awarded under other than full and open competition. The Post-Katrina Act requires the Secretary of Homeland Security to draft regulations to limit to 150 days the duration of any noncompetitive contract that is needed to meet an urgent and compelling need, that is in an amount greater than the simplified acquisition threshold, and that facilitates response to or recovery from a natural or man-made disaster or a terrorist incident. For each noncompetitive disaster assistance contract awarded by FEMA, the Administrator is required to submit a report to Congress. The Post-Katrina Act requires that the FEMA Administrator establish and maintain, on the agency's website, a registry of companies that remove debris, distribute supplies, or carry out reconstruction and other disaster relief activities. Inclusion in the registry is voluntary, and contractors will provide information about their businesses for the registry. Federal agencies are required to consult the registry when conducting acquisition planning for the specified emergency relief activities. In the aftermath of the Gulf Coast hurricanes in 2005 Congress passed legislation that, among other purposes, funded oversight activities of the DHS Office of Inspector General (OIG). Such federal offices, which exist in nearly 60 federal establishments and designated entities, exercise independence to carry out their mandate to combat waste, fraud, and abuse. As part of the continuing effort to oversee the expenditure of federal funds in the Gulf Coast, the Inspector General (IG) for DHS has created an in-house position of assistant inspector general specializing in the Hurricane Katrina recovery effort and has taken the lead in coordinating efforts among peers in relevant agencies by means of a "Homeland Security Roundtable." In addition, the Department of Justice has established a Hurricane Katrina Contract Task Force, which includes relevant offices of inspector general, to coordinate investigations and audits in this matter. The prevention of fraud, waste, and abuse in the Gulf Coast recovery effort remains a major congressional concern. The Post-Katrina Act authorizes the Administrator to designate "up to 1 percent of the total amount provided to a Federal agency for a mission assignment as oversight funds to be used by the recipient agency for performing relevant oversight of activities." Agencies are authorized to use funds for specified purposes, including auditing expenditures, assessing agency management control procedures, and reviewing contracts, among others. Funds cannot be used to fund agency oversight activities that are used to monitor funds directly appropriated to the agency for disaster assistance. To the extent practicable, evaluations and audits are to be performed by the IG of the agency that acts upon the mission assignment, but the statute authorizes oversight under contractual arrangements. The statute also requires recipient agencies to develop oversight plans describing the use of the funds and requires preparation of a risk assessment to identify areas with the greatest risk of fraud, waste, or abuse. Federal agencies must report annually to the Administrator and appropriate committees of Congress on the use of the funds. The Post-Katrina Act directs the Administrator to develop and maintain internal management controls of FEMA disaster assistance programs to prevent fraud and waste by collecting information on disbursements to identify applications from persons ineligible for assistance. Databases developed for this purpose are to be reviewed to assure the presence of internal management controls. The statute also requires that the President or his designee develop verification measures to identify eligible recipients of aid under the Individuals and Household Programs (IHP) of the Stafford Act. (For more information on IHP see the " Housing Assistance " section of this report.) The Post-Katrina Act requires that the FEMA Administrator develop and implement a training program to prevent fraud, waste, and abuse of federal funds in response to or recovery from a disaster. (For information on other training programs see the " Education and Training " section of this report.) The Post-Katrina Act includes 16 reporting requirements that must be met by the DHS Secretary, the FEMA Administrator, and officials in other federal entities. These requirements are intended to ensure that Congress receives information on the implementation of specified new policies, among which are those directed at ensuring that a qualified workforce exists, guidelines for enhanced aid to individuals and families are developed, and that preparedness initiatives are undertaken. The following summaries of reporting requirements in the Post-Katrina Act are organized below in two ways. First, the subheadings identify the entity or official assigned responsibility for the report. Second, within each of these subsections, the reporting requirements are listed based upon the time span given administration officials to complete the report, with the earliest required reports identified first. The statute authorizes the FEMA Administrator to pay recruitment bonuses for certain positions. For each of the five years the bonus authority remains in place, the Agency (no specific official identified) is to submit an annual report to Congress detailing the operations of the recruitment bonus program and providing a description of the use of the authority to provide pay bonuses. The statute requires that the Secretary of the department issue reports on department-wide staffing as well as progress made in emergency communications. Within 120 days of enactment the DHS Secretary is to report to Congress on the staff and resource needs the Office of Emergency Communications requires to fully implement the new "Emergency Communications" title of the HSA. The Comptroller General is to review this report and submit findings to Congress no later than 60 days after receiving the DHS report. Within 180 days of the establishment of a rotation program, the DHS Secretary is required to prepare a report that provides a description of the program, the number of participating employees, and the role of succession planning in the program. Within one year of enactment, the DHS Secretary, through the Director of the Office of Emergency Communications, is required to provide Congress with biennial progress reports that describe the findings of the baseline assessment of interoperability issues; evaluate the Department's efforts to enhance the communications interoperability of emergency managers, emergency response providers, and government officials for all hazard events; identify best practices; and evaluate the feasibility of establishing a mobile communications capability modeled on the Army Signal Corps. SAFE Port Act Reporting Requirements . The SAFE Port Act requires that the DHS Secretary (acting through the Coast Guard Commandant) submit a report to Congress no later than 180 days after enactment that describes the methodology used to allocate grant funds. The Post-Katrina Act assigns the majority of the law's reporting requirements to the FEMA Administrator. The reports include subjects such as administrative operations, standards and guidelines, and the lessons learned from new programs and strategies. Within 90 days of enactment the Administrator is to coordinate with the National Advisory Council, the National Council on Disability, the Interagency Coordinating Council on Preparedness and Individuals with Disabilities, and the Disability Coordinator to develop guidelines to accommodate individuals with disabilities. Within 180 days of enactment the Administrator is to provide Congress with guidelines that define the risk-based target capabilities of the federal, state, local, and tribal governments defining their level of preparedness for preventing, responding to, recovering from, and mitigating all hazards. Within 180 days of enactment the Administrator is to submit to Congress a report detailing how disaster declaration regulations meet the needs of the states with populations less than 1,500,000 and how the regulations comply with statutory restrictions on the use of arithmetic formulas and sliding scales based on income and population. Within 270 days of enactment the Administrator is to submit a report to the appropriate congressional committees describing the National Disaster Housing Strategy, and must submit updated reports to Congress when changes are made to the strategy and periodically, but at least once every five years. Within 270 days of enactment the Administrator is to provide Congress with a report on the implementation of improvements to information technology systems. This report is to include a description of actions taken, improvements made, and funding needed for improvements to FEMA's information technology. Within 270 days of enactment the Administrator is to submit to Congress a report describing the National Disaster Recovery Strategy and the authorities necessary to implement the Strategy. Within 270 days of enactment the Administrator is to submit a report to Congress on the status of the Child Locator Center, with details on funding issues, difficulties in establishing the Center, and the status of cooperative agreements. Within 270 days of enactment the Administrator is to submit to Congress a report on the status of the National Emergency Family Registry and Locator System. Within 12 months of enactment the Administrator is required to provide a federal preparedness report to Congress. The report must detail the level of preparedness for all hazards, provide an assessment of how the national preparedness system is supported through federal assistance, include the results of a comprehensive assessment conducted under the Post-Katrina Act, and provide a list of needed resources, projected expenditures, and achievements. No later than March 31, 2009, the Administrator is to submit a report to Congress on the effectiveness of the Public Assistance Pilot Program. The report must include assessments of benefits and costs, the identification of obstacles to debris recycling, and recommendations for further authority. The Administrator is required to prepare and submit to Congress annual catastrophic resource reports. These reports must, among other matters, identify the resources needed to undertake planning, training, regional office enhancement, surge capacity, logistics, state and local preparedness, and responsiveness to the National Response Plan. The Post-Katrina Act mandates that the Federal Communications Commission (FCC) meet one reporting requirement. Within 180 days of enactment the Chairman of the FCC is to submit a report to Congress on the status of the 911 and E911 plans of the state, local, and tribal governments. In addition to the provisions summarized above that directly affect the administration of emergency management, Congress enacted other statutory changes in light of the experiences gained from Hurricane Katrina's impact. The following provisions establish new policies and will be applicable in future catastrophes that meet specified criteria. All provisions of the Post-Katrina Act took effect on the date of enactment (October 4, 2006), except for amendments pertaining to the following, which take effect March 31, 2007: many, but not all, amendments to the Homeland Security Act that set out new or revised FEMA operations, structures, officers, and procedures, and technical and conforming amendments concerning the codification of leadership positions. The statutes enacted by the 109 th Congress contain several authorization provisions. The Post-Katrina Act authorizes funding increases for FEMA for fiscal years 2008 through 2010. Using FY2007 as the base year, the statute augments total agency funding by 10% each fiscal year over the previous year's appropriation. The statute also authorizes appropriations for the Emergency Management Performance Grant (EMPG) program and for the administration of the Emergency Management Assistance Compact (EMAC). EMPG funding of $375 million is authorized for FY2008. EMAC funding of $4 million is authorized for FY2008, and remains available until expended. The SAFE Ports Act authorizes an appropriation of $400 million for each fiscal year from FY2007 to FY2011 for the new Port Security Grant program. The provisions of the Post-Katrina Act do not alter or affect the authorities of the National Weather Service. The Secretary of Education is authorized to waive normal statutory requirements for the repayment of grant assistance if students of higher education institutions are forced to withdraw from the academic program because of disasters. In order to qualify, students must live, work, or receive their education in an area included in a Stafford Act major disaster declaration and must withdraw during the year in which the disaster occurred or the next academic year. The Federal Judiciary Emergency Special Sessions Act of 2005 authorizes circuit courts of appeals and bankruptcy courts to hold special sessions in any place within the United States outside the circuit under emergency conditions. The statute requires that the Committees on the Judiciary of the Congress be notified of a decision to exercise this authority and that reasonable notice be provided to the U.S. Marshals Service. Similar authority is granted to district courts, except defendants must consent to criminal trials held outside the state in which the crime was committed. The John Warner National Defense Authorization Act provides new authority for the calling up and assignment of duties to national guard troops. Members of the Armed Forces reserves who are members of the National Guard and in full-duty status are authorized to perform duties, as assigned, due to the intentional or unintentional release of toxic or poisonous material that does or might result in catastrophic losses. The statute also authorizes the use of such troops in a potentially or actually catastrophic disaster in the United States. In addition, the statute replaces the Insurrection Clause that authorized the President to use "the militia or armed forces" to suppress insurrections. The new provision authorizes the President to use the National Guard to restore public order if a "natural disaster, epidemic, or other serious public health emergency, terrorist attack or incident" prevents state authorities from maintaining public order. In addition, the act authorizes the President to direct the Secretary of Defense to provide specified supplies and equipment, under limitations, to those affected by such situations. Federal officials, and those operating under federal law or with federal funds, may not seize lawfully held firearms, require their registration, or prohibit possession or carrying of firearms in major disaster or emergency conditions, as defined by the Stafford Act. The statute provides for the temporary surrender of firearms in rescue or evacuation vehicles, protects the right of individuals to seek redress, and sets out judicial remedies for individuals. The following terms identify the acronyms used in this CRS report. CDL: Community Disaster Loan CEM: Comprehensive Emergency Management System CHCO: Chief Human Capital Officer CMO: Chief Medical Officer COG: Continuity of Government COOP: Continuity of Operations CORE: Cadre-On-Response Employees DAE: Disaster Assistance Employees DHS: Department of Homeland Security DOD: Department of Defense EMAC: Emergency Management Assistance Compact EMI: Emergency Management Institute FCC: Federal Communications Commission FCO: Federal Coordinating Officer FEMA Trailers: Temporary Housing Units FEMA: Federal Emergency Management Agency FLETC: Federal Law Enforcement Training Center G&T: Office for Grants and Training GAO: Government Accountability Office HHS: Health and Human Services HSPD-5: Homeland Security Presidential Directive-5 HSPD-8: Homeland Security Presidential Directive-8 HSA: Homeland Security Act IHP: Individual and Household Program NDPC: National Domestic Preparedness Consortium NFA: National Fire Academy NIC: National Integration Center NIMS: National Incident Management System NISAC: National Infrastructure Simulation and Analysis Center NOC: National Operations Center NPG: National Preparedness Goal NPS: National Preparedness System NRP: National Response Plan PA: Public Assistance PETS Act: Pets Evacuation and Transportation Standards Act of 2006 Post-Katrina Act: Post-Katrina Emergency Management Reform Act of 2006 RAMP: Remedial Action Management Program SAFE Port Act: Security and Accountability for Every Port Act of 2005 SHSGP: State Homeland Security Grant Program Stafford Act: Robert T. Stafford Disaster Relief and Emergency Assistance Act TRADE: Training and Data Exchange Group | Reports issued by committees of the 109th Congress, the White House, federal offices of Inspector General, and the Government Accountability Office (GAO), among others, concluded that the losses caused by Hurricane Katrina were due, in part, to deficiencies such as questionable leadership decisions and capabilities, organizational failures, overwhelmed preparation and communication systems, and inadequate statutory authorities. As a result, the 109th Congress revised federal emergency management policies vested in the President; reorganized the Federal Emergency Management Agency (FEMA); and enhanced and clarified the mission, functions, and authorities of the agency, as well as those of its parent, the Department of Homeland Security (DHS). Six statutes enacted by the 109th Congress are notable in that they contain changes that apply to future federal emergency management actions. These public laws include the following: Title VI of P.L. 109-295 (H.R. 5441), the Post-Katrina Emergency Management Reform Act of 2006, referred to in this report as the Post-Katrina Act; Sections of P.L. 109-347 (H.R. 4954), the Security and Accountability for Every Port Act of 2005, known as the SAFE Port Act; P.L. 109-308 (H.R. 3858), the Pets Evacuation and Transportation Standards Act of 2006; P.L. 109-63 (H.R. 3650), the Federal Judiciary Emergency Special Sessions Act of 2005; P.L. 109-67 (H.R. 3668), the Student Grant Hurricane and Disaster Relief Act; and Sections of P.L. 109-364 (H.R. 5122), the John Warner National Defense Authorization Act for Fiscal Year 2007. Most of these statutes contain relatively few changes to federal authorities related to emergencies and disasters. The Post-Katrina Act, however, contains many changes that will have long-term consequences for FEMA and other federal entities. That statute reorganizes FEMA, expands its statutory authority, and imposes new conditions and requirements on the operations of the agency. The Administration will implement these new authorities through the FY2008 appropriations legislation. The oversight plans of committees with jurisdiction indicate that Members of the 110th Congress will evaluate the steps taken by the leadership of FEMA to carry out the expanded legislative mandate. In addition, Members will continue to debate legislation pertaining to the recovery of Gulf Coast states. For example, H.R. 1144 would waive disaster assistance cost share requirements for the states affected by the hurricanes. This report will be updated as developments warrant. |
Poland has had an eventful political evolution in recent years. Since 2001, five prime ministers have held office. Although the last government, led by the Democratic Left Alliance (SLD), steered the nation into the EU and nurtured a strong, export-based economy, its reputation was seriously damaged by a series of high-profile scandals. In Poland's last parliamentary elections, held in September 2005, voters registered their disappointment and the SLD suffered defeat—maintaining Poland's post-1989 track record of turning out the ruling party. Although polls during the campaign suggested that the centrist, pro-market Civic Platform (PO) would take the most votes, the nationalist conservative Law and Justice party (PiS) wound up winning a plurality seats in the lower house of parliament, the Sejm . During the campaign, PiS emphasized family values and social justice and pledged to assert Poland's interests internationally. PiS portrayed itself as the agent for change that would bring about a new era in Poland, and spoke of creating a "Fourth Republic." True to its name, Law and Justice has placed priority on improving the judicial system and aggressively rooting out corruption. Although conservative in outlook on most social issues, PiS favors social spending and distrusts privatization—and especially foreign ownership—of certain "strategic" state assets. PiS was founded in 2001 by identical twin brothers, Jaroslaw and Lech Kaczynski. Former Warsaw mayor Lech became the successful PiS presidential candidate, defeating PO's Donald Tusk in an October 2005 runoff vote. The victory surprised many, as Tusk had held a strong lead in the polls. The two men had served together in the Solidarity party in the 1990s, but their brands of conservatism differed—a reflection of their parties' orientations. Kaczynski, for example, espoused economic nationalism and active government intervention, while Tusk believed that further market-based reforms would ensure prosperity. Analysts attribute the election results to voter approval of Kaczynski's strong anti-corruption policies; his support came mainly from older and less affluent Poles in rural areas, while Tusk appealed to younger and urban voters. Jaroslaw initially declared that he would not serve as prime minster; analysts argue that he did so before the presidential elections in the hopes of helping Lech by defusing potential voter unease over having two siblings run the country. The premiership went instead to Kazimierz Marcinkiewicz. In mid-July 2006, however, Marcinkiewicz, the country's most-trusted office-holder, stepped down; some observers believe that the Kaczynskis, concerned over Marcinkiewicz' growing popularity and independence, may have engineered his departure. In addition, Marcinkiewicz was said to be frustrated that he had not been consulted over recent cabinet changes. After Lech named his twin brother to replace Marcinkiewicz, an opinion poll showed that only 21% of the public approved the appointment of Jaroslaw, whom many viewed as "divisive." After the elections, PiS and PO were expected to form a coalition, but talks soon collapsed. PiS initially decided to rule from a minority position, with informal support from two smaller parties—the rural-based Self Defense (SO) party led by populist Andrzej Lepper, and the League of Polish Families (LPR), an ultra-conservative party aligned with the Catholic church. In April 2006 the three parties entered into a formal coalition with a majority in parliament. The formation of the coalition has had both domestic and continental repercussions: Poland's Foreign Minister tendered his resignation in protest, and in June, the European Parliament stated that the leaders of LPR "incite people to hatred and violence." In September 2006, amid budget disagreements, SO left the coalition, but rejoined the government a few weeks later. Over the following months, additional high level government officials either resigned or were sacked, and the Kaczynskis reportedly consolidated their power by appointing loyalists to those posts. On July 9, 2007, Lepper was dismissed from his cabinet posts on corruption charges, but SO remained in the coalition for the time being. Out of concern that they would either lose seats or be unable to muster enough votes to pass the 5% minimum threshold necessary to stay in parliament, SO and LPR merged to form the League and Self Defense Party (LiS). The new party then proposed conditions for remaining in the coalition. On July 30, PiS rejected those terms. Observers believe the dispute will be resolved after August 22, when parliament reconvenes after recess. Early elections are possible. Poland's economy is among the most successful transition economies in east central Europe; all of the post-1989 governments have generally supported free-market reforms. Today the private sector accounts for over two-thirds of economic activity. In recent years, Poland has enjoyed rapid economic development; GDP grew by 3.4% in 2005 and 5.3% in 2006, and is predicted to rise by 6.3% in 2007. Unemployment, though still high at 12.4% in July 2007, is at its lowest level in several years. To keep a lid on the federal budget deficit, PiS has been struggling with its coalition partners, who have sought additional funding for social programs. In the area of monetary policy, some analysts are concerned over PiS's apparent willingness to reduce the independence of the country's central bank. Leszek Balcerowicz, the respected former governor of the bank, criticized the desire of some in government to push for a reduction in interest rates; under his leadership, the bank geared its policies toward meeting the criteria for joining the euro, whereas PiS and its allies reportedly wished to stimulate demand and growth through rate cuts. Unlike several new EU members, the Polish government has not yet set a firm target date for adopting the euro; Prime Minister Kaczynski stated that "it is very risky and that is why I think we can only consider it when the economy has significantly strengthened." Warsaw reportedly asked Brussels for additional time to bring down its deficit so that it may continue to receive EU assistance and eventually be able to qualify for euro adoption. In January 2007, Balcerowicz' term expired, and parliament approved Slawomir Skrzypek, a Kaczynski ally with little experience in monetary policy, as the new central banker. In July 2007, he announced the creation of an office to study the costs and benefits of joining the eurozone; in the meantime, Mr. Skrzypek said, the central bank would remain neutral on the issue. Despite its center-right label, PiS has been characterized as having a somewhat statist approach toward governance, particularly in its economic policies. For example, it espouses that "national champions" in certain sectors be identified and nurtured. In addition, some have speculated that PiS may seek to overturn earlier, SLD-approved reforms that sought to introduce greater flexibility in the labor code. Also, PiS reportedly would like to introduce vertical integration of the parts of the energy sector that are still owned by the state. To reduce dependence upon Russia, which supplies a large part of Poland's gas and oil, the government has instituted talks with Norway over laying a pipeline and constructing LNG (liquefied natural gas) terminals on the Baltic coast. In addition, Poland and the Baltic states are exploring a joint nuclear power project. Over the past two years, Poland has contributed a significant number of troops to the U.S.-led operation in Iraq. Observers note that the deployment is providing the Polish military with invaluable experience, not the least of which includes commanding a multinational division. However, Poland's presence in Iraq remains unpopular at home. The government has said that Poland will maintain its 900 troops there until the end of 2007. Poland also has sharply stepped up the size of its contingent of soldiers in Afghanistan, to 1,000. In addition, Warsaw contributed 260 troops to the U.N. peacekeeping mission in Lebanon. Poland has been a member of the European Union (EU) since May 2004 and has already experienced economic benefits from membership, particularly in the agricultural sector. Nevertheless, the Polish government was not reluctant to assert itself in a number of issue areas before joining the EU, and has been even less hesitant to do so now that it is a member. The new Polish government has sometimes been skeptical of the EU. It favors the eventual widening (to include Ukraine and Belarus) but not necessarily the deepening of the Union. At an EU meeting in Berlin in early 2006, Poland declined to support a plan to craft an energy agreement with Russia, which in January 2005 had temporarily halted gas deliveries to Ukraine and disrupted deliveries to Europe. Poland proposed instead the creation of an energy security treaty among EU and NATO countries, which would not include Russia, but would acknowledge that Russia would remain a major supplier. Some European analysts argued that Russia should be excluded, as it supplies such a large part of Europe's energy. However, citing past instances of energy cutoffs, Poland contended that Russia is unreliable. In November 2006, frustrated over Russia's energy policies and its year-long Russian ban on Polish agricultural products, Warsaw vetoed talks over the renewal of an EU-Russia partnership agreement. In 2007, attention focused on Poland's efforts to influence the EU voting system, which was under revision as part of a new treaty for the Union. Warsaw maintained that the proposed formula was skewed toward the largest countries, and proposed instead that voting strength be based upon the square root of each country's population; only the Czech Republic supported Poland's solution, which the Kaczynskis claimed was "worth dying for." During the negotiations, Prime Minister Kaczynski also argued that Poland's population would have been 66 million rather than the current 38 million had it not been for Germany's World War II invasion and occupation. A compromise—a delay of the introduction of the new formula—was reached eventually. Warsaw later stated that it would seek to revisit the voting issue during Portugal's EU presidency, but then backed away from that demand. Poland's behavior during the negotiations came in for strong criticism. According to the Financial Times , Jean-Claude Junker, Prime Minister of Luxembourg, "said Poland's stance at last week's summit was 'very near to having been unacceptable.'" Under the new government Poland's relations with Germany and Russia have been strained at times. Many Polish officials were incensed over the Russo-German agreement to construct a natural gas pipeline through the Baltic Sea, rather than overland, through the Baltics and Poland. During the 2005 presidential campaign, Lech Kaczynski said that, if elected, he would maintain a "firm but friendly" relationship with Russia. He also reminded Poles of the devastation wrought by Germany during World War II, but denied that raising this issue was an attempt to influence the election outcome. In June 2006, the German newspaper Tageszeitung ran a satire on the Kaczynski brothers. The Polish government demanded that the German government take action against the newspaper and apologize for the article, but Berlin, citing freedom of the press, responded that intervention would be illegal and an apology inappropriate. The article is believed to have prompted Lech to cancel his attendance of a summit meeting with France and Germany. Poland and the United States have historically close relations. Since 9/11, Warsaw has been a reliable supporter and ally in the global war on terrorism and, as noted earlier, has contributed troops to the U.S.-led coalitions in Afghanistan and in Iraq. Poland also has cooperated with the United States on "such issues as democratization, nuclear proliferation, human rights, regional cooperation ... and UN reform." During Prime Minister Jaroslaw Kaczynski's September 2006 visit to Washington, D.C., Secretary of State Condoleezza Rice described the two countries as "the best of friends." Early in 2007, after years of informal discussions, the Bush Administration began formal negotiations with Poland and the Czech Republic over a proposal to establish missile defense facilities on their territory to protect against missiles from countries such as Iran and North Korea; the plan would entail placing tracking radar in the Czech Republic and interceptor launchers in Poland. If agreements are struck, and if the Polish and Czech parliaments approve the projects, construction on the sites would likely begin in 2008, with initial deployments expected in 2011. Some Poles believe their country should receive additional security guarantees in exchange for assuming a larger risk of being targeted by rogue state missiles because of the presence of the U.S. launchers on their soil. In addition, many Poles are concerned about Russia's response. The Polish government reportedly has been requesting that the United States provide batteries of Patriot missiles to shield Poland against short- and medium-range missiles. Polls show the Polish public is opposed to such a base. Nevertheless, during a July 2007 meeting in Washington, D.C. with President Bush, President Lech Kaczynski reportedly indicated continued support for the program, and also emphasized the need to bolster Poland's security. In September 2006, President Bush publicly acknowledged the existence of a secret CIA program to detain international terror suspects worldwide. Earlier media reports alleged that Poland and Romania were among the countries that had hosted secret CIA prisons, although officials of both governments have denied these allegations. A European Parliament probe conducted throughout 2006 cited no clear proof of prison sites in Europe, but could not rule out the possibility that Romania had hosted detention operations by U.S. secret services. However, in June 2007 a Council of Europe report claimed to have evidence that U.S. detention facilities had been based in the two countries. President Kaczynski has stated that, since he assumed office, "there has been no secret prison—I am 100 percent sure of it," and that he had been "assured there were never any in the past either." Some Poles have argued that, despite the human casualties and financial costs their country has borne in Iraq and Afghanistan, their loyalty to the United States has gone largely unrewarded. Many have hoped that the Bush Administration would respond favorably by providing increased military assistance and particularly by changing its visa policy, which currently requires Poles to pay a $100 non-refundable fee, and then submit to an interview at a U.S. embassy or consulate—requirements that are waived for most western European countries. | Poland held presidential and parliamentary elections in the fall of 2005. After several months, a ruling coalition consisting of three populist-nationalist parties was formed; the presidency and prime minister's post are held by Lech and Jaroslaw Kaczynski, identical twin brothers who have increasingly consolidated their power. Their government's nationalist policies have caused controversy domestically, in both the political and economic arenas, and in foreign relations as well. Relations with some neighboring states and the European Union have been strained at times, but ties with the United States have not undergone significant change. Some observers believe that a recent dispute within the coalition may spark early elections. This report may be updated as events warrant. See also CRS Report RL32967, Poland: Foreign Policy Trends, and CRS Report RL32966, Poland: Background and Current Issues, both by [author name scrubbed]. |
The World Trade Organization's (WTO) Agreement on Technical Barriers to Trade (TBT Agreement) establishes obligations that WTO members must adhere to when they impose requirements on a product's characteristics. To date, relatively few WTO disputes have been raised challenging member compliance with the TBT Agreement's provisions. However, in recent years, the United States has faced claims alleging its failure to abide by the terms of the TBT Agreement. In two of these cases, which are still ongoing, the WTO found that certain U.S. labeling requirements for food products violated the TBT Agreement's nondiscrimination obligations—that is, the measures at issue treated foreign products less favorably than domestic products. The Appellate Body reports from these two disputes provide insight into how the WTO applies these nondiscrimination provisions, and can provide guidance for Congress to consider when enacting future programs that regulate product characteristics. This report analyzes the Appellate Body decisions in two disputes: U.S. – Certain Country of Origin Labeling Requirements ( U.S. – COOL ) and U.S. – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products ( U.S. – Tuna II ). In 2008, Canada and Mexico, through WTO dispute settlement procedures, requested consultations with the United States regarding U.S. country of origin labeling (COOL) requirements for certain beef and pork products. In the WTO dispute U.S. – COOL , Canada and Mexico claimed that the labeling program, inter alia , violated U.S. obligations under the TBT Agreement, arguing that the COOL program impermissibly treated foreign livestock less favorably than domestic livestock. After the parties exhausted the available dispute settlement procedures, including appeals, the WTO Appellate Body ruled in favor of Canada and Mexico, finding that the COOL program impermissibly discriminated against the foreign livestock. After the WTO reached its final decision on the merits in May 2015, Canada and Mexico requested permission from the WTO to retaliate against the United States through the suspension of concessions. The WTO Dispute Settlement Understanding (DSU) allows WTO members to retaliate against an offending party by raising tariffs or suspending other concessions made under WTO agreements in an amount equal to the impairment of trade caused by the offending measure. In their request for retaliation, Canada and Mexico have claimed that the U.S. COOL program, as currently implemented, impairs trade by approximately $3 billion per year. The United States has challenged the amounts that Canada and Mexico have claimed—that appeal is currently being heard by arbitrators at the WTO, with a decision on the amount of impairment due in the coming months. In another recent WTO case involving the United States, U.S. – Tuna II , Mexico claimed that the United States' "dolphin-safe" labeling program for tuna products, established by the Dolphin Protection Consumer Information Act (DPCIA), also violated the TBT Agreement. In that case, Mexico argued that the dolphin-safe label program impermissibly treated tuna from Mexico less favorably than domestic tuna and tuna from other foreign nations. To date, the WTO has ruled in favor of Mexico in this dispute as well; however, Mexico and the United States are awaiting a decision from the WTO's Appellate Body. If Mexico succeeds on appeal, it would be able to seek permission from the WTO to retaliate against the United States. These disputes were two of the first Appellate Body rulings to apply the nondiscrimination requirements of the TBT Agreement. The United States lost both of these disputes for failing to comply with those obligations established in Article 2.1 of the TBT Agreement, the focus of this report. First, to provide a basic understanding of the objectives and requirements of the TBT Agreement, this report provides a general overview of that instrument. Next, it briefly describes the regulatory programs at issue in these two WTO disputes and analyzes how the WTO's Appellate Body applied Article 2.1 in U.S. – COOL and U.S. – Tuna II . The report takes an in-depth look at the test established by the Appellate Body for determining whether a measure is impermissibly discriminatory. Finally, the report provides a brief description of how the United States amended these programs in response to the WTO decisions, and explains why subsequent WTO rulings found that the amended programs still failed to comply with international trade obligations. Shortly following World War II, developed countries sought to reach a multilateral international agreement aimed at reducing barriers to international trade. In 1947, these countries established the General Agreement on Tariffs and Trade 1947 (GATT 1947) in order to reduce tariffs and implement rules preventing discrimination in international trade. Through this agreement, the international community sought to liberalize trade markets and provide for a greater flow of goods across international borders. However, in the decades following the establishment of the GATT 1947, countries sought to further open global markets by reducing non-tariff barriers to trade. The international community recognized that countries frequently adopt measures that regulate a product's characteristics, typically to protect the environment or human health, ensure the quality of products, prevent deceptive practices, or achieve some other legitimate objective. However, these measures can be trade-distorting, and sometimes countries implement such regulations solely to protect domestic markets. To that end, the TBT Agreement is intended to balance the need to protect members' regulatory autonomy with the need to prevent unnecessary obstacles to international trade. The WTO members announced that they were establishing the TBT Agreement to "ensure that technical regulations and standards, including packaging, marking and labelling requirements, and procedures for assessment of conformity with technical regulations and standards do not create unnecessary obstacles to international trade." The TBT Agreement furthers this goal by providing a set of legal obligations that WTO members must adhere to when establishing such measures. The TBT Agreement applies to measures that regulate a product's characteristics. A measure is covered under the TBT Agreement if it regulates on the basis of a product's intrinsic qualities, qualities that are related to the product, or qualities that the product lacks. Characteristics that are related to the product include their identification, presentation, and appearance. In EC – Sardines , for example, Peru challenged an EU regulation establishing standards for what qualified as preserved sardines. The EU regulation established that only one kind of fish, Sar d ina pilchardus , could be labeled for sale as "preserved sardines." The Appellate Body held that this measure prescribed product-related characteristics because it conditioned the labeling of a product based on specific product characteristics, the species of fish. Similarly, in EC – Asbestos , the Appellate Body found that a French decree criminalizing the sale of products containing asbestos fibers fell under the scope of the TBT Agreement because it required all products to have a shared characteristic—that is, all products had to be asbestos-free. The TBT Agreement classifies measures that regulate on the basis of a product's characteristics into three categories: (1) technical regulations; (2) standards; and (3) conformity assessment procedures (CAPs). Technical regulations are documents that prescribe product characteristics with which compliance is mandatory . Technical regulations can include labeling requirements, import bans, or prohibitions that are related to product characteristics. Standards are documents that have been approved by a recognized body, and prescribe product characteristics with which compliance is voluntary . CAPs are procedures, such as those related to testing, verification, inspection, or certification, that are used to ensure that the requirements prescribed by a given standard and/or technical regulation are satisfied. The TBT Agreement lays out obligations that WTO members must adhere to when enacting technical regulations, standards, and CAPs. These obligations can be enforced through the WTO's dispute settlement procedures established by the DSU. Therefore, a country may request the establishment of a WTO dispute settlement panel to determine whether another party's measure violates the terms of the TBT Agreement. To date, most of the WTO disputes involving the TBT Agreement, including U.S. – COOL and U.S. – Tuna II , have focused on the provisions concerning technical regulations. These provisions are contained in Article 2 of the Agreement, which is the focus of this report. Article 2 of the TBT Agreement contains various requirements that WTO members must adhere to when issuing technical regulations. Article 2 requires that a party shall remove technical regulations that are no longer necessary due to changed circumstances; shall base their technical regulations on accepted international standards, when appropriate; shall explain the justification for such regulations when another party so requests; and shall participate in the creation and adoption of international standards with a view toward harmonizing technical regulations. members must also ensure that their measures are not "more trade restrictive than necessary" to fulfill a legitimate government objective. Furthermore, Article 2 of the TBT agreement contains numerous provisions that call for increased transparency among members with regard to technical regulations. Arguably the most significant obligations, at least with regard to recent litigation that has occurred, are found in Article 2.1 of the TBT Agreement. Article 2.1 requires that countries comply with "national treatment" obligations and "most-favored nation" (MFN) obligations. National treatment obligations provide that a country's technical regulations may not treat foreign products less favorably than like products of domestic origin. MFN obligations require that technical regulations treat products from one foreign country no less favorably than products from other foreign countries. The Appellate Body found, in U.S. – COOL and U.S. – Tuna II , that the U.S. labeling programs violated these prohibitions on discrimination. Before analyzing how the WTO Appellate Body has evaluated certain labeling requirements under Articles 2.1 of the TBT Agreement, it is worth pointing out that the TBT Agreement, unlike other WTO agreements, does not provide any explicit exceptions to these obligations. For example, Article XX of the GATT provides that members may implement measures that would otherwise violate GATT obligations if the measures are enacted to protect human health or the environment, conserve natural resources, or "protect public morals." The measure is GATT-compliant if it falls under one of these exceptions, provided it is not a disguised restriction on trade or implemented in an arbitrary manner. Whether a member has properly invoked one of the exceptions is subject to review by a WTO dispute panel. Furthermore, under Article XXI of the GATT, a member may maintain an otherwise impermissible measure if the member has enacted it to protect national security. The TBT Agreement does not contain a corresponding set of explicit exceptions. This characteristic has led some commentators to ask whether the TBT Agreement obligations are intended to be more stringently applied than other WTO agreements. However, as illustrated below, the Appellate Body appears to have read at least some of these exceptions into the text of the TBT Agreement. Prior to analyzing the WTO's decisions in these labeling cases, it is helpful to discuss the statutory and regulatory programs at issue in the disputes. The next sections of the report provide a brief summary of the COOL program and the DPCIA requirements in order to provide context for later analysis of the disputes. The COOL requirements for muscle cuts of beef and pork products went into effect following the enactment of the 2008 farm bill. The U.S. Department of Agriculture (USDA) promulgated interim regulations on the COOL program in August 2008, and then promulgated a final rule in January 2009. It is worth noting that the USDA amended the COOL regulations in 2013, following the initial determinations from the WTO that the program violated the TBT Agreement. This section discusses the regulations from the 2009 USDA rule because those were the regulations in dispute during the initial WTO proceedings discussed later in this report. The COOL statute requires all muscle cuts to be labeled according to their country of origin. The country of origin is determined by where certain production steps occur—that is, the appropriate label is determined by where the animal was born, raised, and slaughtered. The statute distinguishes between countries of origin by using four different categories (Categories A through D) for muscle cuts: Category A: meat derived from animals exclusively born, raised, and slaughtered in the United States; Category B: meat derived from animals of multiple countries of origin (production steps occur in multiple countries, including the United States), but not imported to the United States for immediate slaughter; Category C: meat derived from animals that were imported into the United States for immediate slaughter; and Category D: meat derived from animals where no production steps occurred in the United States. Under the 2009 regulations, the label for Category A meat read "Product of the United States." Packaging for meat that qualified for Category B needed to list, in any order, the applicable foreign country and the United States on the label; therefore, Category B meat could be labeled as "Product of the United States and [Country X]" or as "Product of [Country X] and the United States." The Category C label had to read "Product of [Country X] and the United States," in that order. Finally, meat of exclusively foreign origin, Category D, received a label stating "Product of [Country X]." Notably, the 2009 rule allowed for commingling of meat from different origins during the production process. The regulations prescribed which label could be used if meats from different origins were commingled. For example, if Category B meat was processed on the same day as Category C meat, then end products could receive the Category B label. Similarly, the Category B label would be used if meat from Category A was comingled with meat from Category B. The COOL statute also imposes record-keeping requirements on all producers. The statute provides that the USDA "may conduct an audit of any person that prepares, stores, handles, or distributes a covered commodity." These record-keeping requirements are enforced by penalty provisions; willful noncompliance with the COOL program can lead to fines of up to $1,000 per violation. Importantly, the COOL statute contains numerous exemptions from the labeling requirements. First, the COOL requirements do not apply to processed products. The USDA defines "processed" rather expansively—if meat is cooked, cured, smoked, or restructured in any way, it is considered processed and not subject to the COOL requirements. Second, the statute exempts all food sold in restaurants or food bars (any place that serves prepared food) from COOL requirements. Between these two exceptions, a significant percentage of meat is exempt from the COOL program by the time the product reaches the consumer; however, all upstream producers still would need to maintain records regarding the origin of each production step. These exemptions were of particular significance to the WTO's decisions, discussed below. The other labeling program in dispute at the WTO is the DPCIA. Congress enacted the DPCIA in 1990 in response to fishing practices that were found to be particularly damaging to dolphin populations. The DPCIA created a regulatory program, implemented through the Department of Commerce (DOC), that establishes when tuna products can be labeled as "dolphin-safe." In particular, the statute denies the "dolphin-safe" label for tuna caught using purse seine nets that were "set on" dolphins. For reasons explained below, the statute provides more stringent requirements for tuna that have been caught in a particular area of the Pacific Ocean—these more stringent requirements caused Mexico to challenge the program in the WTO. In the eastern tropical Pacific (ETP), an area off the western coast of Mexico and Central America in the Pacific Ocean, yellowfin tuna typically swim underneath dolphin pods. There is a strong ecological association between the two species, which, for apparently unknown reasons, seems to be stronger in the ETP. Therefore, in the ETP, tuna-fishing boats often look for dolphin pods on the surface of the water, and then seek to catch the tuna that are associated with those dolphins. The fishing boats sometimes "set on" the dolphins (cast nets around the dolphins and associated tuna) to catch tuna, and, incidental to this practice, dolphins may drown when they get caught in the fishing nets. Concerned with the high mortality rate of dolphins from these fishing practices, Congress passed the DPCIA. The DPCIA, and its implementing regulations, establish when a tuna product is eligible for the "dolphin-safe" label. If the tuna has not been caught using methods compliant with the DPCIA, then that tuna may not be labeled "dolphin-safe," and the producer cannot use "any other term or symbol that ... claims or suggests that tuna contained in the product were harvested using a method of fishing that is not harmful to dolphins." Any person found to knowingly and willfully mislabel tuna products covered under the statute is subject to a civil penalty of up to $100,000. It is worth noting that the DOC amended the implementing regulations in 2013 in response to the WTO proceedings discussed below; however, this section discusses the dolphin-safe regulations as they existed when the initial WTO disputes were brought against the United States in 2009. In establishing what types of fishing practices qualify for the dolphin-safe label, the law differentiates between fishing that occurs in the ETP, because of the ecological association between dolphins and tuna in that area, and fishing that occurs elsewhere in the world. For tuna caught in the ETP, a producer can label the product "dolphin-safe" only if the captain of the vessel and an independent observer certify that "no purse seine net was intentionally deployed on or used to encircle dolphins" during the trip, and that "no dolphins were killed or seriously injured" during the expedition. Therefore, tuna caught in the ETP using purse seine nets that were set on dolphins are not eligible for the dolphin-safe label (regardless of whether dolphins are harmed). Similarly, tuna from the ETP cannot be labeled dolphin-safe, regardless of the fishing method used, if the independent observer witnesses the death or serious injury of a dolphin during the trip. However, outside of the ETP, because there is no association between dolphin pods and schools of tuna, the certification requirements are different. In those locations, the captain needs only to certify that purse seine nets were not intentionally deployed on or used to encircle dolphins during the fishing expedition. There is no requirement to certify that no dolphins were harmed or killed, and there is no requirement for an independent observer to be onboard the ship. Notably, the DPCIA regulates only the use of the dolphin-safe label; the law does not prohibit the import, marketing, or sale of tuna that does not qualify for the label. Toward the end of 2008, Canada and Mexico, pursuant to WTO dispute settlement procedures, requested consultations with the United States regarding the COOL program. After consultations did not resolve the dispute between the parties, Canada and Mexico requested the establishment of a dispute settlement panel to determine whether the U.S. COOL program complied with WTO obligations. The WTO established the dispute settlement panel in May 2010. Canada and Mexico alleged, inter alia , that the U.S. COOL program violated Article 2.1 of the TBT Agreement. Similarly, in 2008, Mexico requested consultations with the United States regarding the dolphin-safe labeling program. After consultations did not result in a mutually agreed-upon solution, Mexico requested the establishment of a dispute panel, which was established on April 20, 2009. Mexico also claimed, inter alia , that the U.S. labeling program for tuna violated Article 2.1 of the TBT Agreement. The WTO's Appellate Body decisions from these disputes provide insight into the application of Article 2.1, and on how to determine if a measure qualifies as a technical regulation under the TBT Agreement. An analysis of whether a particular measure violates Article 2 of the TBT Agreement begins by establishing whether the measure in question is in fact a technical regulation under the TBT Agreement. Determining whether the measure is a technical regulation is a threshold question because, if it is not, "then it does not fall within the scope of the TBT Agreement." According to the EC-Sardines case, a technical regulation must meet three criteria: (1) the document must apply to an identifiable product or group of products; (2) the document must "lay down" one or more characteristics of those products; and (3) "compliance with the product characteristics must be mandatory." The United States did not dispute that the COOL program was a technical regulation—it applies to an identifiable group of products (beef and pork); it lays down characteristics of beef and pork by requiring the products to be labeled; and compliance with COOL is mandatory because all muscle cuts subject to COOL must be labeled properly, and producers can face monetary penalties for failing to abide by the requirements. Alternatively, the determination of whether the labeling program was a technical regulation was an important factor in U.S. Tuna II . The first two prongs of the test were relatively simple for the Appellate Body to establish. First, the labeling program applied to an identifiable group of products, namely tuna. Second, the measure laid down certain characteristics of the product in order to qualify for the dolphin-safe label—that is, the tuna had to be caught using particular fishing methods in order to be labeled as "dolphin-safe." Indeed, the United States did not appeal these findings. However, the third prong of the test, whether the measure was mandatory, was a point of contention between the parties. The United States contended that the dolphin-safe tuna label was not a mandatory label because the measure did not prohibit the import, marketing, or sale of any tuna, regardless of the fishing methods used. Mexican distributors, the U.S. noted, were still able to access the U.S. market for tuna—the law prevented only certain tuna from being labeled as dolphin-safe. Therefore, because the DPCIA does not block the sale of such tuna, the United States argued, compliance with the labeling program is voluntary and, thus, the measure should not qualify as a technical regulation. Mexico countered that the program should be viewed as mandatory because the dolphin-safe label could be used only if producers complied with the requirements of the DPCIA, and producers were prohibited from making any other statements regarding dolphin-safe fishing practices on a label. The Appellate Body agreed with Mexico and laid out a method for evaluating whether a measure is "mandatory" for the purposes of the TBT Agreement. Notably, the fact that a producer must meet certain requirements to use a particular label is not dispositive of whether the measure is a technical regulation. A labeling program that establishes that a product must contain certain characteristics in order to use a certain label is not per se a technical regulation. However, the Appellate Body also found that the United States' position, which contended that a labeling requirement is mandatory only if it prevents the sale of the product on the market, was also misguided. The Appellate Body noted that the definition of a technical regulation in the TBT Agreement does not mention the term "market." Therefore, a measure can still be a technical regulation even if it does not prohibit the sale of such a product on the market. The Appellate Body compared the DPCIA with the measure at issue in EC—Sardines . In that case, the technical regulation at issue prohibited the sale of fish labeled as "preserved sardines" unless it was a specific species of fish. The Appellate Body noted that the measure in EC – Sardines did not prohibit the sale of the other species of fish; it only prohibited their sale if they were labeled as preserved sardines. Therefore, the Appellate Body noted, a labeling measure can be a technical regulation even if that particular label is not required in order to put the product on the market. The Appellate Body declared that the determination of "whether a particular measure constitutes a technical regulation must be made in light of the characteristics of the measure at issue and the circumstances of the case." Therefore, there does not appear to be a bright line test, but, rather, a case-by-case evaluation that takes into consideration the facts of the dispute. Such a case-by-case assessment should consider the "nature of the matter addressed by the measure," and evaluate whether the measure (1) is an enforceable law or regulation; (2) prohibits or requires certain conduct; and (3) provides for the only manner to address a particular issue. The Appellate Body then applied each of these three criteria to the measure at issue to find that the labeling program is mandatory for the purposes of the TBT Agreement. First, the DPCIA and its implementing regulations are enforceable laws and regulations. Second, the DPCIA prohibits and prescribes certain conduct with regard to the labeling of tuna products. Finally, and seemingly most importantly, the WTO stressed that the DPCIA provided the only means for identifying tuna products as dolphin-safe. The fact that the law prohibited tuna producers from making any reference to marine mammal safety unless they complied with the terms of the DPCIA seemed to sway the determination by the Appellate Body greatly. Even true statements regarding dolphins are prohibited on a label if the tuna does not qualify for the DPCIA's label. The Appellate Body emphasized that the measure "covers the entire field of what 'dolphin-safe' means in relation to tuna products in the United States." These factors all weighed in favor of the Appellate Body's finding that the DPCIA is a technical regulation and subject to the requirements of Article 2 of the TBT Agreement. The Appellate Body evaluated the COOL program and the DPCIA under Article 2.1 of the TBT Agreement. As discussed above, Article 2.1 requires that "Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country." Thus, this article provides for both national treatment obligations (a member must not treat foreign products less favorably than domestic products) and MFN obligations (a member may not treat products from one foreign country more favorably than it treats the products of any other foreign country) with respect to the establishment and implementation of technical regulations. In U.S. – COOL , Canada and Mexico alleged that the COOL program violated the national treatment requirements—namely, that COOL treats foreign livestock less favorably than it treats domestic livestock. In U.S. – Tuna II , Mexico claimed that the dolphin-safe labeling program violated both the national treatment and the most-favored nation requirements of Article 2.1. In practice, the Appellate Body has evaluated the national treatment obligations and the MFN obligations under the same test, discussed below. The test for whether a product violates the requirements of Article 2.1 contains three parts: (1) the document must be a "technical regulation"; (2) the foreign and domestic products must be "like products"; and (3) the technical regulation must treat the foreign products less favorably than either domestic products, in a national treatment claim, or other foreign products, in an MFN claim. As discussed above, the WTO found in both disputes that the statutes and regulations qualified as technical regulations. Furthermore, the United States did not contest, in either dispute, whether the products at issue were "like products." This left the Appellate Body to evaluate the third criterion: whether the COOL program and DPCIA treated foreign products less favorably than domestic products. To make this determination, the Appellate Body evaluates two factors: (1) whether the measure has a detrimental impact on the foreign products, and, if so, (2) whether the technical regulation is based on a legitimate regulatory distinction. Under the first factor, importantly, a technical regulation need not discriminate against foreign products on its face in order to have a detrimental impact. In both cases, the Appellate Body noted that Article 2.1 prohibits both de jure and de facto discrimination. Therefore, a reviewing panel should not look just at the text of the document, because even a measure phrased in origin-neutral language may have a detrimental effect on foreign products. In both the COOL and DPCIA disputes, the measures were determined to have a de facto detrimental effect on foreign products vis-à-vis domestic products. In order to determine whether the measure has a detrimental impact, the reviewing body shall look to see the effect that the measure has on the market for the products. For example, if the detrimental impact is caused by the independent actions of private parties, such as private firms or consumers making a choice independent of the measure, rather than because of the technical regulation itself, then the measure will not be deemed to have a detrimental impact on the market. As the Appellate Body stated, there must be a "genuine relationship between the measure at issue and an adverse impact on competitive opportunities for imported products." However, importantly, if the technical regulation incentivizes private parties to act in a particular manner that causes a detrimental impact, that impact can still properly be attributed to the measure at issue. The central question to ask is whether the regulatory action "affects the conditions under which like goods ... compete in the market within a Member's territory." This examination is fact-intensive, and should consider characteristics of the particular market, consumer preferences, the relative market share of the countries involved, and historical patterns of trade in that industry. After evaluating these facts, if the regulation provides an advantage to products of domestic origin when compared to the foreign product, then there is a detrimental impact. If the technical regulation does have a detrimental impact, the reviewing WTO panel shall determine if the technical regulation is based on a "legitimate regulatory distinction." Mere detrimental effect is not enough to establish a violation of Article 2.1—that is, if the member implementing the regulation can show that the regulation is based on a legitimate regulatory distinction that is applied in an "even-handed" manner, then the technical regulation is valid. Notably, this part of the test is not readily apparent from reading the text of Article 2.1, as there is no explicit exception for legitimate regulatory distinctions listed in the article. However, the Appellate Body has established that simply because a measure has a detrimental effect on certain products, it does not mean that those products are treated less favorably. The Appellate Body noted that technical regulations, by their very definition, distinguish between products based on their characteristics and, thus, such distinctions do not automatically establish "less favourable treatment" under the TBT Agreement, even if they restrict trade. The Appellate Body noted that Article 2.2 of the TBT Agreement provides guidance on how to interpret Article 2.1. Article 2.2 provides that a technical regulation should not be "more trade restrictive than necessary," showing that measures are allowed to restrict trade to at least some extent. Finally, the Appellate Body cited the preamble of the TBT Agreement to show that WTO members recognize that measures may be enforced to pursue certain legitimate regulatory objectives such as the protection of human or environmental health. Therefore, the judicial test for determining if a measure treats a foreign product "less favorably" is more complex than merely showing that a measure has restricted trade of a product—if the technical regulation is based on a legitimate regulatory distinction that is applied in an "even-handed" manner, then the technical regulation will not violate Article 2.1. However, if the technical regulation is applied in an arbitrary manner, then the detrimental impact reflects discrimination in violation of the TBT Agreement. In evaluating whether a legitimate regulatory distinction exists, the reviewing body must first determine what regulatory distinction is being made by the regulation at issue. A technical regulation, as discussed above, "lays down" characteristics of a product to distinguish the product from another product (e.g., products containing asbestos compared to products without asbestos). The reviewing court must determine how the products are being distinguished. For example, in the DPCIA dispute, the regulatory distinction is based on labeling conditions for tuna caught in the ETP compared to tuna caught outside the ETP—the regulation imposes different requirements based on this distinction. Once the reviewing body determines the regulatory distinction, it must then decide whether the distinction is justified because it is a legitimate regulatory distinction. The Appellate Body does not seem to have provided a clear test to decide whether a measure stems exclusively from a legitimate regulatory distinction. Rather, the reviewing body must evaluate on a case-by-case basis whether the measure at issue is applied in an "even-handed" manner. Such an inquiry is highly fact-intensive and requires an examination of the particular circumstances of the case. Ultimately, the reviewing body asks if the regulatory distinction, which has already been determined to cause harm to foreign products, is being implemented in a legitimate manner considering the objective sought. As discussed previously, the first two prongs of the Article 2.1 test were not contested in the U . S . – COOL case. The parties agreed that COOL was a technical regulation that applied to "like" products. Therefore, the Appellate Body focused on the third and final portion of the Article 2.1 analysis—that is, whether the COOL program treated Canadian and Mexican livestock less favorably than domestic livestock. First, the Appellate Body found that the technical regulation had a detrimental impact on Canadian and Mexican livestock. Specifically, the WTO found that the COOL measure established a de facto requirement that all livestock processors segregate their livestock by origin based on where the animals were born, raised, and slaughtered in order to keep verifiable records and transmit that information down the supply chain, as required by the law. These records, under the COOL statute, must be maintained to avoid facing the statute's penalty provisions. This de facto requirement to segregate the livestock imposed significant costs on livestock producers. Further, after assessing the facts, the WTO found that livestock producers in the United States avoided the added costs associated with segregating livestock by processing only domestic livestock or purchasing foreign livestock at reduced prices. The United States argued that the decision to process only domestic livestock was a business decision made by private parties independent of the measure at issue. However, the Appellate Body rejected this argument by finding that the technical regulation at issue incentivized the processing of only domestic livestock, and was therefore the cause of the detrimental impact. Having found that the COOL statute caused a detrimental impact on foreign products, the Appellate Body then proceeded to the next portion of the test. Based on the facts specific to the U . S . – COOL dispute, the WTO found that the detrimental impact on foreign livestock did not stem from a legitimate regulatory distinction. It established that the purpose of COOL was to provide consumers with information regarding the origin of their meat products. To accomplish this objective, the Appellate Body noted that the COOL statute requires upstream producers to maintain verifiable records on the origin of all livestock and meat, and forward them to the next business in the production chain so the meat can be labeled properly. However, all the information maintained and transmitted down the supply chain was not transmitted to the consumer in a useful manner, if at all. The Appellate Body noted that the labels involved were confusing, and, even if understood, failed to provide the consumer with the amount of information that the upstream producers were required to maintain. While producers had to track where all animals were born, raised, and slaughtered throughout the supply chain, the consumer would rarely receive that information on the product's label. It is difficult for a consumer, without being particularly educated on the issue, to understand what the different labels mean. The Appellate Body also pointed out that the statute's provisions allowing the different categories of meat to be commingled adds further confusion for a consumer. For example, if a slaughterhouse processed Category B meat on the same day as Category C meat, under the regulations, that meat would be eligible to receive a Category B label. Therefore, a consumer could not be sure where each production step occurred based on reading the label, even assuming that the consumer understood the general distinction between the labels. Furthermore, the Appellate Body noted that a substantial amount of meat is exempt from the COOL program, such as meat that is processed or sold in a prepared food establishment, like a restaurant. For meat exempt from label requirements, the consumer does not learn about where any of the meat originated; yet the upstream producers are still required to maintain and transmit all the information regarding the origin of the livestock for each production step. Thus, the Appellate Body ruled that the amount of information required to be maintained by upstream producers (which caused the detrimental impact) was not commensurate with the information actually conveyed to the consumer. The detrimental impact on foreign livestock caused by increased costs due to de facto segregation requirements could not be explained by the need to provide consumers with information on the origin of meat products because little of that information actually reached the consumer. Therefore, the WTO found that the detrimental impact caused by the technical regulation did not stem from a legitimate regulatory distinction, and impermissibly discriminated against foreign products. After establishing that the DPCIA and implementing regulations qualified as technical regulations and that the foreign tuna products were like domestic tuna products and products from other foreign countries, the Appellate Body turned to whether the tuna labeling regulations treated the Mexican tuna products less favorably. First, the Appellate Body determined that the measure caused a detrimental impact on the Mexican tuna products. The facts established, and the United States did not appeal the finding, that "dolphin-safe" labels added significant value to tuna products in the U.S. market because retailers and consumers in the United States greatly prefer purchasing tuna with that label. Thus, after reviewing market data, the WTO found that access to the dolphin-safe label constitutes an advantage. The Appellate Body then had to determine if it was the measure itself that denied Mexico access to that label and, thus, caused a detrimental impact. As previously discussed, the DPCIA provides for more stringent requirements for tuna caught in the ETP than for tuna caught outside of the ETP. Because the Mexican fishing fleet operates mostly in the ETP, the Appellate Body noted, under the technical regulation, "most tuna caught by Mexican vessels ... would not be eligible for inclusion in a dolphin-safe product." The technical regulation had the de facto effect of imposing more stringent requirements on Mexican fishers vis-à-vis fishers from the United States and other foreign countries. Therefore, the regulation had a detrimental effect on Mexican tuna products. The United States argued, again, that independent decisions made by private actors, such as consumers, caused the detrimental impact, not the measure itself; however, the WTO disagreed with that argument. The Appellate Body found that the measure controlled access to the label and, therefore, any value added to the product by the label is provided by the technical regulation. The Appellate Body noted that the "fact that the detrimental impact on Mexican tuna products may involve some element of private choice does not, in our view, relieve the United States of responsibility under the TBT Agreement." Ultimately, the technical regulation caused a change in the way products competed on the U.S. market, to the detriment of Mexican tuna. However, the Appellate Body still had to determine whether the detrimental impact stemmed from a legitimate regulatory distinction. The Appellate Body found that the DPCIA does not stem from a legitimate regulatory distinction, and, thus, the DPCIA represents discrimination in violation of Article 2.1. First, the Appellate Body noted that the stated objective of the United States' measure was to ensure consumers are not misled regarding whether tuna products contain tuna that was caught in a manner that harms dolphins. The United States argued that because there is a substantially larger risk to dolphins in the ETP, the distinction made by the measure is legitimate—that is, the different conditions in the ETP provide a basis for the technical regulation treating tuna caught in the ETP differently from tuna caught outside the ETP. The Appellate Body agreed that fishing in the ETP poses a significant threat to dolphins. However, the Appellate Body also noted that other fishing methods undertaken outside of the ETP also posed a threat to dolphins, even if the threat is not as substantial. The Appellate Body found it problematic that the technical regulation did not address the threats to these dolphins. Under the technical regulation, tuna caught in the ETP would not be eligible for a dolphin-safe label if an independent observer found that any dolphins were killed or harmed during the trip (regardless of the fishing methods used). Meanwhile, outside the ETP, tuna would be eligible for the dolphin-safe label even if someone observed that a dolphin was killed or injured during the trip. The WTO found that while the measure takes an absolute approach to dolphin safety in the ETP, where Mexico fishes, it takes a much more lenient approach in all other parts of the globe. The Appellate Body emphasized: We note, in particular, that the US measure fully addresses the adverse effects on dolphins resulting from setting on dolphins in the ETP, whereas it does not address mortality (observed or unobserved) arising from fishing methods other than setting on dolphins outside the ETP. In these circumstances, we are not persuaded that the United States has demonstrated that the measure is even-handed in the relevant respects, even accepting that the fishing technique of setting on dolphins is particularly harmful to dolphins. The Appellate Body concluded that the DPCIA is not properly "calibrated" to address risks to dolphins from different parts of the ocean and is, therefore, not even-handed. Thus, because the measure had a detrimental effect on Mexican tuna products, and the technical regulation was not applied in an even-handed manner, the DPCIA reflects discrimination in violation of Article 2.1 of the TBT Agreement. In each dispute, after the Appellate Body found that the United States' technical regulations violated obligations contained in WTO agreements, the United States had a "reasonable period of time" to comply with the WTO's findings. In both cases, the executive agencies responsible for implementing the programs revised the applicable regulations in an attempt to bring the programs into compliance with WTO obligations. WTO compliance panels found, in both disputes, that those changes did not cure the defects with the technical regulations. In U.S. – COOL , the dispute has proceeded to the retaliation phase of the dispute settlement process. In U.S. – Tuna II , the United States is waiting on the Appellate Body's opinion on its appeal of the compliance panel findings. This section of the report provides a very brief description of the amendments to the regulations and the subsequent findings of the compliance panels and Appellate Body reviewing those amendments. The applied test under Article 2.1, as discussed above, remained the same. The USDA, through notice-and-comment rulemaking, amended the regulations pertaining to the COOL program in 2013. In the department's amendments, it appears that the USDA attempted to make the information maintained by upstream producers "commensurate" with the information provided to consumers. In this manner, the new regulations provided that the labels on all muscle cuts of meat had to include where all of the production steps occurred. For example, instead of a Category A label reading "Product of the U.S.," the label is now required to read "born, raised, slaughtered in the U.S." The other categories of labels were similarly amended to include the production steps. Furthermore, the new rule prohibited commingling of meats to help ensure that each label appropriately reflected the origin of the meat. Therefore, the USDA attempted to adhere to the WTO ruling not by removing the incentive for segregation, but by ensuring that consumers received more of the collected information. However, Canada and Mexico were unsatisfied with the changes to the COOL program. Both countries requested that a WTO compliance panel review the changes to the U.S. program to determine whether the new regulations satisfied WTO obligations. The compliance panel found that although the changes to the program provided more information to the consumer, the actions were not enough to bring the measure into compliance. The compliance panel noted, inter alia , that the burden on upstream producers was still not commensurate with information provided to consumers because of the statutory exemptions for processed meat and for meat sold at prepared food establishments. Following the same tests as outlined above, the WTO found that the COOL program was not based on a legitimate regulatory distinction, and thus represented impermissible discrimination in violation of Article 2.1 of the TBT Agreement. Canada and Mexico have since requested permission from the WTO to retaliate against U.S. products due to the United States' failure to bring the COOL program into compliance with WTO obligations. Together, Canada and Mexico have sought retaliation for approximately $3 billion in impairment. The United States has challenged the amount of damages that Canada and Mexico have claimed. Currently, the dispute regarding the amount of impairment the COOL program causes is being heard by an arbitration panel at the WTO. Canada and Mexico then will be able to suspend concessions (e.g., raise tariffs) on U.S. products in the amount determined by the arbitration panel. However, if the United States brings the COOL program into compliance with WTO obligations, the authority to suspend concessions will terminate. In order for the United States to bring the measure into compliance, Congress will have to amend the COOL statute. Following the Appellate Body's determination in U.S. – Tuna II , discussed above, the DOC amended the implementing regulations for the DPCIA in an attempt to come into compliance with the WTO ruling. Because the WTO Appellate Body found that the DPCIA violated Article 2.1 because it fully addressed dolphin mortality in the ETP while failing to address dolphin mortality outside of the ETP, the amended regulations imposed stricter requirements on tuna caught outside of the ETP to better "calibrate" the dolphin-safe labeling program. Thus, again, the United States appears to have attempted to solve the problem not by alleviating the burden on the foreign producers, but rather by tailoring the rule so that it qualified as an even-handed and legitimate regulatory distinction. The amended regulations maintained the requirements for ETP vessels to keep an independent observer onboard the ship to certify that no dolphins were killed or injured during the trip. However, it added, inter alia , a requirement that ships outside the ETP have the captain certify that no dolphins were killed or harmed during the particular fishing expedition. The compliance panel again followed the Article 2.1 test outlined above. First, it found that requiring an independent observer "involves an expenditure of significant resources." Because only vessels operating in the ETP are required to maintain an independent observer, the regulation had a de facto detrimental impact on the Mexican tuna fleet, which mostly fishes in that area. Second it sought to determine whether the detrimental impact stems from a legitimate regulatory objective. Although admitting that the DOC amendments brought the program closer to compliance, the panel still found that the technical regulation was not applied in an even-handed manner. The compliance panel found that independent observers have skills and qualifications that captains do not necessarily have, yet only fishing vessels in the ETP are subject to this independent observer requirement. Thus, it is still more difficult and costly for Mexican tuna products to qualify for the dolphin-safe label. The panel stated that the varying provisions, which could allow for less accurate information regarding dolphin mortality for tuna caught outside the ETP, is "in contradiction with the objectives of the amended tuna measure," and found that the measure is not even-handed. The United States has appealed the ruling by the compliance panel. The Appellate Body has indicated that it expects its report to be circulated in November 2015. If the Appellate Body agrees that the DPCIA program violates Article 2.1 of the TBT Agreement, Mexico may seek permission to retaliate against the United States for failing to comply with WTO obligations. While, to date, the TBT Agreement has not been subject to extensive analysis from the Appellate Body, the Appellate Body's decisions in these two labeling disputes provide insight into the obligations imposed by that agreement. These cases can provide guidance to Congress and executive agencies when formulating technical regulations, including labeling programs. Legislators and agency officials must consider whether any regulatory scheme has a detrimental effect on foreign trade, and, if so, they must ensure that the program is tailored appropriately so that it is applied in an even-handed manner. | The World Trade Organization's (WTO) Agreement on Technical Barriers to Trade (TBT Agreement) contains obligations that WTO members must adhere to when they impose requirements on a product's characteristics. Countries typically implement such requirements in order to protect human health or the environment, prevent deceptive practices, or further other legitimate policy goals. However, these measures can be trade-distorting, and sometimes countries implement such regulations solely to protect domestic markets. To that end, the TBT Agreement is intended to balance the need to protect members' regulatory autonomy with the need to prevent unnecessary obstacles to international trade. To date, relatively few WTO disputes have been raised challenging member compliance with the TBT Agreement's provisions. However, in recent years, the United States has faced claims alleging its failure to abide by the terms of the TBT Agreement. In two of these cases, U.S.–COOL and U.S.–Tuna II, the WTO found that the United States violated the nondiscrimination obligations contained in Article 2.1 of the TBT Agreement because the measures treated foreign products less favorably than domestic products. The Appellate Body reports from these two disputes provide insight into how the WTO applies these nondiscrimination provisions, and can provide guidance to Congress when it enacts future programs that regulate product characteristics. First, to provide a basic understanding of the objectives and requirements of the TBT Agreement, this report provides a general overview of that instrument. Next, it briefly describes the regulatory programs at issue in these two WTO disputes before analyzing how the WTO's Appellate Body applied Article 2.1 of the TBT Agreement in U.S.–COOL and U.S.–Tuna II. The report takes an in-depth look at the test established by the Appellate Body for determining whether a measure is impermissibly discriminatory. Finally, the report provides a brief description of how the United States amended these programs in response to the WTO decisions, and explains why subsequent WTO rulings found that the amended programs still failed to comply with international trade obligations. |
Willie Davis was a passenger in a car stopped by police in Greenville, Alabama, for a traffic violation. The police arrested Davis for giving a false name. After handcuffing him and placing him in the back of a patrol car, the police searched the passenger compartment of the car in which Davis had been riding. The police found a gun inside Davis's jacket, and Davis was convicted of possessing a firearm as a convicted felon. At the time of the search, the police were acting in conformity with Eleventh Circuit precedent. The Eleventh Circuit had adopted the widely accepted interpretation of the Supreme Court's decision in New York v. Belton , which entitled police to conduct a warrantless and suspicionless search of a vehicle's passenger compartment after arresting one of its passengers. After Davis was convicted, however, the Supreme Court held in Arizona v. Gant that this type of suspicionless vehicle search incident to arrest violated the Fourth Amendment to the U.S. Constitution. The Fourth Amendment provides a right against "unreasonable searches and seizures." It secures privacy interests in one's person and property against unreasonable incursions by state and federal officials. However, the parameters of Fourth Amendment protection have significantly changed during the last century and continue to evolve in response to Supreme Court decisions. As the Court's Fourth Amendment jurisprudence shifts, so does its approach to related questions, such as when and how courts should remedy Fourth Amendment violations. Although the Supreme Court has often framed civil liberty and the rule of law as requiring that a legal remedy accompany every legal right, the Court did not announce a remedy for Fourth Amendment violations until 1914. Then, in Weeks v. United States , the Court held that unconstitutionally obtained evidence could be excluded at trial to remedy a Fourth Amendment violation. This remedy, subsequently termed the "exclusionary rule," initially only applied to Fourth Amendment violations by federal actors, but, in 1961, the Court extended it to violations by state actors as well. The scope of the exclusionary rule has narrowed since these early decisions. The exclusionary rule, for example, is no longer treated as a constitutional doctrine. Instead, the Supreme Court has described the rule as a pragmatic doctrine that only applies when the benefits of evidentiary suppression exceed its costs to the justice system. The Court has also articulated several exceptions to the exclusionary rule's applicability. The "good-faith exception," which renders the exclusionary rule inapplicable to evidence that the police obtained illegally but in "good-faith," is arguably the most significant of these exceptions. Today, the good-faith exception applies in such a wide number of circumstances that its application appears to be the norm from which evidentiary exclusion is the exception. Under recent Supreme Court jurisprudence, the good-faith exception applies to all illegally obtained evidence that was not seized as a result of "deliberate" and "culpable" police misconduct. The Court emphasized this standard in its decision in Davis , confirming that police culpability is now the dispositive factor in determining the exclusionary rule's applicability. Courts apply the exclusionary rule to deter Fourth Amendment violations by suppressing unconstitutionally seized evidence. The rule was initially conceived as a constitutionally required remedy for—rather than a deterrent of—illegal searches and seizures, but recent Supreme Court cases have emphasized that the exclusionary rule is neither rooted in nor required by the U.S. Constitution. This shift in judicial thinking may reflect a move toward textualism on the Supreme Court as well as concern that the exclusionary rule impedes the criminal justice system by barring probative evidence of a criminal defendant's guilt from admission at trial. The Supreme Court has narrowed the reach of the exclusionary rule over the years. Today, the exclusionary rule is applied only if the benefits of its application—primarily its deterrent effect on unconstitutional police conduct—outweigh the costs to law enforcement and the administration of justice. The Court has also articulated several exceptions to the exclusionary rule's operability. Arguably the good-faith exception is the most significant exception to the exclusionary rule. It permits the unconstitutionally obtained evidence to be introduced at trial when it was seized in "good-faith" by law enforcement officers. As it was initially articulated in United States v. Leon , the good-faith exception seemed to apply only when the police acted in "objectively reasonable reliance" on the legal error of an authority other than the police. These authorities included state legislatures and magistrate judges. However, the Supreme Court subsequently extended the good-faith exception to good-faith reliance on a clerical error within the police department—namely, a mistake in a police database file regarding the status of the suspect's arrest warrant. In Herring v. United States , the Court held in 2009 that "to trigger the exclusionary rule, police conduct must be sufficiently deliberate that exclusion can meaningfully deter it, and sufficiently culpable that such deterrence is worth the price paid by the justice system." Supporters of the exclusionary rule criticized the decision for undermining the Fourth Amendment by expanding the good-faith exception's applicability. However, the Court wrote that "the flagrancy of the police misconduct" has always "constituted an important step in the calculus" of the exclusionary rule, and it characterized the exclusionary rule's evolution as a series of cases excluding evidence obtained as a result of flagrant or deliberate violations of suspects' rights. United States v. Davis was the first case in which the Supreme Court was asked to apply the Herring standard and determine whether particular police conduct was "culpable." Prior to the Supreme Court's opinion, the federal circuit courts of appeals had reached conflicting decisions about the admissibility of evidence seized in an unconstitutional search that, at the time it was conducted, complied with precedent. The Supreme Court held that this evidence is admissible because police do not act culpably by conducting an unconstitutional search that conformed with "binding appellate precedent." The case confirms that, under the Herring test, police culpability is now the sole relevant factor in determining whether the exclusionary rule applies. In United States v. Davis , Davis contended that police culpability was only one relevant factor in determining whether the exclusionary rule applies. He contended that the exclusionary rule can also apply for other reasons, including (1) if doing so is constitutionally mandated under the retroactivity doctrine, which requires courts to apply recently announced Fourth and Fifth Amendment rules retroactively to certain cases on direct review, and (2) if its application would facilitate the development of Fourth Amendment law by incentivizing future appeals. As discussed below, the Court rejected Davis's approach and assessed the exclusionary rule's applicability solely with reference to the culpability standard prescribed in Herring . The Court determined that the police had not acted wrongfully by complying with appellate precedent, and it therefore held that the exclusionary rule did not apply. One Justice concurred in the judgment and two dissented. As to Davis's first argument, the Supreme Court drew a distinction between retroactively applying a new judicial rule for the conduct of criminal prosecutions and deciding how to remedy a violation of that rule. According to the retroactivity doctrine, Article III of the U.S. Constitution requires the retroactive application of a new Supreme Court precedent on criminal procedure to all cases not yet final. Davis relied on this doctrine to argue that, when a new Fourth Amendment rule is announced, both the new rule and the method of redress used to remedy the wrong suffered by the defendant in that case should both be applied retroactively on appeal. He drew support from language in the Supreme Court's opinion in Danforth v. Minnesota describing retroactivity as "about remedies, not rights" and a question of "redressability." However, the Court rejected Davis's contention as mischaracterizing the retroactivity jurisprudence so as to conflate it with the case law applying the good-faith exception. The Court wrote that the retroactivity doctrine and its case law determine "whether a new rule is available on direct review as a potential ground for relief ... [not] what 'appropriate remedy' (if any) the defendant should obtain." Having defined the retroactivity doctrine as a determining the appropriate rule and the exclusionary rule as a determining the appropriate remedy in a given case, the Court considered whether the exclusionary rule was applicable in Davis . Davis contended that the appropriate test for the exclusionary rule's application balanced the benefits of applying the exclusionary rule's application with its costs. Davis further argued that the benefits outweighed the costs because its application would, in addition to deterring unconstitutional police searches, facilitate the development of Fourth Amendment law. While the two dissenters found this argument persuasive, the Court held that it could not be reconciled with exclusionary rule precedent. Ensuring that defendants have incentives to challenge erroneous lower-court case law is not, the Court wrote, a relevant consideration in an exclusionary rule case. The Court emphasized that the exclusionary rule has only one purpose, deterring culpable police conduct, and it neither applies nor should apply for any other reason. However, the Court also left open the possibility that, in a future case, it "could, if necessary, recognize a limited exception to the good-faith exception for a defendant who obtains a judgment overruling ... Fourth Amendment precedents." Instead of following Davis's approach, the Court assessed the exclusionary rule's applicability solely with reference to the culpability standard prescribed in Herring . Under this standard, a defendant benefits from the exclusionary rule's application only if his Fourth Amendment rights were violated "deliberately, recklessly, or with gross negligence" or as a result of "recurring or systemic negligence" by law enforcement. The Court found that Davis had not met this high standard because the police had "acted in strict compliance with binding precedent." Applying the exclusionary rule in this case, the Court wrote, would transform the exclusionary rule into "a strict liability regime" that penalizes police officers for unintentional constitutional violations. Accordingly, the Court determined that the exclusionary rule was inapplicable. Supreme Court Justice Sotomayor found that Davis did not determine whether the exclusionary rule applies when the law governing the constitutionality of a particular search is unsettled. In its earlier opinion in Davis , the Eleventh Circuit had reached a similar conclusion, but it had adopted a different rationale than the one Justice Sotomayor put forth in her concurrence. The Eleventh Circuit confined its holding in Davis to a police officer's good-faith reliance on clear and unambiguous appellate precedent because, in its view, police officers engage in deliberate and culpable conduct when they try to conduct legal analysis. According to the Eleventh Circuit, police are ill-equipped to analyze precedent and answer legal questions, and therefore their attempts to perform this type of legal reasoning should be viewed as culpable conduct. The Eleventh Circuit also stated that requiring police to engage in more limited police action pending decisive judgments from the U.S. Supreme Court maintains a necessary "incentive to err on the side of constitutional behavior." In contrast, Justice Sotomayor stated in her concurrence that the Court's opinion in Davis would not control cases in which police had relied on ambiguous precedent because the facts in Davis did not present the Court with the opportunity to determine whether exclusion in those circumstances would be warranted. Justice Sotomayor did not adopt the Eleventh Circuit's view that a police officer's attempt at legal analysis is, necessarily, deliberate and culpable conduct. Moreover, unlike the Eleventh Circuit, she rejected the view that an officer's culpability is dispositive of the exclusionary rule's applicability. She wrote that she reads the exclusionary rule precedents as requiring evidentiary exclusion when it would "appreciably deter Fourth Amendment violations." While she said she had found that exclusion in Davis would not appreciably deter future Fourth Amendment violations, this did not determine "whether exclusion would appreciably deter Fourth Amendment violations when the government law is unsettled." Justice Breyer, joined by Justice Ginsburg, dissented from the majority opinion. The dissent criticized the majority for engaging in a formalistic and ultimately unworkable analysis, violating important principles of constitutional adjudication, and vitiating the exclusionary rule. First, the dissent contended that by distinguishing between the applicable rule of criminal procedure and the applicable remedy, the majority engaged in an overly formalistic analysis that would prove unworkable in practice. Davis will burden courts with the responsibility for determining when appellate precedent is sufficiently "binding" for police officers to have acted reasonably by complying with it. While this may be a simple analysis in Davis because the petitioner conceded the point, the dissent suggested that, in the future, it will be much more difficult for courts to assess whether a previous case was "binding." By way of illustration, the dissent wondered whether a case would be "binding" if its facts were readily distinguishable or its holding expressly limited to the facts presented in that particular case. Because the definition of "binding" is difficult to reduce to a single bright-line rule, the dissent argued lower courts' application of Davis is likely to confuse and confound police operations. Second, the dissent expressed concern for the justice of the majority's opinion. The dissent pointed out that the defendant in Davis suffered the same legal wrong as the defendant in Gant , and, therefore, principles of fairness entitled the defendant in Davis to benefit from the same legal remedy as the defendant in Gant . It recognized that the majority had suggested that this unfairness could be avoided in the future by refusing to apply the exclusionary rule to the defendant in the case in which the new rule was announced. However, the dissent argued that this approach would have even more harmful effects. It would, the dissent contended, vitiate the appellate function of the federal circuit courts and the U.S. Supreme Court in Fourth Amendment cases by eliminating the sole incentive for defendants to appeal lower court decisions. This would threaten the role of the U.S. Supreme Court in harmonizing constitutional law across the circuits by essentially eliminating Fourth Amendment cases from its docket. Finally, the dissent criticized the Court's adherence to the culpability standard for the exclusionary rule. The exclusionary rule, it argued, does not—and was not intended to—punish police officers for violating a defendant's Fourth Amendment rights, and, therefore, an officer's culpability should not determine the exclusionary rule's applicability. If, as the majority strongly suggested, the culpability standard is dispositive, then the good-faith exception effectively swallows the exclusionary rule. In turn, the dissent warned, "ordinary" Americans would lose their primary source of protection against unreasonable searches and seizures. Congress has occasionally considered supplementing the Supreme Court's exclusionary rule jurisprudence with legislation codifying the exclusionary rule or the good-faith exception. Over the years, some Members have expressed displeasure that the exclusionary rule substantially interferes with law enforcement and the conviction of criminal defendants against whom there is probative evidence that they have committed a crime. However, congressional efforts to curtail the exclusionary rule's reach have encountered resistance over concerns that, in the name of fighting crime, these efforts will result in the violation of the rights of innocent people. In 1968, Congress codified the exclusionary rule to a limited extent with respect to information obtained illegally through interceptions of certain wire or oral communications. More recently, the 104 th Congress considered codifying a good-faith exception to the exclusionary rule in the Exclusionary Rule Reform Act of 1995. Notably, Congress would not be able to curtail the exclusionary rule's application in circumstances in which it is constitutionally required. However, the Supreme Court has consistently emphasized that the rule has no constitutional basis. It is therefore widely accepted that Congress has broad authority to bar (or require) the exclusionary rule in federal cases, and the Court's opinion in Davis supports this position. Nevertheless, legislation barring the exclusionary rule might carry implications for the operability of "state exclusionary rules" and raise questions about whether and how Fourth Amendment violations should be deterred and/or remedied in the future. Davis v. United States was the first case in which the Supreme Court applied the "deliberate" and "culpable" Herring standard for the good-faith exception's application. The Supreme Court held that evidence seized in an unconstitutional search that, at the time it was conducted, complied with precedent is admissible because police do not act culpably when they conform with "binding appellate precedent." The case also suggests that police culpability is the sole relevant factor in determining whether the exclusionary rule applies. Although the majority and dissent in Davis disagreed over whether the holding would dramatically limit the number of cases in which the exclusionary rule applies, Davis fits within a body of case law that, as a whole, narrows the rule's applicability. On one hand, this trend suggests that the exclusionary rule's opponents may no longer be motivated to reform the rule legislatively, and therefore any push to codify the exclusionary rule will originate with the rule's supporters. However, legislative reform may not only be motivated by a desire to see the exclusionary rule apply—or not apply—to remedy Fourth Amendment violations, it may also be motivated by a perceived need to provide clarity and predictability to police operations. Exclusionary rule jurisprudence has been described as so "severely contorted" and "complicated" as to be nearly impossible for police officers, who need to make quick decisions about the legality of their actions, to apply in the field. Drawing on this concern, the dissent in Davis suggested that the Court's decision would confound police operations by further complicating this jurisprudence and requiring courts and police to make difficult distinctions between "binding" and non-binding appellate precedent. However, supporters of the Court's opinion in Davis would presumably disagree with this assessment and contend that Davis clarified the exclusionary rule jurisprudence by restricting the rule's application to only the most flagrantly violative searches. | In Davis v. United States, the Supreme Court held that evidence seized in violation of the defendant's Fourth Amendment rights is admissible at trial when the police seized the evidence in good-faith reliance on "binding appellate precedent." The petitioner in that case, Willie Davis, was a passenger in a car that was stopped by police for a traffic violation. The police arrested the driver for driving while intoxicated and Davis for giving a false name. After handcuffing Davis and placing him in the back of a patrol car, the police searched the passenger compartment of the car in which Davis had been riding. The police found a revolver inside Davis's jacket, and Davis was convicted of possessing a firearm as a convicted felon. At the time of the search, the police were acting in conformity with controlling Eleventh Circuit precedent. However, after Davis was convicted and had filed an appeal, the Supreme Court ruled that this type of vehicle search incident to arrest was unconstitutional under the Fourth Amendment. Nevertheless, when Davis's appeal reached the Court, it held that even though the search was unconstitutional, the gun it produced was admissible under the good-faith exception to the exclusionary rule. The exclusionary rule bars evidence obtained in an unconstitutional search from being introduced at trial. The rule is a pragmatic doctrine intended to deter Fourth Amendment violations. It traditionally applies when (1) no exception, such as the good-faith exception, bars its operability; (2) exclusion will achieve "appreciable deterrence" of Fourth Amendment violations; and (3) the benefits of evidentiary suppression outweigh its burdens on the justice system. In 2009, the Supreme Court broadened the good-faith exception when it announced in Herring v. United States that unconstitutionally obtained evidence is admissible at trial unless the evidence was the product of "deliberate" and "culpable" police misconduct. Davis was the first Supreme Court case to apply the Herring standard. The case furthers the impression that police culpability is now the sole relevant factor in determining whether the exclusionary rule applies. The Court rejected Davis's contentions that other relevant factors include whether the exclusionary rule's application would facilitate the development of Fourth Amendment law and whether a recently announced Fourth and Fifth Amendment rule applies retroactively. Two Justices dissented from the Court's opinion. One Justice concurred in the judgment but rejected the Court's view that police culpability is the dispositive factor in an assessment of whether the exclusionary rule applies. Congress has occasionally considered legislation codifying the exclusionary rule or its good-faith exception. The scope of Congress's authority to enact or modify exclusionary rule jurisprudence depends on the extent to which the exclusionary rule is constitutionally required. The Supreme Court in Davis emphasized that the exclusionary rule's application is not constitutionally mandated by either the Fourth Amendment or the retroactivity doctrine. Accordingly, Davis supports the view that Congress has substantial authority to mandate the exclusionary rule's applicability or inapplicability in federal court cases. |
Judge Samuel Alito, who has been nominated by President Bush to take retiring JusticeSandra Day O'Connor's seat as associate justice of the U.S. Supreme Court, has been a judge on theU.S. Court of Appeals for the Third Circuit since 1990. This report examines his major judicialopinions, both for the majority and in dissent, in freedom of speech cases. (1) It also briefly discusses somecases in which he joined the opinion for the court but did not write it. Freedom of speech cases involve interpretations of the part of the First Amendment thatprovides, "Congress shall make no law ... abridging the freedom of speech, or of the press." TheSupreme Court has interpreted this restriction to apply not only to Congress, but to every level ofgovernment -- federal, state, and local -- and to all three branches of government -- executive,legislative, and judicial. The Supreme Court has also found that "no law" should not be takenliterally, and it is clear that the government may prohibit speech that consists of, among other things,threatening to kill someone, conspiring to commit a crime, offering a bribe, engaging in perjury,treason, or false advertising, or, to cite Oliver Wendell Holmes' famous example, falsely shoutingfire in a theater. Freedom of speech cases thus involve deciding just what exceptions apply to themandate that there shall be "no law ... abridging the freedom of speech." (2) This report examines JudgeAlito's free speech opinions by subject area. Prisoners' Free Speech Rights. In Banks v. Beard ,the Third Circuit, with Judge Alito dissenting, struck down a prison policy that prohibited inmates,who had been segregated from the general prison population for being disruptive, from having"access to photographs, and all newspapers and magazines which are neither legal nor religious innature." (3) The SupremeCourt has agreed to review the case. The majority opinion relied on the Supreme Court's decision in Turner v. Safley "that a prison regulation that impinges on inmates' constitutional rights 'is valid if it is reasonablyrelated to legitimate penological interests.'" (4) The Third Circuit wrote: The Supreme Court articulated an analytical frameworkwithin which the reasonableness of such a regulation is assessed by weighing four factors. First,there must be a "valid, rational connection between the prison regulation and the legitimategovernmental interest put forward to justify it." Second, the court must determine "whether thereare alternative means of exercising the right that remain open to prison inmates." Third, the courtmust assess "the impact accommodation of the asserted constitutional right will have on guards andother inmates" and prison resources generally. Finally, the court must consider whether there are"ready alternatives" to the regulation that "fully accommodate the prisoners' rights at de minimus [sic] cost to valid penological interests. The existence of such alternatives is evidence that theregulation is an "exaggerated response to prison concerns." (5) The Third Circuit applied these four factors and found, as to the first factor, that prisonofficials had offered no evidence that the speech restriction had a rational connection to thelegitimate governmental interests in rehabilitation of prisoners or security; as to the second factor,that inmates had no alternative means to exercise their "First Amendment right of access to areasonable amount of newspapers, magazines, and photographs" (6) ; and, as to the third and fourthfactors, that alternative policies that were less restrictive of First Amendment rights would have onlya minimal impact on prison resources. These alternative policies were to establish specific readingperiods in which guards deliver a single newspaper or magazine to an inmate's cell and retrieve itat the end of the period, or to escort prisoners "to the secure mini-law library to read a periodical oftheir choosing." (7) Judge Alito dissented, disagreeing with the majority's application of all four Turner v. Safley factors. As to the first factor, he argued that it was rational for prison officials to think that their FirstAmendment restriction would deter inmates who were not in segregated confinement from engagingin misconduct that could send them there, and would deter inmates who were in segregatedconfinement from engaging in misconduct that could keep them there longer. Judge Alito alsoargued that prison officials need not offer evidence that their rule achieves its rehabilitative purposebecause all that Turner v. Safley requires is a " logical connection between the regulation and theasserted goal." (8) As to thesecond factor, Judge Alito argued that inmates could receive information about current events frombooks in the prison library and could receive letters from family members and friends, even if notphotographs. As to the third and fourth factors, Judge Alito found that the alternative policies thatthe majority suggested would impose significant burdens on prisons. The Supreme Court is likely to decide Banks v. Beard before the end of June 2006, but notbefore the Senate votes on whether to confirm Judge Alito's nomination. In Waterman v. Farmer , Judge Alito wrote a unanimous opinion upholding a New Jerseystatute that denied access to sexually oriented material to inmates who were imprisoned aspedophiles, child molesters, or rapists. (9) Applying Turner v. Safley 's first prong, Judge Alito found "thatNew Jersey has a legitimate penological interest in rehabilitating its most dangerous and compulsivesex offenders," and "could rationally have seen a connection between pornography and rehabilitativevalues." (10) Applyingthe second prong, Judge Alito found that the statute was not so broad as "to forbid prisoners fromreading the Bible, legal publications, or other non-pornographic books," and therefore left theplaintiffs with alternative means to exercise their constitutional rights. (11) Applying the third andfourth prongs, Judge Alito concluded that the less-restrictive alternative of the prison's reviewingincoming publications on a case-by-case basis would have costs that would be "far from de minimis"and "would have an unduly burdensome effect 'on guards ... and on the allocation of prisonresources.'" (12) Teachers' Free Speech Rights. In Edwards v.California University of Pennsylvania , Judge Alito wrote a unanimous opinion for the Third Circuitholding "that the First Amendment does not place restrictions on a public university's ability tocontrol its curriculum." (13) The case was brought against the university by a tenuredprofessor who alleged that the university had violated his First Amendment rights by suspending himfor teaching from a nonapproved syllabus in order to advance his religious beliefs. Judge Alitoquoted from a Supreme Court case holding that "when the State is the speaker, it may makecontent-based choices. When the University determines the content of the education it provides, itis the University speaking." (14) In Sanguigni v. Pittsburgh Board of Public Education , Judge Alito wrote a unanimousopinion for the Third Circuit upholding a public high school's power to remove a teacher from hercoaching positions for publishing certain statements in a faculty newsletter. (15) The teacher's statementshad focused on employee morale, asserting "that some faculty members were 'being put under unduestress,' had experienced 'bad luck,' and had left the building with 'low esteem.'" (16) Judge Alito wrote: "Whileholding that public employees enjoy substantial free speech rights, the Supreme Court hasnevertheless recognized that 'the State has interests as an employer in regulating the speech of itsemployees," and that, [w]ith respect to personnel actions, ... First Amendment rights are implicatedonly when a public employee's speech relates to matters of public concern." (17) In Sanguigni , the teacher'sstatements did not relate to a matter of public concern, and her free speech claim, Judge Alito found,had been properly dismissed by the lower court. Students' Free Speech Rights. In Saxe v. StateCollege Area School District , the Third Circuit, in an opinion by Judge Alito, found a public schooldistrict's "Anti-Harassment Policy" unconstitutionally overbroad because it prohibited "a substantialamount of speech that would not constitute actionable harassment under either federal or statelaw." (18) Even"[a]ssuming for present purposes that the federal anti-discrimination laws are constitutional in allof their applications to pure speech, we note that the [school district's] Policy's reach is considerablybroader. For one thing, the Policy prohibits harassment based on personal characteristics that arenot protected under federal law. ... [Federal statutes] cover only harassment based on sex, race,color, national origin, age and disability. The Policy, in contrast, is much broader, reaching, at theextreme, a catch-all category of 'other personal characteristics' (which, the Policy states, includesthings like 'clothing,' 'appearance,' 'hobbies and values,' and 'social skills'). ... By prohibitingdisparaging speech directed at a person's 'values,' the Policy strikes at the heart of moral and politicaldiscourse -- the lifeblood of constitutional self government (and democratic education) and the coreconcern of the First Amendment. That speech about 'values' may offend is not cause for itsprohibition, but rather the reason for its protection ... ." (19) Nevertheless, school students do not have full First Amendment rights, so Judge Alito"examine[d] whether the Policy may be justified as a permissible regulation of speech within theschools." He noted Supreme Court cases that hold that "a school may categorically prohibit lewd,vulgar or profane language," and "may regulate school-sponsored speech ... on the basis of anylegitimate pedagogical concern. Speech falling outside of these categories ... may be regulated onlyif it would substantially disrupt school operations or interfere with the rights of others." (20) Judge Alito found that thePolicy "appears to cover substantially more speech than could be prohibited under" this test. (21) Among the speech itunconstitutionally covered was speech that has the "purpose" of disruption, even when there was noreasonable basis to believe that it would cause substantial disruption; and speech that offends butdoes not interfere with the rights of others. Furthermore, "harassment" as defined by the Policy didnot necessarily rise to the level of substantial disruption. Saxe included a concurring opinion by Judge Rendell but no dissent. Judge Rendell expressed"strong disagreement with the notion ... that the judicial analysis of permissible restrictions on speechin a given setting should be affected -- let alone dictated -- by legislative enactments intended toproscribe activity that could be classified as 'harassment.'" (22) In C.H. ex rel. Z.H. v. Oliva , the plaintiff was a kindergarten student in a class in which thestudents were asked to make posters depicting what they were thankful for on ThanksgivingDay. (23) The plaintiffproduced a poster indicating that he was thankful for Jesus, and his poster was displayed in thehallway of the school, along with those of his classmates. Subsequently, however, Board ofEducation employees removed the poster because of its religious theme, and later the child's teacherreturned the poster to the hallway, but in a less prominent location at the end of the hallway. A freespeech claim was filed on behalf of the student. The Third Circuit, en banc, did not reach the merits of the free speech claim, in part becauseit found that it was "not alleged that the removal occurred as a result of any school policy against theexhibition of religious material," or "that the restoration to 'a less prominent place' was the result ofa school policy or an authoritative directive from [the principal or superintendent]." (24) Judge Alito dissented,writing: I would hold that discriminatory treatment of the posterbecause of its "religious theme" would violate the First Amendment. Specifically, I would hold thatpublic school students have the right to express religious views in class discussion or in assignedwork, provided that their expression falls within the scope of the discussion or the assignment andprovided that the school's restriction on expression does not satisfy strict scrutiny. (25) The final phrase in this quotation implies that the school's restriction on free expressionwould be constitutional if it satisfied strict scrutiny. What Judge Alito meant by this was that, if theposter "would have 'materially disrupt[ed] classwork or involve[d] substantial disorder or invasionof the rights of other" students, then its discriminatory treatment would be permitted as an exceptionto the First Amendment. Otherwise, to treat the poster differently "because it expressed thanks forJesus, rather than for some secular thing ... was quintessential viewpoint discrimination, and it wasproscribed by the First Amendment. ..." (26) Judge Alito added that for the school to display the poster wouldnot have violated the Establishment Clause because "[t]he Establishment Clause is not violated whenthe government treats religious speech and other speech equally and a reasonable observer wouldnot view the government practice as endorsing religion." (27) Judge Alito would have sent the case back to the lower court todetermine whether the poster had been treated in a discriminatory fashion because of its religiouscontent and, if so, whether the discrimination satisfied strict scrutiny. Discrimination Against Religious Speech. In Child Evangelism Fellowship of New Jersey Inc. v. Stafford Township School District , Judge Alitowrote a unanimous opinion affirming a preliminary injunction issued against a public school districtto require it to allow a religious group "to hand out materials and staff a table at Back-to-Schoolnights." (28) Judge Alitonoted that, although the school district "had no constitutional obligation to distribute or post any community group materials or to allow any such groups to staff tables at Back-to-School nights[,]... when it decided to open up these fora to a specified category of groups (i.e., non-profit,non-partisan community groups) for speech on specific topics (i.e., speech related to the students andthe schools)," it could not "discriminate against speech on the basis of its viewpoint." (29) The school district had discriminated against the religious group because it feared that toallow it to speak on school property would violate the Establishment Clause of the First Amendment,which prohibits the government from endorsing religion. But Judge Alito found that the speech wasnot school-sponsored, because the school district's purpose in allowing the distribution and postingof community group materials was "not to convey its own message" but was "to 'assist allorganizations' in the community." (30) Because the plaintiff's speech was private and notschool-sponsored, the fact that it was religious did not cause it to violate the Establishment Clause. The plaintiff, therefore, was likely to succeed on the merits of its case and was entitled to apreliminary injunction pending trial. Zoning of "Adult" Establishments. In Phillipsv. Borough of Keyport , a district court had dismissed a lawsuit before trial, but the Third Circuitruled that it should go forward and sent it back for trial. (31) Judge Alito concurred, but dissented with respect to allowingone of the claims to go forward. The lawsuit was over the denial of an application to open an adultbook and video store at a particular location. The denial was based on an ordinance that prohibitedsuch establishments from being located within 500 feet of a residence, church, school, playground,or the like. Sexually explicit material is protected by the First Amendment unless it constitutes obscenityor child pornography, neither of which was at issue in Phillips . Speech that is protected by the FirstAmendment may not be regulated on the basis of its content unless the regulation satisfies strictscrutiny. This means, as the court in Phillips wrote, that content-based regulations "will be sustainedonly if they are shown to serve a compelling state interest in a manner which involves the leastpossible burden on expression." (32) Now, it might appear that a regulation that limits the location of a bookstore because it sellssexually explicit material discriminates against the bookstore on the basis of the content of itsmaterial, and that such a regulation therefore should be subject to strict scrutiny. The SupremeCourt, however, has held that regulations that "are justified without reference to the content of theregulated speech" are to be regarded as content-neutral. (33) The regulation at issue in Phillips was justified allegedly not onthe basis of animus toward sexually explicit material, but "to prevent the deterioration of thecommunity" and "to ensure [its] economic prosperity" and "well being of the quality of life." (34) Regulations of speech that are regarded as content-neutral, however, are not necessarilyconstitutional. Although they are not subject to strict scrutiny, they are subject to "intermediate"scrutiny, which, as the court in Phillips explained, means that they will be upheld only if "they arenarrowly tailored to serve a significant or substantial governmental interest; and ... they leave openample alternative channels of communication." (35) (Thus, a city could not prohibit adult bookstores at all locations,or allow them only at excessively inconvenient ones.) Intermediate scrutiny may be contrasted withstrict scrutiny in that a regulation may be narrowly tailored without necessarily imposing the leastpossible burden on expression, and may serve a significant or substantial governmental interestwithout necessarily serving a compelling one. In Phillips , the district court had concluded "that the Ordinance is an effort to suppress thesecondary effects of sexually explicit expression and not sexually explicit expression itself," and thatit "was narrowly tailored to achieve that objective." (36) The court of appeals, however, concluded "that the district courtwas simply not in a position to make these findings," and therefore sent the case back to the districtcourt to hear evidence on these matters. (37) The court of appeals added that "our First Amendmentjurisprudence requires that the Borough identify the justifying secondary effects with someparticularity," and that "[t]o insist on less is to reduce the First Amendment to a charade in thisarea." (38) On another point, the court of appeals did not take a strong free-speech position. It held that,although there must "be a factual basis for a legislative judgment [as to the existence of secondaryeffects] presented in court when that judgment is challenged," there is no "requirement that such afactual basis have been submitted to the legislative body prior to the enactment of the legislativemeasure." (39) JudgeRosenn, dissenting, observed that "not a single court of appeals has interpreted Renton as requiringabsolutely no pre-enactment evidence." (40) Judge Alito concurred with the court of appeals majority as to all of the above. He dissented,however, from part IV of the decision, in which the majority held that, on remand, the district courtshould also consider the plaintiffs' claim that their right to substantive due process was violated whentheir application was subjected to "denial, delay and revocation" because of defendants' "dislike ofthe proposed adult entertainment expression." (41) Judge Alito dissented because he believed that, even if theplaintiffs' application had been rejected for improper reasons, he was not convinced "that everyill-motivated governmental action that restricts the use of real estate constitutes a violation ofsubstantive due process." (42) He believed, therefore, that the district court had properlydismissed the substantive due process claim. His dissent thus did not turn on a point of FirstAmendment law. In Terminello v. City of Passaic , Judge Alito joined an unreported decision in a case thatchallenged a requirement that, in order to qualify for an entertainment license, a theater must employan off-duty police officer as part of its security team. (43) Although the opinion does not state that this theater was an"adult" establishment, we include it in this section because, like the zoning restriction in Phillips ,the requirement here was aimed at combating the secondary effects of speech rather than atregulating speech on the basis of its content. The district court had granted the theater a preliminaryinjunction that allowed it to operate pending trial. The City appealed, and the Third Circuit vacatedthe preliminary injunction because the lower court had used the wrong standard in granting theinjunction. It should have used the intermediate scrutiny standard that is applicable to restrictionsthat are justified without regard to the content of speech, which is that such restrictions must be"narrowly tailored to serve a substantial or significant government interest; and ... leave[ ] openample alternative channels for communication." The Third Circuit found that the district court could not have properly determined whetherthe restriction was narrowly tailored "because there is no evidence in the record establishing the costof hiring off-duty police officers as compared to bonded security guards ... ." The Third Circuit,therefore, sent the case back to the district court for the district court to receive evidence on thisquestion and then determine whether the requirement was narrowly tailored and whether it shouldreissue the preliminary injunction. Erotic Dancing. In Conchatta, Inc. v. Evanko ,the plaintiffs were a "gentleman's club" in Philadelphia and two erotic dancers who worked there. They challenged as violating the First Amendment a Pennsylvania statute that prohibits "lewd,immoral, or improper entertainment" in a facility holding a liquor license. (44) They requested apreliminary injunction, pending a trial, against the enforcement of the statute. The district courtdenied their request, and the Third Circuit, in an unreported decision joined by Judge Alito, affirmed. The court noted that, to be granted a preliminary injunction, "a plaintiff must show both (1) that theplaintiff is reasonably likely to succeed on the merits and (2) that the plaintiff is likely to experienceirreparable harm without the injunction." Applying this standard, the court of appeals found that the plaintiffs "have made a strong casethat the statute is overbroad," which means that it restricts speech that is protected by the FirstAmendment. But the court did not find it necessary to decide the question, because it held that "theplaintiffs are nevertheless not entitled to a preliminary injunction because, as the District Court held,the plaintiffs failed to show that the denial of their motion for a preliminary injunction would resultin irreparable harm." This was because "the plaintiffs have never been cited for violating the statuteor regulations, and there is no imminent threat of such action." A dissenting judge found that "[t]he plaintiff dancers have already suffered irreparable harmand will continue to suffer irreparable harm if their motion for a preliminary injunction is notgranted." This was because the dancers' "uncertainty as to what the regulation prohibits and theirfear of being found in violation" caused them "to restrain their performances." The dissent quotedthe Supreme Court as having said that "the loss of First Amendment freedoms, for even minimalperiods of time, unquestionably constitutes irreparable injury." (45) The district court later decided the case on the merits and found the statute unconstitutionalto the extent that it contained the words "immoral" and "improper" because "[t]here can be no doubtthat the terms 'immoral or improper' are vague," and therefore the statute "does not providereasonably clear notice of what is and what is not prohibited." (46) The court upheld thestatute insofar as it applied to "lewd" conduct, as it found that "lewd" was "sufficiently clear so asnot to constitute unconstitutional vagueness." Defamation. Tucker v. Fischbein was adefamation case for which Judge Alito wrote the Third Circuit's 2-to-1 opinion. (47) The suit was brought byWilliam Tucker and his wife, C. Delores Tucker, a crusader against "gangsta rap" lyrics, against theestate of rapper Tupac Shakur and several companies connected with the production of an album ofShakur's. The plaintiffs alleged that Shakur on the album had attacked Mrs. Tucker "using 'sexuallyexplicit messages, offensively coarse language and lewd and indecent words' and that she hadreceived death threats because of her activities." (48) The plaintiffs sued for defamation, alleging that the husband hadsuffered a loss of consortium as a result of the lyrics. Loss of consortium means loss by one spouseof the comfort and society of the other, and may, but does not necessarily, include the loss of sexualrelations. Richard Fischbein, the lawyer representing Shakur's estate, was quoted in the press asexpressing skepticism about the claim that the lyrics could have destroyed Mrs. Tucker's sex life. The plaintiffs then amended their complaint to include Fischbein as a defendant for having defamedthem by characterizing their loss of consortium claim as a claim for loss of sexual relations. Fischbein subsequently again expressed his skepticism of the claim that the lyrics could havedestroyed Mrs. Tucker's sex life, and the Tuckers amended their complaint again, to add anotherdefamation claim against Fischbein, as well as one against Time , and Newsweek for publishing hiscomment. Fischbein, Time , and Newsweek moved for summary judgment, and the federal district courtgranted their motions, which means that it dismissed the case without allowing it to go to trial. Itdid so because the Tuckers were "public figures" under defamation law, and could not prove by clearand convincing evidence that the defendants acted with "actual malice," as public figures must doto win a defamation case. To act with "actual malice" means to make a defamatory statement "withknowledge that it was false or with reckless disregard of whether it was false or not." (49) On appeal, in order to show that Fischbein had acted with actual malice, "the Tuckersargue[d] that Fischbein, as a lawyer, should have known that a claim for loss of consortium may nothave anything to do with damage to sexual relations," so he "was at least reckless when he told thepress that Mrs. Tucker was trying to recover for injury to her sex life." (50) Judge Alito rejected thisargument with respect to the first time that Fischbein made a statement to the press, because, at thattime, "there is no evidence that Fischbein was informed that Mr. Tucker's consortium claims did notrefer to damage to sexual relations." (51) After the Tuckers added him to their complaint, however, itappears that Fischbein should have known that they had not claimed a loss of sexual relations, and,therefore, Judge Alito found, a reasonable jury could find by clear and convincing evidence thatFischbein's second statement that the Tuckers had made such a claim constituted actual malice. Judge Alito, however, affirmed the dismissal of the claims against Time and Newsweek because hefound no clear and convincing evidence that they had acted with actual malice. Judge Nygaard dissented from Judge Alito's holding as to Fischbein, as Judge Nygaard readthe Tuckers' amended complaint as "insufficient to indicate a change in their attitude toward alleginga loss of sexual relations" and therefore he found no clear and convincing evidence that Fischbeinhad spoken with actual malice. (52) In another defamation case, Remick v. Manfredy , Judge Alito joined an opinion by JudgeSloviter finding that, in context, the defendant's statement that the plaintiff was "attempting to extortmoney" was not defamatory because it constituted mere "rhetorical hyperbole." (53) It was, in context, anopinion, and, under Pennsylvania law, "an opinion cannot be defamatory unless it 'may reasonablybe understood to imply the existence of undisclosed defamatory facts justifying the opinion.'" (54) Commercial Speech. In Pitt News v. Pappert ,Judge Alito wrote a unanimous decision striking down a restriction on commercial speech. (55) Section 4-498 of thePennsylvania Statutes Annotated banned advertisers from paying for alcoholic beverage advertisingin communications media affiliated with a university, college, or other educational institution, anda student newspaper sued. Judge Alito first noted that it makes no difference that the statute, ratherthan banning the newspaper's speech, merely prevented it from receiving payment for speech. "Imposing a financial burden on a speaker based on the content of the speaker's expression is acontent-based restriction and must be analyzed as such." (56) Judge Alito next applied the Central Hudson test to the speech restriction. Advertising is aform of commercial speech, and commercial speech, though protected by the First Amendment, issubject to greater governmental regulation than other speech. The Supreme Court has prescribed thefour-prong Central Hudson test to determine whether a governmental regulation of commercialspeech is constitutional. This test asks initially (1) whether the commercial speech at issue isprotected by the First Amendment (that is, whether it concerns a lawful activity and is notmisleading) and (2) whether the asserted governmental interest in restricting it is substantial. "If bothinquiries yield positive answers," then to be constitutional the restriction must (3) "directly advance[] the governmental interest asserted," and (4) be "not more extensive than is necessary to serve thatinterest." (57) Judge Alito noted that the first prong of the test is satisfied, as "the law applied to ads thatconcern lawful activity (the lawful sale of alcoholic beverages) and that are not misleading." (58) He also found the secondprong satisfied, as "[t]here can also be no dispute that the asserted government interest -- preventingunderage drinking and alcohol abuse -- are, at minimum, 'substantial.'" (59) He found, however, thatthe statute founders on the third and fourth prongs. As for the third prong, "the Commonwealth hasnot shown that Section 4-498 combats underage or abusive drinking 'to a material degree.' ... Section4-498 applies only to advertising in a very narrow sector of the media ... and the Commonwealth hasnot pointed to any evidence that eliminating ads in this narrow sector will do any good." (60) As for Central Hudson 's fourth prong, the Supreme Court has held that it is not to beinterpreted to require the legislature to use the "least restrictive means" available to accomplish itspurpose. Instead, the Court held, legislation regulating commercial speech satisfies the fourth prongif there is a "reasonable 'fit' between the legislature's ends and the means chosen to accomplish thoseends." (61) "Here," JudgeAlito wrote, "Section 4-498 is both severely over- and under-inclusive." (62) It was overinclusivebecause it included students who were over the legal drinking age, and they were a substantialmajority of the students. It was underinclusive presumably because it applied only to a narrow sectorof the media. Judge Alito added that Pennsylvania "can seek to combat underage and abusive drinking byother means that are far more direct and that do not affect the First Amendment," namely by"enforcement of the alcoholic beverage control laws on college campuses." (63) He concluded "thatSection 4-498 fails the Central Hudson test," and then added that it "violates the First Amendmentfor an additional, independent reason: it unjustifiably imposes a financial burden on a particularsegment of the media, i.e., media associated with universities and colleges." (64) For such a financialburden to be justifiable under the First Amendment, it must be "'necessary' to achieve what the[Supreme] Court has described as 'an overriding government interest' and an 'interest of compellingimportance.'" (65) But "theCommonwealth has not shown that Section 4-498 is 'necessary' to discourage underage drinking orabusive drinking." (66) Public Employees' Speech Rights. In Swartzwelder v. McNeilly , Judge Alito wrote a unanimous decision upholding a preliminaryinjunction that prevented the Pittsburgh Police Bureau from enforcing its order requiring itsemployees "to obtain clearance before testifying in court under certain circumstances." (67) In this case, the Bureauattempted to enforce its order against a police officer who was an expert in the proper use of forceby police officers and who was subpoenaed to testify as a defense expert in the prosecution of apolice officer for first-degree murder in connection with a shooting in the line of duty. Thesubpoenaed police officer sued, contending that the order deprived him of his First Amendment rightof free speech, and he sought a preliminary injunction against enforcement of the order pending trial. The federal district court granted the preliminary injunction after a Magistrate Judge found that theplaintiff was likely to prevail in the lawsuit, that irreparable harm would result if the preliminaryinjunction were not granted, that granting the preliminary injunction would not cause greater harmto the defendant than denying it would cause to the plaintiff, and that the preliminary injunctionwould be in the public interest. Judge Alito noted the general principle that, "[w]hile public employees do not give up all 'theFirst Amendment rights they would otherwise enjoy as citizens to comment on matters of publicinterest,' 'the State has interests as an employer in regulating the speech of its employees ... ." (68) He found that a speechrestriction would be permissible in this case if the government could "show that the interests of bothpotential audiences and a vast group of present and future employees in a broad range of present andfuture expression are outweighed by that expression's 'necessary impact on the actual operation' ofthe Government." (69) As for the free speech interests in Swartzwelder v. McNeilly , "the regulation of opinion testimonyalone imposes a significant burden on First Amendment interests" of both Bureau employees andpotential audiences. As for the government's interests, Judge Alito found that several interests thatthe government cited, such as "keeping track of the location of employees who are testifying," couldbe served without reviewing and clearing the substance of their testimony. (70) Others, such as"prevent[ing] public confusion regarding the City's official policies and practices," could be servedby an order that applied only to testimony related to an employee's official duties. (71) Judge Alito thereforeconcluded that the district court had not abused its discretion in finding that the plaintiff was likelyto prevail in the lawsuit. As for the other elements that must be shown to be granted a preliminaryinjunction, Judge Alito noted that "[t]he loss of First Amendment freedoms, for even minimalperiods of time, unquestionably constitutes irreparable injury"; that the balance of hardships weighsin the plaintiff's favor because a preliminary injunction "leaves the City free to attempt to draft newregulations"; and that "the public interest is best served by eliminating the unconstitutionalrestrictions imposed by" the order. (72) Freedom of Association. In In re Asbestos SchoolLitigation , Judge Alito wrote a 2-to-1 opinion holding that an asbestos manufacturer could not,"consistent with the First Amendment, be held liable on the plaintiff's conspiracy and concert ofaction claims." (73) Theplaintiffs had alleged that Pfizer had "marketed an asbestos-containing product for an eight-yearperiod without warnings though it had specific knowledge of the product's hazard. This conduct wasin keeping with the method of marketing asbestos products by its co-conspirators, as Pfizer wellknew, without any or adequate warnings." (74) Pfizer's alleged co-conspirators were members of a tradeorganization called the Safe Building Alliance (SBA). Pfizer argued that to hold it liable on the conspiracy claim would penalize its "exercise of itsFirst Amendment rights to engage in free speech and to associate with [the SBA]." (75) Judge Alito agreed,finding that to hold Pfizer liable would be "squarely inconsistent with the Supreme Court's decisionin N.A.A.C.P. v. Claiborne Hardware Co. " (76) That case grew out of a boycott by the N.A.A.C.P. of whitemerchants in Claiborne County, Mississippi, from 1966 to 1972. A group of the merchants sued theN.A.A.C.P. and the Mississippi Supreme Court upheld a judgment in the merchants' favor "basedon civil conspiracy and the common law tort of malicious interference with the plaintiffs'businesses." (77) Theboycott had included some acts of violence, but the U.S. Supreme Court reversed, concluding "thatthe nonviolent elements of the boycott -- giving speeches, banding together for collective advocacy,nonviolent picketing, personal solicitation of nonparticipants, and the use of a local black newspaper-- were protected by the First Amendment." (78) The Supreme Court wrote in Claiborne Hardware : Civil liability may not be imposed merely because anindividual belonged to a group, some members of which committed acts of violence. For liabilityto be imposed by reason of association alone, it is necessary to establish that the group itselfpossessed unlawful goals and that the individual held a specific intent to further those illegalaims. (79) "In the present case," Judge Alito wrote, "it is abundantly clear that the strict standard set outin Claiborne Hardware cannot be met," and he therefore ruled for Pfizer. (80) He added that, although"the factual background of Claiborne Hardware was very different from this case and that theconstitutionally protected conduct in Claiborne Hardware was of much greater societalimportance[,] ... nothing in the Supreme Court's opinion ... lends support to the suggestion that thestandard it enunciated was not meant to have general applicability." (81) Dissenting Judge Stapleton argued that "[j]oining together with others does not render legalconduct that would be illegal if engaged in on one's own," and Claiborne Hardware "expresslyrecognizes that one may be held liable if one supports a group that one knows to have 'illegalaims.'" (82) In this case,he added, "Pfizer has failed to convince me that its position is in any way different from a defendantin any antitrust conspiracy case. ..." (83) We conclude this report with a note of caution. For various reasons, one should draw onlylimited conclusions from the fact that, in each of the cases discussed above, Judge Alito voted forthe party to the litigation who claimed a free speech right, or for the other party (which was agovernmental entity except in the defamation cases and the freedom of association case). One reason is that some judicial decisions follow clear Supreme Court precedents, which alower-court judge may feel obliged to follow whether he agrees with them or not, but which he mightbe inclined to overturn were he on the Supreme Court. Another reason is that the fact that a judge favored or disfavored the free speech side in aparticular case may reveal little of his view of the First Amendment, because the basis of his opinionmay not have been his view of the First Amendment. In Phillips v. Borough of Keyport , forexample, Judge Alito joined an opinion to send the case back to the lower court to hear additionalevidence. This ruling favored the government because the lower court had previously ruled againstthe government, but it did not ensure that the government would ultimately win the case. Similarly,in Terminello v. City of Passaic , the Third Circuit vacated the district court's decision because thedistrict court had applied the wrong legal standard in granting an injunction, not necessarily becausethe Third Circuit disagreed with the district court's result on the merits. Yet another reason to use caution in attributing particular First Amendment views to a judgeon the basis of particular rulings is that even a ruling for the government may expand the right of freespeech, and a ruling against the government may narrow it (not that there are necessarily anyinstances of either of these occurrences among the cases discussed in this report). A famous exampleof the former occurrence is Schenck v. United States , in which Justice Oliver Wendell Holmes wrotean opinion that affirmed a criminal conviction, yet expanded the First Amendment so that thegovernment could punish political advocacy only when such advocacy creates a "clear and presentdanger." (84) | Judge Samuel Alito, who has been nominated by President Bush to take retiring JusticeSandra Day O'Connor's seat as associate justice of the U.S. Supreme Court, has been a judge on theU.S. Court of Appeals for the Third Circuit since 1990. This report examines his major judicialopinions, both for the majority and in dissent, in freedom of speech cases. It also briefly discussessome cases in which he joined the opinion for the court but did not write it. This report examinesJudge Alito's free speech opinions by subject area. |
T he U.S. Constitution expressly grants each house of Congress the power to discipline its own Members for misconduct, including through expulsion, stating that: [e]ach House may determine the Rules of its Proceedings, punish its Members for disorderly Behaviour, and, with the Concurrence of two thirds, expel a Member. This report discusses the nature of the power of Congress to remove a Member, including the historical background of the Expulsion Clause, the implications of the limited judicial interpretations of the Clause's meaning, and other potential constitutional limitations in the exercise of the expulsion power. The report then explores a number of issues of debate as to Congress's power to expel, including whether past practice is legally binding on a given body; which acts may be sufficient to warrant expulsion; and whether acts that occurred prior to the Member's election or reelection to Congress are subject to the expulsion power. Expulsion is the process by which a house of Congress may remove one of its Members, after the Member has been duly elected and seated. Expulsion, which is expressly provided for in the Expulsion Clause, is often confused with exclusion, which is an implied power of Congress that stems from the Qualifications Clauses for the House and Senate. Exclusion occurs when a body of Congress refuses to seat a Member-elect. Unlike the two-thirds majority requirement of the expulsion power, a body of Congress may exclude a Member-elect with a simple majority. As the Supreme Court has explained, while exclusion and expulsion both bar an individual from holding a seat in Congress, the two actions exist for different purposes and occur at different times. Specifically, in Powell v. McCormack , the Court explored the constitutionality of Representative Adam Clayton Powell's exclusion from the House of Representatives. The impetus for the case was an investigation of expenditures authorized by Powell during the 89 th Congress, which concluded that, as chairman of a House committee, the Member had engaged in improper activities, including deceiving House authorities with regard to travel expenses and directing illegal payments to his wife. The House took no formal action with regard to those findings during that Congress, but refused to administer the oath of office to Powell at the start of the 90 th Congress the following year. Subsequently, a Select Committee, which was appointed at the outset of the 90 th Congress to determine Powell's eligibility to be seated as a Member, recommended that Powell be sworn into office as a Member and subsequently disciplined. However, the House rejected that recommendation and instead adopted a resolution that would exclude Powell, which it approved by a vote of 307 to 116. Powell sued to be reinstated and on appeal the Supreme Court held that Powell's exclusion was unconstitutional, explaining that "exclusion and expulsion are not fungible proceedings." While the Court recognized that the Constitution grants broad authority to each of the houses of Congress regarding expulsion and other discipline, it explained that Congress's authority regarding exclusion was limited to the enumerated qualifications requirements. Because of the distinct nature of each action, the Court emphasized that the vote to exclude Powell, despite exceeding a two-thirds majority, could not substitute for his expulsion. Discerning the constitutional meaning of the Expulsion Clause requires an examination of the text of the Clause, the historical background that undergirds the Clause, the limited judicial decisions that have sought to interpret its text, and a brief evaluation of how the Clause may be subject to limitation by other constitutional principles. In addition, and in light of the discretionary nature of the power, an assessment of House and Senate practice is necessary for a full understanding of the expulsion power. The Expulsion Clause states that "[e]ach House may [ ... ] punish its Members for disorderly Behaviour, and, with the Concurrence of two thirds, expel a Member." Thus, the sole textual standard expressly defined by the Constitution requires that expulsion of a Member of Congress may only be enforced "with the Concurrence of two-thirds." While the Expulsion Clause does not specify the measure of the two-thirds majority, the standard is generally understood to be assessed relative to the number of Members of that body who are present and voting. Similarly, the two-thirds majority requirement mirrors the standard by which Congress may likewise remove officials in the executive and judicial branches of government through the impeachment process. Like other constitutional provisions relating to the powers and privileges of the Congress, the origins of the Expulsion Clause lay with the practices of the English Parliament. The English House of Commons historically exercised an inherent authority to expel members by a simple majority vote. That power was viewed as one to be wielded at the body's "absolute discretion" with few recognized limitations, and as a result, it was historically utilized more liberally in England than it has been used in the United States. Moreover, the expulsion power was used in a relatively ad hoc manner with, for example, no established standards governing the type of conduct warranting expulsion. As a result, hundreds of members were expelled from Parliament prior to the turn of the 19 th century on grounds ranging from publishing slanderous writings to treason. Early parliamentary expulsions were motivated not only by a desire to preserve the integrity of the legislative process, but also to expel unpopular or dissenting legislators for political or religious reasons. One contemporary English expulsion case that influenced the members of the U.S. Constitutional Convention was that of John Wilkes. Wilkes was a Member of Parliament who in 1763 criticized the King's peace treaty with France. Wilkes was arrested, expelled from the House of Commons, and fled into exile. He later returned to England and was reelected to Parliament in 1768, only to be convicted of seditious libel and again expelled from the House. Wilkes was repeatedly reelected, but each time Parliament excluded him, prevented him from taking his seat, and ultimately declared him ineligible for reelection. Wilkes was finally permitted to serve following his election in 1774, after which the House of Commons expunged his expulsions and exclusions, acknowledging that it had acted in a manner "subversive of the rights of the whole body of electors of this kingdom." The English precedents and traditions concerning expulsion were incorporated into the proceedings of the colonial legislatures, where legislators were expelled for an equally wide array of reasons. But the Wilkes case had a "significant impact in the American colonies," and after the Revolution, "few expulsions occurred in the new state legislatures." Indeed, the abuse of the expulsion power by the House of Commons in the Wilkes case likely led to the two predominant constitutional restrictions on each house's authority to judge its membership and discipline its members: constitutionally fixed qualifications for service in the House and Senate and a two-thirds supermajority requirement to expel a Member. There was, however, seemingly no significant debate on the Expulsion Clause at the Constitutional Convention. Some insight, however, can be gleaned from the drafting history. Early draft versions of the Expulsion Clause, first arising from the Convention's Committee of Detail, distinguished between the power to expel and the power to punish members for "disorderly behavior." Based on earlier draft versions, it appears that the "disorderly behavior" language was entirely separate from, and therefore inapplicable to, the power to expel. It was not until late in the Convention's consideration of the provision that the body approved the two-thirds requirement for expulsion. James Madison recommended the addition, noting that "the right of expulsion was too important to be exercised by a bare majority.... " No mention was made at the Convention in regards to the type of misconduct that would warrant expulsion. Accordingly, it appears that the Founders viewed the chief barrier to the expulsion power's abuse as the procedural requirement of the approval of a supermajority of a house of Congress, as opposed to any substantive requirement that defines what sort of conduct warrants expulsion. The U.S. Supreme Court and lower federal courts have not decided a case directly bearing on the expulsion of a Member of Congress, although judicial discussions of the expulsion power have developed in dicta. The Supreme Court has stated, for example, that Congress's expulsion power "extends to all cases where the offence is such as in the judgment of the Senate is inconsistent with the trust and duty of a member." The Court highlighted that a Member's conduct could be subject to legislative discipline even if "[i]t was not a statutable offence nor was it committed in his official character, nor was it committed during the session of Congress, nor at the seat of government." The Court has also emphasized that the House and Senate may exercise the expulsion power exclusively, such that any prosecution by the executive of related offenses by the Member do not interfere with Congress's power to expel. These relatively few statements suggest a broad view of the expulsion power. A likely explanation for the lack of judicial precedent directly addressing questions arising under the Expulsion Clause may be found in the political question doctrine, a principle stemming from the Constitution's separation of powers. Courts have declined to decide cases involving "political questions," which are controversies where there is a "textually demonstrable constitutional commitment of the issue to a coordinate political department; or a lack of judicially discoverable and manageable standards for resolving it." In this vein, courts have been cognizant that the expulsion power, as a form of legislative discipline, exists separately from civil or criminal liability and empowers the respective houses of Congress to maintain the integrity and dignity of the legislature itself and its proceedings. The Supreme Court has reflected this reasoning in some of the cases that have touched on the Expulsion Clause. For example, in 1897, the Court discussed the Expulsion Power in a case of a petitioner convicted of criminal contempt for refusing to answer questions during a congressional investigation of potential misconduct of Members of Congress. The Court acknowledged the broad power to discipline Members held by the houses of Congress and the discretion with which they could exercise that power, ultimately declining to "encroach upon the province of that body." In another example, the Court recognized that the standards by which expulsion may occur are at the "almost unbridled discretion" of Congress in a criminal case against a Senator involving congressional privileges. The Court further noted that Members who are subject to legislative discipline are "judged by no specifically articulated standards" that are applied by a body "from whose decision there is no established right of review." The Court also discussed justiciability in Powell v. McCormack , after determining that the House's attempt to bar a Member's service constituted an exclusion rather than expulsion. The Court generally recognized that the exclusion at issue in the case was justiciable because "the Constitution leaves the House without authority to exclude any person, duly elected by his constituents, who meets all the requirements for membership expressly prescribed in the Constitution." In a concurring opinion, however, Justice William O. Douglas noted that, "if this were an expulsion case I would think that no justiciable controversy would be presented." There have been no cases in which Members of Congress who were expelled challenged the expulsion decision itself in court. Some Members who have faced disciplinary proceedings under the Expulsion Clause have attempted to challenge the disciplinary measures through judicial review, but the lower courts have consistently declined to consider the claims, citing separation of powers concerns. For example, in United States v. Traficant , a Member of the House of Representatives was both convicted by a jury of criminal charges related to his service in Congress and subsequently found by the House Ethics Committee to have violated the House's internal rules of conduct, resulting in his eventual expulsion. The U.S. Court of Appeals for the Sixth Circuit (Sixth Circuit) rejected the Member's claim that he could not be punished through both a criminal trial and legislative discipline because of the Fifth Amendment's Double Jeopardy prohibition. According to the Member's argument, "he was twice placed in jeopardy: first, when the House of Representatives initiated hearings that included the possibility of his imprisonment [ ... ] and second, after Congress had already expelled him, when the district court ordered his imprisonment." The Sixth Circuit concluded that both branches have distinct authority to punish behavior of Members that can be exercised independent of the other. Likewise, in Rangel v. Boehner , a Member of the House of Representatives who the House had censured (a disciplinary action also authorized under the Expulsion Clause) for various ethical violations sought judicial review of the House's action, alleging procedural improprieties violated House Rules and his due process rights. The court rejected the justiciability of the Member's lawsuit. The U.S. District Court for the District of Columbia held that the House's decision to discipline the Member for his conduct was a political question and concluded that such review of Congress's exercise of the discretion afforded it under the Expulsion Clause was "a classic example of a demonstrable textual commitment to another branch of government" that is synonymous with the political question doctrine. Despite the Court's general view that the Expulsion Clause vests each house of Congress with a broad and discretionary power to expel its own Members that will not be questioned by a federal court, arguments can be made that the Constitution may impose other constraints on the use of the expulsion power that could raise justiciable matters. For example, it could be asserted that judicial review is proper with respect to exercises of the expulsion power that conflict with other provisions of the Constitution. The most prominent argument that has been made is that the expulsion power could conflict with the right of a Member's constituency to choose their own representative. Under Article I, the House "shall be composed of Members chosen ... by the People " and, under the Seventeenth Amendment, the Senate "shall be composed of two Senators from each State, elected by the people thereof .... " This argument has principally arisen when the House or Senate has considered expelling a Member for misconduct that occurred prior to an election and was known to the Member's constituency when they elected him to office. To exercise the power of expulsion in such a scenario, the body might, in the words of a House Report, "abuse its high prerogative, and [] might exceed the just limitations of its constitutional authority by seeking to substitute its standards and ideals for the standards and ideals of the constituency of the Member who had deliberately chosen him to be their Representative." No court, however, has held that there are external constraints to the expulsion power, and such a view may be in tension with the text and intent of the Clause, which has generally been viewed as vesting broad power in both the House and the Senate. Questions may also be raised as to whether the exercise of the expulsion power may be limited by other external constitutional restraints, like the Constitution's individual rights provisions. For example, the equal protection component of the Fifth Amendment's Due Process Clause could be viewed to prevent both the House and the Senate from making discriminatory expulsion decisions, such as on the basis of the Member's race. No court has previously considered this precise question, but the Supreme Court has held that other discretionary internal congressional powers are limited by the Constitution's individual rights provisions. Other arguments could be made for judicial review of certain expulsions—for example a scenario in which a house seats an elected Member and then immediately expels that individual—if the expulsion functioned like an exclusion of a Member through the imposition of additional qualifications in violation of the Supreme Court's holding in Powell . For example, if the House or Senate immediately expelled a new Member because he had a previous criminal conviction, that action could be seen as adding a non-constitutional qualification for election to Congress, i.e., that a Member not have previously been convicted of a crime. Nonetheless, while it is true that Powell prohibits the House or Senate from imposing upon Members additional qualifications beyond those standing qualifications prescribed in the Constitution with respect to exclusion, the opinion also drew a rather formalist distinction between exclusions and expulsions that may cast doubt on this argument. Specifically, the Court reasoned that "exclusion and expulsion are not fungible proceedings" and rejected the respondent's "attempt to equate exclusion with expulsion." The Powell Court largely deferred to the House in determining what constitutional provision it was proceeding under, holding: The Speaker ruled that House Resolution No. 278 contemplated an exclusion proceeding. We must reject respondents' suggestion that we overrule the Speaker and hold that, although the House manifested an intent to exclude Powell, its action should be tested by whatever standards may govern an expulsion. If the Court were unwilling to hold that an exclusion was in effect an expulsion, it would seem reasonable to assert that it would be equally unwilling to accept that an expulsion was in effect an exclusion. In light of the scant evidence of the Expulsion Clause's historical basis and the limited judicial precedent in interpreting the Clause, Congress's own treatment of its expulsion power may play an important role in delineating the contours of the Clause. House and Senate practice has interpretive import for two reasons. First, the Supreme Court has suggested that "[i]n the performance of assigned constitutional duties each branch of the Government must initially interpret the Constitution, and the interpretation of its powers by any branch is due great respect from the others." Thus, it would seem that as a general matter, Congress's view of the scope of its own expulsion power is an important starting point for the proper interpretation of the Expulsion Clause. Second, the Supreme Court has often treated historical practice as an "important interpretive factor" in construing constitutional provisions. The Court turned to historical practice, for example, in a recent challenge to presidential recess appointments, reasoning that "in interpreting the [Recess Appointment] Clause, we put significant weight upon historical practice." However, it should be noted that the extent that practice provides an interpretive gloss on constitutional text often varies depending on whether the practice is "long settled and established." As will be discussed in more detail below, little about the margins of the House and Senate's expulsion power is settled, especially, for example, with regard to the question of whether each house may expel a Member for conduct occurring prior to an intervening election. While House and Senate practice may not necessarily constitute legal precedent, it nevertheless may establish procedural and parliamentary norms, and—to the extent that a court has the opportunity to evaluate the Clause—may have some influence on how a court construes the reach of the expulsion power. Moreover, even if not legally binding, historical practice may guide both the House and Senate in making their own decisions about how to wield their own authority. Although the expulsion power has been described as broad by the Supreme Court, expulsion cases have been rare. In total, 20 Members of Congress have been actually expelled from their respective bodies—5 in the House and 15 in the Senate. While the grounds for these expulsions may illustrate the potential bases upon which the House or Senate may decide to expel a Member, as historical practice, they are not necessarily the exclusive grounds for expulsion. The grounds upon which the power may be exercised are left to the discretion of the respective bodies of Congress, though legal commentary indicates that the bodies should act judiciously in exercising that power. Expulsion, according to that understanding, is "'in its very nature discretionary, that is, it is impossible to specify beforehand all the causes for which a member ought to be expelled; and, therefore, in the exercise of this power, in each particular case, a legislative body should be governed by the strictest justice.'" Expulsion has not been understood to apply automatically in cases of any particular conduct of Members. Thus, in light of historical practice, the predominant basis upon which both the House and Senate have exercised their power to expel Members is disloyalty to the United States. In fact, 18 of the 20 expulsions in congressional history were based on the Members' disloyalty to the United States. The earliest expulsion case in 1797 involved a Senator who "concocted a scheme for Indians and frontiersmen to attack Spanish Florida and Louisiana, in order to transfer those territories to Great Britain" for his own financial gain. The Senate special committee that was appointed to investigate the matter recommended expulsion, describing the Senator's conduct as "entirely inconsistent with his public trust," and the full Senate subsequently voted to expel the Member by a vote of 25-1. The majority of expulsion cases based on disloyalty to the United States—17 of the 18—arose in the context of the secession of the Confederate states during the earliest years of the Civil War. In early 1861, the Senate considered the status of Members representing states that were contemplating secession, ultimately expelling 10 Members in a single vote after the war had begun. In those cases, the Members represented southern states that had seceded from the Union, and the Members had not formally resigned from the Senate. The expulsion resolution cited the Members' failure to appear in the Senate and alleged that the Members "are engaged in said conspiracy for the destruction of the Union and Government, or, with full knowledge of such conspiracy, have failed to advise the Government of its progress or aid in its suppression." Other examples of Civil War expulsions involved Members who represented states that had not seceded, but who themselves had supported secessionists. For more than a century following the Civil War expulsions, neither the House nor the Senate expelled a Member. The two most recent expulsions—both Members of the House—concerned a broader range of behavior, beyond disloyalty to the country, for which Congress would expel one of its Members. Those expulsions resulted after the Representatives were convicted of criminal charges under various public corruption statutes. In 1980, a Member was expelled following a criminal conviction on charges relating to receiving a payment in return for promising to use official influence on legislation in the so-called ABSCAM investigation. The most recent expulsion occurred in 2002, when the House expelled a Member who had been convicted of various criminal charges relating to his official actions in Congress, including bribery, illegal gratuities, obstruction of justice, defrauding the government, filing false tax returns, and racketeering. It should be noted that in a number of cases, Members' behavior has drawn public calls for expulsion or preliminary proceedings by the respective house toward potential expulsion, but ultimately resulted in the Member resigning prior to a formal decision to expel. It is unclear how much weight should be given to such cases or what cases appropriately qualify as relevant to consider the expulsion power. To the extent such cases are relevant, Members have resigned facing formal expulsion inquiries or even recommendations for expulsion for conduct during their time in office. In the Senate, one such example occurred in 1995 when the Select Committee on Ethics recommended expelling a Member following its investigation of allegations of sexual misconduct, misuse of official staff, and attempts to interfere with the committee's inquiry. In the House, for example, the Committee on Standards of Official Conduct recommended expelling a Member for conduct violations related to activities that also resulted in the Member's criminal conviction for accepting illegal gratuities, illegal trafficking, and obstruction of justice. As discussed above, the text of the Expulsion Clause, its history, and subsequent historical practice all support a broad, but not unlimited, power in both the House and Senate to expel Members for conduct occurring during a Member's term of office. However, whether the House and Senate have authority to expel a Member for conduct that solely occurred prior to an intervening election appears to be unresolved. House and Senate practice (drawn primarily from committee reports relating to expulsion resolutions that were either not approved or not acted upon by the full body) concerning expulsions for prior misconduct are relatively inconsistent and do not appear to establish a clear and constant interpretation of whether prior conduct (i.e., conduct occurring before an intervening election) may form the basis for an expulsion. While the reasoning underlying the House and Senate approach to expulsions for prior misconduct does not appear to be uniform, and thus may have limited value in discerning the meaning of the constitutional power, there is some evidence to suggest that both the House and the Senate have, on occasion, "distrusted their power" to expel for such conduct. While there has been some disagreement over the question, it would appear that when this "distrust" manifests itself through the adoption of a more restrictive interpretation of the expulsion power, it is generally grounded more in considerations of policy than of constitutional authority. On occasions in which House or Senate action appears to suggest that the body is reticent to expel a Member for conduct that occurred prior to election, the cited justification generally relates to a reluctance to supplant the judgment of the duly elected Member's constituency with that of a supermajority of the body. That justification is strongest when the Member's constituency is fully aware of the prior misconduct, but nevertheless chooses to elect the Member to represent them. In short, the body must balance its interest in "assur[ing] the integrity of its legislative performance and its institutional acceptability to the people at large as a serious and responsible instrument of government," with a respect for the electoral decisions of the voting public and deference traditionally paid to the popular will and choice of the people. This view is consistent with James Madison's statements in the Federalist Papers that "frequent elections" would be the chief means of ensuring "virtuous" legislators. It also finds support in Justice Joseph Story's early view that although the expulsion power was both necessary and critical to the integrity of each house, exercise of the power was "at the same time so subversive of the rights of the people," as to require that it be used sparingly and to be "wisely guarded" by the required approval of a two-thirds majority. Congress's attempt to balance the interests in preserving the integrity of the House and Senate with the desire to avoid supplanting the will of the people, however interpreted and applied, does not appear to be based on a clear constitutional prescription. This distinction was perhaps best articulated in a frequently cited 1914 House Judiciary Report: In the judgment of your committee, the power of the House to expel or punish by censure a Member for misconduct occurring before his election or in a preceding or former Congress is sustained by the practice of the House, sanctioned by reason and sound policy and in extreme cases is absolutely essential to enable the House to exclude from its deliberations and councils notoriously corrupt men, who have unexpectedly and suddenly dishonored themselves and betrayed the public by acts and conduct rendering them unworthy of the high position of honor and trust reposed in them.... But in considering this question and in arriving at the conclusions we have reached, we would not have you unmindful of the fact that we have been dealing with the question merely as one of power , and it should not be confused with the question of policy also involved. As a matter of sound policy, this extraordinary prerogative of the House, in our judgment, should be exercised only in extreme cases and always with great caution and after due circumspection, and should be invoked with greatest caution where the acts of misconduct complained of had become public previous to and were generally known at the time of the Member's election. However, to confirm the ambiguity and uncertainty associated with congressional views on this question, that same report then implicitly suggested that there may be some form of constitutional limit at play. The report noted that to exercise the power of expulsion in a case in which the misconduct was generally known at the time of the Member's election, the House "might abuse its high prerogative, and in our opinion might exceed the just limitations of its constitutional authority by seeking to substitute its standards and ideals for the standards and ideals of the constituency of the Member who had deliberately chosen him to be their Representative." The question of whether the power to expel extends to misconduct that occurred prior to a Member's election (or reelection) has been explored more thoroughly in the House than in the Senate. As early as 1884, Speaker John G. Carlisle responded to a proposed House investigation of alleged misconduct that occurred prior to a Member's election by stating that "this House has no right to punish a Member for any offense alleged to have been committed previous to the time when he was elected as a member of the House. That has been so frequently decided in the House that it is no longer a matter of dispute." It is not clear whether the Speaker was referencing the expulsion power specifically, or the House's power to discipline its members more generally. Regardless, there, in fact, has been some divergence of views on whether a Member can be expelled for prior misconduct. The existing interpretations were highlighted in 1872 by the opposing conclusions drawn by two House committees investigating Members Oakes Ames and James Brooks for their role in the Credit Mobilier scandal. The alleged misconduct had occurred "four or five years" prior to being brought to the attention of the House and before the Members had been elected to Congress. A special committee found that the House had authority to expel a Member for conduct occurring in a prior Congress, and before an intervening election, and recommended that the House exercise that power with respect to Ames and Brooks. The report concluded that the Constitution placed "no qualification [on] the [expulsion] power" and assigned no restriction as to when an offense that warranted expulsion had to occur. The committee interpreted the expulsion power to have no apparent limit, reasoning that although inappropriate, "[i]f two-thirds of the House shall see fit to expel a man ... without any reason at all ... they have the power, and there is no remedy except by appeal to the people." The committee also addressed whether the expulsion power authorized the House to override the will of a Member's constituency, who, with full knowledge of the questionable conduct, chose to elect him as their representative: The committee have no occasion in this report to discuss the question as to the power or duty of the House in a case where a constituency, with a full knowledge of the objectionable character of a man, have selected him to be to their representative. It is hardly a case to be supposed that any constituency, with a full knowledge that a man had been guilty of an offense involving moral turpitude, would elect him. The majority of the committee are not prepared to concede such a man could be forced upon the House, and would not consider the expulsion of such a man any violation of the rights of the electors, for while the electors have rights that should be respected, the House as a body has rights also that should be protected and preserved. The House Judiciary Committee reached a different conclusion with respect to Ames and Oakes, however, adopting a much narrower view of the expulsion power. According to the Committee, so long as a Member "does nothing which is disorderly or renders him unfit to be in the House while a member thereof ... the House has no right or legal constitutional jurisdiction or power to expel the member." In support of this conclusion, the Committee also addressed the right of the Member's constituency, noting: This is a Government of the people, which assumes that they are the best judges of the social, intellectual, and moral qualifications of their Representatives whom they are to choose, not anybody else to choose for them.... Ultimately, the House chose to censure, rather than expel, Ames and Brooks. However, in adopting the censure resolution, the House specifically refused to agree to a preamble that asserted that "grave doubts exist as to the rightful exercise by this House of its power to expel a Member for offenses committed by such Member long before his election thereto and not connected with such election." Other House examples, however, suggest that the House has viewed itself, at times, as lacking the power to expel a Member for misconduct occurring prior to the individual's last election. The House Rules Manual, for example, reflects different interpretations. The Manual previously provided that "both Houses have distrusted their power to punish in such cases," though it no longer makes such a statement. Similarly, a House select committee investigating the possible expulsion of John W. Langley stated in 1925 that "with practical uniformity the precedents in such cases are to the effect that the House will not expel a Member for reprehensible action prior to his election as a Member.... " A 1972 House report similarly noted that "[p]recedents, without known exception, hold that the House will not act in any way against a Member for any actions of which his electorate had full knowledge at the time of his election. The committee feels that these precedents are proper and should in no way be altered." The Supreme Court relied upon these and other House precedents in Powell . Although urged by the House to view Powell's exclusion as an expulsion, the Court would not assume that the House would have voted to exclude Powell given that Members had "expressed a belief that such strictures [on expelling a Member for prior conduct] apply to its own power." The Court specifically stated, however, it was not ruling on the House's authority to expel for past misconduct. Two additional, more recent examples, may provide additional insight into the ambiguity of the House's various positions on the reach of the expulsion power. In 1979, a House committee recommended the censure of Charles C. Diggs, Jr., when he was reelected to the House after being convicted of a criminal kickback scheme involving his congressional employees. In discussing the question of the House's authority to punish a Member for known conduct that occurred prior to an election, the Committee noted that "the House has jurisdiction under Article I, Section 5 to inquire into the misconduct of a Member occurring prior to his last election, and under appropriate circumstances, to impose at least those disciplinary sanctions that fall short of expulsion ." Although perhaps questioning whether expulsion can reach prior misconduct, the committee did not conclude that it lacked the power to expel in such a case, instead deeming it "unwise" to "express an opinion on the Constitutional issue of whether the House has the power to expel" for prior misconduct. The report added that "the House cannot overlook entirely the reelection of Rep. Diggs following his conviction and due respect for that decision by his constituents is a proper element in the consideration of this case." In 1981, a House committee recommended the expulsion of Raymond F. Lederer for misconduct occurring while he was a Member, but prior to his reelection to Congress. A grand jury indicted Lederer in connection with the ABSCAM inquiry before his reelection, but he was not convicted until after the voters of his district had returned him to Congress. As a result of this timing, the Special Counsel to the House Committee on Standards of Official Conduct concluded that "the voters did not have full knowledge of the offenses he committed at the time they reelected him, and there appears to be no constitutional impediment to the Congressional expulsion power under such circumstances." Senate consideration of expulsion for prior misconduct appears to be less developed than in the House. Such limited practice suggests that the Senate does not appear to have a clearly established view on whether a Member may be expelled for conduct that occurred prior to the Member's election to the Senate. In 1807, John Quincy Adams provided an early, broad conception of the Senate's expulsion power, writing in a committee report that "[b]y the letter of the Constitution the power of expelling a Member is given to each of the two Houses of congress, without any limitation other than that which requires a concurrence of two-thirds." The two-thirds requirement was, in the opinion of the committee, "a wise and sufficient guard against the possible abuse of this legislative discretion." Yet, the report also suggested that whether the public was aware of the misconduct was significant in asserting that expulsion was the appropriate remedy when misconduct was "suddenly and unexpectedly revealed to the world." Other Senate precedents suggest that the timing of the misconduct should be viewed as one of many factors in determining whether expulsion is appropriate. For example, as Senator-elect Arthur R. Gould prepared to take the oath of office after being elected in 1926, allegations were made that he engaged in bribery in connection with a Canadian railroad contract that occurred in 1911—a full 15 years earlier. A Senate committee investigated and recommended that the Senate disregard all charges. In the committee report, a question was raised as to whether, under the circumstances, the Senate had the authority to expel. Although no opinion was expressed by the committee on the "important constitutional questions touching the power of the Senate," the report nevertheless stated that "the expulsion of a Member of the Senate for an offense alleged to have been committed prior to his election must depend upon the peculiar facts and circumstances of the particular case." The full Senate later adopted the committee's recommendation to disregard all charges. Perhaps the most restrictive view taken by a Senate committee of the Senate's expulsion power occurred not in an expulsion case, but in the exclusion case of Senator William Langer. Shortly after his election to the Senate in 1941, the Senate received allegations of the Senator's participation in a wide variety of misconduct, including a bribery and kickback scheme during his time as a state official. A Senate committee investigated the matter and in its report recommended that Langer be excluded on the grounds that he lacked the required "moral fitness" to be a Senator. The report also discussed the absence of any authority to expel Langer from the Senate. "This committee finds," the report concluded, "that expulsion cannot occur unless the offender is a member, at the time when the injury to the Senate insides." The Committee did qualify that blanket conclusion, however, by reserving the Senate's right to expel a Member for unknown prior misconduct, ultimately concluding that the Constitution "does not contemplate expulsion for any crime or violation of rules, or Infraction of law, except such as occurred either during membership or was first disclosed during membership to the impairment of the honor of the Senate." The recommended expulsion of Senator Robert Packwood in 1995 supports the conclusion that the Senate retains the authority to expel a Member for conduct prior to election, at least when the conduct was not previously known and occurred during the Member's previous term in office. In that instance, the Senate Ethics Committee voted unanimously to recommend that the Senate expel Senator Packwood for various allegations, including acts of sexual misconduct stretching back to 1969. Much of the Senator's conduct, however, was not uncovered until after his 1992 reelection. The Committee report began by articulating a broad expulsion power, acknowledging that the Supreme Court had "implied an unqualified authority of each House of Congress to discipline a Member for misconduct, regardless of the specific timing of the offense." The report also made a distinction between the power of censure and the power to expel, similar to that which was made by the House in the Diggs case, noting that "[h]istorically, neither House of congress has abdicated its ability to punish a Member in the form of censure" for prior misconduct. With regard to expulsion, the report noted only that "[t]here have been indications that the Senate, in an expulsion case, might not exercise its disciplinary discretion with regard to conduct in which an individual had engaged before the time he or she had been a member." For this proposition, the Senate report cited to a single past expulsion case in which the Senate did not act on a specific charge "since it was to have been taken previously to the election" of the Senator. These House and Senate examples would appear to support the conclusion that both bodies have been "less than consistent" in their views on the expulsion power's application to conduct occurring prior to a Member's last election. However, in either house, the key factors for consideration include whether the Member's constituency had knowledge of the misconduct and whether the misconduct, though taking place before an intervening election, nonetheless occurred during one of the Member's previous terms in office. However, as previously noted, the exercise of restraint generally does not appear to be grounded in a constitutional restriction, but rather a policy choice based on respect for the democratic system. Article I § 5 of the Constitution provides the House and Senate with broad, but not unlimited, authority to expel their own Members with the concurrence two-thirds of the body. In light of limited judicial interpretations of the Clause and limited and inconsistent House and Senate practice, it is difficult to define precisely the scope of the expulsion power, especially with regard to the nature and timing of conduct that may justify expulsion. Nonetheless, historical practice suggests that the chief and competing concerns that animate debates over the expulsion power are interests in preserving the integrity of a given house versus the interest in preserving the results of a democratic election. | The U.S. Constitution expressly grants each house of Congress the power to discipline its own Members for misconduct, including through expulsion, stating that: [e]ach House may determine the Rules of its Proceedings, punish its Members for disorderly Behaviour, and, with the Concurrence of two thirds, expel a Member. Expulsion is the process by which a house of Congress may remove one of its Members after the Member has been duly elected and seated. The Supreme Court has considered expulsion to be distinct from exclusion, the process by which the House and Senate refuse to seat Members-elect. In so concluding, the Supreme Court has held that exclusion cannot be used as a disciplinary tool, and Congress, accordingly, cannot undertake disciplinary measures on Members until after those Members have taken the oath of office. The constitutional limits on the power of expulsion are informed by the Expulsion Clause's text, historical background, judicial precedent, and historical practice. Presently, the only explicit standards for expulsion are the requirement for approval of two-thirds majority of the body imposing the punishment and the requirement that the individual subject to the expulsion has been formally seated as a Member of that body. The history of the Expulsion Clause suggests that the expulsion power is broad and confers to each house of Congress significant discretion as to the proper grounds for which a Member may be expelled. Accordingly, courts generally have declined to adjudicate the standards by which expulsions might be considered in the House or Senate. To date, 20 Members of Congress have been expelled: 5 in the House and 15 in the Senate. A large majority of those expulsions were predicated on Members' behavior deemed to be disloyal to the United States at the outset of the Civil War. Nonetheless, the two most recent expulsions followed Members' convictions on public corruption charges. One significant area of debate is whether a Member can be expelled for behavior arising prior to his or her election. The historical practice in each house of Congress is limited and mixed as to whether such expulsions are appropriate. The extent to which these historical practices could be said to bind Congress as precedent is unclear, as is Congress's authority to discipline Members for conduct that occurred prior to their election or reelection to office. These debates are centered on two general concerns that may be in tension with each other: maintaining the ability of each house of Congress to preserve the integrity of the institution and overriding the will and right of constitutents to choose their representatives. This report discusses the nature of the power of Congress to remove a Member, including the historical background of the Clause, the implications of the limited judicial interpretations of the Clause's meaning, and other potential constitutional limitations in the exercise of the expulsion power. The report then analyzes the potential grounds upon which a Member might be expelled, including an overview of past cases resulting in expulsion and a discussion of the potential exercise of the expulsion power for conduct occurring prior to the Member's election or reelection to Congress. |
Since 1984, a number of acts named after former Congressman Carl D. Perkins have been the main federal laws authorized to support the development of career and technical education (CTE) programs aimed at students in secondary and postsecondary education. The Carl D. Perkins Career and Technical Education Act of 2006 (Perkins Act; P.L. 109-270 ), the most recent reauthorization of the federal CTE law, was passed in 2006 and authorized appropriations through FY2012. The authorization of appropriations was extended through FY2013 under the General Education Provisions Act, and the Perkins Act has continued to receive appropriations through annual appropriations acts through FY2017. During the 114 th Congress, the House Committee on Education and the Workforce marked up and unanimously reported the Strengthening Career and Technical Education for the 21 st Century Act ( H.R. 5587 ), which would have provided for a comprehensive six-year reauthorization of the Perkins Act. H.R. 5587 was subsequently passed by the House of Representatives on September 13, 2016, by a vote of 405-5. No further action was taken on the bill. In the 115 th Congress, a new act, also named the Strengthening Career and Technical Education for the 21 st Century Act ( H.R. 2353 ), was introduced and marked up by the House Committee on Education and the Workforce. H.R. 2353 is similar to H.R. 5587 from the 114 th Congress but contains several modified provisions. The committee reported the bill unanimously on May 17, 2017. H.R. 2353 was passed by the House under suspension of the rules on June 22, 2017. H.R. 2353 would authorize appropriations through FY2023. This report does not attempt to provide a comprehensive analysis of H.R. 2353 . Rather, it provides an overview of the primary changes that would be made by H.R. 2353 . Table 1 compares provisions in current law side-by-side with new or revised provisions in H.R. 2353 . It also contains a section that highlights selected definitions that would be significantly revised or are introduced in H.R. 2353 . Table A-1 depicts the authorizations of appropriations for CTE programs authorized under H.R. 2353 . Table 1 highlights the differences between current law and H.R. 2353 , as passed by the House Committee on Education and the Workforce in May 2017. The table is organized topically, focusing on the areas of current law that would see the most significant changes under H.R. 2353 . These areas include the following: overall structure and funding levels, state and local funding formula provisions, state and local plan provisions, accountability and improvement provisions, state and local use of funds provisions, national activities, prohibitions, general provisions, selected revised definitions, and selected new definitions. | Since 1984, a number of acts named after former Congressman Carl D. Perkins have been the main federal laws authorized to support the development of career and technical education (CTE) programs aimed at students in secondary and postsecondary education. The Carl D. Perkins Career and Technical Education Act of 2006 (Perkins Act; P.L. 109-270), the most recent reauthorization of the federal CTE law, was passed in 2006 and authorized appropriations through FY2012. The authorization of appropriations was extended through FY2013 under the General Education Provisions Act, and the Perkins Act has continued to receive appropriations through annual appropriations acts through FY2017. During the 114th Congress, the House Committee on Education and the Workforce marked up and unanimously reported the Strengthening Career and Technical Education for the 21st Century Act (H.R. 5587), which would have provided for a comprehensive reauthorization of the Perkins Act. H.R. 5587 was subsequently passed by the House of Representatives on September 13, 2016, by a vote of 405-5. No further action was taken on the bill. In the 115th Congress, a new act, also named the Strengthening Career and Technical Education for the 21st Century Act (H.R. 2353), was introduced and marked up by the House Committee on Education and the Workforce. H.R. 2353 is similar to H.R. 5587 from the 114th Congress but contains several modified provisions. The committee reported the bill unanimously on May 17, 2017. H.R. 2353 was passed by the House under suspension of the rules on June 22, 2017. H.R. 2353 would make a number of major changes to current law. Some of these include repealing the Tech Prep program, which provided funds to consortia of secondary and postsecondary CTE providers but has not been funded since FY2010; gradually raising total authorized appropriation levels for CTE, reaching a total of $1.21 billion in FY2023, compared to the FY2017 actual appropriations of $1.12 billion; introducing a change to the state allocation formula that would require that states receive an allocation of no less than 90% of their previous year's allocation starting in FY2021; permitting states to reserve up to 15% of their Basic State Grants funds for innovative CTE activities in rural areas or areas with higher numbers or concentrations of CTE students; allowing states to set their own annual targets on the core indicators of performance at both the secondary and postsecondary education levels without approval from the Secretary of Education; replacing the local plan required from CTE providers with a comprehensive needs assessment meant to align the CTE programs being offered with local workforce needs; removing the ability of the Secretary of Education to withhold state funds due to a lack of improved performance; and revising and introducing a number of new definitions, including common definitions for terms already defined in the Workforce Innovation and Opportunity Act. This report highlights the key provisions in H.R. 2353 and explains the major differences between it and current law. |
The Social Security Administration (SSA) oversees programs that touch the lives of millions of American families and are key components of the nation's economic safety net. The Old-Age, Survivors, and Disability Insurance (OASDI) program, commonly known as Social Security, is the most well-known of these programs. SSA is also responsible for carrying out two cash assistance programs for certain groups of low-income individuals: (1) Supplemental Security Income (SSI) for the Aged, Blind, and Disabled and (2) Special Benefits for Certain World War II Veterans. In addition to its own programs, the agency supports the administration of a number of non-SSA programs, such as Medicare, and provides and verifies data for a variety of federal and state program purposes. Benefit payments for SSA's programs are considered mandatory spending , which means that such outlays are controlled by each program's authorizing statute—not by appropriations acts. However, the resources needed to carry out SSA's programs, as well as to support the administration of other priorities, are considered discretionary spending and thus are controlled by the annual appropriations process. This report provides background on mandatory spending for SSA's programs but its focus is on annual discretionary appropriations for SSA's administrative activities. It begins with a brief description of SSA's programs and then examines the agency's projected spending on benefit payments and operating costs in FY2017. Next, it provides an overview of the FY2017 President's budget request for all of SSA's accounts, the FY2017 Commissioner's budget request for the agency's administrative accounts, and major congressional actions on SSA's appropriations for FY2017. Lastly, the report examines trends in the budget request and the appropriation for the limitation on administrative expenses (LAE) as well as how changes in the composition of the LAE appropriation have affected agency workloads. Most of the data presented in this report can be found in SSA's FY2017 budget justification to Congress, which is available at https://www.ssa.gov/budget/ . SSA is charged with administering several federal income support programs established under the Social Security Act, namely Social Security (OASDI; Title II of the act); Supplemental Security Income (SSI; Title XVI of the act); and Special Benefits for Certain World War II Veterans (Title VIII of the act). Social Security is a social insurance program that replaces a portion of an insured worker's earnings based on the individual's career-average earnings in covered employment. In contrast, SSI and Special Benefits for Certain World War II Veterans are public assistance programs that provide a guaranteed minimum income to certain groups of individuals who have little or no Social Security or other income. All three programs are entitlements , meaning that the federal government is obligated to pay benefits to individuals who meet the eligibility requirements specified in each program's authorizing statute. To conform to the presentation of data in SSA's FY2017 budget justification to Congress, this report describes Old-Age and Survivors Insurance and Disability Insurance as separate programs. Old-Age and Survivors Insurance (OASI) provides monthly cash benefits to insured workers aged 62 or older and to their eligible spouses and children. It also pays benefits to certain survivors of deceased insured workers. Workers achieve insured status by working and paying Social Security taxes for a sufficient number of years in jobs that are covered under the Social Security system. OASI benefits and administrative costs are paid out of the Federal Old-Age and Survivors Insurance Trust Fund to which current workers, their employers, and self-employed individuals contribute. Under current law, the OASI trust fund's share of the combined 12.4% Social Security payroll tax rate is 10.03%. Social Security Disability Insurance (SSDI) pays monthly cash benefits to nonelderly insured workers who are unable to perform substantial work because of severe, long-term disabilities and to their eligible spouses and children. Workers become insured in the event of disability by working for a certain number of years in jobs that are covered under Social Security and thus are subject to payroll taxes. SSDI benefits are payable until the disabled worker dies, returns to work, or reaches Social Security's full retirement age (currently 66), at which point the worker transitions to OASI. SSDI benefits and administrative costs are paid out of the Federal Disability Insurance (DI) Trust Fund to which current workers, their employers, and self-employed individuals contribute. Under current law, the DI trust fund's share of the combined 12.4% Social Security payroll tax rate is 2.37%. SSI provides cash assistance to needy aged, blind, or disabled individuals, including blind or disabled children. The program's goal is to provide qualified individuals with a guaranteed minimum income to meet their basic needs for food, clothing, shelter, and other daily necessities. To qualify for SSI, a person must have limited income and assets as well as meet certain other requirements. Monthly SSI benefits are reduced by other countable income, meaning that SSI is often a program of "last resort" for low-income seniors and individuals with disabilities. States may complement federal SSI benefits with state supplementary payments (SSPs) that are made solely with state funds. Federal SSI benefits and administrative costs are paid out of the general fund of the U.S. Treasury, also known as general revenues . The Special Benefits for Certain World War II Veterans program provides a minimum cash benefit to two groups of low-income individuals who live outside of the United States: American veterans of World War II and veterans of the Filipino armed forces that fought alongside the American military during that conflict. To qualify, individuals must have been aged 65 or older on December 14, 1999; have been SSI eligible for that month; be an eligible World War II veteran; have limited income; and reside outside the United States. The program's benefits and related administrative costs are paid out of general revenues. As shown in Figure 1 , outlays for the OASI, SSDI, SSI, and Special Benefits for Certain World War II Veterans programs combined are projected to be $1.034 trillion in FY2017. This projection includes benefit payments as well as SSA and non-SSA administrative expenses and certain other costs. Of this amount, nearly $1.018 trillion (or 98.4%) is for benefit payments. Adjusted for double counting, SSA estimates that approximately 68.4 million individuals will receive federal benefits from its programs in FY2017. As noted earlier, benefit outlays for SSA's programs are considered mandatory spending and therefore are not controlled by annual appropriations acts. Spending on benefit payments for these programs is determined by the eligibility requirements and benefit formula specified in each program's authorizing statute. Table 1 shows administrative outlays for each program as a percentage of benefit payments and for Social Security, as a share of trust fund income. The right column of the table excludes non-SSA administrative expenses and certain other costs, except in the row labeled "Total," which includes costs associated with Medicare-related activities. Administrative costs as a share of benefit payments are projected to be 1.3% in FY2017. Administrative costs as a share of benefit payments are greater for SSA's disability programs compared with OASI because the disability programs are more complicated to administer and thus require more resources per applicant or beneficiary. As a means-tested program, SSI is particularly complex to administer because SSA must verify all sources of income and resources available to a SSI recipient and adjust benefits every time there is a change in the recipient's income, which could be on a month-by-month basis. The ratio of administrative costs to benefit payments for the Special Benefits for Certain World War II Veterans program is noticeably higher compared with Social Security or SSI because of low benefit levels and the declining number of individuals in receipt of benefits. In FY2017, SSA projects that the program will provide benefits to fewer than 500 individuals each month, on average. Although benefit payments for SSA's programs are considered mandatory spending and thus are not controlled by the annual appropriations process, the agency requires annual discretionary appropriations to carry out its programs and to support the administration of non-SSA programs, such as Medicare, and other priorities. This section of the report provides an overview of SSA's accounts by examining the Obama Administration's FY2017 budget request for the agency. It also discusses the FY2017 Commissioner's budget request for the agency's administrative accounts and highlights major congressional actions on SSA's FY2017 appropriations. SSA's accounts are traditionally funded through the Departments of Labor, Health and Human Services, and Education, and Related Agencies (LHHS) appropriations bill. The President's FY2017 budget request to Congress for SSA consisted of four accounts: (1) Payments to Social Security Trust Funds, (2) Supplemental Security Income Program, (3) Limitation on Administrative Expenses (LAE), and (4) Office of Inspector General. The LAE account funds the costs for carrying out SSA's programs and for supporting the administration of non-SSA programs and other priorities. The FY2017 President's budget request for SSA's accounts is summarized in Table 2 . Each account is discussed in more detail below. The Payment to Social Security Trust Funds account is designed to reimburse the OASI and DI trust funds for the costs of certain activities payable by general revenues. It consists of mandatory funding that is permanently and indefinitely authorized—and thus is provided outside of the annual appropriations process—and mandatory funding that is provided through the annual appropriations process. For FY2017, the President's budget request included $11.4 million in payments to the Social Security trust funds that are provided through the annual appropriations process. Of this amount, $5 million was for interest earned on benefit checks that remain uncashed for at least six months and $6.4 million was for administrative costs related to 1974 pension reform legislation. For FY2017, the President's budget projected $39.2 billion in payments to the Social Security trust funds that are provided outside of the annual appropriations process. Nearly this entire amount (or 99.9%) is from subjecting a portion of Social Security benefits to federal income tax. The remaining amounts are from reimbursements for union administrative expenses and payments related to changes in the reporting of self-employment income. The vast majority of funding provided to SSA each year through the appropriations process is for the SSI program, which is an appropriated entitlement (i.e., mandatory appropriation). As with other entitlement programs, such as Social Security, the level of spending on SSI benefits is controlled through the program's authorizing statute, which sets the criteria used to determine program eligibility and benefit levels. However, because SSI's authorizing statute does not provide authority to make payments to fulfill legal obligations, funding for SSI benefits is provided through mandatory spending that is enacted through annual appropriations acts. SSI-related administrative expenses are also provided through the annual appropriations process. Funding for the SSI program is paid out of general revenues and appropriated to SSA in the Supplemental Security Income Program account. The SSI account contains three components. First, there is a regular appropriation for SSI benefits and administrative costs for the current fiscal year, which is described in additional detail below. Second, there is an indefinite appropriation for any costs incurred for the current fiscal year after June 15. This component allows SSA to continue to pay SSI benefits in the event that benefit obligations are greater than expected during the last months of the fiscal year. Third, there is an advance appropriation for benefit payments for the first quarter of the succeeding fiscal year. This component is designed to ensure the timely payment of benefits in case of a delay in next fiscal year's appropriations bill. Funds appropriated for the SSI program remain available to SSA until expended. As shown in Table 3 , the FY2017 President's budget request included $43.8 billion for FY2017 program costs ("Subtotal Regular Appropriation") and $15 billion for SSI benefits in the first quarter of FY2018 ("Advance for Subsequent Year"). Total SSI benefits payable in FY2017 were estimated to be $52.9 billion ("Subtotal Federal Benefits"), with $14.5 billion coming from the advance appropriation that was enacted as part of the FY2016 omnibus for SSI benefits in the first quarter of FY2017. In addition to funding benefit payments, the SSI appropriation provides for the program's administrative expenses, beneficiary services, and research and demonstration project-related costs. The FY2017 President's budget request for these administrative and other expenses was $5.4 billion. Administrative expenses for the SSI program are initially paid from the OASI and DI trust funds and are appropriated to the discretionary LAE account. The mandatory appropriation to the SSI program account is used to reimburse the trust funds from general revenues for these costs. Administrative expenses for the SSI program include costs related to disability determinations, initial applications and appeals, and program integrity activities. The FY2017 President's budget request for administrative expenses was $5.2 billion ( Table 3 ). The SSI appropriation also funds beneficiary services, research, and Medicare outreach. Beneficiary services include payments to state vocational rehabilitation (VR) agencies and Ticket to Work employment networks (ENs) for employment services provided to SSI recipients. The FY2017 President's budget request included $89 million for beneficiary services, $58 million for research and demonstration projects, and an additional $2 million for costs associated with the Department of State's two-year special immigrant visa extension for Afghans ( Table 3 ). The appropriation for the LAE account funds SSA's administrative costs associated with OASI, SSDI, SSI, and Special Benefits for Certain World War II Veterans as well as costs incurred by the agency to support Medicare and other non-SSA programs. This account also funds certain functions, such as employment verification, information technology activities, and the Social Security Advisory Board (SSAB). The LAE account is discretionary and thus is controlled through the annual appropriations process. The funds that make up this account come from Social Security's OASI and DI trust funds, Medicare's Hospital Insurance (HI) and Supplementary Medical Insurance (SMI) trust funds, general revenues, and user fees paid to SSA ( Figure 2 ). The FY2017 President's budget request for SSA's LAE account was $13.067 billion, which is $905 million (or 7.4%) more than the amount enacted for FY2016. This overall appropriation consists of the base LAE appropriation, additional funding for program integrity work, and funding for LAE activities from user fees paid to SSA. The base LAE appropriation is the general appropriation for SSA's administrative activities. The FY2017 President's budget request for the base LAE appropriation was $11.121 billion, which is $522 million (or 4.9%) more than the amount enacted for FY2016 ( Table 4 ). Please note that the FY2016 base LAE appropriation provided $150 million for one-time costs associated with the renovations and modernization of the Arthur J. Altmeyer Building, which is located at SSA's headquarters campus in Woodlawn, MD. If these costs are excluded, then the FY2017 President's budget request is $672 million (or 6.4%) more than the FY2016 base LAE appropriation and is $1.055 billion (or 8.8%) more than the FY2016 total LAE appropriation. The FY2017 President's budget request included $1.819 billion for costs associated with SSA's program integrity activities, which include continuing disability reviews (CDRs) and SSI redeterminations. CDRs are periodic reviews of disabled Social Security and SSI beneficiaries to determine if they continue to meet the statutory definition of disability. SSI redeterminations are periodic reviews of nonmedical eligibility factors (such as income, assets, and living arrangements) to determine if SSI recipients are still eligible for the program and are receiving the correct payment amount. SSA estimated that the number of CDRs scheduled for FY2017 will result in net federal program savings (OASDI, SSI, Medicare, and Medicaid) over a 10-year period of about $8 on average for every $1 appropriated for program integrity funding. Likewise, the agency estimated that the level of SSI redeterminations scheduled for the fiscal year will result in net federal program savings over 10 years of about $3 on average for every $1 budgeted for program integrity funding. Section 101 of the Budget Control Act of 2011 (BCA; P.L. 112-25 ) amended Section 251 of the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA; P.L. 99-177 ) to reestablish discretionary spending limits as part of the annual appropriations process. The BBEDCA permits the limits (often called caps ) to be adjusted for certain purposes, one of which is program integrity work related to SSA's disability programs. Specifically, Section 251(b)(2)(B) of the BBEDCA allows the spending caps to be increased for FY2012 through FY2021 by the amount by which funds appropriated to SSA for CDRs and SSI redeterminations for a fiscal year exceed $273 million, up to a specified maximum level for that fiscal year. Section 815 of the Bipartisan Budget Act of 2015 (BBA 2015; P.L. 114-74 ) amended SSA's cap adjustment levels in the BBEDCA to permit higher maximum adjustments for FY2017 through FY2019 and a lower maximum adjustment in FY2021 ( Table 5 ). The FY2017 President's budget request for $1.819 billion in program integrity funding included the base amount of $273 million and the full cap adjustment of $1.546 billion authorized under the BBEDCA for FY2017. In addition to modifying SSA's cap adjustment levels in the BBEDCA, the BBA 2015 expanded the types of program integrity activities for which cap adjustment funding may be used to include cooperative disability investigation (CDI) units and fraud prosecutions by Special Assistant United States Attorneys (SAUSAs). The CDI program is a multiagency effort between SSA, the Office of the Inspector General (OIG), state Disability Determination Services (DDS) agencies, and state and local law enforcement agencies to investigate initial disability claims and post-entitlement events involving suspected fraud. SAUSAs are attorneys from SSA's Office of the General Counsel who are dedicated to prosecuting fraud cases referred by the OIG that otherwise would not be prosecuted in federal court. Furthermore, the BBA 2015 clarified that the term continuing disability reviews includes work CDRs, which are reviews of disabled Social Security beneficiaries to determine if their earnings and related work activity are within applicable limits and if benefits should continue. The FY2017 President's budget included a request for $127 million in LAE appropriations from two SSA-collected user fees for certain administrative activities. The first user fee is for SSA's administration of SSI state supplementation programs. As noted earlier, some states supplement federal SSI benefits with state supplementary payments (SSPs) that are made solely with state funds. States that elect federal administration of their supplementation program reimburse SSA for the cost of the SSPs that the agency makes to eligible recipients on behalf of the state. Since FY1994, SSA has charged participating states for the cost of administering their program by assessing a user fee on each SSP made by the agency based on a fee schedule prescribed in federal law. The user fee is $11.68 per SSP in FY2017. The first $5.00 of each fee is credited to the Treasury's general fund, and the amount of the fee above $5.00 is credited to the Treasury's account for SSI state supplement user fees. Federal law permits the credited funds to be made available for obligation to the extent and in the amount provided in advance in appropriations acts. The FY2017 President's budget request for SSI state supplement user fees was $126 million. The second user fee is for SSA's administration of the certification process for nonattorney representatives to qualify for direct fee withholding. Individuals applying for Social Security or SSI benefits may appoint an attorney or qualified nonattorney to represent them through the adjudicative process. If a claimant is successful and entitled to past-due benefits, the appointed representative may be eligible to receive direct payment of his or her fee out of the claimant's past-due benefits. The Social Security Act requires nonattorney representatives to meet certain prerequisites to qualify for direct fee withholding, such as passing a written examination as well as a criminal background check. Section 303(c) of the Social Security Protection Act of 2004 ( P.L. 108-203 ) permits SSA to assess nonattorney representatives reasonable fees to cover the cost of administering these prerequisites. User fees collected from nonattorney representatives are made available for obligation to the extent and in the amount provided in advance in appropriations acts. The FY2017 President's budget request for user fees charged to nonattorney representatives was $1 million. The OIG investigates fraud, waste, and abuse within SSA's programs, in addition to auditing the agency's ability to carry out the programs effectively and efficiently. It also monitors improper receipt of federal benefits; investigates certain crimes committed by SSA employees, contractors, and program beneficiaries; and supports larger government-wide homeland security efforts. Funding for the OIG is provided through discretionary appropriations to a separate administrative account. The FY2017 President's budget request for the OIG account was $112 million, which is $6.5 million (or 6.2%) more than the amount enacted for FY2016 ( Table 6 ). Of this amount, $31 million was from general revenues and $81 million was from the OASI and DI trust funds, as authorized by Section 201(g)(1) of the Social Security Act for costs associated with the OASI and SSDI programs. SSA became an independent federal agency on March 31, 1995, following the enactment of the Social Security Independence and Program Improvements Act of 1994 ( P.L. 103-296 ). Section 104(a) of the act granted the Commissioner of Social Security the authority to submit to Congress, without revision, an annual budget for SSA. This budget request is independent of the President's budget request for the agency and generally includes a request for administrative expenses and a request for the OIG. The Commissioner's budget request is included at the end of SSA's section in the appendix to the President's budget. The FY2017 Commissioner's budget request for total administrative discretionary resources was $13.859 billion, which represents $13.610 billion for administrative expenses, $128 million for research, and $121 million for the OIG. Administrative expenses included $13.079 billion in LAE funding and $531 million in no-year funding for various initiatives. The FY2017 President's budget request for LAE funding is $12 million (or 0.1%) less than the FY2017 Commissioner's budget request. In addition, the FY2017 President's budget request for the OIG is $9 million (or 7.4%) less than the FY2017 Commissioner's budget request. On July 14, 2016, the House Committee on Appropriations approved its FY2017 LHHS appropriations bill ( H.R. 5926 ) by a vote of 31 to 19. The House bill would have provided $11.899 billion for SSA's LAE account, which was $1.168 billion (or 8.9%) less than the amount in the FY2017 President's budget request and was $263 million (or 2.2%) less than the amount enacted for FY2016 ( Table 7 ). Excluding the one-time cost of $150 million authorized in the FY2016 omnibus for renovating and modernizing the Arthur J. Altmeyer Building, the House bill would have provided $113 million (or 0.9%) less than the FY2016 enacted appropriation for the LAE account. In addition, the House bill would have provided $393 million less in cap adjustment funding for program integrity work permitted under the BBEDCA for FY2017 (see Table 5 and Table 7 ). Lastly, the House bill would have provided $105.5 million for the OIG account, which was the same amount that was enacted for FY2016. On June 9, 2016, the Senate Committee on Appropriations approved its FY2017 LHHS appropriations bill ( S. 3040 ) by a vote of 29 to 1. The Senate bill would have provided $12.482 billion for SSA's LAE account, which is $585 million (or 4.5%) less than the amount in the FY2017 President's budget request but is $320 million (or 2.6%) more than the amount enacted for FY2016 ( Table 7 ). Excluding the one-time cost of $150 million authorized in the FY2016 omnibus for renovating and modernizing the Arthur J. Altmeyer Building, the Senate bill would have provided $470 million (or 3.9%) more than the FY2016 enacted appropriation for the LAE account. As with the President's budget request, the Senate bill would have provided the full amount of cap adjustment funding for program integrity work permitted under the BBEDCA for FY2017 (see Table 5 and Table 7 ). The Senate bill would have also provided $105.5 million for the OIG account, which is the same amount that was enacted for FY2016. On September 29, 2016, President Barack Obama signed into law the Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, and Zika Response and Preparedness Act ( H.R. 5325 ; P.L. 114-223 ), which contained the Continuing Appropriations Act, 2017 (Division C). The day before, H.R. 5325 was passed in the Senate by a vote of 72-26 and in the House by a vote of 342-85. The first FY2017 continuing resolution (CR) provided continuing appropriations for 11 of the 12 annual appropriations bills (including the LHHS appropriations bill) through December 9, 2016. In general, discretionary accounts covered by the first FY2017 CR were funded at the same rate and under the same conditions as they were in the FY2016 omnibus, minus an across-the-board (ATB) rescission of 0.496%. However, funding dedicated to SSA's program integrity work was exempt from the ATB rescission. On December 10, 2016, President Obama signed into law the Further Continuing and Security Assistance Appropriations Act, 2017 ( H.R. 2028 ; P.L. 114-254 ). The bill was passed in the House on December 8 by a vote of 326-96 and in the Senate on December 9 by a vote of 63-36. The second FY2017 CR provided continuing appropriations for 11 of the 12 annual appropriations bills (including the LHHS appropriations bill) through April 28, 2017. In general, as was the case with the first FY2017 CR, discretionary accounts covered by the second FY2017 CR were funded at the same rate and under the same conditions as they were in the FY2016 omnibus, minus an ATB rescission. However, instead of an ATB reduction of 0.496% (per the first FY2017 CR), the reduction in the second FY2017 CR was 0.1901%. Similar to the first CR, SSA's program integrity work was exempt from the ATB rescission. In addition, Section 172 of the second FY2017 CR set aside $150 million in the LAE account to address the hearings backlog within SSA's Office of Disability Adjudication and Review (ODAR). On April 28, 2017, President Trump signed into law a third FY2017 CR ( H.J.Res. 99 ; P.L. 115-30 ). The House passed the bill by a vote of 382-30, and the Senate passed the bill by voice vote. The short-term CR continued funding under the terms of the previous CR through May 5, 2017. On May 5, 2017, President Trump signed into law the Consolidated Appropriations Act, 2017 ( H.R. 244 ; P.L. 115-31 ). The bill was passed in the House on May 3 by a vote of 309-118 and in the Senate on May 4 by a vote of 79-18. It provides continuing appropriations for 11 of the 12 annual appropriations bills (including the LHHS appropriations bill) through September 30, 2017. Under Title IV of Division H of the FY2017 omnibus, SSA's discretionary appropriations are $12.428 billion for the LAE account and $105.5 million for the OIG account. $1.819 billion of the LAE appropriation is for program integrity activities, which is composed of $273 million in base funding and $1.546 billion in cap adjustment funding. (This amount is the maximum cap adjustment permitted under the BBEDCA for FY2017; see Table 5 .) As shown in Table 7 , the totals and subtotals for the LAE and OIG accounts under the FY2017 omnibus are the same as the amounts passed by the Senate Committee on Appropriations for FY2017. The FY2017 appropriation for the LAE account includes a number of changes in the methodology for allocating funds as well as the use of those funds. First, the FY2017 omnibus provides a combined amount for the base LAE and program integrity work: $12.358 billion. The legislative language in the FY2017 omnibus specifies that $1.819 billion of the combined appropriation is dedicated for program integrity work. Thus, the base LAE amount is $12.358 billion minus $1.819 billion, which equals $10.539 billion. Second, unlike in past years, the appropriation for program integrity work is made available through the first half of the next fiscal year; in this case, through FY2018 (i.e., through March 31, 2018). Third, the FY2017 omnibus authorizes funding dedicated to program integrity work to be used for CDI units and costs associated with the prosecution of fraud by SAUSAs. Although the BBA 2015 authorized cap adjustment funding for program integrity work to be used for such activities, the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) specified that program integrity funding could be used only for CDRs and SSI nonmedical redeterminations for eligibility. The FY2017 omnibus provides $90 million from the LAE account to address the disability hearings backlog, which is 40% less than the $150 million authorized for such activities in the second FY2017 CR. However, unlike the second FY2017 CR, the FY2017 omnibus provides funding for the backlog through the end of the next fiscal year; in this case, through FY2018 (i.e., through September 30, 2018). Since SSA became an independent agency, the Commissioner's budget request for the LAE account has exceeded the President's budget request in nominal (i.e., unadjusted) dollars for all but two fiscal years: FY1997 and FY1998 ( Figure 3 ). After taking into account all rescissions, except rescissions of no-year information technology systems funds, the enacted appropriation for the LAE account exceeded the Commissioner's budget request only for FY1997, FY1998, and FY2009. The enacted appropriation exceeded the President's budget request only for FY1997, FY2008, FY2009, and FY2014. Please note that the FY2014 President's budget request included a legislative proposal for a dedicated source of mandatory funding for program integrity work instead of a request for discretionary base and cap adjustment funding. If the funding associated with this legislative proposal had been included in the LAE, then the enacted appropriation for FY2014 would have been less than the President's budget request. Figure 4 shows historical trends in the annual appropriation for SSA's LAE account using three measures: (1) nominal dollars, (2) price-indexed dollars, and (3) wage-indexed dollars. The lower line labeled "Nominal Dollars" shows a steady increase in the appropriation for the LAE account over the past 20 years, although the rate of this increase has slowed since FY2010. The middle line in Figure 4 labeled "Price Indexed to 2017 Dollars" shows the trend in SSA's LAE appropriation adjusted for changes in prices, as measured by the Consumer Price Index for All Urban Consumers (CPI-U). Although the price-indexed line is flatter than the nominal line, there is a noticeable rise in the appropriation for SSA's LAE account during the FY2000s. Between FY2010 and FY2013, however, the value of appropriation declines in real terms, only to increase through FY2017. Another method for examining historical trends in SSA's LAE account is to adjust the annual appropriation for wage growth. The majority of SSA's administrative budget is obligated for payroll expenses, which include pay raises due to step increases, promotions, and cost-of-living adjustments. Because wages tend to grow faster than prices, annual increases in payroll expenses, which are largely fixed costs, can increase an agency's administrative expenses faster than the rate of inflation. According to SSA, the agency's fixed costs typically grow at a rate of $300-$350 million per year. The top line in Figure 4 labeled "Wage Indexed to 2017 Dollars" shows the trend in the appropriation for SSA's LAE account adjusted for changes in wages, as measured by SSA's Average Wage Index (AWI). The wage-indexed line shows a steady decline in the value of the LAE appropriation in real terms from FY2010 to FY2015, followed by a slight increase in FY2016 and then a small decrease in FY2017. The recent nominal growth in the annual appropriation for SSA's LAE account stems from increases in funding authorized specifically for program integrity work. Between FY2010 and FY2017, the amount of the LAE appropriation dedicated to program integrity work increased by 140%, from $758 million to $1.819 billion ( Figure 5 ). Program integrity funding includes base funding provided to meet Section 251(b)(2)(B) of the BBEDCA and cap adjustment funding pursuant to annual limits specified in the act. When adjusted for price and wage growth over this period, SSA's program integrity funding grew by 115% and 94%, respectively. The increases in dedicated program integrity funding have allowed SSA to hire more federal and DDS employees to conduct additional full medical CDRs. Between FY2010 and FY2016, the number of CDRs processed by SSA increased by 162%, from 324,500 to 850,000 ( Figure 6 ). During this period, the CDR backlog declined by 79%, from 1.361 million pending reviews in FY2010 to about 280,000 in FY2016. However, as shown in Figure 7 , the amount of the LAE appropriation available for other core workloads has essentially remained flat, increasing by 0.2% in nominal terms, from $10.642 billion in FY2010 to $10.663 billion in FY2017. General LAE funding refers to LAE funding not dedicated to program integrity work, that is, the base LAE appropriation and funding from user fees paid to SSA for certain administrative activities. When adjusted for price and wage growth over this period, general LAE funding fell by 10% and 19%, respectively. According to SSA and others, the declining real value of the general LAE appropriation has contributed to agency delays in processing other workloads. One of the most publicized issues for SSA over the past several years has been the growing number of pending disability cases at the hearing level of the administrative appeals process. From the end of FY2010 to the end of the second quarter of FY2017, the number of pending hearings grew by 58%, from 705,400 to 1.12 million ( Figure 8 ; left axis). During that same period, the average wait time for a hearing decision increased by 37%, from 426 days to 583 days ( Figure 8 ; right axis). At a hearing before the Senate Special Committee on Aging, a SSA official stated that The House appropriations bill, if enacted, would cut the agency's base administrative funding below the FY 2016 enacted level and result in serious degradation of service. For example, at such low funding levels, we could face up to two weeks of employee furloughs, when our field offices could be closed to the public. The Senate appropriation bill, while higher than the House bill, would still fall short of providing us the funding to serve record numbers of claimants and beneficiaries. The reports accompanying the House and Senate bills do not provide an explicit rationale for each committee's FY2017 funding level. However, in enacting the FY2017 omnibus, it would seem that Congress believes that the Senate's FY2017 funding level is sufficient for SSA to perform its non-program integrity responsibilities. The FY2016 LHHS appropriations bill was passed as Division H of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) on December 18, 2015. The total FY2016 appropriation for SSA's LAE account was $12.162 billion, which was $352 million (or 2.8%) less than the amount requested in the President's budget for that year but was $356 million (or 3.0%) more than the amount enacted for FY2015 ( Table A-1 ). The enacted appropriation for the LAE account provided $13 million less in cap adjustment funding for program integrity work than was permitted under the BBEDCA for FY2016 (see Table 5 ). The FY2016 appropriation for the OIG account was $4.3 million (or 3.9%) less than the FY2016 President's budget request but was $2.2 million (or 2.1%) more than the amount enacted for FY2015 ( Table A-1 ). | The Social Security Administration (SSA) is responsible for administering a number of federal entitlement programs that provide income support (cash benefits) to qualified individuals. These programs are Old-Age, Survivors, and Disability Insurance (OASDI), commonly known as Social Security; Supplemental Security Income (SSI) for the Aged, Blind, and Disabled; and Special Benefits for Certain World War II Veterans. In FY2017, SSA's programs are projected to pay a combined $1 trillion in federal benefits to an estimated 68.4 million individuals. The cost to administer these programs is projected to be about 1.3% of benefit outlays. Although benefit payments for SSA's programs are considered mandatory spending and thus are not controlled by the annual appropriations process, the agency requires annual discretionary appropriations to carry out its programs and to support the administration of non-SSA programs, such as Medicare, as well as various other priorities. The annual appropriation for SSA's limitation on administrative expenses (LAE) account provides nearly all of the agency's administrative funding. The LAE account is composed of funds from the Social Security and Medicare trust funds for their share of administrative expenses, the general fund of the U.S. Treasury for SSI's share of administrative expenses, and user fees paid to SSA for certain administrative activities. Additional appropriations from Congress provide funding for SSI program costs, research and demonstration projects, SSA's Office of the Inspector General (OIG), and certain payments to the Social Security trust funds. SSA's accounts are traditionally funded through the Departments of Labor, Health and Human Services, and Education, and Related Agencies (LHHS) appropriations bill. The Obama Administration's FY2017 request for SSA's LAE account was $13.067 billion, which included $1.819 billion for program integrity activities such as continuing disability reviews (CDRs) and SSI nonmedical redeterminations. By comparison, the FY2016 appropriation for SSA's LAE account was $12.162 billion, with $1.426 billion dedicated to program integrity work. On September 29, 2016, President Obama signed into law the Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, and Zika Response and Preparedness Act (H.R. 5325; P.L. 114-223), which contains the Continuing Appropriations Act, 2017 (Division C). The first FY2017 continuing resolution (CR) provided continuing appropriations for 11 of the 12 annual appropriations bills (including the LHHS appropriations bill) through December 9, 2016. On December 10, 2016, President Obama signed into law the Further Continuing and Security Assistance Appropriations Act, 2017 (H.R. 2028; P.L. 114-254). The second FY2017 CR provided continuing appropriations for 11 of the 12 annual appropriations bills (including the LHHS appropriations bill) through April 28, 2017. On April 28, 2017, President Trump signed into law a third FY2017 CR (H.J.Res. 99; P.L. 115-30). The short-term CR continued funding under the terms of the previous CR through May 5, 2017. On May 5, 2017, President Trump signed into law the Consolidated Appropriations Act, 2017 (H.R. 244; P.L. 115-31), which provides continued funding through the end of FY2017. The annualized funding level for the LAE account under the FY2017 omnibus is $12.482 billion, with $1.819 billion dedicated to program integrity work. Over the past several years, Congress has increased the amount of funding provided to SSA for program integrity work. This increase has allowed the agency to process more CDRs and SSI redeterminations, resulting in additional net savings to the federal government. However, funding for non-program integrity work during this period has essentially remained flat in nominal (unadjusted) terms. According to SSA and others, recently enacted funding levels for non-program integrity work have contributed to agency delays in processing other workloads, such as pending disability cases at the hearing level of the administrative appeals process. |
This report provides a status update on FY2013 appropriations actions for accounts traditionally funded in the appropriations bill for the Departments of Labor, Health and Human Services, and Education, and Related Agencies (L-HHS-ED). This bill provides discretionary and mandatory appropriations to three federal departments: the Department of Labor (DOL), the Department of Health and Human Services (HHS), and the Department of Education (ED). In addition, the bill provides annual appropriations for more than a dozen related agencies, including the Social Security Administration (SSA). Discretionary funds represent less than one-quarter of the total funds appropriated in the L-HHS-ED bill. Nevertheless, the L-HHS-ED bill is typically the largest single source of discretionary funds for domestic non-defense federal programs among the various appropriations bills (the Department of Defense bill is the largest source of discretionary funds among all federal programs). The bulk of this report is focused on discretionary appropriations because these funds receive the most attention during the appropriations process. The L-HHS-ED bill typically is one of the more controversial of the regular appropriations bills because of the size of its funding total and the scope of its programs, as well as various related policy issues addressed in the bill, such as restrictions on the use of federal funds for abortion and for research on human embryos and stem cells. See the Key Policy Staff table at the end of this report for information on which analysts to contact at the Congressional Research Service with questions on specific agencies and programs funded in the L-HHS-ED bill. This report is divided into several sections. The current section provides an explanation of the scope of the L-HHS-ED bill (and hence, the scope of this report), as well as an introduction to important terminology and concepts that carry throughout the report. Next is a series of sections describing the status of funding for FY2013. These sections describe the continuing resolutions that have governed FY2013 appropriations levels for L-HHS-ED programs ( P.L. 113-6 , P.L. 112-175 ), as well as disaster relief appropriations ( P.L. 113-2 ). There is also a summary of congressional actions on FY2013 L-HHS-ED appropriations bills during the 112 th Congress. This is followed by an overview of the FY2013 President's Budget request and (for context) a review of the conclusion of the FY2012 appropriations process. The next section provides a brief summary and analysis of proposed mandatory and discretionary FY2013 appropriations under the Senate committee bill from the 112 th Congress ( S. 3295 ) and the FY2013 President's Budget, by bill title, compared to comparable FY2012 funding levels. All numbers in this section—and throughout the report as a whole (except as noted)—are drawn from (or estimated based on) amounts provided in the committee report ( S.Rept. 112-176 ) accompanying S. 3295 from the 112 th Congress. (There is no similar analysis for the draft bill that was approved by the House Appropriations L-HHS-ED Subcommittee because this draft bill was not introduced or reported out of committee prior to the conclusion of the 112 th Congress.) The following section provides a summary of budget enforcement activities for FY2013. This includes a brief description of the Budget Control Act of 2011 (BCA), the recent FY2013 sequestration order, and an overview of House and Senate work on a budget resolution and 302(b) allocations (i.e., budget enforcement caps). Finally, the report concludes with overview sections for each of the major components of the bill: the Department of Labor, the Department of Health and Human Services, the Department of Education, and Related Agencies. These sections provide selected highlights of FY2013 appropriations actions based on the Senate committee bill from the 112 th Congress and the President's request. Note that these sections do not currently include tables showing funding levels for individual programs. For that level of detail, see the table beginning on p. 240 of the committee report ( S.Rept. 112-176 ) accompanying S. 3295 , as well as programmatic details discussed throughout the text of the committee report. Note also that analysis of the draft House subcommittee bill from the 112 th Congress is not provided in these sections. This report is focused strictly on appropriations to agencies and accounts that are subject to the jurisdiction of the Labor, HHS, Education, and Related Agencies Subcommittees of the House and the Senate Appropriations Committees (i.e., accounts traditionally funded via the L-HHS-ED bill). Department "totals" provided in this report do not include funding for accounts or agencies that are traditionally funded by appropriations bills under the jurisdiction of other subcommittees. The L-HHS-ED bill provides appropriations for the following federal departments and agencies: the Department of Labor; the majority of the Department of Health and Human Services, except for the Food and Drug Administration (provided in the Agriculture appropriations bill), the Indian Health Service (provided in the Interior-Environment appropriations bill), and the Agency for Toxic Substances and Disease Registry (also funded through the Interior-Environment appropriations bill); the Department of Education; and more than a dozen related agencies, including the Social Security Administration, the Corporation for National and Community Service, the Corporation for Public Broadcasting, the Institute of Museum and Library Services, the National Labor Relations Board, and the Railroad Retirement Board. Note also that funding totals displayed in this report do not reflect amounts provided outside of the regular appropriations process. Certain direct spending programs, such as Old-Age, Survivors, and Disability Insurance and parts of Medicare, receive funding directly from their authorizing statute; such funds are not reflected in the totals provided in this report because they are not subject to the regular appropriations process (see related discussion in the " Important Budget Concepts " section). The L-HHS-ED bill includes both discretionary and mandatory funding. While all discretionary spending is subject to the annual appropriations process, only a portion of all mandatory spending is provided in appropriations measures. Mandatory programs funded through the annual appropriations process are commonly referred to as appropriated entitlements . In general, appropriators have little control over the amounts provided for appropriated entitlements; rather, the authorizing statute establishes the program parameters (e.g., eligibility rules, benefit levels) that entitle certain recipients to payments. If Congress does not appropriate the money necessary to meet these commitments, entitled recipients (e.g., individuals, states, or other entities) may have legal recourse. Not all mandatory spending is provided through the annual appropriations process. Certain entitlements receive direct spending budget authority from their authorizing statute (e.g., Old-Age, Survivors, and Disability Insurance) and thus are not subject to the annual appropriations process. The funding amounts in this report do not include direct spending budget authority provided outside the regular appropriations process. Instead, the amounts in this report reflect only those funds, discretionary and mandatory, that are provided through appropriations bills. Note that, as displayed in this report, mandatory amounts for the FY2013 President's request reflect current law (or current services) estimates as reported in S.Rept. 112-176 ; they do not include any of the Administration's proposed changes to a program's authorizing statute that might affect total spending. (In general, such proposals are excluded from this report, as they typically require authorizing legislation.) Note also that the report focuses most closely on discretionary funding. This is because discretionary funding receives the bulk of attention during the appropriations process. (As noted earlier, although the L-HHS-ED bill includes more mandatory funding than discretionary funding, the appropriators generally have less flexibility in adjusting mandatory funding levels than discretionary funding levels.) Budget authority is the amount of money Congress allows a federal agency to commit or spend. Appropriations bills may include budget authority that becomes available in the current fiscal year, in future fiscal years, or some combination. Amounts that become available in future fiscal years are typically referred to as advance appropriations . Unless otherwise specified, appropriations levels displayed in this report refer to the total amount of budget authority provided in an appropriations bill (i.e., "total in the bill"), regardless of the year in which the funding becomes available. In some cases, the report breaks out "current year" appropriations (i.e., the amount of budget authority available for obligation in a given fiscal year , regardless of the year in which it was first appropriated). As the annual appropriations process unfolds, current year appropriations plus any additional adjustments for congressional scorekeeping are measured against 302(b) allocation ceilings (budget enforcement caps for appropriations subcommittees that traditionally emerge following the budget resolution process). Unless otherwise specified, appropriations levels displayed in this report do not reflect additional scorekeeping adjustments , which are made by the Congressional Budget Office (CBO) to reflect conventions and special instructions of Congress. Congress did not enact a regular L-HHS-ED appropriations bill prior to the beginning of FY2013. Instead, FY2013 funding for programs typically supported by the L-HHS-ED bill was temporarily provided by a six-month continuing resolution (CR), P.L. 112-175 , which was later superseded by a full-year CR ( P.L. 113-6 , Division F). On March 26, 2013, President Obama signed into law the Consolidated and Further Continuing Appropriations Act, 2013 ( P.L. 113-6 , H.R. 933 , as amended). This law funds 7 of the 12 regular appropriations bills (including L-HHS-ED) via a full-year CR in Division F. With limited exceptions, the full-year CR generally funds discretionary L-HHS-ED programs at their FY2012 levels, minus an across-the-board rescission of 0.2% per Section 3004, as interpreted by the Office of Management and Budget (OMB). This is a lower level of funding than had been provided by the six-month CR for FY2013, which generally funded discretionary L-HHS-ED programs at FY2012 rates, plus. 0.612%. Note that amounts provided by the full-year CR will be further reduced, as appropriate, by the FY2013 sequester ordered by President Obama on March 1, 2013. Because the sequester was ordered before the enactment of the FY2013 full-year CR, OMB calculated the amounts to be sequestered based on annualized funding levels in place under the six-month FY2013 CR ( P.L. 112-175 ). In light of the enactment of the full-year appropriations law, the effect of these reductions at the account, program, project, and activity level remains unclear, pending further guidance from OMB as to how these reductions are to be applied (see " FY2013 Joint Committee Sequestration " for more information). In general, the full-year CR funds L-HHS-ED programs at the same funding levels (minus 0.2%, per Section 3004) and under the same terms and conditions as the FY2012 appropriations law ( P.L. 112-74 ). However, the final CR includes more than 20 special provisions (sometimes called "anomalies") for L-HHS-ED programs, which carve out limited exceptions to these rules. For instance, the full-year CR does the following: Provides funding increases, compared to FY2012 (not accounting for sequestration), for a selection of programs, including HHS Refugee and Entrant Assistance programs (§1509), the Child Care and Development Block Grant (§ 1510), Head Start (§1511), and the Public Health and Social Services Emergency Fund (§1512). Gives the Secretary of Labor authority to transfer up to $30 million in unobligated funds (i.e., funds from prior year appropriations) to the Office of Job Corps for operational costs incurred during program year 2012 (which ends on June 30, 2013) and possibly program year 2013 (§1501). Clarifies allocation rules for ED's Individuals with Disabilities Education Act (IDEA) Part B program (§1514). Reserves $3 million out of total budgetary resources in ED's Safe Schools and Citizenship Education account for Project School Emergency Response to Violence (Project SERV) to "provide education-related services to local educational agencies and institutions of higher education in which the learning environment has been disrupted due to a violent or traumatic crisis" (§1513). Rescinds specified amounts of mandatory funding that would otherwise be available for selected HHS programs: -$200 million for the Community-Based Care Transitions program (§1520), -$400 million for the Independent Payment Advisory Board (IPAB, §1521), and -$6.4 billion in bonus payments for the State Children's Health Insurance Program (CHIP, §1521). Temporarily extends the authorization and mandatory HHS funding for Temporary Assistance for Needy Families (TANF) and the Child Care Entitlement to States through the end of FY2013 (§1522). For a complete list of L-HHS-ED anomalies contained in the final CR, see P.L. 113-6 , Division F, Title V. H.R. 933 was initially approved by the House on March 6, 2013. The Senate amended and approved a new version of H.R. 933 two weeks later, on March 20. The House adopted the Senate version the following day. The amended bill was then signed into law ( P.L. 113-6 ) on March 26, just before the expiration of the six-month CR ( P.L. 112-175 ). Notably, as initially agreed to in the House, H.R. 933 would have funded most discretionary L-HHS-ED programs (except anomalies) at their FY2012 levels, minus an across-the-board rescission of 0.098%. This version of the bill included fewer anomalies for L-HHS-ED programs than the enacted version. On September 28, 2012, the President signed into law a six-month government-wide CR ( P.L. 112-175 ). The six-month CR generally maintained funding for discretionary programs at their FY2012 rates, plus 0.612%. It was scheduled to expire on March 27, 2013, but was ultimately superseded by the final full-year appropriations law ( P.L. 113-6 ) on March 26, 2013. On January 29, 2013, President Obama signed into law the Disaster Relief Appropriations Act, 2013 ( P.L. 113-2 ). Overall, the law provided $50.7 billion in supplemental funding and legislative provisions to address immediate losses from Hurricane Sandy and to support mitigation for future disasters. Programs and activities within L-HHS-ED received roughly $827 million, which was distributed as follows: $800 million to the HHS Public Health and Social Services Emergency Fund (PHSSEF) account. Of this total, the law called for HHS to transfer $500 million to the Social Services Block Grant, $100 million to the Head Start program, and at least $5 million to the HHS Office of the Inspector General for oversight and accountability activities. The law gave the HHS secretary discretion over the remaining $195 million, including the authority to transfer those funds throughout the department for activities such as the repair and rebuilding of nonfederal biomedical or behavioral research facilities. $25 million to the DOL Workforce Investment Act Dislocated Worker National Reserve to support employment services and job training for dislocated workers. $2 million to the Social Security Administration Limitation on Administrative Expenses (LAE) account for expenses directly related to Hurricane Sandy. (These funds were made available from certain unobligated balances at the Social Security Administration.) Table 1 provides a timeline of FY2013 L-HHS-ED appropriations actions initiated by Congress during the 112 th Congress. The remainder of this section provides additional detail on these and other steps toward full-year L-HHS-ED appropriations. This section is focused on bills targeted specifically to L-HHS-ED appropriations and does not include information on broader spending bills, such as continuing resolutions or disaster supplementals, which are discussed above. On July 18, 2012, the House Appropriations L-HHS-ED Subcommittee approved a draft bill to provide full-year FY2013 L-HHS-ED appropriations. The bill was not marked up by the full committee prior to the end of the 112 th Congress and a detailed table on programs that would have been funded by the bill was not made publicly available. As such, this report provides only limited information about this draft bill from the 112 th Congress. According to the committee's press release, the bill would have provided roughly $150 billion for discretionary L-HHS-ED programs and activities in FY2013. This amount, which matches the L-HHS-ED budget cap established by the House Appropriations Committee, includes current year budget authority only (adjusted for scorekeeping). As such, this estimate is not comparable to most other numbers in this report, because other estimates (except as noted) generally include total budget authority in the bill, not current year budget authority only (see " Important Budget Concepts " for further explanation). While the draft subcommittee bill would have increased funding for some programs (e.g., Head Start), the committee's press release indicated that the bill would have decreased aggregate discretionary funding for DOL, HHS, and ED compared to FY2012. The draft subcommittee bill also included a number of provisions that would have rescinded funding, prohibited use of funds for certain activities, or eliminated programs or agencies altogether. For instance, the bill would have rescinded funding for—or otherwise stop implementation of—certain aspects of the health reform law ( P.L. 111-148 , as amended); terminated the HHS Agency for Healthcare Research and Quality (AHRQ), while transferring some of AHRQ's functions elsewhere; temporarily halted the reorganization, announced in April 2012, of various HHS agencies and offices (including the Administration on Aging) into a new Administration on Community Living; terminated funding for ED's Race to the Top program; and eliminated funding for the Corporation for Public Broadcasting (one of the bill's "related agencies"). On June 14, 2012, the Senate Committee on Appropriations reported a bill that would provide full-year FY2013 L-HHS-ED appropriations ( S. 3295 , S.Rept. 112-176 ). Prior to this, on June 12, 2012, the L-HHS-ED Subcommittee of the Senate Committee on Appropriations had approved a draft bill for full committee consideration. As reported by the full committee during the 112 th Congress, S. 3295 would have provided $166 billion in discretionary funding for L-HHS-ED. This amount is about 1% more than the comparable FY2012 funding level ($164 billion) and about 0.03% less than the FY2013 President's request, based on estimates drawn from the committee report. In addition, the Senate committee bill would have provided an estimated $612 billion in mandatory funding, for a combined total of nearly $778 billion for L-HHS-ED as a whole (see Figure 1 ). This amount is roughly 5% more than the comparable FY2012 funding level and 0.01% less than the FY2013 President's request, based on estimates provided in the committee report. On February 13, 2012, the Obama Administration released its FY2013 Budget. The President's Budget requested $166 billion in discretionary funding for accounts funded by the L-HHS-ED bill (+1% from comparable FY2012), based on estimates shown in the Senate committee report. In addition, the President's Budget requested roughly $612 billion in annually appropriated mandatory funding (based on the most recent current law estimates), for a total of roughly $778 billion (+5% from comparable FY2012) for the L-HHS-ED bill as a whole. On December 23, 2011, President Obama signed into law the Consolidated Appropriations Act, 2012 ( H.R. 2055 , H.Rept. 112-331 , P.L. 112-74 ). This appropriations "megabus" provided FY2012 appropriations for nine of the twelve regular appropriations bills, including L-HHS-ED. (Prior to December 23, L-HHS-ED funding for FY2012 had been provided by a series of short-term continuing resolutions: P.L. 112-68 , P.L. 112-67 , P.L. 112-55 , P.L. 112-36 , and P.L. 112-33 .) Also on December 23, President Obama signed into law the Disaster Relief Appropriations Act, 2012 ( H.R. 3672 , P.L. 112-77 ), which provided additional L-HHS-ED funding for certain program integrity activities at the Social Security Administration. Combined, these laws provided an estimated $164 billion in discretionary funding for accounts traditionally funded by the L-HHS-ED bill. In addition, the laws provided an estimated $577 billion in mandatory funding for L-HHS-ED accounts, for a total of roughly $741 billion. These FY2012 estimates, as reported in the S.Rept. 112-176 (accompanying the FY2013 Senate committee bill), take into account the 0.189% across-the-board rescission required for most discretionary L-HHS-ED accounts in FY2012, as well as estimated transfers and adjustments for comparability or other activities. (For additional details on amounts provided by bill title, see Table 2 in this report or see CRS Report R42010, Labor, Health and Human Services, and Education: FY2012 Appropriations .) Table 2 displays the total amount of FY2012 discretionary and mandatory L-HHS-ED funding (adjusted for comparability) provided, by title, compared to the FY2013 President's request and the FY2013 Senate committee bill (referred to as the FY2013 proposals in this report). The amounts shown in this table reflect total budget authority provided in the bill (i.e., all funds appropriated in the current bill, regardless of the fiscal year in which the funds become available), not total budget authority available for the current fiscal year. When taking into account both mandatory and discretionary funding, HHS received more than three-quarters of the FY2012 L-HHS-ED appropriations; the same would also be true under both of the FY2013 proposals shown in Table 2 (see Figure 2 for the composition of the FY2013 Senate committee bill from the 112 th Congress). This is largely due to the sizable amount of mandatory funding included in the HHS appropriation, the majority of which is for Medicaid grants to states and payments to health care trust funds. After HHS, the Department of Education and Related Agencies represent the next-largest shares of total L-HHS-ED funding, accounting for roughly 9% to 10% each in FY2012 and the FY2013 proposals. Unlike HHS, the majority of appropriations for ED are discretionary. However, the bulk of funding for the Related Agencies goes toward mandatory payments and administrative costs of the Supplemental Security Income program at the Social Security Administration. Finally, the Department of Labor accounts for the smallest share of total L-HHS-ED funds: roughly 2% in FY2012 and the FY2013 proposals. When looking only at discretionary appropriations, however, the overall composition of L-HHS-ED funding is noticeably different (see Figure 2 ). Rather than being dominated by HHS alone, the majority of all discretionary appropriations (84%) are split relatively evenly between HHS and ED in FY2012 and in the two FY2013 proposals. The Department of Labor and the Related Agencies then combine to account for a roughly even split of the remaining 16% of discretionary L-HHS-ED funds in FY2012 and in the FY2013 proposals. Congress considered FY2013 appropriations in the context of the Budget Control Act of 2011 (BCA, P.L. 112-25 ), which established discretionary spending limits for FY2012-FY2021. The BCA allows for adjustments to be made to annual discretionary spending caps for certain costs specified in the law, including increases (up to a point) in new budget authority provided for specified program integrity initiatives at HHS and the Social Security Administration. The BCA also tasked a Joint Select Committee on Deficit Reduction to develop a federal deficit reduction plan for Congress and the President to enact by January 15, 2012. The failure of Congress and the President to enact deficit reduction legislation by that date triggered an automatic spending reduction process established by the BCA, consisting of a combination of sequestration and lower discretionary spending caps. This process was initially scheduled to begin on January 2, 2013. However, prior to that date, Congress enacted legislation delaying the implementation of sequestration (as discussed below). The American Taxpayer Relief Act (ATRA, P.L. 112-240 ), enacted on January 2, 2013, made a number of significant changes to the procedures in the BCA that take place during FY2013. First, the implementation date for the joint committee sequester was delayed for two months, until March 1, 2013. Second, the dollar amount of the joint committee sequester was reduced by $24 billion. Third, the statutory caps on discretionary spending for FY2013 (and FY2014) were lowered. The joint committee sequestration process for FY2013 requires the Office of Management and Budget (OMB) to implement across-the-board spending cuts at the account and program level to achieve equal budget reductions from both defense and nondefense funding at a percentage to be determined under terms specified in the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA, Title II of P.L. 99-177 , 2 U.S.C. 900-922), as amended by the BCA. On March 1, 2013, President Obama ordered that the joint committee sequester be implemented pursuant to the BCA, as amended by ATRA. The accompanying OMB report indicated a dollar amount of budget authority to be canceled from each account containing non-exempt funds. The law calls for the sequester to be applied at the program, project, and activity (PPA) level within each account, but comprehensive PPA data were not made available on March 1. Because the sequester was ordered before the enactment of full-year appropriations for FY2013, OMB calculated the amounts to be sequestered based on annualized funding levels under the six-month FY2013 CR ( P.L. 112-175 ). Accordingly, OMB estimated that the joint committee sequester would require a 5.0% reduction in non-exempt nondefense discretionary funding, a 2.0% reduction in certain Medicare funding (subject to a special rule), and a 5.1% reduction for most other non-exempt nondefense mandatory funding. (OMB also reported on the required percent reductions of non-exempt defense spending, but these do not apply to L-HHS-ED.) OMB applied these percentages to funding levels in place at that time (the six-month CR) to determine dollar amount reductions for each budget account. Although final FY2013 appropriations have been enacted, the effect of the sequester reductions at the account and PPA level remains unclear, pending further guidance from OMB as to how these reductions should be applied. The full-year FY2013 appropriations law requires a number of federal agencies and departments—including DOL, HHS, and ED—to submit operating plans to the appropriations committees within 30 days of the bill's enactment. These operating plans are expected to display FY2013 funding estimates at the program, project, and activity level that reflect the effects of sequestration and the 0.2% rescission required by Section 3004 of P.L. 113-6 , as interpreted by OMB. Notably, some programs are exempt from sequestration or subject to special rules. The L-HHS-ED bill contains several programs that are exempt from sequestration, including Medicaid, payments to health care trust funds, Supplemental Security Income, Special Benefits for Disabled Coal Miners, retirement pay and medical benefits for commissioned Public Health Service officers, foster care and adoption assistance, and certain family support payments. The L-HHS-ED bill also contains several programs that are subject to special rules under sequestration, such as unemployment compensation, certain student loans, health centers, and portions of Medicare. On June 12, 2012, the Senate Committee on Appropriations adopted revised FY2013 funding caps (commonly referred to as 302(b) allocations) for each appropriations subcommittee, including L-HHS-ED (see Table 3 ). These allocations are based on the Senate's FY2013 aggregate and committee spending caps (commonly referred to as 302(a) allocations). The 302(a) allocations were established and made enforceable in the Senate via a so-called "deeming resolution" filed in the Congressional Record on March 20, 2012, by Senate Budget Committee Chairman Kent Conrad. Separately, several concurrent resolutions on the FY2013 budget have been brought to the floor in the Senate, but each has been rejected on a motion to proceed. Meanwhile, on April 17, 2012, the House agreed to H.Res. 614 , a special rule deeming the House-passed budget resolution for FY2013 ( H.Con.Res. 112 ) as enforceable, pending the adoption by the House and Senate of a budget resolution for FY2013. On May 8, the House agreed to H.Res. 643 , which amended H.Res. 614 by inserting enforceable aggregate and committee spending levels—302(a) allocations—that were originally included in the committee report accompanying H.Con.Res. 112 ( H.Rept. 112-421 ). On the basis of these 302(a) allocations, the House Committee on Appropriations has reported out FY2013 spending caps—302(b) allocations—for each appropriations subcommittee. Most recently, the House reported revised 302(b) allocations on May 22, 2012 (see Table 3 ). Notably, the FY2013 spending caps established in the House are lower than those established in the Senate. The allocation gap could create a challenge in reconciling FY2013 legislation drafted by the House and Senate subcommittees. See Table 3 for an overview of the L-HHS-ED 302(b) allocations for FY2013, as compared to the Senate committee bill for FY2013 and comparable FY2012 appropriations subject to that year's 302(b). Note that budget enforcement caps are applied to budget authority available in the current fiscal year (excluding emergency funding), adjusted for scorekeeping by the Congressional Budget Office. As such, totals shown in this table may not match other totals shown in this report. Note that all figures in this section are based on regular L-HHS-ED appropriations only; they do not include funds provided outside of the annual appropriations process (e.g., direct appropriations for Unemployment Insurance benefits payments). All amounts in this section are rounded to the nearest million or billion (as labeled). The dollar changes and percent changes discussed in the text are based on unrounded amounts. DOL is a federal department comprised of multiple entities that provide services related to employment and training, worker protection, income security, and contract enforcement. Annual L-HHS-ED appropriations laws direct funding to all DOL entities (see box for all entities supported by the L-HHS-ED bill). The DOL entities fall primarily into two main functional areas—workforce development and worker protection. First, there are several DOL entities that administer workforce employment and training programs, such as the Workforce Investment Act (WIA) state formula grant programs, Job Corps, and the Employment Service, that provide direct funding for employment activities or administration of income security programs (e.g., for the Unemployment Insurance benefits program). Also included in this area is the Veterans' Employment and Training Service (VETS), which provides employment services specifically for the veteran population. Second, there are several agencies that provide various worker protection services. For example, the Occupational Safety and Health Administration (OSHA), the Mine Safety and Health Administration (MSHA), and the Wage and Hour Division provide different types of regulation and oversight of working conditions. DOL entities focused on worker protection provide services to ensure worker safety, adherence to wage and overtime laws, and contract compliance, among other duties. In addition to these two main functional areas, the Bureau of Labor Statistics (BLS) collects data and provides analysis on the labor market and related labor issues. The FY2013 Senate committee bill from the 112 th Congress ( S. 3295 , S.Rept. 112-176 ) would have provided $14.68 billion in combined mandatory and discretionary funding for DOL. This amount is $28 million (-0.2%) less than the comparable FY2012 funding level of $14.71 billion and $358 million (+2.5%) more than the FY2013 President's Budget request of $14.32 billion, based on estimates reported in S.Rept. 112-176 . (See Table 4 .) Of the total recommended for DOL in the FY2013 Senate committee bill, roughly $12.34 billion (84%) would have been discretionary. This amount is $211 million (-1.7%) less than the estimated discretionary funding level for FY2012 ($12.55 billion) and $358 million (+3.0%) more than the discretionary total requested in the FY2013 President's Budget. The following are some DOL highlights from the FY2013 Senate committee bill from the 112 th Congress ( S. 3295 ) compared to comparable FY2012 funding levels and proposed funding levels from the FY2013 President's Budget. The FY2013 Senate committee bill would have continued a provision started in the FY2011 appropriations law, which limits the governors' reserve of WIA state formula grants to 5% of the total received from the three state formula grants—Adult, Youth, and Dislocated Workers. The statutory limit is 15%, but the FY2011 appropriations law reduced this to 5% and the FY2012 appropriations law maintained this provision. The FY2013 Senate committee bill would, however, have added new language allowing governors to reserve up to 10% of the three WIA state formula grants if half of that total reserve is used to support on-the-job and incumbent worker training to prevent layoffs or increase employment. The three state formula grant programs would have been funded at $2.6 billion in the FY2013 Senate committee bill, the same funding level in FY2012. The FY2013 Senate committee bill would have maintained flat funding ($49.9 million) relative to FY2012 for the Workforce Innovation Fund (WIF). The WIF was created in the FY2011 appropriations law ( P.L. 112-10 ) in response to a request from the FY2011 President's Budget. It provides competitive grants for innovative approaches to workforce development. The Senate committee bill would have added language to allow a portion of WIF funding to be used for Pay for Success pilot programs, which provide performance-based awards to entities delivering employment and training services with effective outcomes. Adopting a proposal from the President's budget request, the FY2013 Senate committee bill would have eliminated funding for two current programs—Pilots, Demonstrations, and Research (-$6.6 million); and Evaluation (-$9.6 million). Instead of funding research and evaluation activities through the aforementioned programs, the Senate committee bill (consistent with the President's request) would have implemented a 0.5% set-aside of funds from appropriations for WIA, Job Corps, and the Employment Service for these activities. Finally, the FY2013 Senate committee bill included $75 million (an increase of $15 million from FY2012) within the State Unemployment Insurance and Employment Service Operations (SUIESO) account to conduct in-person re-employment and eligibility assessments and to conduct Unemployment Insurance (UI) improper payment reviews. The FY2013 Senate committee bill would have provided $237.7 million for salaries and expenses of the WHD. This amount is approximately $10 million more than the FY2012 level. The committee report indicated that the increase was intended to support the WHD's initiative to detect and deter employee misclassification and to increase oversight of the minimum wage provisions in Section 14(c) of the Fair Labor Standards Act (FLSA). Regarding misclassification, at issue is whether workers are classified as "independent contractors" inappropriately, which has implications for these employees' access to benefits and protections extended to regular wage and salary employees. Section 14(c) of the FLSA allows DOL to issue certificates to organizations that permit them to pay subminimum wages to workers with disabilities. The FY2013 Senate committee bill would have provided $619 million for BLS, an increase of nearly $10 million over the FY2012 level and would have directed the Secretary of Labor to conduct a comprehensive assessment of the proper purpose, structure, and methods of the Federal-State cooperative statistics system. This cooperative system includes BLS, ETA, and state labor market information agencies, among other entities. In addition, the Senate committee bill expressed support for the National Longitudinal Surveys (NLS) program and recommended that data collection in the NLS occur not less than biennially. The FY2013 Senate committee bill would have provided $262.8 million for VETS, a decrease of about $1.6 million compared to the FY2012 appropriation, but an increase of about $4 million compared to the President's FY2013 budget request. Within VETS, however, the Senate committee bill would have increased funding for the Transition Assistance Program (TAP), which provides employment information and related services to military members transitioning to the civilian sector, from nearly $9 million in FY2012 to $14 million in FY2013. The proposed increase in TAP funding reflects the expected increase in the number of transitioning service members. Note that all figures in this section are based on regular L-HHS-ED appropriations only; they do not include funds for HHS agencies provided through other appropriations bills (e.g., funding for the Food and Drug Administration) or outside of the annual appropriations process (e.g., direct appropriations for Medicare or pre-appropriated mandatory funds provided by authorizing laws, such as the Patient Protection and Affordable Care Act [ACA, P.L. 111-148 ]). All amounts in this section are rounded to the nearest million or billion (as labeled). The dollar changes and percent changes discussed in the text are based on unrounded amounts. HHS is a sprawling federal department comprised of multiple agencies working to enhance the health and well-being of Americans. Annual L-HHS-ED appropriations laws direct funding to most (but not all) HHS agencies (see box for all agencies supported by the L-HHS-ED bill). For instance, the L-HHS-ED bill directs funding to five Public Health Service (PHS) agencies: HRSA, CDC, NIH, SAMHSA, and AHRQ. These public health agencies support diverse missions, ranging from the provision of health care services and supports (e.g., HRSA, SAMHSA), to the advancement of health care quality and medical research (e.g., AHRQ, NIH), to the prevention and control of infectious and chronic disease (e.g., CDC). In addition, the L-HHS-ED bill provides funding for annually appropriated components of CMS, which is the HHS agency responsible for the administration of Medicare, Medicaid, and the State Children's Health Insurance Program (CHIP), and consumer protections and private health insurance provisions of the ACA. The L-HHS-ED bill also provides funding for two HHS agencies focused primarily on the provision of social services: ACF and ACL. The mission of ACF is to promote the economic and social well-being of vulnerable children, youth, families, and communities. Meanwhile, ACL was formed with a goal of increasing access to community supports for older Americans and people with disabilities. Notably, ACL is a new agency within HHS—it was established in April 2012 and brings together the Administration on Aging, the Office of Disability, and the Administration on Developmental Disabilities (renamed the Administration on Intellectual and Developmental Disabilities) into one agency. Finally, the L-HHS-ED bill also provides funding for the HHS Office of the Secretary, which encompasses a broad array of management, research, oversight, and emergency preparedness functions in support of the entire department. The FY2013 L-HHS-ED bill reported by the Senate Committee on Appropriations in the 112 th Congress ( S. 3295 , S.Rept. 112-176 ) would have provided $621.6 billion in combined mandatory and discretionary funding for HHS. This amount is $32.3 billion (+5.5%) more than the comparable FY2012 funding level of $589.3 billion and $1.0 billion (+0.2%) more than the FY2013 President's Budget request of $620.6 billion, based on estimates reported in S.Rept. 112-176 . (See Table 5 .) Of the total recommended for HHS in the FY2013 Senate committee bill, roughly $71.0 billion (11.4%) would have been discretionary. This amount is $1.4 billion (+2.0%) more than the estimated discretionary funding level for FY2012 ($69.6 billion) and $1.0 billion (+1.4%) more than the discretionary total requested in the FY2013 President's Budget ($70.0 billion). Annual HHS appropriations are dominated by mandatory funding, the majority of which goes to CMS to provide Medicaid benefits and payments to health care trust funds. When taking into account both mandatory and discretionary funding, CMS accounts for roughly 87% of all HHS appropriations in FY2012 and in both FY2013 proposals (i.e., the President's Budget and the Senate bill). The PHS agencies combine for the next-largest share of total HHS appropriations, accounting for an estimated 8% of total HHS appropriations in FY2012 and 7% of total HHS funding in both FY2013 proposals. By contrast, when looking exclusively at discretionary appropriations, CMS constitutes 6% to 8% of total discretionary HHS appropriations in FY2012 and in the FY2013 proposals. In fact, the PHS agencies receive the dominant share of discretionary HHS funding, estimated at 64% to 66% of total discretionary appropriations in FY2012 and the FY2013 proposals. NIH traditionally receives the largest share of all discretionary funding among HHS agencies (43% to 44% in FY2012 and the FY2013 proposals), with ACF accounting for the second-largest share of all discretionary HHS appropriations (23% in FY2012 and both FY2013 proposals). See Figure 3 for an agency-level breakdown of HHS appropriations (combined mandatory and discretionary) in the FY2013 Senate committee bill. This section discusses several important aspects of discretionary HHS appropriations. First, it provides an introduction to two special funding mechanisms included in the public health budget, the Public Health Service Evaluation Set-Aside and the Prevention and Public Health Fund. Next, it reviews a limited selection of FY2013 discretionary funding highlights across HHS. Finally, the section concludes with a brief overview of significant provisions from annual HHS appropriations laws that restrict spending in certain controversial areas, such as abortion and stem cell research. A unique budget feature of some of the agencies and programs in HHS is their receipt of funding from the Public Health Service (PHS) Evaluation Set-Aside program, also known as the PHS Evaluation Tap. The tap provides more than a dozen HHS programs with funding beyond their regular appropriations (or in a few cases, programs may be funded, or requested for funding, entirely from the tap). The PHS Evaluation Tap allows the Secretary of HHS to redistribute a portion of eligible PHS agency appropriations for program evaluation purposes across HHS. In the annual L-HHS-ED act, Congress specifies the maximum percentage for the set-aside, and also directs specific amounts of funding from the tap to a number of HHS programs. The set-aside level for FY2012 was 2.5% of eligible appropriations, making just over $1.0 billion available for transfer among programs. The FY2013 President's Budget proposed to increase the set-aside to 3.2%, which would have made nearly $1.4 billion available for reallocation under the President's proposed FY2013 funding levels. The proposed uses of the extra tap funding included increasing overall program support in some cases, and replacing regular appropriations with tap funding in other cases. In S. 3295 (112 th Congress), the Senate Appropriations Committee rejected the proposed increase and maintained the tap at 2.5% "because of concern about the effect of this proposal on PHS Act agencies that are used as a source of evaluation transfers, most notably NIH." The Patient Protection and Affordable Care Act (ACA) established three multi-billion dollar trust funds to support programs and activities within the PHS agencies. One of these, the Prevention and Public Health Fund (PPHF, ACA Section 4002, as amended), is intended to provide support each year to prevention, wellness, and other public health programs and activities authorized under the PHS Act. For FY2013, the ACA pre-appropriated $1.25 billion in mandatory funds, but Congress subsequently amended the ACA to decrease FY2013 the pre-appropriations to $1.0 billion. The PPHF funds are available for transfer to agencies and programs as specified by Congress in the L-HHS-ED appropriations bill. The FY2013 President's Budget included the Administration's suggested allocations of the mandatory PPHF money; the Senate Appropriations Committee bill from the 112 th Congress approved some of the amounts and adjusted others. The PPHF money is intended to supplement, sometimes quite substantially, the funding that selected programs receive through regular appropriations. Examples in S. 3295 (112 th Congress) include $280 million for CDC's Community Transformation Grants (funded entirely from the PPHF), nearly $62 million for various CDC infectious disease programs, $88 million for four SAMHSA programs, and $10 million for ACL and CDC programs on Elderly Falls Prevention. The discussion below reviews a limited selection of FY2013 discretionary funding highlights for programs supported by the HHS public health agencies, as well as programs administered by CMS, ACF, and ACL. The discussion is based on the FY2013 Senate committee bill from the 112 th Congress ( S. 3295 ) compared to comparable FY2012 funding levels and proposed funding levels from the FY2013 President's Budget. The Senate committee report accompanying the Senate committee bill discussed FY2013 funding amounts for the five public health agencies covered in the bill in terms of the total of three different funding streams: (1) new budget authority provided in the bill (both discretionary and mandatory appropriations); (2) evaluation tap funds transferred to agency programs; and (3) funding that the Administration and the committee would allocate to agencies from the Prevention and Public Health Fund. Inclusion of the latter two categories is important because for certain programs, support previously provided through regular appropriations has been proposed by the Administration to be replaced by one or both of the other funding streams. Based on committee recommendations presented in the report, the committee did not generally approve of this approach. Considering new BA only, the Senate committee bill would have provided small increases compared to FY2012 for HRSA, CDC, and NIH, and a small decrease for SAMHSA. AHRQ funding, provided entirely from the evaluation tap, would have decreased from the FY2012 level. By contrast, the FY2013 President's Budget had proposed flat funding for NIH and decreases for each of the other four agencies. Selected PHS highlights of the Senate committee bill include an emphasis on disease prevention and health promotion, especially through CDC programs such as those for childhood immunizations, prevention of diabetes, obesity, and smoking, work on cognitive health and cognitive impairment, and food safety; support of medical research and innovation, including $30.7 billion for NIH, an overall increase of $100 million (+0.3%) from FY2012, which included a $30 million boost for the Cures Acceleration Network that fosters translational medicine; maintenance of funding levels for some HRSA programs that the Administration had proposed decreasing or eliminating, such as the Children's Hospitals Graduate Medical Education program (maintained at $265 million), Community Health Centers (maintained at $1.567 billion), and Area Health Education Centers (maintained at $27 million); increases to certain HRSA programs, including $2.397 billion in BA for Ryan White AIDS programs (+1.3% from FY2012, -2.0% from the FY2013 President's request) and $144 million for Rural Health programs (+4.3% from FY2012, +17.9% from the FY2013 request); and increases of $20 million each for the two SAMHSA block grants, recommending $459 million in BA for the Community Mental Health Services Block Grant (+4.6% from FY2012, +4.6% from the FY2013 President's request) and $1.741 billion in BA for the Substance Abuse Prevention and Treatment Block Grant (+1.2% from FY2012, +26.5% from the FY2013 request). The committee did not approve funding requested by the Administration to create new State Prevention Grant programs in both mental health and substance abuse. The FY2013 Senate committee bill would have provided increases in both of the discretionary appropriations accounts at CMS. The bill would have provided $610 million for Health Care Fraud and Abuse Control activities (+97% from FY2012, the same level requested in the FY2013 President's Budget). In addition, the bill would have provided $4.37 billion for CMS Program Management (+14% from FY2012, -9% from the FY2013 President's request). According to the committee report ( S.Rept. 112-176 ) accompanying the bill, the bulk of these funds ($3.16 billion) would have been directed toward program operations. The report stated that program operations funds were intended to be used for program safeguard expenditures to Medicare contractors, ACA implementation, and to address increased demand for services that will result from Medicare population growth. The FY2013 Senate committee bill demonstrated an interest in supporting early childhood care and education programs administered by ACF, including Head Start and the Child Care and Development Block Grant (CCDBG). The bill would have provided $8.04 billion for Head Start (+0.9% from FY2012, -0.2% from the FY2013 President's request), directing the proposed increase toward cost-of-living adjustments (estimated at roughly 0.6%) for current grantees and transition costs associated with the program's new Designation Renewal System, through which low-performing grantees are identified and required to re-compete for funding. The Senate committee bill would also have increased funding for the CCDBG, recommending an FY2013 funding level of $2.44 billion (+7% from FY2012, -6% from the FY2013 President's request) and specifying that a portion of the increase go toward new formula grants for the improvement of the early childhood care and education workforce. The Senate committee bill would have provided roughly $30 million (+1% from FY2012) for ACL Program Administration. This is the same funding level requested by the President's Budget, with amounts adjusted for comparability to reflect the administrative costs, including salaries and oversight, of all components of the newly created ACL (e.g., Administration on Aging, Office of Disability, and Administration on Intellectual and Developmental Disabilities). In addition, the Senate committee bill would have provided new funding of $8 million for Adult Protective Services State Demonstration Projects to be administered by ACL. This is the same amount the Administration requested for FY2013. These demonstration grants are authorized by the Elder Justice Act to provide competitive grants to states for testing innovative approaches for detecting and preventing elder abuse and exploitation. The Senate committee bill would have rejected the FY2013 President's Budget proposal to transfer the Community Service Employment for Older Americans program from the Department of Labor to HHS/ACL, but would have accepted the Administration's proposal to transfer the State Health Insurance Programs (SHIPs) from CMS to ACL. SHIPs, which the Senate committee bill would have funded at $52 million (the same level as FY2012 and the FY2013 request), provide one-on-one counseling and information assistance to Medicare beneficiaries and their families on Medicare and other health insurance issues. In accepting the proposal to transfer SHIPs to ACL, the committee report noted that many SHIPs are already housed in, or are partnered with, area agencies on aging. Annual L-HHS-ED appropriations regularly contain restrictions related to certain controversial issues. For instance, annual appropriations laws generally include provisions limiting the circumstances under which L-HHS-ED funds (including Medicaid funds) may be used to pay for abortions. Under current provisions, (1) abortions may be funded only when the life of the mother is endangered or in cases of rape or incest; (2) funds may not be used to buy a managed care package that includes abortion coverage, except in cases of rape, incest, or endangerment; and (3) federal programs and state/local governments that receive L-HHS-ED funding are prohibited from discriminating against health care entities that do not provide or pay for abortions or abortion services. Similarly, annual appropriations since FY1997 have included a provision prohibiting L-HHS-ED funds (including NIH funds) from being used to create human embryos for research purposes or for research in which human embryos are destroyed. The Senate committee bill would have maintained each of these provisions for FY2013. In addition, the FY2012 law reinstated a provision, removed in FY2010, prohibiting L-HHS-ED funds from being used for needle exchange programs. The FY2013 Senate bill would have modified this provision. The FY2012 law also expanded a provision prohibiting CDC spending on activities that advocate or promote gun control so that it applied to all HHS appropriations and added a new, broader provision prohibiting the use of any L-HHS-ED funds (plus funds transferred from the Prevention and Public Health Fund) for the promotion of gun control. The FY2013 Senate committee bill would have eliminated the HHS-only prohibition on use of funds for gun control, but maintained the broader (L-HHS-ED-wide) prohibition against activities to advocate or promote gun control. Note that all figures in this section are based on regular L-HHS-ED appropriations only; they do not include funds provided outside of the annual appropriations process (e.g., certain direct appropriations for Federal Direct Student Loans and Pell Grants). All amounts in this section are rounded to the nearest million or billion (as labeled). The dollar changes and percent changes discussed in the text are based on unrounded amounts. The federal government provides roughly 9% of overall funding for elementary and secondary education; the vast majority of funding comes from states and local districts. States and school districts also have primary responsibility for the provision of elementary and secondary education in the United States. Nevertheless, the United States Department of Education (ED) performs numerous functions, including promoting educational standards and accountability; gathering education data via programs such as the National Assessment of Education Progress; disseminating research on important education issues; and administering federal education programs and policies. ED is responsible for administering a large number of elementary and secondary education programs, many of which provide direct support to school districts with a high concentration of disadvantaged students and students with disabilities. One of the most important priorities for ED in elementary and secondary education is improving academic outcomes for all students; particularly disadvantaged students, students with disabilities, English language learners, Indians, Native Hawaiians, and Alaska Natives. With regard to higher education, the federal government supports roughly 74% of all direct aid provided to students to finance their postsecondary education. There are also many higher education programs administered by ED—the largest are those providing financial aid to facilitate college access, primarily through student loans and the Pell grant program. In addition, ED administers programs that address vocational rehabilitation, career and technical education, and adult education. The FY2013 L-HHS-ED bill reported by the Senate Committee on Appropriations in the 112 th Congress ( S. 3295 , S.Rept. 112-176 ) would have provided $71.8 billion in combined mandatory and discretionary funding for ED. This amount is $517 million (+ 0.7%) more than the comparable FY2012 funding level of $71.2 billion and $1.4 billion (-1.9%) less than the FY2013 President's Budget request of $73.1 billion, based on estimates reported in S.Rept. 112-176 . (See Table 6 .) Of the total recommended for ED in the FY2013 Senate committee bill, roughly $68.5 billion (95%) would have been discretionary. This amount is $408 million (+0.6 %) more than the discretionary funding level for FY2012 ($68.1 billion) and $1.4 billion (-2.0%) less than the discretionary total requested in the FY2013 President's Budget. The following are some ED highlights from the FY2013 Senate committee bill from the 112 th Congress ( S. 3295 ) as compared to comparable FY2012 funding levels and proposed funding levels from the FY2013 President's Budget. As in FY2011 and FY2012, the FY2013 President's Budget proposed a significant reorganization of Elementary and Secondary Education Act (ESEA) programs that would consolidate many separate authorities into larger programs as part of a reauthorization of the ESEA. As a result, several ESEA program titles in the FY2013 President's Budget request are not directly comparable to final FY2012 appropriations or the FY2013 Senate committee bill. Where comparable, the FY2013 President's request is included in the discussion that follows. The FY2013 Senate committee bill would have increased funding for Education for the Disadvantaged State Grants (ESEA Title I-A) program to $14.6 billion. This amount is $100 million more (+0.7%) than the comparable FY2012 funding of $14.5 billion. The FY2013 President's budget requested level funding for the program. The FY2013 Senate committee bill would have provided funding of $11.7 billion for Individuals with Disabilities Act (IDEA) Grants to States, Part B. This amount is $100 million (+1%) more than the comparable FY2012 funding of $11.6 billion. The FY2013 President's Budget proposed to level fund this program. Both the FY2013 Senate committee bill and the FY2013 President's Budget would have provided funding of $463 million for IDEA Grants for Infants and Families. This amount is $20 million (+5%) more than the comparable FY2012 funding of $443 million. The FY2013 Senate committee bill would have increased funding for the Promoting Readiness of Minors in Supplemental Security Income (PROMISE) program to $12 million. This amount is $10 million (+501%) more than the comparable FY2012 funding of $2 million. The FY2013 President's Budget would have provided $30 million in funding for the PROMISE Program. The program provides competitive grants to states to fund programs to improve outcomes for children who receive Supplemental Security Income and their families. The FY2013 President's Budget would have eliminated Impact Aid Payments for Federal Property (-$67 million from FY2012). According to the FY2013 President's Budget, "these payments are made to LEAs without regard to the presence of federally connected children and do not necessarily provide for educational services for such children." The FY2013 Senate committee bill proposed to level fund this program. The FY2013 President's Budget would have increased funding for the Race to the Top program, originally authorized by the American Recovery and Reinvestment Act (ARRA, P.L. 111-5 ) in FY2009. It proposed to fund Race to the Top at $850 million. This amount is $301 million (+55%) more than the comparable FY2012 funding of $549 million. The FY2013 Senate committee bill would have provided a small increase of less than half a million (+0.06%) for Race to the Top. The committee report ( H.Rept. 112-176 ) accompanying the FY2013 Senate committee bill indicated an expectation that a significant amount of FY2013 funding for Race to the Top would be used for the Early Learning Challenge (RTT-ELC) program. It also stated that the RTT-ELC program was to be administered jointly by ED and HHS. In addition, both the FY2013 Senate committee bill and the FY2013 President's Budget would have funded a new organization within ED—the Advanced Research Projects Agency—using FY2013 appropriations provided to the Investing in Innovation Fund. According to the report on the Senate committee bill, this program was expected to: identify and promote advances in science and engineering that could be translated into learning technologies, evaluate new learning technologies, and help to accelerate technological advances. The FY2013 Senate committee bill would have set aside up to 30% ($44.8 million) from the Investing in Innovation Fund for this new program; the FY2013 President's Budget did not specify a funding level for the program. The FY2013 Senate committee bill would have increased funding for the Fund for the Improvement of Education (FIE) to $86 million. This amount is $20 million (+30%) more than the comparable FY2012 funding of $66 million. It would have dedicated $29 million of this amount to fund competitive awards for school libraries and childhood literacy activities. Additionally, $19 million of the FIE funding would have been used for a new STEM initiative, and $26.5 million of FIE funding would have been for the Arts in Education program. The FY2013 President's Budget would have cut funding for FIE to $36 million. This amount is $30 million (-45%) less than the comparable FY2012 funding of $66 million. Both the FY2013 Senate committee bill and the FY2013 President's Budget would have increased funding for the Promise Neighborhood program. The FY2013 Senate committee bill would have increased funding to $80 million. This amount is $20 million (+34%) more than the comparable FY2012 funding of $60 million. The FY2013 President's Budget requested $100 million, which is $40 million (+67%) more than the comparable FY2012 funding of $60 million. The FY2013 Senate committee bill would have provided $49 million for Safe and Drug Free Schools and Communities Act—National Activities. This amount is $16 million (-25%) less than the comparable FY2012 funding of $65 million. The FY2013 President's Budget would have consolidated the program with several others; as a consequence, it is not directly comparable to either the FY2013 Senate committee bill or FY2012 funding. The FY2013 President's Budget would have zeroed out two Rehabilitation Services and Disability Research programs, namely the Supported Employment State Grants program and the Migrant and Seasonal Farmworkers program. It proposed to transfer funding from these two programs to Vocational Rehabilitation State Grants. In addition, it would have funded Rehabilitation Services and Disability Research Training Programs at $30 million. This amount is $5 million (-15%) less than the comparable FY2012 funding of $36 million. It proposed to transfer this $5 million to Vocational Rehabilitation State Grants. The FY2013 Senate committee bill would have level funded these programs. The FY2013 Senate committee bill would have increased funding for the Fund for the Improvement of Postsecondary Education (FIPSE) to $44 million. This amount is $40 million (+1,145%) more than the comparable FY2012 funding of $4 million. The FY2013 President's Budget would have provided $70 million for FIPSE. This amount is $67 million (+1,903%) more than the comparable FY2012 funding of $4 million. Of this amount, $55 million would have been used for a new program, First in the World, intended to apply lessons learned from the Investing in Innovation program toward achieving a goal of increasing the rate of college completion. The FY2013 President's Budget proposed $1 billion for a new RTT program focused on College Affordability and Completion. The intent was for this program to provide grants to states for systemic reform initiatives to increase affordability, quality, and productivity in higher education. The FY2013 Senate committee bill did not provide funding for this program. Note that figures in this section are based on regular L-HHS-ED appropriations only; they do not include funds provided outside the annual appropriations process (e.g., direct appropriations for Old-Age, Survivors, and Disability Insurance benefit payments by the Social Security Administration). All amounts in this section are rounded to the nearest million or billion (as labeled). The dollar changes and percent changes in the text are based on unrounded amounts. The FY2013 L-HHS-ED bill reported by the Senate Committee on Appropriations from the 112 th Congress ( S. 3295 , S.Rept. 112-176 ) would have provided $69.56 billion in combined mandatory and discretionary funding for related agencies funded through this bill. This amount is $3.29 billion (+5.0%) more than the comparable FY2012 funding level of $66.26 billion and $31.95 million (-0.1%) less than the FY2012 President's Budget request of $69.59 billion, based on estimates reported in S.Rept. 112-176 . (See Table 7 .) Of the total recommended for related agencies in the FY2013 Senate committee bill, roughly $14.14 billion (20.3%) would have been discretionary. This amount is $318 million (+2.3%) more than the estimated discretionary funding level for FY2012 ($13.83 billion) and $32 million (-0.2%) less than the discretionary total requested in the FY2013 President's Budget. In general, the largest share of funding appropriated to related agencies in the L-HHS-ED bill goes to the Social Security Administration (SSA). When taking into account both mandatory and discretionary funding, the SSA accounted for 97% of the entire related agencies appropriation in FY2012 ($64 billion). The bulk of mandatory SSA funding from the L-HHS-ED bill supports the Supplemental Security Income program ($52.4 billion in FY2012). When looking exclusively at discretionary funding, the SSA remains the largest component of the related agencies appropriation, constituting roughly 83% of discretionary funds in FY2012 ($11.5 billion). The majority of discretionary SSA funding covers administrative expenses for Social Security, SSI, and Medicare. After the SSA, the next-largest agency of the related agencies appropriation is the Corporation for National and Community Service (CNCS), which constituted roughly 2% of all funding and 8% of discretionary funding in FY2012 ($1.1 billion). Typically, each of the remaining related agencies receives less than $1 billion from the annual L-HHS-ED appropriations bill. One highlight for the related agencies section of the FY2013 Senate committee bill from the 112 th Congress ( S. 3295 ), as compared to comparable FY2012 funding levels and proposed funding levels from the FY2013 President's Budget, involves funding provided to the SSA for program integrity activities. These activities consist of continuing disability reviews and redeterminations of SSI eligibility. The Senate committee bill would have increased the appropriation for program integrity activities from the FY2012 level of $756.05 million to $1.02 billion, with $273 million coming from base funding and $751 million coming from the budget cap adjustment authorized by the BCA. Also of note, the Senate committee bill would have provided the President's requested funding level of $1.06 billion for the CNCS, which is $13.76 million (+1.3%) more than FY2012 funding level of $1.05 billion. | This report provides an overview of actions taken by Congress to provide FY2013 appropriations for the accounts funded by the Departments of Labor, Health and Human Services, and Education, and Related Agencies (L-HHS-ED) appropriations bill. The L-HHS-ED bill provides funding for all accounts subject to the annual appropriations process at the Departments of Labor (DOL) and Education (ED). It provides annual appropriations for most agencies within the Department of Health and Human Services (HHS), with certain exceptions (e.g., the Food and Drug Administration is funded via the Agriculture bill). The L-HHS-ED bill also provides funding for more than a dozen related agencies, including the Social Security Administration. Continuing Resolutions: On March 26, 2013, President Obama signed into law the Consolidated and Further Continuing Appropriations Act, 2013 (P.L. 113-6). Division F of this law includes a full-year continuing resolution (CR) for L-HHS-ED. With limited exceptions, the full-year CR generally funds discretionary L-HHS-ED programs at their FY2012 levels, minus an across-the-board rescission of 0.2% per Section 3004, as interpreted by the Office of Management and Budget (OMB). The full-year CR superseded a six-month CR for FY2013 (P.L. 112-175) that had been enacted on September 28, 2012. The six-month CR generally funded discretionary L-HHS-ED programs at their FY2012 rates, plus 0.612%. Sequestration: On March 1, 2013, President Obama issued a sequestration order, as required under the terms of the Budget Control Act of 2011 and the Balanced Budget and Emergency Deficit Control Act of 1985, as amended. The order called for an across-the-board cut of 5.0% for non-exempt nondefense discretionary funding, 2.0% for certain Medicare funding (per a special rule), and 5.1% for other non-exempt nondefense mandatory funding. Because the sequester was ordered before the enactment of the FY2013 full-year CR, OMB calculated the amounts to be sequestered based on annualized funding levels in place under the six-month FY2013 CR (P.L. 112-175). In light of the enactment of the full-year appropriations law, the effect of these reductions at the account, program, project, and activity level remains unclear, pending further guidance from OMB as to how these reductions are to be applied. Disaster Relief Funding: On January 29, 2013, the President signed into law a supplemental appropriations bill in response to Hurricane Sandy (P.L. 113-2). This disaster supplemental included roughly $827 million for L-HHS-ED programs and activities, the majority of which ($800 million) went to HHS to support health, mental health, and social services needs in affected states, including costs related to the construction and renovation of damaged health, mental health, biomedical research, child care, and Head Start facilities. House Actions on L-HHS-ED Bill (112th Congress): On July 18, 2012, the House Appropriations L-HHS-ED Subcommittee approved a draft FY2013 L-HHS-ED bill. This bill was not introduced or marked up by the full committee prior to the end of the 112th Congress. A detailed table on programs funded by the bill was not made publicly available and, as such, this report includes only limited information on the draft House subcommittee bill. Senate Actions on L-HHS-ED Bill (112th Congress): On June 14, 2012, the Senate Appropriations Committee reported its FY2013 L-HHS-ED bill (S. 3295, S.Rept. 112-176). The committee report estimated that this bill included $166.0 billion in discretionary funds, which is about 1.2% more than the committee's estimate of comparable FY2012 funds ($164.1 billion). In addition, the committee report estimated the bill included $611.6 billion in mandatory funds, for a combined total of $777.6 billion (+4.9% from the comparable FY2012 funding level). President's Request: On February 13, 2012, prior to the initiation of congressional action on FY2013 appropriations, the Obama Administration released the FY2013 President's Budget. The President's Budget, as estimated in the committee report accompanying the FY2013 Senate bill (S.Rept. 112-176), called for $166.1 billion in discretionary funding for L-HHS-ED accounts (+1.2% from FY2012). In addition, the President requested $611.6 billion in mandatory funding, for a combined total of $777.6 billion (+4.9% from FY2012) in L-HHS-ED appropriations. DOL Snapshot: The FY2013 Senate committee bill from the 112th Congress would have provided roughly $12.3 billion in discretionary funding for DOL. This amount is 1.7% less than the comparable FY2012 funding level of $12.6 billion and 3.0% more than the FY2013 request of $12.0 billion, as estimated in S.Rept. 112-176. HHS Snapshot: The FY2013 Senate committee bill from the 112th Congress would have provided roughly $71.0 billion in discretionary funding for HHS. This amount is 2% more than the comparable FY2012 funding level of $69.6 billion and 1.4% more than the FY2013 request of $70.0 billion, as estimated in S.Rept. 112-176. ED Snapshot: The FY2013 Senate committee bill from the 112th Congress would have provided roughly $68.5 billion in discretionary funding for ED. This amount is 0.6% more than the comparable FY2012 funding level of $68.1 billion and 2.0% less than the FY2013 request of $69.9 billion, as estimated in S.Rept. 112-176. Related Agencies Snapshot: The FY2013 Senate committee bill from the 112th Congress would have provided roughly $14.1 billion in discretionary funding for L-HHS-ED related agencies. This amount is 2.3% more than the comparable FY2012 funding level of $13.8 billion and 0.2% less than the FY2013 request of $14.2 billion, as estimated in S.Rept. 112-176. |
In 2008, oil prices nearly doubled, reaching record levels, before falling back to below $40 per barrel by the end of the year. In the 110 th Congress, proposals included a number of legislative initiatives to increase domestic oil production. These proposals fell into two broad categories: to (1) open areas of the Outer Continental Shelf (OCS) which were under a leasing moratoria; and to (2) encourage companies holding oil and gas leases to diligently develop leases to bring them into production. Proponents of these initiatives argued that promising areas should be open for exploration to maximize domestic oil production as soon as possible. This report provides a review of selected legislative initiatives in the 110 th Congress, examines oil production and resource data, and discusses oil development concerns on federal lands, both onshore and on the OCS. Legislation on oil and gas development on federal lands has not yet been introduced for the 111 th Congress. As the 111 th Congress begins, Congress is faced with issues such as enhancing domestic energy supply and security while assessing areas of environmental concern. The Bush Administration lifted the OCS moratoria on July 14, 2008 and Congress allowed its annual OCS moratoria (see details below) to expire on September 30, 2008 under a continuing resolution—Continuing Appropriations Act for 2009 ( P.L. 110-329 ). The continuing resolution expires on March 6, 2009 or when a permanent appropriations bill for FY2009 is enacted. Based on the executive branch relaxation of the OCS ban, the Bush Administration began the process of preparing the OCS five-year leasing program in August of 2008, two years ahead of schedule. The Draft Proposed OCS Oil and Gas Leasing Program, 2010-2015 was published in early January 2009. This draft proposal, if finalized, would supersede the current five-year program which runs from 2007-2012. The Obama Administration has not yet made a decision to move forward with the proposal. If the early draft is finalized by the Administration, Congress can accept or reject the plan. Under current law, the primary onshore oil and gas lease term is for 10 years. Offshore lease terms are 5,8, or 10 years depending on water depth. If the lease is not producing oil or gas in commercial quantities by the end of its primary term, the lease reverts back to the government for a possible future lease sale—unless the lessee is granted an extension. Extensions are granted for onshore lessees under 43 CFR 3107 for a one-time, two-year period. Offshore extensions are granted under 30 CFR 250.180. The regulation for offshore extensions does not specify the length of the extension. Also, it is not clear how often the Bureau of Land Management(BLM) or Minerals Management Service (MMS) grant extensions. On July 17, 2008, an energy proposal that reached the House floor ( H.R. 6515 , Drill Responsibly in Leased Lands Act of 2008), was defeated under a suspension of the rules vote (which requires a two-thirds majority) by 244-173. This act was said to promote an "expeditious and environmentally responsible" development of the National Petroleum Reserve in Alaska (NPRA) and would have denied new leases to lessees that were not diligently developing their leases, producing oil or gas, or relinquishing non-producing leases. Proponents of this bill argued that many of the lessees are "sitting" on federal leases, and not producing oil or gas. Although both bills, H.R. 6515 , and H.R. 6251 , retained the 10-year primary oil and gas lease term, language removed from an earlier version of H.R. 6251 would have reduced the primary lease term (for onshore and deepwater offshore) from a 10-year term to five years (with extensions possible). On June 26, 2008, under suspension of the rules, H.R. 6251 was also defeated by a vote of 223-195 (two-thirds needed for passage). These two bills were referenced as "use it or lose it" proposals, supported by policymakers who argued that it was unnecessary to lift the OCS moratorium because there were millions of acres already leased that could yield crude oil production, but which were presently inactive. It is unclear how much, and how quickly, additional production would take place on non-producing leases. Some critics of "use it or lose it" proposals argued that these proposals could create a disincentive for companies to seek leases, and/or result in lower bonus bids on new leases. A "use it or lose it" policy, critics of the bills argued, would not necessarily lead to additional production sooner; it might, in fact, undercut that objective. As noted, implementation of "use it or lose it" legislation could result in fewer bids or lower bid offers if a more stringent timeline were to be imposed on all leases held. However, by maintaining the 10-year primary term, as both bills would have done, more federal funds might be appropriated for permitting, and other required environmental reviews. A similar bill in the Senate ( S. 3239 , Responsible Federal Oil and Gas Lease Act) would have denied lessees new leases unless lessees were producing oil or gas on currently held leases; if lessees did not diligently develop each lease, they would have been required to relinquish them. The House and Senate proposals would have required the Secretary of the Interior to define diligent development as it relates to oil and gas leases. U.S. crude oil production peaked at 9.637 million barrels per day in 1970. The Energy Information Administration (EIA) of the Department of Energy projects that U.S. oil production will increase from today's 5.1 million barrels per day (mbd) to 6.3 mbd by 2018, then decline to 5.6 mbd by 2030, but EIA did not factor-in possible changes in lease management. EIA projected that offshore crude oil production would increase from about 1.4 mbd to 2.2 mbd by 2030. When the EIA included access to the OCS, without the leasing moratoria, production was projected to rise by an additional 200,000 barrels per day by 2020 with no significant impact on prices. Based on mean resource estimates by the MMS, an ICF International report prepared for the American Petroleum Institute estimates an increase in OCS production of 286,000 barrels per day in 2030 with increased access to the OCS. When ICF assumed a much larger resource base for the OCS (and without the leasing moratoria), oil production was estimated to increase 900,000 barrels per day in 2030. An anticipated rise in U.S. domestic production on federal lands is seen as coming primarily from deepwater offshore areas as shallow water and onshore oil fields are in decline. According to the MMS, deepwater oil already accounts for more than 70% of offshore production and 18.5 % of total U.S. crude oil production. Since 2002, shallow water lease sales have dropped from 418 to 264 while deepwater lease sales rose from 281 to 633. Deepwater lease sales spiked in 1997 at 1,110, following the Deepwater Royalty Relief Act of 1995. Further, it is notable that there has been increasing exploration activity and an increase in reported finds in the Gulf of Mexico in very deep waters since 2003. Given that oil prices are set in a world market, any additions to U.S. oil supply must be seen in the context of additions to oil supply worldwide. According to the Department of the Interior agencies (Bureau of Land Management and the Minerals Management Service), there are approximately 67 million acres of "active" (meaning that the lease is still in its primary term) oil and gas leases on federal lands that are not in production. About 33 million acres are located onshore and an additional 34 million acres are located offshore. Approximately 12 million acres onshore and about 10.5 million acres offshore are in producing status, (i.e., producing commercial volumes) (see Table 2 below). For offshore oil, under the Known Resources category, (proved reserves, unproved reserves, and reserve appreciation), the Minerals Management Service (MMS) estimates oil reserves in the OCS to be 8.55 billion barrels. In addition, the MMS categorizes 6.88 billion barrels of oil as Reserve Appreciation. In the Undiscovered Technically Recoverable Resources category, the MMS estimates oil resources to be near 86 billion barrels. Within the Undiscovered Resources category, about 41 billion barrels of oil would potentially come from the Gulf of Mexico and about 25.3 billion possible barrels of oil would come from Alaska. With that total, roughly 66.4 billion possible barrels out of 84.24 billion possible barrels are available (about 79%) for leasing in the current MMS five-year leasing program. MMS estimates the amount unavailable at around 17.8 billion possible barrels. Federal onshore proved oil reserves are estimated at 5.3 billion barrels, plus about 6.3 billion barrels in reserve appreciation according to a recent survey of onshore federal lands. Further, there is an estimated, 24.2 billion possible barrels of undiscovered technically recoverable oil resources [see note above] on federal lands, of which 19.0 billion possible barrels of oil are offlimits. The Energy Policy Act of 2005 (EPACT-05) enacted several provisions that were aimed at expediting the development of oil and gas on public lands, particularly concerned with the approval of applications for permits to drill (APDs) (see Table 2 ). Some critics of EPACT-05 believe that the permitting is moving too fast without adequate environmental review. A number of concerns arise in the oil and gas leasing process that might delay or prevent oil and gas development from taking place, or might account for the large number of leases held in non-producing status. Below is a list of often-cited issues which, individually or in combination, are used to explain why more leases are not producing. Rig or equipment availability, particularly offshore Higher capital costs Skilled labor shortages Leases in the development cycle (e.g., conducting environmental reviews, permitting, or exploring) but not producing Legal challenges that might delay or prevent development No commercial discovery on a lease tract Holding leases (because of the lack of capital or as "speculators") to sell or "farm out" at a later date Ability to secure extensions on non-producing leases Securing and being able to hold large number of lease tracts, often contiguous, to maximize return on their investment Many leases expire before exploration or production occurs. Data from the BLM or MMS on the development status for existing leases has not been made available; thus, it is difficult to classify the amount of acreage that has had no activity, is in the permitting stage, or is under exploration but not producing. Under an annual Congressional funding prohibition (in the Interior, Environment, and Related Agencies appropriation bill) and a Presidential Withdrawal, oil and gas leasing and development has been banned in the offshore OCS areas along the U.S. Atlantic and Pacific coasts. However, on July 14, 2008, under a Presidential Directive, the Bush Administration lifted the Executive OCS moratoria that had been in place since 1990, first imposed by President George H.W. Bush, and extended to 2012 by President Bill Clinton. The Congressional ban began in 1981 and was expanded and continued through the annual appropriations process since that time. Each year Congress must approve language that would prohibit funding for pre-leasing and leasing activity in designated areas of the OCS. However, separate withdrawals might be enacted legislatively, such as provided in the Gulf of Mexico Energy Security Act of 2006 (GOMESA, P.L. 109 - 432 ) which placed nearly all of the Eastern Gulf of Mexico under a leasing and drilling moratorium until 2022. The Eastern Gulf of Mexico was not part of the Executive OCS ban that was recently lifted by President Bush or the annual congressional ban that Congress allowed to expire on September 30, 2008. Over the past several years, there have been many legislative proposals to lift the congressional ban, some of which have been successful, on part or all of the OCS. For example, GOMESA removed a small section of the Central Gulf of Mexico (an area south of lease sale area 181; under a previous boundary configuration, the area was located in the Eastern Gulf of Mexico). In 2003, Congress omitted language from the FY2004 Interior appropriation bill that would have prevented lease sales in the North Aleutian Basin Planning Area of Alaska. The President concurred with congressional actions, thus making that area open for a future lease sale. The recent congressional action approving the Continuing Appropriations Act for FY2009 ( P.L. 110 - 329 , enacted September 30, 2008), that continued the funding of government activities through March 6, 2009, or until a regular appropriations bill is enacted, omitted language that provided for the congressional OCS moratoria along the Atlantic and Pacific coasts. Those areas may now be made available for preleasing, leasing, and related activity that could lead to oil and gas development. | Over the past year, crude oil prices have nearly doubled, reaching record levels, before falling below $40 dollars per barrel by the end of the year. In the 110th Congress, proposals included a number of legislative initiatives to increase domestic oil production. These proposals fell into two broad categories: (1) to open areas of the Outer Continental Shelf (OCS) which were under a leasing moratoria; and (2) to encourage companies holding oil and gas leases to diligently develop leases to bring them into production. Two bills were introduced that would have denied new leases to those lessees who were not developing their leases or producing oil or gas (H.R. 6251 and H.R. 6515). The two bills, which included similar provisions, were introduced under suspension of the rules in the House and both failed to achieve the necessary two-thirds support. Comparable legislation was introduced in the Senate (S. 3239). As the 111th Congress begins, Congress is faced with issues such as enhancing domestic energy supply and security while assessing areas of environmental concern. The Bush Administration lifted the OCS moratoria on July 14, 2008 and Congress allowed its annual OCS moratoria (see details below) to expire on September 30, 2008 under a continuing resolution—Continuing Appropriations Act for 2009 (P.L. 110-329). The continuing resolution expires on March 6, 2009 or when a permanent appropriations bill for FY2009 is enacted. Under an annual Congressional funding prohibition (in the Interior, Environment, and Related Agencies appropriation bill) and a Presidential Withdrawal, oil and gas leasing and development has been banned in the offshore OCS areas along the U.S. Atlantic and Pacific coasts. However, on July 14, 2008, under a Presidential Directive, the Bush Administration lifted the Executive OCS moratoria that had been in place since 1990. The recent congressional action approving the Continuing Appropriations Act for FY2009 (P.L. 110-329, enacted September 30, 2008), that continued the funding of government activities through March 6, 2009, or until a regular appropriations bill is enacted, omitted language that provided for the congressional OCS moratoria along the Atlantic and Pacific coasts. Those areas may now be made available for preleasing, leasing, and related activity that could lead to oil and gas development. The moratorium, however, would remain in place for nearly all of the Eastern Gulf of Mexico as it was placed off-limits separately under the Gulf of Mexico Energy Security Act of 2006 (P.L. 109-432) until 2022. Based on the executive branch relaxation of the OCS ban, the Bush Administration began the process of preparing the OCS five-year leasing program in August of 2008, two years ahead of schedule. The Draft Proposed OCS Oil and Gas Leasing Program, 2010-2015 was published in early January 2009. This draft proposal, if finalized, would supersede the current five-year program which runs from 2007-2012. The Obama Administration has not yet made a decision to move forward with the proposal. If the early draft is finalized by the Administration, Congress can accept or reject the plan. |
The use of military commissions to try suspected terrorists has been the focus of intense debate (as well as significant litigation) since President Bush in November 2001 issued his original Military Order (M.O.) authorizing such trials. The M.O. specified that persons subject to it would have no recourse to the U.S. court system to appeal a verdict or obtain any other sort of relief, but the Supreme Court essentially invalidated that provision in its 2004 opinion, Rasul v. Bush . In response, Congress enacted the Detainee Treatment Act of 2005 (DTA). The DTA did not authorize military commissions, but amended Title 28, U.S. Code to revoke all judicial jurisdiction over habeas claims by persons detained as "enemy combatants," and it created jurisdiction in the Court of Appeals for the District of Columbia Circuit to hear appeals of final decisions of military commissions. The Supreme Court, after finding that Congress's efforts to strip it of jurisdiction did not apply to a case already pending before the Court, Hamdan v. Rumsfeld , invalidated the military commission system established by presidential order. The Court held that although Congress had in general authorized the use of military commissions, such commissions were required to follow procedural rules as similar as possible to courts-martial proceedings, as required by the Uniform Code of Military Justice (UCMJ). In response, Congress promptly passed the Military Commissions Act of 2006 (MCA 2006) to authorize military commissions and establish procedural rules that were modeled after, but departed from in some significant ways, the UCMJ. The MCA 2006 also amended the Detainee Treatment Act in order to strip the judiciary of habeas jurisdiction in all cases brought by detainees, including pending cases, but the Supreme Court held that provision to be an unconstitutional suspension of the Writ of Habeas Corpus. President Bush reconstituted the military commissions under the MCA 2006 by issuing Executive Order 13425. The Department of Defense (DOD) issued regulations for the conduct of military commissions pursuant to the MCA 2006 and restarted the military commission proceedings, which resulted in three convictions under the Bush Administration. One detainee, David Matthew Hicks of Australia, was convicted of material support to terrorism pursuant to a plea agreement in 2007. In 2008, Salim Hamdan was found guilty of one count of providing material support for terrorism and sentenced to 66 months' imprisonment, but credited with five years' time served. Both men are now free from detention. Ali Hamza Ahmad Suliman al Bahlul of Yemen was found guilty of multiple counts of conspiracy and solicitation to commit certain war crimes and of providing material support for terrorism in connection with his role as Al Qaeda's "propaganda chief." He refused representation and boycotted most of his trial, and was subsequently sentenced to life imprisonment. The latter two convictions were reversed on appeal by the U.S. Court of Appeals for the D.C. Circuit. The government sought and was granted a rehearing en banc in the Bahlul case to appeal the decisions. On rehearing, the D.C. Circuit invalidated Bahlul's convictions for solicitation and material support for terrorism on ex post facto grounds, but upheld the conspiracy charge, sending it back to the original panel to resolve additional challenges. No challenge to military commissions under the MCA 2006 reached the Supreme Court. President Obama halted the proceedings upon taking office in January 2009 in order to review whether to continue their use. The President issued an Executive Order requiring that the Guantánamo detention facility be closed no later than a year from the date of the Order. The Order required specified officials to review all Guantánamo detentions to assess whether the detainee should continue to be held by the United States, transferred or released to another country, or be prosecuted by the United States for criminal offenses. The Secretary of Defense was also required to take steps to ensure that all proceedings before military commissions and the United States Court of Military Commission Review were halted, although some pretrial proceedings continued to take place. One case was moved to a federal district court. In May 2009, the Obama Administration announced that it was considering restarting the military commission system with some changes to the procedural rules. DOD informed Congress about modifications to the Manual for Military Commissions, to take effect July 14, 2009. The Senate passed the Military Commissions Act of 2009 (MCA 2009) as part of the Department of Defense Authorization Act (NDAA) for FY2010, S. 1391 , to provide some reforms the Administration supported and to make other amendments to the Military Commissions Act, as described below. The bill that emerged from conference ( H.R. 2647 ) contained some, but not all, of the proposals submitted by the Obama Administration, and was enacted October 28, 2009, P.L. 111-84 . President Obama's Detention Policy Task Force issued a preliminary report July 20, 2009, reaffirming that the White House considers military commissions to be an appropriate forum for trying some cases involving suspected violations of the laws of the war, although federal criminal court would be the preferred forum for trials of detainees. The disposition of each case was assigned to a team composed of Department of Justice (DOJ) and Department of Defense (DOD) personnel, including prosecutors from the Office of Military Commissions. Appended to the report was a set of criteria to govern the disposition of cases involving Guantánamo detainees. This protocol identified three broad categories of factors to be taken into consideration: Strength of interest, namely, the nature and gravity of offenses or underlying conduct; identity of victims; location of offense; location and context in which the individual was apprehended; and the conduct of the investigation. Efficiency, namely, protection of intelligence source and methods; venue; number of defendants; foreign policy concerns; legal or evidentiary problems; efficiency and resource concerns. Other prosecution considerations, namely, the extent to which the forum and offenses that can be tried there permit a full presentation of the wrongful conduct, and the available sentence upon conviction. Federal prosecutors are to evaluate their cases under "traditional principles of federal prosecution." On November 13, 2009, Attorney General Holder announced his decision to transfer the five "9/11 conspirators," who include Khalid Sheikh Mohammed, Walid Muhammed Salih Mubarak Bin Attash, Ramzi Bin Al Shibh, Ali Abdul-Aziz Ali, and Mustafa Ahmed Al Hawsawi, to the Southern District of New York to stand trial. Five other detainees to be tried by military commission included Omar Khadr, a Canadian citizen captured as a teenager and charged before a military commission for allegedly throwing a hand grenade that killed a U.S. soldier in Afghanistan; Abd al-Rahim al-Nashiri, whose military commission charges related to the October 2000 attack on the USS Cole were previously withdrawn in February 2009; Ahmed Mohammed Ahmed Haza al Darbi, accused of participating in an Al Qaeda plot to blow up oil tankers in the Straits of Hormuz; and two other detainees about whom no further information was given. As the deadline for closing the detention facility at Guantánamo passed unmet, the Obama Administration reportedly completed its assessment, determining that about 50 of the detainees held there would continue to be held without trial, that around 40 detainees would be prosecuted in military commission or federal court, and that the remaining 110 detainees would be released once a suitable country has agreed to take each of them. However, the transfer of 30 detainees of Yemeni nationality was stymied because an Al Qaeda affiliate in Yemen is suspected to have been behind attempt to blow up a civilian airliner on Christmas Day 2009. Military commissions are courts usually set up by military commanders in the field to try persons accused of certain offenses during war. They may also try persons for ordinary crimes during periods of martial law or military occupation, where regular civil courts are not able to function. Past military commissions trying enemy belligerents for war crimes directly applied the international law of war, without recourse to domestic criminal statutes, unless such statutes were declaratory of international law. Historically, military commissions have applied the same set of procedural rules that applied in courts-martial. By statute, military commissions have long been available to try "offenders or offenses designated by statute or the law of war." For the most part, military commissions have been employed where U.S. Armed Forces have established a military government or martial law, as in the war with Mexico, 1846-1848, the Civil War, the Philippine Insurrection of 1899-1902, and in occupied Germany and Japan after World War II. President Bush's Military Order setting up military commissions appeared to have been designed to replicate a pair of military commission orders issued during World War II by President Roosevelt for the trial of German saboteurs caught within the territory of the United States after having evaded U.S. coastal defenses. These tribunals were historically a bit anomalous in that they took place in Washington, DC, during a period when the civilian courts were open. A similar practice during the Civil War, which accounted for a small number of the military commission cases, was held unconstitutional. The Supreme Court held essentially in Ex parte Milligan that military trials of persons who had never been members of the Armed Forces of the United States could never be valid on friendly territory where martial law has not been declared and civilian courts are functioning. However, the Supreme Court upheld the F.D.R. tribunals by explaining that the holding in Milligan was limited to cases in which civilians—persons who are not members of the armed forces of an enemy government—were tried by military commission, and did not preclude the government from trying enemy belligerents for violations of the law of war, regardless of the operational status of the civilian courts. The Bush Administration established rules prescribing detailed procedural safeguards for the tribunals. These rules were praised as a significant improvement over what might have been permitted under the language of the M.O., but some continued to argue that the enhancements did not go far enough. Critics also noted that the rules did not address the issue of indefinite detention without charge, as appeared to be possible under the original M.O., or that the Department of Defense may continue to detain persons who have been found not guilty by a military commission. The Pentagon reportedly stated that its Inspector General (IG) looked into allegations, made by military lawyers assigned as prosecutors to the military commissions, that the proceedings were rigged to obtain convictions, but the IG did not substantiate the charges. The Military Commissions Act ("MCA") grants the Secretary of Defense express authority to convene military commissions to prosecute those fitting the definition under the MCA of "alien unprivileged enemy belligerents." The Secretary delegated the authority to a specially appointed "convening authority," who has responsibility for accepting or rejecting charges referred by the prosecution team, convening military commissions for trials, detailing military commission members and other personnel, approving requests from trial counsel to communicate with the media, approving requests for expert witnesses, approving plea agreements, carrying out post-trial reviews, and forwarding cases for review, along with other duties spelled out in the MCA or in DOD's Regulation for Trial by Military Commission. The MCA eliminates the requirement for military commissions to conform to either of the two uniformity requirements in article 36, UCMJ, which President Bush's military commissions were held in Hamdan to violate. Instead, it establishes chapter 47A in Title 10, U.S. Code and excepts military commissions under this chapter from the requirements in article 36. It provides that the UCMJ "does not, by its terms, apply to trial by military commissions except as specifically provided in this chapter." While declaring that the enacted chapter is "based upon the procedures for trial by general courts-martial under [the UCMJ]," it establishes that "[t]he judicial construction and application of [the UCMJ], while instructive, is therefore not of its own force binding on military commissions established under this chapter." It expressly exempts these military commissions from UCMJ articles 10 (speedy trial), 31 (self-incrimination warnings), and 32 (pretrial investigations), and the MCA 2006 amended articles 21, 28, 48, 50(a), 104, and 106 of the UCMJ to except military commissions under chapter 47A. Other provisions of the UCMJ are to apply to trial by military commissions under chapter 47A only to the extent provided therein. The MCA establishes jurisdiction for military commissions somewhat more narrowly than that asserted in President Bush's M.O. The M.O. was initially criticized by some as overly broad in its assertion of jurisdiction, because it could be interpreted to cover non-citizens who had no connection with Al Qaeda or the terrorist attacks of September 11, 2001, as well as offenders or offenses not triable by military commission pursuant to statute or the law of war. A person designated by President Bush as subject to his M.O. was amenable to detention and possible trial by military tribunal for violations of the law of war and "other applicable law." The MCA 2006 largely validated President Bush's jurisdictional scheme for military commissions. The MCA, as amended in 2009, authorizes military commissions to try any "alien unprivileged enemy belligerent," which includes an individual (other than a privileged belligerent) who: (A) has engaged in hostilities against the United States or its coalition partners; (B) has purposefully and materially supported hostilities against the United States or its coalition partners; or (C) was a part of Al Qaeda at the time of the alleged offense under [chapter 47A of Title 10, U.S. Code ]. Thus, persons who do not directly participate in hostilities, but "purposefully and materially" support hostilities, are subject to trial under the MCA. Citizens who fit the definition of "unprivileged enemy belligerent" are not amenable to trial by military commission under the MCA, but their detention is not expressly precluded. The MCA, as amended, defines "hostilities" to mean any conflict "subject to the laws of war." It does not explain what conduct amounts to "supporting hostilities." To the extent that the jurisdiction is interpreted to include conduct that falls outside the accepted definition of participation in an armed conflict, the MCA might run afoul of the courts' historical aversion to trying civilians before military tribunals when other courts are available. It is unclear whether this principle would apply to aliens captured and detained overseas, but the MCA does not appear to exempt from military jurisdiction permanent resident aliens captured in the United States who might otherwise meet the definition of "unprivileged enemy belligerent." It is generally accepted that aliens within the United States are entitled to the same protections in criminal trials that apply to U.S. citizens. Therefore, to subject persons to trial by military commission who do not meet the exception carved out by the Supreme Court in ex parte Quirin for unlawful belligerents, to the extent such persons enjoy constitutional protections, would likely raise significant constitutional questions. To date, no resident aliens have been charged for trial before a military commission under the MCA. As originally enacted, the MCA 2006 did not specifically identify who was to make the determination that defendants met the definition of "unlawful enemy combatant." The government sought to establish jurisdiction based on the determinations of Combatant Status Review Tribunals (CSRTs), set up by the Pentagon to determine the status of detainees using procedures similar to those the Army uses to determine POW status during traditional wars. The CSRTs, however, were not empowered to determine whether the enemy combatants are unlawful or lawful, which led two military commission judges to hold that CSRT determinations are inadequate to form the basis for the jurisdiction of military commissions. The Court of Military Commission Review (CMCR) reversed. While it agreed that the CSRT determinations are insufficient by themselves to establish jurisdiction, it found the military judge erred in declaring that the status determination had to be made by a competent tribunal other than the military commission itself. In denying the government's request to find that CSRT determinations are sufficient to establish jurisdiction over the accused, the CMCR interpreted the MCA to require more than establishing membership in Al Qaeda or the Taliban. The CMCR found no support for [the government's] claim that Congress, through the M.C.A., created a "comprehensive system" which sought to embrace and adopt all prior C.S.R.T. determinations that resulted in "enemy combatant" status assignments, and summarily turn those designations into findings that persons so labeled could also properly be considered "unlawful enemy combatants." Similarly, we find no support for [the government's] position regarding the parenthetical language contained in § 948a(1)(A)(i) of the M.C.A.—"including a person who is part of the Taliban, Al Qaeda, or associated forces." We do not read this language as declaring that a member of the Taliban, Al Qaeda, or associated forces is per se an "unlawful enemy combatant" for purposes of exercising criminal jurisdiction before a military commission. We read the parenthetical comment as simply elaborating upon the sentence immediately preceding it. That is, that a member of the Taliban, Al Qaeda, or associated forces who has engaged in hostilities or who has purposefully and materially supported hostilities against the United States or its co-belligerents will also qualify as an "unlawful enemy combatant" under the M.C.A. (emphasis added [by the court]). As a consequence of the decision, the prosecution has the burden of proving jurisdiction over each person charged for trial by a military commission. The Manual for Military Commissions was amended in May 2009 to reflect this practice, and the 2009 MCA amended 10 U.S.C. Section 948d to task the military commission with establishing its own jurisdiction. Under the amended language, membership in Al Qaeda (but not the Taliban) appears sufficient to establish jurisdiction, regardless of whether the defendant participated in or even supported hostilities, although the defendant must generally be alleged to have committed one of the listed crimes "in the context of and associated with hostilities." The MCA provides jurisdiction to military commissions to try alien unprivileged belligerents for listed offenses as well as Sections 904 and 906 of Title 10 (aiding the enemy and spying), or the law of war, "whether such offense was committed before, on, or after September 11, 2001." Crimes to be triable by military commission are defined in subchapter VIII (10 U.S.C. §§950p–950t). The MCA defines the following offenses: murder of protected persons; attacking civilians, civilian objects, or protected property; pillaging; denying quarter; taking hostages; employing poison or similar weapons; using protected persons or property as shields; torture, cruel or inhuman treatment; intentionally causing serious bodily injury; mutilating or maiming; murder in violation of the law of war; destruction of property in violation of the law of war; using treachery or perfidy; improperly using a flag of truce or distinctive emblem; intentionally mistreating a dead body; rape; sexual assault or abuse; hijacking or hazarding a vessel or aircraft; terrorism; providing material support for terrorism; wrongfully aiding the enemy; spying; attempts; conspiracy; solicitation; contempt; perjury and obstruction of justice. The MCA largely adopted the list of offenses DOD had authorized for trial by military commission under the presidential order. That list was not meant to be exhaustive. Rather, it was intended as an illustration of acts punishable under the law of war or triable by military commissions. The regulations contained an express prohibition of trials for ex post facto crimes. Although many of the crimes defined in the MCA seem to be well established offenses against the law of war, at least in the context of an international armed conflict, some of the listed crimes may be new. For example, a plurality of the Supreme Court in Hamdan agreed that conspiracy is not a war crime under the traditional law of war. The crime of "murder in violation of the law of war," which punishes persons who commit hostile acts that result in the death of any persons, including lawful combatants, may also be new, depending on how it is interpreted. The Department of Defense had argued that the element "in violation of the law of war" is established by showing that the perpetrator is an unprivileged belligerent. The latest version of the Manual for Military Commissions reflects the understanding that the offense may be tried by military commission even if it does not violate the international law of war. While it appears to be well established that a civilian who kills a lawful combatant is triable for murder and cannot invoke the defense of combatant immunity, it is not clear that the murder constitutes a violation of the law of war (rather than domestic or martial law), or that the same principle applies in armed conflicts of a non-international nature, where combatant immunity does not apply. The International Criminal Tribunal for the former Yugoslavia (ICTY) has found that war crimes in the context of non-international armed conflict include murder of protected persons, but has found that the killing of a combatant is not necessarily a war crime. Thus, prison guards at Omarska and other detention camps were found guilty, among other crimes, of "murder, as a violation of the laws or customs of war" for causing the deaths of prisoners. Similarly, the International Criminal Court applies a definition of murder in the context of a non-international armed conflict to require that the victim is a protected person, while the killing (or wounding) of a "combatant adversary" is defined as a war crime only if it is done "treacherously." While one of the Guantánamo military commission judges found, without elaborating on what "murder in violation of the law of war" entails, that Congress could reasonably conclude that it constitutes a common law violation of the law of war, another read the crime to consist of two elements: "the [attempted] killings ... were committed by an unlawful enemy combatant AND (2) that the method, manner or circumstances used violated the law of war." There is historical support for the view that the offense pertains to means and methods of killing, but the notion that the unlawfulness element may be satisfied by proof that the offender is an "unlawful combatant" is not well supported. Military commissions were used during the U.S. Civil War to try the charge of "murder in violation of the law of war," but this charge apparently applied to privileged belligerents who committed murder perfidiously or who killed prisoners of war, while unprivileged belligerents were charged simply with murder. The charge of "murder, in violation of the laws of war" was occasionally brought against Filipino natives during the Philippine Insurrection, generally involving the killing of unarmed civilians or prisoners. However, it is not easy to discern why some cases were charged as "murder" while others had added the phrase "in violation of the laws of war." Sometimes the distinction appears to turn on the status of the victim, other times the determining factor seems to be the status of the perpetrator or more precisely, the authority under which the hostile act was carried out. Murder qualified by reference to the law of war was charged most frequently against those whose legitimacy as combatants was not challenged. In one case in which insurgents killed U.S. soldiers during a firefight, the conviction for murder in the violation of the laws of war was overturned in part on the basis that "[t]he killing of the deceased soldiers in an engagement with a regular detachment of the public enemy is not murder but a natural consequence incidental to a state of war." Similarly, defining as a war crime the "material support for terrorism" does not appear to be supported by historical precedent. The military judge in the Hamdan military commission case deferred to Congress's determination in the MCA that "material support for terrorism" describes a traditional offense against the law of war, citing Civil War precedents for trying crimes such as cooperating with guerrillas or "guerrilla-marauders." The Court of Military Commission Review affirmed, but was overruled by the U.S. Court of Appeals for the D.C. Circuit. The D.C. Circuit sitting en banc affirmed the conclusion that the material support offense is not a pre-existing war crime, nor one that is traditionally triable by military commission, and invalidated a conviction for it on ex post facto grounds, without deciding whether the Ex Post Facto Clause of the Constitution applies to foreigners held at Guantanamo or whether Congress could prospectively make material support a war crime for conduct committed after enactment of the MCA 2006. The issue could potentially be headed to the Supreme Court. The Supreme Court's decision in Ex parte Milligan may have limited the extent to which such crimes may be tried by military commissions where martial law has not been established, and may also call into question whether such crimes are properly considered war crimes or should be treated as ordinary crimes triable by military commissions when necessity demands it. Charges related to aiding guerrillas were typically accompanied by a specification stating that the accused was a citizen and owed allegiance to the United States, but not ordinarily stating that the activity violated the law of war, suggesting that the offense was a violation of martial law rather than the international law of war applicable to belligerents. Many persons were tried by military commissions during the Philippine Insurrection for consorting with insurgents or other armed outlaws, but only after the commanding general issued a proclamation to the public explaining its obligation under the law of military occupation (a subset of the law of war analogous to martial law) to refrain from such activity. The Obama Administration earlier expressed misgivings as to whether the crime of "material support for terrorism" amounts to an ex post facto law, and recommended the offense be eliminated from the MCA, prior to attempting unsuccessfully to defend convictions for material support at the D.C. Circuit. All but one of the detainees against whom charges had been filed prior to 2011 had at least one count of "material support for terrorism" among them, although in most cases the allegations underlying the charge appeared under other charges as well. Congress chose not to eliminate the material support charge when it amended the MCA in 2009. Newer cases have avoided the charge, although one case appears to charge equivalent conduct as "aiding the enemy" under UCMJ article 904. The law of war has traditionally applied within the territorial and temporal boundaries of an armed conflict between at least two belligerents. It traditionally has not been applied to conduct occurring on the territory of neutral states or on territory not under the control of a belligerent, to conduct that preceded the outbreak of hostilities, or to conduct during hostilities that do not amount to an armed conflict. Unlike the conflict in Afghanistan, the conflict related to the September 11 attacks does not have clear boundaries in time or space, nor is it entirely clear in all cases who the belligerents are. The broad reach of President Bush's M.O. to encompass conduct and persons customarily subject to ordinary criminal law evoked criticism that the claimed jurisdiction of the military commissions exceeded the customary law of armed conflict, although DOD regulation purported to restate customary law. The MCA provides jurisdiction to military commissions over covered offenses "when committed by an alien unprivileged enemy belligerent before, on, or after September 11, 2001." Further, the MCA states that it codifies offenses "that have traditionally been triable by military commission" and establishes no "new crimes that did not exist before [its] enactment"; and that therefore it "does not preclude trial for offenses that occurred before the date of the enactment of this subchapter, as so amended." Whether, in fact, the offenses were established under the law of war prior to the enactment of the MCA has already been the subject of two successful challenges by defendants. In enacting the MCA, Congress seems to have provided the necessary statutory definitions of criminal offenses to overcome previous objections with respect to subject matter jurisdiction of military commissions. However, questions may still arise with respect to the necessity for conduct to occur in the context of hostilities in order to be triable by military commission. In 2008, the military judge in the Hamdan case concluded that a nexus with hostilities was required, holding that a charge of "[m]embership in a conspiracy that planned and carried out the attacks of September 11 th , 2001 will be deemed to be in violation of the law of war; membership in a conspiracy that planned or carried out other attacks long before that date and unrelated to hostilities will not." The MCA provides for a qualified military judge to preside over panels of at least 5 military officers, except in the cases in which the death penalty is sought, in which case panels are to consist of 12 members unless that number are not reasonably available, in which case the minimum is 9 panel members. Procedures for assigning military judges as well as the particulars regarding the duties they are to perform are left to the Secretary of Defense to prescribe, except that the military judge may not be permitted to consult with members of the panel outside of the presence of the accused and counsel except as prescribed in 10 U.S.C. Section 949d. The military judge has the authority to decide matters related to the admissibility of evidence, including the treatment of classified information, but has no authority to compel the government to produce classified information. The MCA empowers military commissions to maintain decorum during proceedings. Previously, under the DOD rules prior to enactment of the 2006 MCA, the presiding officer was authorized "to act upon any contempt or breach of Commission rules and procedures," including disciplining any individual who violates any "laws, rules, regulations, or other orders" applicable to the commission, as the presiding officer saw fit. Presumably this power was to include not only military and civilian attorneys but also any witnesses who had been summoned under order of the Secretary of Defense. The MCA, 10 U.S.C. §950t, authorizes the military commissions to "punish for contempt any person who uses any menacing word, sign, or gesture in its presence, or who disturbs its proceedings by any riot or disorder." It is unclear whether this section is meant to expand the jurisdiction of military commissions to cover non-enemy unprivileged belligerent witnesses or civilian observers, but the M.M.C. expressly provides for jurisdiction over all persons, including civilians, and permits military judges to sentence those convicted with both fines and terms of confinement. In the case of military commissions established under the UCMJ, there is statutory authority for military commissions to punish contempt with a fine of $100, confinement for up to 30 days, or both. Although the MCA does not set limits on punishment for contempt, the M.M.C. 2012 limits confinement to 30 days and fines to $1000. The MCA provides that military commissions have the same power as a general court-martial to compel witnesses to appear in a manner "similar to that which courts of the United States having criminal jurisdiction may lawfully issue." However, rather than providing that the trial counsel (prosecution) and the defense are to have equal opportunity to obtain witnesses and evidence, as is the case in general courts-martial, the MCA provides the defense a "reasonable opportunity" to obtain witnesses and evidence, in a manner comparable "to the opportunity available to a criminal defendant" in an article III court. The M.M.C. provides the trial counsel with responsibility for producing witnesses requested by the defense, unless trial counsel determines the witness's testimony is not required or is protected, but the defense counsel may appeal the determination to the convening authority or, after referral, the military judge. Under article 47 of the UCMJ, a duly subpoenaed witness who is not subject to the UCMJ and who refuses to appear before a military commission may be prosecuted in federal court. Presumably, this article could be used to prosecute civilians residing in U.S. territory who refuse to comply with a subpoena issued under the MCA. The M.M.C. provides the military judge or any person designated to take evidence authority to issue a subpoena to compel the presence of a witness or the production of documents. As is the case with general courts-martial, the military judge may issue a warrant of attachment to compel the presence of a witness who refuses to comply with a subpoena. Subpoena authority under the UCMJ may not be used to compel a civilian witness to travel abroad in order to provide testimony, so the corresponding authority under the MCA may be insufficient to compel civilian witnesses to travel to Cuba. Testimony by video transmission may be permitted in such cases. One of the perceived shortcomings of President Bush's M.O. had to do with the problem of command influence over commission personnel. M.C.O. No. 1 provided for a "full and fair trial," but contained few specific safeguards to address the issue of impartiality. The President or his designee were empowered to decide which charges to press; to select the members of the panel, the prosecution and the defense counsel, and the members of the review panel; and to approve and implement the final outcome. The President or his designees had the authority to write procedural rules, interpret them, enforce them, and amend them. Justice Kennedy remarked in his concurring opinion in Hamdan v. Rumsfed that the concentration of authority in the Appointing Authority was a significant departure from the structural safeguards Congress has built into the military justice system. The MCA, by providing requirements for the procedural rules to guard against command influence, may alleviate some of these concerns. In particular, the MCA prohibits the unlawful influence of military commissions and provides that neither the military commission members nor military counsel may have adverse actions taken against them in performance reviews. Many of the procedural rules are left to the discretion of the Secretary of Defense or his designee, more so than is the case under the UCMJ. Rule 104 of the Rules for Military Commissions (R.M.C.) prohibits command influence in terms similar to those in the Manual for Courts-Martial, except that they apply more broadly to "all persons" rather than only to "all persons subject to the [UCMJ]." On the other hand, it has been argued that the multiple roles assigned to the convening authority, that is, the DOD official who decides which charges to bring, allocates resources among the parties, and then approves or disapproves the findings of the military commission, create an inherent risk of unfairness (or the perception of unfairness). While the convening authority for courts-martial also plays multiple roles, these functions serve as commanders' tools for enforcing discipline among subordinates, a context that arguably differs in important ways from bringing criminal cases against alleged enemies. Improper influence by the legal advisor to the convening authority has been alleged at a few military commission proceedings, prompting military judges to issue orders in some cases granting relief. Executive branch control over who serves as military judges has also led to charges of unfairness. The MCA lists a minimum set of rights to be afforded the accused in any trial, and provides the accused an opportunity to appeal adverse verdicts to the United States Court of Appeals for the District of Columbia Circuit, but only "with respect to the findings and sentence as approved by the convening authority and as affirmed or set aside as incorrect in law by the United States Court of Military Commission Review." The circuit court is empowered to take action "only with respect to matters of law, including the sufficiency of the evidence to support the verdict." The MCA provides that the accused is to be informed of the charges as soon as practicable after the charges and specifications are referred for trial. The accused is to be presumed innocent until determined to be guilty. The presumption of innocence and the right against self-incrimination are to result in an entered plea of "Not Guilty" if the accused refuses to enter a plea or enters a "Guilty" plea that is determined to be involuntary or ill informed. The accused has the right not to testify at trial and to have the opportunity to present evidence and cross-examine witnesses for the prosecution. Because the public, and not just the accused, has a constitutionally protected interest in public trials, the extent to which trials by military commission are open to the press and public may be subject to challenge by media representatives. The First Amendment right of public access extends to trials by court-martial, but is not absolute. It does not impose on the government a duty "to accord the press special access to information not shared by members of the public generally." The reporters' right to gather information does not include an absolute right to gain access to areas not open to the public. In general, trials may be closed only where the following test is met: the party seeking closure demonstrates an overriding interest that is likely to be prejudiced; the closure is narrowly tailored to protect that interest; the trial court has considered reasonable alternatives to closure; and the trial court makes adequate findings to support the closure. The MCA provides that the military commission judge may close portions of a trial only to protect information from disclosure where such disclosure could reasonably be expected to cause damage to the national security, such as information about intelligence or law enforcement sources, methods, or activities; or to ensure the physical safety of individuals. The information to be protected from disclosure does not necessarily have to be classified. To the extent that the exclusion of the press and public is based on the discretion of the military judge without consideration of the constitutional requirements relative to the specific exigencies of the case at trial, the procedures may implicate the First Amendment rights of the press and public. The M.M.C. provides, in Rule 806, that the military judge may close proceedings only to protect information designated for such protection by a government agency or to secure the physical safety of individuals. However, the rule also provides that "in order to maintain the dignity and decorum of the proceedings or for other good cause, the military judge may reasonably limit the number of spectators in, and the means of access to, the courtroom, and exclude specific persons from the courtroom." Such limitations must be supported by written findings. One method military judges have adopted to protect classified information without closing a hearing to the public is to employ a time-delay on the audio feed of the proceedings to the public in the gallery in order to permit the judge or other authorized person to turn off the audio in the event classified information has been or is about to be disclosed. The measure was said to be necessary because the statements of the accused are presumptively classified. If the switch is activated, the judge was to order a halt to the proceedings to evaluate the nature of the information or to permit the prosecution to assert a national security privilege. The MCA of 2009 inserted a new subtitle V to provide procedures for handling classified or sensitive information, including the closure of evidentiary hearings when such information is to be discussed, the sealing of records, and the issuance of protective orders. It states that the trial counsel may "object to any question or line of inquiry that may require the witness to disclose classified information not previously found to be admissible" during testimony. In such circumstances, the military judge is to "take such suitable action to determine whether the response is admissible as will safeguard against the compromise of any classified information," which may leave room for the use of time delay devices as described above, though the measure isn't expressly authorized. The American Civil Liberties Union (ACLU) and various media groups filed a petition for mandamus with the Court of Military Commission Review (CMCR) challenging the scope of the protective order issued in the case against the five alleged September 11 conspirators on the basis of its perceived inconsistency with the First Amendment. The CMCR denied the writ without deciding whether it had jurisdiction to issue the writ, finding the controversy to be unripe for decision. Under UCMJ art. 39, the accused at a court-martial has the right to be present at all proceedings other than the deliberation of the members. Under the DOD rules for military commissions prior to the MCA, the accused or the accused's civilian attorney could be precluded from attending portions of the trial for reasons involving national security, but a detailed (assigned) defense counsel was to be present for all hearings. The MCA does not provide for the exclusion of the accused from portions of his trial, and does not allow classified information to be presented to panel members that is not disclosed to the accused. The accused may be excluded from trial proceedings (other than panel deliberations) by the military judge only upon a determination that the accused persists in disruptive or dangerous conduct. However, the accused may be excluded from in camera considerations regarding the treatment of classified information. The accused may not waive the right to be present at his trial, but may forfeit it through disruptive behavior or refusal to attend proceedings. As is the case in military courts-martial, an accused before a military commission under the MCA has the right to have military counsel assigned free of charge. The right to counsel attaches much earlier in the regular military justice system, where the accused has a right to request an attorney prior to being interrogated about conduct relating to the charges contemplated, than under the MCA. Under the MCA, at least one qualifying military defense counsel is to be detailed "as soon as practicable." The accused may also hire a civilian attorney who meets specific qualifications and agrees to comply with all applicable rules. If civilian counsel is hired, the detailed military counsel serves as associate counsel. Unlike the previous DOD rules, the MCA provides that the accused has the right to self-representation. Previous DOD rules provided that defense counsel was to be assigned free of cost once charges were referred, but permitted the accused to request another Judge Advocate General (JAG) officer to be assigned as a replacement if available in accordance with any applicable instructions or supplementary regulations that might later be issued. The MCA, as amended, incorporates this measure, providing the accused an opportunity to request a specific JAG officer to act as counsel, if the requested officer is reasonably available. DOD regulations provide that the accused may request a specific military attorney from the defense team at the beginning of the proceedings, and may request a replacement counsel from the Chief Defense Counsel if he believes his detailed counsel has been ineffective or if he is otherwise materially dissatisfied with his assigned counsel. The M.M.C. provides that, in the event the accused elects to represent himself, the detailed counsel shall serve as "standby counsel," and the military judge may require that such defense counsel remain present during proceedings. The MCA requires civilian attorneys defending an accused before military commission to meet the same strict qualifications that applied under DOD rules. A civilian attorney must be a U.S. citizen with at least a SECRET clearance with membership in any state or territorial bar and no disciplinary record. The MCA does not set forth in any detail what rules might be established to govern the conduct of civilian counsel. Under the last-issued regulation, the Chief Defense Counsel has the responsibility of determining the eligibility of civilian defense counsel, and may reconsider the determination based on "subsequently discovered information indicating material nondisclosure or misrepresentation in the application, or material violation of obligations of the civilian defense counsel, or other good cause." Alternatively, the Chief Defense Counsel may refer the matter to either the convening authority or the DOD Deputy General Counsel (Personnel and Health Policy), who may revoke or suspend the qualification of any member of the civilian defense counsel pool. The MCA does not address the monitoring of communications between the accused and his attorney, and does not provide for an attorney-client privilege. Rule 502 of the Military Commission Rules of Evidence (Mil. Comm. R. Evid.) provides for substantially the same lawyer-client privilege that applies in courts-martial. With respect to the monitoring of attorney-client communications, the previous DOD rules for military commissions initially provided that civilian counsel were required to agree that communications with the client were subject to monitoring. That requirement was later modified to require prior notification and to permit the attorney to notify the client when monitoring is to occur. Although the government was not permitted to use information against the accused at trial, some argued that the absence of the normal attorney-client privilege could impede communications between them, possibly decreasing the effectiveness of counsel. Civilian attorneys were bound to inform the military counsel upon learning of information about a pending crime that could lead to "death, substantial bodily harm, or a significant impairment of national security." The required agreement under the current regulations imposes a similar duty to inform, but does not mention monitoring of communications. The revelation that the rooms where attorneys are permitted to meet with clients were fitted with hidden listening devices has caused some concern among defense attorneys at military commission proceedings. The Sixth Amendment to the U.S. Constitution guarantees that those accused in criminal prosecutions have the right to be "confronted with the witnesses against [them]" and to have "compulsory process for obtaining witnesses in [their] favor." The Supreme Court has held that "[t]he central concern of the Confrontation Clause is to ensure the reliability of the evidence against a criminal defendant by subjecting it to rigorous testing in the context of an adversary proceeding before the trier of fact." In courts-martial, the Military Rules of Evidence (Mil. R. Evid.) provide that "[a]ll relevant evidence is admissible, except as otherwise provided by the Constitution of the United States [and other applicable statutes, regulations and rules]." Relevant evidence is excluded if its probative value is outweighed by other factors. The accused has the right to view any documents in the possession of the prosecution related to the charges, and evidence that reasonably tends to negate the guilt of the accused, reduce the degree of guilt, or reduce the punishment, with some allowance for protecting non-relevant classified information. Supporters of the use of military commissions to try suspected terrorists have viewed the possibility of employing evidentiary standards that vary from those used in federal courts or in military courts-martial as a significant advantage over those courts. The Supreme Court seemed to indicate that the previous DOD rules were inadequate under international law, remarking that "various provisions of Commission Order No. 1 dispense with the principles, articulated in Article 75 [of Protocol I to the Geneva Conventions] and indisputably part of the customary international law, that an accused must, absent disruptive conduct or consent, be present for his trial and must be privy to the evidence against him." The MCA provides that the accused has the right "to present evidence in [his] defense, to cross-examine the witnesses who testify against [him], and to examine and respond to evidence admitted against [him] on the issue of guilt or innocence and for sentencing." It is not clear what evidence might be excluded from this requirement as irrelevant to the issues of guilt, innocence, or appropriate punishment. It is possible that this provision could be interpreted not to apply to evidence relevant to the credibility of a witness or the authenticity of a document, so that the accused would have no right to examine and respond to such evidence, unless expressly provided elsewhere in the MCA. The MCA provides that defense counsel is to be afforded a reasonable opportunity to obtain witnesses and other evidence, including evidence in the possession of the United States, as specified in regulations prescribed by the Secretary of Defense. It does not guarantee the defense equal opportunity with the prosecution to obtain such evidence, as is the case at general courts-martial. The MCA provides that all of the information admitted into evidence at trial under any rule must be provided to the accused. The accused is also entitled to exculpatory and mitigating information known to the prosecution or investigators, with procedures permitting some variance for security concerns. The MCA provides for the protection of national security information during the discovery phase of a trial under procedures similar to the Classified Information Procedures Act and the Manual for Courts-Martial. Classified information is privileged and need not be disclosed. Where M.C.O. No. 1 permitted the withholding of any "Protected Information," the MCA permits the government to withhold only information determined by the United States Government pursuant to statute, executive order, or regulation to require protection against unauthorized disclosure for reasons of national security. Further, if the government wishes to withhold any classified information, the trial counsel must submit a declaration, signed by a knowledgeable official with classification authority, invoking the United States' classified information privilege and setting forth the damage to the national security that the discovery of or access to such information reasonably could be expected to cause. The military judge may authorize production of the classified information if she determines that it would be "noncumulative, relevant, and helpful to a legally cognizable defense, rebuttal of the prosecution's case, or to sentencing," in accordance with standards generally applicable in federal criminal cases. Specifically, the military judge may authorize the government to delete specified portions of evidence to be made available to the accused, or may allow an unclassified summary or statement setting forth the facts the evidence would tend to prove, to the extent practicable in accordance with the rules used at general courts-martial. Trial counsel may submit applications for protective measures on an ex parte basis, and the MCA does not provide defense counsel with access to the classified information that serves as the basis for substitute or redacted proffers. The decision to permit a substitution or grant other relief, which is required so long as the military judge determines such relief would "provide the accused with substantially the same ability to make a defense" as would access to the classified information itself, is not subject to a motion for reconsideration, but all of the submitted information and hearing transcripts are sealed and preserved for submission in case of appeal. The Secretary of Defense may prescribe in the rules of evidence that evidence is admissible as authentic if the military judge determines that "there is sufficient evidence that the evidence is what it is claimed to be," and instructs the members that they may consider any issue as to authentication or identification of evidence in determining the weight, if any, to be given to the evidence. The accused is entitled to the exclusion of evidence that is not probative or reliable, or of evidence the probative value of which is substantially outweighed by the "danger of unfair prejudice, confusion of the issues, or misleading the members"; or by "considerations of undue delay, waste of time, or needless presentation of cumulative evidence." The MCA prohibits the use of statements obtained through torture as evidence in a trial, except to prove torture where the defendant is accused of committing torture. For information obtained through coercion that does not amount to torture, the MCA 2006 provided a different standard for admissibility depending on whether the statement was obtained prior to or after the enactment of the DTA. Statements elicited through such methods prior to the DTA were admissible if the military judge were to find that the "totality of circumstances under which the statement was made renders it reliable and possessing sufficient probative value" and "the interests of justice would best be served" by admission of the statement. Statements taken after passage of the DTA were admissible if, in addition to the two criteria above, the military judge were to find that "the interrogation methods used to obtain the statement do not violate the cruel, inhuman, or degrading treatment prohibited by section 1003 of the Detainee Treatment Act." The MCA 2009 eliminates the distinction above, making statements obtained through cruel, inhuman or degrading methods inadmissible regardless of when they were made. The Obama Administration had already amended the military commission regulations in May 2009 to remove the discrepancy. Otherwise, out-of-court statements by the accused may be admitted if the military judge finds that the totality of the circumstances renders the statement reliable and possessing sufficient probative value; and either that the statement was voluntarily given or that the statement was made "incident to lawful conduct during military operations at the point of capture or during closely related active combat engagement, and the interests of justice would best be served by admission of the statement into evidence." Voluntariness is to be determined considering the totality of the circumstances, including the following: (1) The details of the taking of the statement, accounting for the circumstances of the conduct of military and intelligence operations during hostilities. (2) The characteristics of the accused, such as military training, age, and education level. (3) The lapse of time, change of place, or change in identity of the questioners between the statement sought to be admitted and any prior questioning of the accused. The defense is required to make any objections to the proposed use of any statements by the accused prior to entering a plea, if the trial counsel has disclosed the intent to use the statement, otherwise the objection will be deemed to have been waived. The military judge may require the defense to establish the grounds for excluding the statement. However, the government has the burden of establishing the admissibility of the evidence. If the statement is ruled admissible, the defense is permitted to present evidence with respect to the voluntariness of the statement, and the military judge must instruct the members to consider that factor in according weight to the evidence. Testimony given by the accused for the purpose of denying having made a statement or for disputing the admissibility of a statement is not to be used against him for any purpose other than in prosecution for perjury or false statements. The current version of Mil. Comm. R. Evid. 304 is modeled on Mil. R. Evid. 304, which prescribes rules for courts-martial to provide for the admission into evidence of confessions and admissions (self-incriminating statements not amounting to an admission of guilt). Under court-martial rules, such a statement and any evidence derived as a result of such a statement are admissible only if the statement was made voluntarily. Involuntary statements are those elicited through coercion or other means in violation of constitutional due process. To be used as evidence of guilt against the accused at court martial, a confession or admission must be corroborated by independent evidence. There is no requirement for corroboration of such statements at military commissions; however, the military judge may take the existence of corroborating evidence into consideration in determining the probative value and reliability of the statement. In one case before a military commission, the military judge ordered a detainee's statements to Afghan officials at the time of his capture suppressed on the basis of death threats against the detainee as well as his family. Such treatment is regarded as torture under the Military Commission Rules of Evidence. Further, the military judge ruled that statements subsequently made by the accused to U.S. interrogators likewise were required to be suppressed because they were taken under circumstances that did not sufficiently dissipate the coercive effect of the earlier threats. The government sought to appeal the latter ruling, but later dropped the charges against the detainee after he prevailed in his habeas petition. Hearsay evidence is an out-of-court statement, whether oral, written, or conveyed through non-verbal conduct, introduced into evidence to prove the truth of the matter asserted. M.C.O. No. 1 did not exclude hearsay evidence. The MCA allows for the admission of hearsay evidence that would not be permitted under the Manual for Courts-Martial only if the proponent of the evidence notifies the adverse party sufficiently in advance of trial of the intention to offer the evidence, as well as the "particulars of the evidence (including [unclassified] information on the general circumstances under which the evidence was obtained)." Originally, the evidence was to be inadmissible only if the party opposing its admission "clearly demonstrates that the evidence is unreliable or lacking in probative value." The May 2009 changes to the regulations reverse the burden of demonstrating reliability to the proponent of the evidence, and the MCA 2009 reflects the change. The rules regarding hearsay are provided in Mil. Comm. R. Evid. 801 to 807. In contrast to the relatively restrictive rule applied in courts-martial, where hearsay is not admissible except as permitted by a lengthy set of exceptions, the military commission rules provide that hearsay is admissible on the same basis as any other form of evidence except as provided by these rules or an act of Congress, perhaps creating a presumption of admissibility for hearsay evidence in military commissions. Mil. Comm. R. Evid. 803 provides that hearsay may be admitted if it would be admissible under the rules applicable at courts-martial. Otherwise, hearsay is admissible only if the party proffering it notifies the adverse party with sufficient time in advance of trial or hearing of its intent to offer such evidence and provides any materials in its possession regarding the time, place, and conditions under which the statement was procured; and the military judge finds, considering the relevant circumstances, that (A) the statement is offered as evidence of a material fact; (B) the statement is probative for which it is offered; (C) direct testimony from the witness is not available as a practical matter, taking into consideration the physical location of the witness, the unique circumstances of military and intelligence operations during hostilities, and the adverse impacts on military or intelligence operations that would likely result from the production of the witnesses; and (D) the general purposes of the rules of evidence and the interests of justice will best be served by admission of the statement into evidence. Under the previous rules, hearsay evidence was inadmissible if the opponent demonstrated by a preponderance of the evidence that such hearsay was unreliable under the totality of the circumstances. The current rules do not expressly allocate the burden of proof as to reliability of hearsay evidence. Presumably it falls on the proponent of the evidence. The MCA 2009 adopted rules for the protection of classified information that are similar to the Classified Information Procedures Act (CIPA), which supplies rules for criminal trials in federal civilian courts. The rules in subchapter V of the MCA also adopt modifications to CIPA that reflect experience in courts that have construed it for use in federal terrorism trials. The MCA directs military judges to view CIPA case law as authoritative unless such a construction would be inconsistent with provisions of the MCA. At military commissions convened pursuant to the MCA, classified information is to be protected during all stages of proceedings and is privileged from disclosure for national security purposes. Whenever the United States seeks to protect certain information from disclosure in any military commission case, the prosecution is to submit a declaration, signed by a knowledgeable official with classification authority, invoking the privilege and setting forth the damage to national security that would be expected to occur without protective measures. The military judge may not authorize the discovery of or access to such information unless he determines that it would be relevant and useful to any part of the defense's case. The military judge may authorize the United States to delete or withhold specified items of classified information from documents made available to the accused; substitute a summary of the information; or substitute a statement admitting relevant facts that the classified information would tend to prove. The military judge must consider a claim of privilege and review any supporting materials in camera if requested by the government, and must grant the relief sought if he finds that the summary, statement, or other substitute would "provide the accused with substantially the same ability to make a defense as would discovery or access to the specific classified information." The accused may not move for reconsideration of protective measures granted to the government if the order was entered pursuant to an ex parte showing. The government, however, can bring an interlocutory appeal in the event the judge orders that classified information must be disclosed or imposes sanctions for the government's refusal to permit disclosure, or refuses a protective order sought by the government. With respect to the protection of intelligence sources and methods relevant to specific evidence, the military judge is required to permit trial counsel to introduce otherwise admissible evidence before the military commission without disclosing the "sources, methods, or activities by which the United States acquired the evidence" if the military judge finds that such information is otherwise admissible as evidence, that it is reliable, and that the redaction is consistent with affording the accused a fair trial. The MCA does not explicitly provide an opportunity for the accused to contest the admissibility of substitute evidence proffered under the above procedures. It does not appear to permit the accused or his counsel to examine the evidence or a proffered substitute prior to its presentation to the military commission. If constitutional standards required in the Sixth Amendment are held to apply to military commissions, the MCA may be open to challenge for affording the accused an insufficient opportunity to contest evidence. Classified evidence is privileged under Mil. Comm. R. Evid. 505. During the examination of witnesses at trial, the trial counsel may make an objection to any question or motion that might lead to the disclosure of classified information. The military judge is required to take appropriate action, such as taking a proffer of the nature of the information the witness might be expected to provide, reviewing the matter in camera if requested by the government. The judge may order that only parts of documents or other materials be entered into evidence, unless fairness dictates the whole ought to be considered. In the event the defense reasonably expects to disclose classified information at trial, defense counsel must notify the trial counsel and the judge, and is precluded from disclosing information known or believed to be classified until the government has had a reasonable opportunity to move for an in camera determination as to protective measures. In the event the military judge denies a government motion to provide a substitution or alternative to disclosures and the accused is prevented from disclosing classified information at trial due to the government's objection, the military judge may dismiss the case or, if the interest of justice is not served by dismissal, the judge may order other relief, such as dismissal of specified charges or specifications, finding against the government on any issue to which the excluded evidence is relevant, or striking or precluding all or part of a witness's testimony. The MCA provides that military commissions may adjudge "any punishment not forbidden by [the MCA], including the penalty of death…." It specifically proscribes punishment "by flogging, or by branding, marking, or tattooing on the body, or any other cruel or unusual punishment, ... or [by the] use of irons, single or double." A vote of two-thirds of the members present is required for sentences of up to 10 years. Longer sentences require the concurrence of three-fourths of the members present. The death penalty must be approved unanimously, both as to guilt (except in the case of a guilty plea) and to the sentence, by all members present for the vote. In cases where the death penalty is sought, a panel of 12 members is required (unless the convening authority certifies that 12 members are not "reasonably available" because of physical conditions or military exigencies, in which case no fewer than nine are required), with all members present for the vote agreeing on the sentence. The death penalty must be expressly authorized for the offense, and the charges referred to the commission must have expressly sought the penalty of death. The death sentence may not be executed until the commission proceedings have been finally adjudged lawful and all appeals are exhausted, and after the President approves the sentence. The President is permitted to "commute, remit, or suspend [a death] sentence, or any part thereof, as he sees fit." For sentences other than death, the Secretary of the Defense or the convening authority is permitted to adjust the sentence downward. Chapter X of the Rules for Military Commissions covers sentencing. "Aggravating factors" that may be presented by the trial counsel include evidence that "any offense of which the accused has been convicted comprises a violation of the law of war." Unlike the rules for courts-martial, there is no express opportunity for the trial counsel to present evidence regarding rehabilitative potential of the accused. However, the rules provide that the accused may make a sworn or unsworn statement to present mitigating or extenuating circumstances or to rebut evidence of aggravation submitted by the trial counsel. In the case of an unsworn statement, which may be written or oral, the accused is not subject to cross-examination by the trial counsel. The death penalty may only be adjudged if expressly authorized for the offense listed or if it is authorized under the law of war; and all 12 members of the commission voted to convict the accused (except in the case of a guilty plea); found that at least one of the listed aggravating factors exists; agreed that such factors outweigh any extenuating or mitigating circumstances; and voted to impose the death penalty. Aggravating factors include that the offense resulted in the death of or substantially endangered the life of one or more other persons, the offense was committed for the purpose of receiving money or a thing of value, the offense involved torture or certain other mistreatment, the accused was also found guilty of another capital crime, the victim was below the age of 15, or that the victim was a protected person. Other aggravating circumstances include specific law-of-war violations, which are not to be applied to offenses of which they are already an element. Subchapter VI of the MCA prescribes post-trial procedure and appeals, similar to procedures DOD had implemented. It provides for an administrative review of the trial record by the convening authority followed by a review panel. The MCA 2009 did not make major changes to the appellate structure. The MCA 2006 codified the establishment of the review body set up under the pre-2006 DOD rules for military commissions. The Court of Military Commission Review (CMCR) is composed of judges who meet the same qualifications as military judges or comparable qualifications for civilian judges. The accused may appeal a final decision of the military commission with respect to issues of law to the CMCR. Like the UCMJ, the MCA prohibits the invalidation of a verdict or sentence due to an error of law unless the error materially prejudices the substantial rights of the accused. If the CMCR approves the verdict, the accused may appeal the final decision to the U.S. Court of Appeals for the District of Columbia Circuit. Appellate court decisions may be reviewed by the Supreme Court under writ of certiorari. Post-trial procedures for military commissions are set forth in Chapter XI of the Rules for Military Commissions. Post-trial proceedings may be conducted to correct errors, omissions, or inconsistencies, where the revision can be accomplished without material prejudice to the accused. Sessions without members may be ordered to reconsider any trial ruling that substantially affects the legal sufficiency of any findings of guilt or the sentence. Once the record is authenticated and forwarded to the convening authority, the accused is permitted, within 20 days unless additional time is approved, to submit matters relevant to whether to approve the sentence or disapprove findings of guilt. The convening authority is required to consider written submissions. If the military commission has made a finding of guilty, the legal advisor also reviews the record and provides recommendations to the convening authority. The convening authority may not take an action disapproving a finding of not guilty or a ruling that amounts to a finding of not guilty. However, in the case of a finding of not guilty by reason of lack of mental responsibility, the convening authority may commit the accused to a suitable facility for treatment pending a hearing to determine whether the accused may be released or detained under less than the most stringent circumstances without posing a danger to others. Rehearings of guilty findings may be ordered at the discretion of the convening authority, except where there is a lack of sufficient evidence to support the charge or lesser included offense. Rehearings are permitted if evidence that should not have been admitted can be replaced by an admissible substitute. Any part of a sentence served pursuant to the military commission's original holding counts toward any sentence that results from a hearing for resentencing. In all cases in which the convening authority approves a finding of guilty, the record is forwarded to the CMCR, unless the accused (where the sentence does not include death) waives review. No relief may be granted by the CMCR unless an error of law prejudiced a substantial trial right of the accused. The accused has 20 days after receiving notification of the CMCR decision to submit a petition for review with the U.S. Court of Appeals for the District of Columbia Circuit. Within two years after a military commission conviction becomes final, an accused may petition the convening authority for a new trial on the ground of newly discovered evidence or fraud on the military commission. Prior to the MCA, DOD regulations for military commissions provided that the accused could not be tried for the same charge twice by any military commission once the commission's finding on that charge became final (meaning once the verdict and sentence had been approved). However, the regulations appeared to permit revisions of a verdict prior to its becoming final in ways that might have resulted in double jeopardy. The MCA provides that "[n]o person may, without the person's consent, be tried by a military commission under this chapter a second time for the same offense." Jeopardy attaches when a guilty finding becomes final after review of the case has been fully completed. The MCA prevents double jeopardy in such cases by expressly eliminating the possibility that a finding that amounts to a verdict of not guilty is subject to reversal by the convening authority or to review by the CMCR or the D.C. Circuit. The severity of a sentence adjudged by the military commission cannot be increased on rehearing unless the sentence prescribed for the offense is mandatory. These protections are covered in Chapter XI of the Rules for Military Commission. Proceedings are not authorized to reconsider any ruling that amounts to a finding of not guilty as to any charge or specification, except with respect to a charge where the record indicates guilt as to a specification that may be charged as a separate offense under the MCA. Proceedings for increasing the severity of a sentence are not permitted unless the commission failed to adjudge a proper sentence under the MCA. The inadequacy of an indictment in specifying charges could raise double jeopardy concerns. If the charge does not adequately describe the offense, another trial for the same offense under a new description is not as easily prevented. The MCA requires that charges and specifications be signed under oath by a person with personal knowledge or reason to believe that matters set forth therein are true, and requires that they be served on the accused written in a language he understands. There is no express requirement regarding the specificity of the charges in the MCA, but the Rules for Military Commission provide that the charge must state the punitive article of the act, law of war, or offense as defined in the Manual for Military Commissions that the accused is alleged to have violated. A specification must allege every element of the charged offense expressly or by necessary implication. The Rules for Military Commissions make the trial counsel responsible for causing the accused to be served a copy of the charges in English and another language that the accused understands, where appropriate. After the accused is arraigned, the military judge may permit minor changes in the charges and specifications before findings are announced if no substantial right of the accused is prejudiced, but no major changes may be made over the objection of the accused without a new referral. President Bush's 2001 Military Order also left open the possibility that a person subject to the order might be transferred at any time to some other governmental authority for trial, or that a person already charged for crimes in federal courts could be made subject to the Order and transferred for trial by military commission. Double jeopardy might have arisen in either event, depending on whether jeopardy had attached prior to transfer, even if the trial did not result in a final verdict. The MCA does not expressly address such transfers or prohibit trial in another forum. The Rules for Military Commissions, however, provide the accused a waivable right to move to dismiss charges on the basis that he has previously been tried by a federal civilian court for the same offense. The following charts provide a comparison of general courts-martial to the military tribunals under the Military Commissions Act of 2006 as initially enacted and as amended by the Military Commissions Act of 2009. Chart 1 compares the legal authorities for establishing military tribunals (including courts-martial), the jurisdiction over persons and offenses, and the structures of the tribunals. Chart 2 , which compares procedural safeguards, follows the same order and format used in CRS Report RL31262, Selected Procedural Safeguards in Federal, Military, and International Courts , by [author name scrubbed], in order to facilitate comparison of the proposed legislation to safeguards provided in federal court, the international military tribunals that tried World War II crimes at Nuremberg and Tokyo, and contemporary ad hoc tribunals set up by the UN Security Council to try crimes associated with hostilities in the former Yugoslavia and Rwanda. | On November 13, 2001, President Bush issued a Military Order (M.O.) pertaining to the detention, treatment, and trial of certain non-citizens in the war against terrorism. Military commissions pursuant to the M.O. began in November 2004 against four persons declared eligible for trial, but the Supreme Court in Hamdan v. Rumsfeld invalidated the military commissions as improper under the Uniform Code of Military Justice (UCMJ). To permit military commissions to go forward, Congress approved the Military Commissions Act of 2006 (MCA), conferring authority to promulgate rules that depart from the strictures of the UCMJ and possibly U.S. international obligations. Military commissions proceedings were reinstated and resulted in three convictions under the Bush Administration. Upon taking office in 2009, President Obama temporarily halted military commissions to review their procedures as well as the detention program at Guantánamo Bay in general, pledging to close the prison facilities there by January 2010, a deadline that passed unmet. One case was moved to a federal district court. In May 2009, the Obama Administration announced that it was considering restarting the military commission system with some changes to the procedural rules. Congress enacted the Military Commissions Act of 2009 (MCA 2009) as part of the Department of Defense Authorization Act (NDAA) for FY2010, P.L. 111-84, to provide some reforms the Administration supported and to make other amendments to the Military Commissions Act, as described in this report. The plan to transfer five "high value detainees" to New York for trial in federal court, announced in November 2009, was halted due to resistance from Congress and some New York officials. Military commissions resumed under the new statute, resulting in an additional five convictions, although two of the previous convictions were reversed on appeal. The government was granted a rehearing en banc at the U.S. Court of Appeals for the D.C. Circuit for one case, which resulted in the partial reinstatement of a conspiracy conviction pending further review by the original panel of judges. This report provides a background and analysis comparing military commissions as envisioned under the revised MCA to those established by the MCA 2006. After reviewing the history of the implementation of military commissions in the armed conflict against Al Qaeda and associated forces, the report provides an overview of the procedural safeguards provided in the MCA. Finally, the report provides two charts comparing the MCA as amended by the MCA 2009 to the original MCA enacted in 2006 and to general courts-martial. The first chart describes the composition and powers of the military tribunals, as well as their jurisdiction. The second chart, which compares procedural safeguards in courts-martial to the MCA as enacted and as amended, follows the same order and format used in CRS Report RL31262, Selected Procedural Safeguards in Federal, Military, and International Courts, as well as CRS Report R40932, Comparison of Rights in Military Commission Trials and Trials in Federal Criminal Court, both by [author name scrubbed], to facilitate comparison with safeguards provided in federal court and international criminal tribunals. |
As of February 11, 2009, a total of 240 persons have served for 30 years or more in the United States Congress as Representative or Senator. That number is only 2% of the 11,893 men and women who have represented their states and congressional districts since the First Congress convened on March 4, 1789. Of the 240 Members serving 30 years or more, 139 served only in the House of Representatives; 29 served only in the Senate; and 72 served in both chambers. Four of the 240 Members are women, three of whom have served in the House and Senate. Over time, the number of Members serving 30 years or more has grown. Only two Members with over 30 years of service began serving in Congress in the 18 th century: Nathaniel Macon began his service in 1791; Samuel Smith, in 1793. Seven served entirely during the 19 th century. By 1967 (90 th Congress), a total of 100 Members had served 30 years or more. As of February 11, 2009, (111 th Congress) that number had risen to 240. Among Members of the 111 th Congress, 16 incumbent Senators and 18 incumbent Representatives have served 30 years or longer. Table 1 lists Members who have served 30 years or longer in descending order of the length of their congressional service, as measured in days. For each Member, the table presents the Member's party and state represented; dates of the Member's first and last day of service, by chamber; days of service in each chamber; and total days of congressional service. Total service is also presented in years and fractions of years. Calculations of days of service varied according to the pattern of a Member's service. For example— Clarence A. Cannon of Missouri served in one continuous period from 3/4/1923 through 5/12/1964. The elapsed time from one date to the other was 15,045, but because Representative Cannon served for each of the elapsed days and on the first day, we add one day to the elapsed time for a total of 15,046 days. Justin Morrill served in both the House and the Senate, continuously from 3/4/1855 to 3/3/1867 in the House (4,383 days) and from 3/4/1867 to 12/28/1898 in the Senate (11,623 days). Morrill's total congressional service was the sum of those two periods, 16,006 days. Henry Jackson of Washington also served continuously in both the House and the Senate, but because of a statutory change there is an overlap of one day in his official dates of service. Jackson served in the House from 1/3/1941 through 1/3/1953, but his first day in the Senate was also on 1/3/1953. If we simply added his House service (4,384 days) and his Senate service (11,199 days), we would double-count 1/3/1953; so we add the days of service in each chamber (15,583 days) and subtract one day from that sum for Jackson's total days of congressional service (15,582 days). Alternately, we could simply count the days from when his House service started through the date of the day when his Senate service ended. Samuel Smith served in the House, then in the Senate, then again in the House, and then once again in the Senate. His first period of service (in the House) did not overlap with the second (in the Senate). There was a break between his first period of Senate service and his second period of House service, but there is an overlapping day (12/17/1822) when he moved finally from the House again to the Senate. Accordingly, we add the days of each period of service and subtract one day from the sum for a total of 14,276 days of congressional service. Table 1 draws the dates of congressional service from the Biographical Directory of the United States Congress, 1774-Present ; the "Table of United States Senators" in U.S. Congress, Senate, Senate Manual , S. Doc. 104-1; and various editions of the Congressional Directory (Washington: GPO). When a date in the Biographical Directory was unclear, CRS consulted other sources for clarification, as shown in notes to Table 1 . | This report identifies the 240 Members of Congress who have served in Congress for at least 30 years, as of February 11, 2009. Those 240 Members are only 2% of the 11,893 individuals who have represented their states and congressional districts in Congress since 1789. Of the 240 Members with at least 30 years of congressional service, 139 have spent all of their congressional careers in the House; 29 have spent all of their careers in the Senate; and 72 have had combined service in the House and Senate. Among Members of the 111th Congress, 16 Senators and 18 Representatives have served 30 years or more. This report supercedes CRS Report RL30370, by [author name scrubbed], Specialist in American National Government. This report will not be updated. |
Large-scale deployment of concentrating solar power (CSP), a renewable energy technology for generating electricity, has the potential to affect the availability of water resources in the Southwest for other uses. Because the water demand of CSP is highly dependent on the type of CSP facilities constructed (e.g., whether thermal storage is included and whether wet cooling is used) and their locations, and because the data for these evolving technologies are preliminary, there remains much uncertainty about the impacts of CSP on Southwest water use. Water resource constraints are likely to prompt adoption of more freshwater-efficient technologies, or decisions not to site CSP facilities in certain locations. However, water constraints do not necessarily preclude CSP in the Southwest, given the ability to reduce the freshwater use at CSP facilities. This report presents a brief primer on CSP, then discusses the potential water implications of CSP deployment in the Southwest. CSP comprises a set of technologies that convert thermal solar energy into electricity. The quantity of electricity produced at these facilities, the water intensity per unit of electricity generated, and the local and regional constraints on freshwater will shape the cumulative effect of CSP deployment on southwestern water resources, and the long-term sustainability of CSP as a renewable energy technology. As the 111 th Congress considers energy and climate legislation, and as individual states take actions such as adopting renewable energy portfolios and identifying geographic regions suitable for renewable energy development, the implications of large-scale adoption of renewable technologies are receiving greater attention. How large-scale expansion of solar generation in the Southwest may affect the people, economy, land, protected species, and water resources of the region are being analyzed in order to compare the local, regional, and national advantages and disadvantages of CSP compared to other electricity options. Site-specific and cumulative water resource implications are among many factors (e.g., cost, climate and air pollution emissions, land and ocean impacts, wildlife and the environment impacts) to be weighed when judging the tradeoffs between different energy options. CSP—or solar thermal power, as it is also known—typically employs large arrays of ground-based mirrors to concentrate sunlight onto a heat transfer medium (e.g., oil, salt, or water), which is heated above 212°F (100°C) to roughly 662°F (350°C), depending on the medium. The heat is used to generate steam via a heat exchanger to spin a steam turbine. Alternatively, steam can be generated directly by the mirror arrays. Photovoltaic (PV) solar is a separate class of solar technology that uses panels of solar cells to convert sunlight directly into electricity. Operation of CSP and PV facilities to generate electricity does not directly release greenhouse gases. There remains significant uncertainty about the future rate and level of CSP deployment. In some CSP installations, sunlight is concentrated from the mirror arrays onto a single, central location atop a tall solar tower where the heat typically melts salt or boils water. In other CSP installations, solar parabolic-mirror troughs, also known as solar troughs , focus sunlight on miles of piping running through a field of mirrors, heating the heat transfer fluid (usually oil). Pressurized steam, produced by the heat transfer medium, then drives a turbine-generator producing electricity. Other less common CSP technologies exist; this report focuses on solar trough and solar tower CSP technologies. CSP currently is better suited than PV installations for larger facilities, and the steam-cycle used in CSP is more familiar to utility engineers. Electricity from a large CSP plant is estimated to cost $0.10 per kilowatt-hour (kWh) over a facility's operating life; electricity from a large PV facility is estimated at $0.26/kWh given current technologies. In terms of cost, both PV and CSP facilities at the scale now being developed (generally between 50 megawatts (MW) and 1,200 MW) are at an early stage in their commercial adoption and use; these early facilities are anticipated to produce electricity at more than twice the cost of conventional coal plants. CSP generation costs are expected to decrease as more solar plants are installed and technologies and operations improve. As of March 2009, 11 large solar trough facilities were operating in the United States (1 in Arizona, 1 in Nevada, and 9 in California), with a total capacity of 339 MW. An additional 16 large-scale solar trough and solar tower plants are planned. The 15 in the West ─ 1 in Arizona, 2 in Nevada, and 12 in California ─ have planned capacities totaling 4.0 gigawatts (GW). The one in Florida is planned as a 75 MW facility. Adding heat storage, such as molten salt storage, can improve the economics of CSP operation because it allows the heat retained in storage to produce electricity into the night hours. The availability of thermal storage technologies gives CSP an additional advantage over PV. The CSP facility currently operating in Arizona has plans to add thermal storage. The first large-scale CSP plant with thermal storage began operations in Granada, Spain, in November 2008; the facility is a 50 MW plant with seven hours of thermal storage. CSP technologies generate power via the same steam cycle as coal or nuclear power plants; the main difference is the fuel used to turn water into steam. There are two major water processes in a steam turbine system—the steam cycle and the cooling process. Most of the water is consumed during cooling, and the choice of cooling technology largely determines how much water is actually consumed at a facility. Fossil and nuclear power plants use the same wet-cooling technologies as those for CSP. Water is used to produce steam to turn the steam turbines; this water is recycled for the generation of steam in the "closed-loop" steam cycle. Theoretically, water is not lost in the steam production cycle (though real-world imperfections necessitate some "make-up" water to compensate for leaks in the system). Steam is cooled in a condenser and condensed back to a liquid water state to be reused. The condenser itself is then cooled. For wet cooling of the condenser, the most common technology is to use a separate circuit of water to remove the heat from the condenser; this water then flows to an evaporative cooling tower that dissipates the collected heat energy to the environment. Most of this cooling water is lost as clouds of water vapor to the atmosphere as the condenser water contacts the air and the cooling tower. Alternatively, wet cooling can also occur by sending the condensed steam directly to the cooling tower. The 11 large-scale CSP facilities operating in the United States all use wet cooling. In areas where water supplies are constrained, dry cooling technologies may be used, which blow air over extensive networks of steam pipes designed with convective cooling fins to dissipate the heat energy over their surface area. No water is used or consumed in dry cooling. Air, however, has a much lower capacity to carry heat than water; therefore, dry cooling generally is less efficient than wet cooling in removing heat. Often, massive cooling fans are used to remove the heat from the pipe array in dry cooling. These fans consume a portion of the electricity generated by the power plant. Although dry cooling reduces water use, its consumption of energy for cooling fans and reduction of thermal efficiency of the steam turbines, especially on the hottest days of the year, when summer-peaking utilities most need power, is a significant factor impeding its adoption. It may be possible to offset the effect of dry cooling on net electricity generation by using bigger solar collecting fields or perhaps PV systems to run cooling fans. Where efficiency is a concern and water is constrained, a hybrid combination of wet and dry cooling technologies may be used. (See " Reducing the CSP Water Footprint ," below, for more information on hybrid cooling.) CRS was not able to identify any operating large-scale CSP facility in the United States or the world that uses dry cooling, but the technology is being considered as new CSP proposals are being developed in water-constrained areas, such as Southern California counties. Further research on materials and the thermal properties of the heat transfer medium in solar installations may allow the medium to reach higher temperatures, producing hotter steam for the turbines and greater electricity output. However, steam turbine operating characteristics are constrained by the materials used to manufacture the turbines. These materials will then determine how well the turbine is able to accommodate high pressures. Another alternative to increase output would be to add a combustion turbine to the existing solar cycle. If higher-temperature steam can be produced, then combustion turbines operating at lower pressures can be used to augment the solar steam turbines, resulting in more efficient energy output. Ongoing research at the U.S. Department of Energy's National Renewable Energy Lab (NREL) has shown that an integrated solar combined cycle plant would have efficiencies higher than those of a solar-only plant, and potentially higher than those in a fossil-fuel combined-cycle plant. It also has costs 25% to 75% lower than those of a solar-only plant, and offers the lowest cost of solar electric energy among hybrid options. In arid and semi-arid regions like the Southwest, or other areas with intense water demand, water supply is an issue for locating any thermoelectric power plant, not only CSP. The cumulative impact of installing multiple thermoelectric power plants in a region with existing water constraints raises numerous policy questions. As previously noted, there is significant uncertainty about the future rate and location of CSP deployment; this uncertainty significantly restricts the ability to evaluate the extent and location of potential water resource implications of CSP deployment. Additional data and analysis on where CSP may deploy and how it may affect local water availability would benefit federal, state, and local decision-makers when evaluating the potential consequences of general policies and individual permitting and siting decisions. The analysis presented in this report is based on available projections for CSP deployment at the county level. The Electric Power Research Institute (EPRI) developed an index of the susceptibility of U.S. counties to water supply constraints. The index was derived by combining information on the extent of development of available renewable water supply, groundwater use, endangered species, drought susceptibility, estimated growth in water use, and summer deficits in water supply. EPRI produced Figure 1 , which shows the susceptibility to constrained water supplies. Comparing the water constraint index to NREL's projection of CSP deployment by 2050, in Figure 2 , shows overlap, particularly in Arizona and California. NREL's analysis did not consider water availability as a constraint on CSP deployment. This overlap represents a policy issue for local, state, and federal decision-makers: should the federal government promote electricity generation given local water resource constraints and demands, and if so, how? For example, what kinds of solar technologies are most appropriate for counties susceptible to water supply constraints? Figure 2 represents one projection of where CSP may be deployed based on federal and state policies, prices, and costs at the time of the analysis. These model inputs are dynamic, and the models are being improved. In particular, when, where, and how much CSP is installed by 2050 and the technologies used are sensitive to state and federal policies. Consequently, NREL plans to release updated projected deployments based on changes in these inputs, as well as proposed changes (e.g., analyses of the impacts of climate change bills on CSP deployment). The Western Governors' Association (WGA) is producing a map of potential renewable energy zones taking into consideration renewable resources, transmission, and wildlife issues. The WGA analysis focuses on transmission feasibility, while the NREL deployment projections were based on a CSP market analysis. Because of these differences, the initial results of the WGA mapping effort show a different depiction of potential locations for solar facilities ( Figure 3 ). For example, Figure 3 identifies more opportunities for solar deployment in Utah and Colorado. Like the NREL analysis used to develop Figure 2 , the WGA mapping effort does not consider water availability or water resource impacts when designating the areas for renewable development. Many of the counties with solar development zones in the draft preliminary WGA map are the same counties that EPRI found to be highly and moderately susceptible to water supply constraints (see Figure 1 ). The WGA map also shows potential for CSP deployment in areas somewhat susceptible to water supply constraints (e.g., Utah). As shown in Figure 2 and Figure 3 , CSP is likely to be concentrated in the Southwest, while new fossil fuel thermoelectric facilities would be more dispersed across the country. This concentration of CSP in a region of the country with water constraints has raised questions about whether, and how, to invest in large-scale deployment of CSP. Most electricity generation requires and consumes water (see Table 1 ). Wind is an exception, and PV consumes water only for washing mirrors and surfaces. The water consumed per megawatt-hour (MWh) of electricity produced is referred to as the energy technology's water intensity . Why is there concern specifically about the CSP water footprint? CSP using wet cooling (i.e., solar trough and solar tower) consumes more water per MWh than some other generation technologies, as shown in Table 1 . The water intensity of electricity from a CSP plant with wet cooling generally is higher than that of fossil fuel facilities with wet cooling. However, its water intensity is less than that of geothermal-produced electricity. As previously discussed and as shown by comparing the second and third columns in Table 1 , the majority of water consumption at a CSP facility occurs during the cooling process. The fourth column in Table 1 depicts the water consumed in producing the fuel source; this water consumption generally does not occur at the same location as generation. Although CSP cooling technologies are generally the same as those used in traditional thermoelectric facilities, the CSP water footprint is greater due to CSP's lower net steam cycle efficiency. Options exist for reducing the water consumed by thermoelectric facilities, including CSP facilities; however, with current technology, these options reduce the quantity of energy produced and increase the energy production cost. Because water use is a function of electricity produced, a key factor determining the amount of water used at a CSP facility is the amount of electricity to be produced during a period of time. How much electricity a CSP facility will generate in a year depends on the amount of time the facility operates. The utilization of a facility is measured by its capacity factor , which is expressed as a percent. This is the ratio of the amount of power generated at a facility to the maximum amount of power the facility could have generated if it operated at continuously at maximum output. Capacity is the maximum potential instantaneous power output rate at a facility. A capacity factor allows for electricity estimates to be made using information on a plant's capacity. Notably, many of the goals for solar deployment are being stated in capacity terms, that is, in kilowatts (kW), MW, or GW, not in terms of electricity generated (kilowatt-hours or MWh). Baseload plants typically have capacity factors of more than 70%, and peaking plants of about 25% or less; cycling plants fall in the middle. For most CSP facilities currently proposed in the Southwest using wet cooling, the capacity factor ranges from 25% for solar troughs without storage to greater than 40% for solar troughs with six hours of thermal storage. Capacity factors for CSP plants with storage are highly uncertain given the early stage of CSP storage technology. As the cost of thermal storage is reduced, future parabolic trough plants could yield capacity factors greater than 70%, competing directly with future baseload combined cycle plants or coal plants. Increased capacity factors mean more energy is generated at a facility, and represent an increase in the quantity of water consumed for each MW of installed capacity. Therefore, without knowing the capacity factor, projections of installed capacity in the Southwest provide incomplete information for producing reliable estimates of the water that may be required for future CSP installations. The trend for new thermoelectric generation, including CSP, in water-constrained areas is toward more freshwater-efficient cooling. These technologies may reduce, but not eliminate, the water resource impacts of CSP deployment or other expansion of electricity generation in the Southwest. Among the factors likely to push adoption of more freshwater-efficient cooling at some CSP facilities are the scale of projected deployment, growing awareness of the water use of CSP, and ongoing research on more freshwater-efficient cooling alternatives. A February 2009 memo from the Regional Director of the Pacific West Region of the National Park Service (NPS) to the Acting State Director for Nevada of the Bureau of Land Management illustrates the trend toward more freshwater-efficient cooling. The memo identifies water availability and water rights issues as impacts to be evaluated in permitting of renewable energy projects on federal lands. The memo states: "In arid settings, the increased water demand from concentrating solar energy systems employing water-cooled technology could strain limited water resources already under development pressure from urbanization, irrigation expansion, commercial interests and mining." The memo also cites rulings in 2001 and 2002 by the Nevada State Engineer identifying reluctance to grant new water rights for water-cooled power plants. The Western Governors' Association has established a goal of 8 GW by 2015 for solar energy capacity. If this goal is achieved through wet-cooled CSP without storage (i.e., with a 25% capacity factor), the water requirements would be roughly 43 thousand acre-feet per year (ka-f/year). If the premium solar sites are selected for these first investments, they likely would be concentrated in Arizona and California. To provide a sense of scale for this water consumption, it can be compared to the overall state-level water consumption. For example, if all of the 8 GW was constructed in Arizona, the increased water demand would represent roughly 1% of the state's consumptive water use. NREL projected as part of its Concentrating Solar Deployment System (CSDS) that 55 GW of CSP would be deployed by 2050 and assumed that the CSP facilities would all have six hours of storage. NREL estimated the mean capacity factor for these facilities at 43%. If 55 GW of capacity by 2050 is achieved using wet cooling, the water requirements would be roughly 505 ka-f/year. CSP water use would be less if more water-efficient cooling is employed and if not all the facilities under the 55 GW deployment projection have thermal storage. Alternatively, electricity generated and water use could be higher if 12 hours of thermal storage are employed in some or all facilities. Some states, like Arizona and New Mexico, currently produce more electricity than they consume, and export the surplus. CSP deployment is likely to significantly increase the electricity exports from these states. According to NREL's analysis, significant amounts of the 55 GW generated would be transmitted outside of the CSP-generating states, thereby resulting in a virtual export of the water resources of the producing states to the consuming states. The higher the water consumed per kilowatt-hour, the more the Southwest's limited water resources would be virtually exported to other regions. The virtual export of water raises policy questions about concentrating electricity generation and its impacts in a few counties and states while its benefits are distributed more broadly. Virtual water imports and exports, however, are not unique to electricity. For example, water is embedded in locally produced agricultural products and manufactured goods that are distributed nationally or globally. Regional estimates of water use of CSP do not fully capture what deployment may mean for water use in the states and counties with the CSP facilities. How CSP may affect existing water uses will depend on the level of CSP capacity located in a county, the capacity factor of the facilities, and the existing consumptive use in the county. Many of the counties identified as potential locations for CSP also were identified by EPRI as having some level of susceptibility to water supply constraints. The potential use of water by CSP in moderately constrained counties (e.g., Grant and Luna, NM) and in highly constrained counties (e.g., La Paz and Maricopa, AZ) may lead to the adoption of or requirement for more freshwater-efficient CSP facilities. For some Southwest counties with relatively low water use, large-scale deployment of CSP, even with water-efficient cooling technologies, could significantly increase the demand for water in the county (e.g., Grant, NM, and Mineral, NV). Without new water supplies becoming available and assuming that most water supplies in these arid regions are already allocated to existing uses, the water used by CSP may be purchased from existing water rights holders, or a CSP facility might develop its own supplies from impaired waters. The most likely source of water rights to purchase would come from the agricultural sector of these states. If policy makers choose to require that CSP not consume the water quantities described above, CSP facilities could reduce their freshwater footprint by employing more water-efficient cooling technologies or by cooling using alternate water supplies (i.e., impaired water supplies such as saline groundwater). Alternatives to wet cooling can significantly reduce the freshwater footprint of CSP. Emerging cooling technologies that have the potential to consume much less freshwater include dry cooling (previously discussed), hybrid dry-wet cooling, cooling with fluids other than freshwater, and more innovative technologies (e.g., wet-surface air coolers, advanced wet cooling). The alternatives receiving most attention in the development of proposals for new thermoelectric facilities in water-constrained areas are dry and hybrid cooling. A Department of Energy (DOE) report, Concentrating Solar Power Commercial Application Study: Reducing Water Consumption of Concentrating Solar Power Electricity Generation , found that dry cooling could reduce water consumption to roughly 80 gal/MWh for solar troughs and 90 gal/MWh for solar towers, compared to the cooling water consumption shown in Table 1 . However, DOE also found that electricity generation at a dry-cooled facility dropped off at ambient temperatures above 100°F. Dry cooling, thus, would reduce generation on the same hot days when summer peak electricity demand is greatest. For parabolic troughs in the Southwest, the benefit in the reduction in water consumption from dry cooling resulted in cost increases of 2% to 9% and a reduction in energy generation of 4.5% to 5%. The cost and energy generation penalties for dry cooling depend largely on how much time a facility has ambient temperature above 100°F. In order to weigh the tradeoffs in energy generation, cost, and water use, DOE researched hybrid cooling processes that combine dry and wet cooling. The hybrid system consists of parallel wet and dry cooling facilities, with the wet cooling operating only on hot days. By using wet cooling in parallel with dry cooling on hot days, losses of thermal efficiency from dry cooling can be reduced. How often the wet cooling is used determines how much water is consumed and the effect of hot days on thermal efficiency. DOE found that a hybrid cooling system in the Southwest using 50% of the water of wet cooling would maintain 99% of the performance of a wet-cooled facility. A hybrid cooling system using 10% of the water of wet cooling would maintain 97% of the energy performance. There also may be opportunities to reduce the freshwater footprint by using alternative water supplies, such as saline water or water with otherwise impaired quality. However, information on the feasibility of alternative water supplies for cooling is limited. For large sections of the areas shown in Figure 2 for CSP deployment, data on the depth to saline groundwater supplies is unavailable. More extensive and updated information may be forthcoming in a future assessment of brackish groundwater required by Section 9507 of P.L. 111-11 , the Omnibus Public Land Management Act of 2009. Other alternative water supplies, such as effluent from municipal or industrial wastewater treatment facilities, are less likely options for CSP because most of the anticipated sites for CSP deployment are remote from urban development. Growing populations and changing values have increased demands on water supplies and river systems, resulting in water use and management conflicts throughout the country, particularly in the West. In many western states, agricultural water needs can be in direct conflict with urban needs, as well as with water for thermoelectric cooling, threatened and endangered species, recreation, and scenic enjoyment. Debate over western water resources revolves around the issue of how best to plan for and manage the use of this renewable, yet sometimes scarce and increasingly sought after, resource. Traditional users of water supplies often are wary of new water demands that may compete or result in reduced deliveries to farms (leading to lost agricultural production). Deployment of CSP would add an additional demand to existing freshwater competition in the Southwest. As indicated in the analysis herein, there remains significant uncertainty about where, how much, and what type of CSP capacity may be installed. Technological advances in CSP, thermal storage, and cooling technologies also may change the water intensity of any CSP that is deployed. Water resource data gaps on current and projected non-CSP water consumption and on availability of impaired water supplies add uncertainty to analyses of the potential significance of CSP freshwater use and alternatives to its use. For these reasons, any estimate of how much water may be consumed by CSP at the regional, state, or county level is highly uncertain. Any shift of freshwater resources to CSP from an existing use would have costs and benefits. For example, if the water is shifted from agricultural use to CSP cooling, the region would forgo the benefits of that agricultural production. Alternatively, the water could also become available for use in CSP through improvements in agricultural or municipal and industrial water efficiency. CSP, however, would bring jobs and investments to the Southwest while producing electricity (without significant greenhouse gas emissions) that could be put to use by municipal, industrial, and other consumers in a broader area of the country. How to manage existing and new water demands is largely up to the states. Most electricity siting and water planning, management, and allocation decisions are delegated to the states. Federal agencies support state water management efforts through data collection and technology research. Whether and how the federal government should promote water conservation, efficiency, markets, and regional- and state-level planning and collaboration is a matter of debate, and actions in these areas often occur on a piecemeal or ad hoc basis. At the same time, federal policies (e.g., energy, agriculture, and tax policies) can affect water-related investments and water use, and operations of federal facilities can affect the water available for allocation. CRS analyzed NREL's CSP deployment scenario for 2050 in order to evaluate potential state and local water resource implications. CRS chose NREL's scenario as the basis for this analysis because it provided county-level deployment estimates; other available renewable deployment projections are at much larger geographic scales, typically at the region or state level. A major drawback of using a deployment scenario that extends to 2050 is that it is highly speculative. At the same time, water resource planning, projects, and decisions often are performed and evaluated on time scales encompassing many decades. Illustrative Scenario of State Water Use Under 2050 Deployment Projection NREL projected as part of its Concentrating Solar Deployment System (CSDS) that 55 GW of CSP would be deployed by 2050 and assumed that the CSP facilities would all have six hours of storage. NREL estimated the mean capacity factor for these facilities at 43%. If 55 GW of capacity by 2050 is achieved using wet cooling, the water requirements would be roughly 505 thousand acre-feet per year (ka-f/year). CRS developed a scenario, shown in Table A-1 , for how the 55 GW of CSP capacity might be distributed across the five states that are identified for CSP deployment in Figure 2 . Table A-1 shows an illustrative scenario of water use in each state if wet cooling is used. CSP water use would fall if more water-efficient cooling is employed and if not all the facilities under the 55 GW deployment projection have thermal storage. Alternatively, water use could be higher if 12 hours of thermal storage are employed in some facilities. The scenario used in Table A-1 is based on the NREL projection in Figure 2 ; as more current projections of how much and where CSP may be deployed are released, any estimates of state water use impacts would change. For example, if updated projections show that New Mexico, Texas, and Colorado have more CSP deployment than shown in Figure 2 , the CSP water footprint may be greater in those states than shown in Table A-1 . Similarly, if deployment in Arizona and California is less than shown in Figure 2 , the CSP water footprint in these states would be smaller. That is, if CSP deployment by 2050 in Arizona were to be 9 GW, rather than the 18 in the scenario in Table A-1 , CSP water use would be half of the 3.9%. The illustrative scenario of potential water consumption from the 55 GW is sensitive to the capacity factor used. The total water consumption varies from 483 ka-f/year for a capacity factor of 41% to 541 ka-f/year for a capacity factor of 46%; these capacity factors were the upper and lower ends of the range used in NREL's 55 GW analysis. NREL varied the capacity factor to capture differences in energy production anticipated based on the solar resource at the different locations in the Southwest. Uncertainty about where CSP facilities might be constructed, whether these facilities will perform at the capacity factors currently assumed, and which types of cooling technologies these facilities will use contribute to there being little known about the future water resource impacts of CSP deployment. Illustrative Scenario of County Water Use Under 2050 Deployment Projection The state-level scenarios in Table A-1 do not fully capture what a 55 GW deployment may mean for water use in the counties with the CSP facilities. CRS used Figure 2 to develop a scenario of county-level CSP deployment and its water use for a sample of counties. The results, shown in Table A-2 , illustrate that the local effect will depend on the capacity located in the county, the capacity factor of the facilities, the type of cooling used, and the existing consumptive use in the county. Table A-2 illustrates that, for a number of counties, the potential water demand of wet-cooled CSP could be significant in 2050. The calculations in Table A-2 demonstrate why there is interest in using non-freshwater sources and in adopting more water-efficient cooling techniques, and why regulators in some states, such as California, may be reluctant to permit wet-cooled facilities. All of the counties in Table A-2 were identified to have some susceptibility to water supply constraints. Table A-2 illustrates that, in some counties (e.g., Grant, NM, and Mineral, NV), water use of CSP under the NREL deployment projections may result in a notable change in county water use even if dry cooling is employed. The potential use of water by CSP in moderately constrained counties (e.g., Grant and Luna, NM) and in highly constrained counties (e.g., San Bernardino, CA , and La Paz and Maricopa, AZ) may lead to the adoption of or requirement for freshwater-efficient CSP facilities. | As the 111th Congress considers energy and climate legislation, the land and water impacts of renewable technologies are receiving greater attention. The cumulative impact of installing numerous thermoelectric power plants on the water resources of the Southwest, a region with existing water constraints, raises policy questions. Solar Abundance and Water Constraints Converge. Many Southwest counties are premium locations for siting solar electricity facilities, but have constrained water supplies. One policy question for local, state, and federal decision-makers is whether and how to promote renewable electricity development in the face of competing water demands. A principal renewable energy technology being considered for the Southwest is concentrating solar power (CSP), which uses ground-based arrays of mirrors to concentrate thermal solar energy and convert it into electricity. The steam turbines at CSP facilities are generally cooled using water, in a process known as wet cooling. The potential cumulative impact of CSP in a region with freshwater constraints has raised questions about whether, and how, to invest in large-scale deployment of CSP. Much uncertainty about the water use impacts of CSP remains because its water demand is highly dependent on the location and type of CSP facilities constructed (e.g., whether thermal storage is included and whether wet cooling is used), and because the data for these evolving technologies are preliminary. Water Consumption and Electricity Generation Tradeoffs. In arid and semi-arid regions like the Southwest or in other areas with intense water demand, water supply is an issue for locating any thermoelectric power plant, not only CSP. The trend is toward more freshwater-efficient cooling technologies for CSP and other thermoelectric generation. Why is there concern specifically about the CSP water footprint? CSP facilities using wet cooling can consume more water per unit of electricity generated than traditional fossil fuel facilities with wet cooling. Options exist for reducing the freshwater consumed by CSP and other thermoelectric facilities. Available freshwater-efficient cooling options, however, often reduce the quantity of electricity produced and increase electricity production costs, and generally do not eliminate water resource impacts. The quantity of electricity produced at these facilities, the water intensity per unit of electricity generated, and the local and regional constraints on freshwater will shape the cumulative effect of CSP deployment on southwestern water resources and the long-term sustainability of CSP as a renewable energy technology. Water resource constraints may prompt adoption of more freshwater-efficient technologies or decisions not to site CSP facilities in certain locations. Next Steps. Water constraints do not necessarily preclude CSP in the Southwest, given the alternatives available to reduce the freshwater use at CSP facilities. Moreover, water impacts are one of many factors (e.g., cost, climate and air pollution emissions, land and ocean impacts, wildlife and the environmental impacts) to be weighed when judging the tradeoffs between different energy options. States are responsible for most water planning, management, and allocation decisions and electricity siting decisions. Whether and how the federal government should promote water conservation, efficiency, markets, and regional- and state-level planning and collaboration is a matter of debate. At the same time, federal policies (e.g., energy, agriculture, and tax policy) can affect water-related investments and water use, and operations of federal facilities can affect the water available for allocation. |
In 1891, Congress established the U.S. Courts of Appealsâoften called "circuit courts"âto hear appeals from federal district courts and, later, many agency regulations. The circuit courts remain the last avenue of judicial review for all but the relatively few cases the Supreme Court considers. Establishing the appeals courts organized federal judicial business into geographic divisions (circuits). Today, there are 11 numbered circuit courts, covering federal judicial districts housed in the 50 states and U.S. territories. In addition, the Court of Appeals for the D.C. Circuit has jurisdiction over appeals for the District of Columbia, including many agency appeals. Finally, the Court of Appeals for the Federal Circuit has national jurisdiction over specialized issues such as patents and trademarks. The Ninth Circuit, located in the western United States, is the nation's largest circuit court in geography, population, and appeals filings. ( Figure 1 shows the boundaries of the current Ninth Circuit.) On occasion, the Ninth Circuit has been noted for its controversial rulings. These factors, and others discussed below, surround recent proposals to split the Ninth Circuit into one or more new circuits. Opponents counter that the Ninth Circuit should remain intact, and that proposals to split the circuit threaten judicial independence. This report provides information and analysis on the debate concerning splitting the Ninth Circuit and compares provisions of House and Senate bills introduced during the 109 th Congress that propose to split the circuit. The report also analyzes potential impacts of these proposed reorganizations. The current debate over the Ninth Circuit echoes themes present in the past and generally focuses on six areas: (1) geography and population, (2) judgeships and caseloads, (3) how quickly the circuit disposes of cases, (4) cost of splitting the circuit, (5) en banc procedures, and (6) the circuit's rulings. Analysis suggests that splitting the Ninth Circuit would have different effects on each of these six areas, as is summarized at the end of this report. The debate over whether to split the current Ninth Circuit into two or more circuits has been before Congress for decades. Two major commissions on circuit reorganization have reached different conclusions concerning the Ninth Circuit. In 1973, the "Hruska Commission"âcharged by Congress with evaluating the federal circuit courtsârecommended that the Ninth Circuit be divided in two. In 1998, the "White Commission"âwhich Congress tasked with examining the Ninth Circuit in particularârecommended against dividing the Ninth Circuit (stating that doing so would be "impractical and is unnecessary"), but also proposed creating three somewhat autonomous divisions within the circuit to improve court management. Congress chose not to adopt the Hruska or White Commissions' recommendations to reorganize the Ninth Circuit. Since the mid-1990s, several bills have been introduced that would split the Ninth Circuit. During the 108 th Congress, Representative Michael Simpson sponsored House Amendment 780 to S. 878 , which would have split the Ninth Circuit into three circuits. The House passed S. 878 with the amendment (by a vote of 205-194) in October 2004, but the measure did not win Senate approval. In the 109 th Congress, seven bills have been introduced in the House and Senate that, in whole or in part, propose to split the Ninth Circuit into two or more circuits. The Appendix (at the end of this report) provides an overview of each bill's major provisions relating to a Ninth Circuit split. Late in 2005, the Federal Judgeship and Administrative Efficiency Act of 2005 ( H.R. 4093 , sponsored by Representative James Sensenbrenner, who chairs the House Judiciary Committee) became the focus of legislative and media attention when language from the bill was inserted into the Deficit Reduction Act of 2005 ( H.R. 4241 ), which the House passed on November 18, 2005. During conference negotiations, language splitting the Ninth Circuit into proposed new Ninth and Twelfth Circuits was dropped from the budget reconciliation bill. In the Senate, three bills ( S. 1296 , S. 1301 , and S. 1845 ) proposing to split the Ninth Circuit were the subject of an October 2005 Subcommittee on Administrative Oversight and the Courts hearing. H.R. 4093 in the House and S. 1845 in the Senate appeared to be the bills receiving the most legislative and media attention during the first session. Most recently in the House, on February 8, 2006, H.R. 4093 was reported by the Judiciary Committee and placed on the Union Calendar. On the Senate side, S. 1845 was originally scheduled for a June 29 Judiciary Committee markup. That markup was postponed after Chairman Arlen Specter, in response to a request from Senator Dianne Feinstein, agreed to schedule a future hearing on S. 1845 . The full Senate Judiciary Committee held a September 20, 2006, hearing on S. 1845 . The witnesses and contents of that hearing were largely reminiscent of other recent hearings on the topic. The status of that debate is discussed throughout this report. The major difference among the seven bills introduced during the 109 th Congress to split the Ninth Circuit concerns whether the current Ninth Circuit would be divided into two or three new circuits. Four of the seven billsâ H.R. 3125 (Representative Michael Simpson), H.R. 4093  (Representative James Sensenbrenner), S. 1296 (Senator Lisa Murkowski), and S. 1845 (Senator John Ensign)âwould split the Ninth Circuit into two circuits: the new Ninth and the Twelfth (all bills specify the same geographic boundaries), as shown in Figure 2 . Under these bills, the new Ninth Circuit would include California, Guam, Hawaii, and the Northern Mariana Islands. The Twelfth Circuit would include Alaska, Arizona, Idaho, Montana, Nevada, Oregon, and Washington. The four bills also specify where reorganized courts would meet and, in some cases, be headquartered. Currently, the Ninth Circuit is headquartered (including the offices of the clerk and circuit executive) in San Francisco and also meets in Los Angeles, Portland, and Seattle. Under H.R. 4093 and S. 1845 , the new Ninth Circuit would meet in Honolulu, Pasadena, and San Francisco; the Twelfth would meet in Las Vegas, Missoula, Phoenix, Portland, and Seattle. Two other bills ( H.R. 3125 and S. 1296 ) propose slightly different arrangements. Under S. 1296 , the New Ninth Circuit would meet in Honolulu and San Francisco; a Twelfth Circuit would meet in Phoenix, Portland, and Missoula. H.R. 3125 specifies that a new Ninth Circuit meet in Honolulu, Pasadena, and San Francisco (like H.R. 4093 and S. 1845 ); the Twelfth Circuit would meet in Phoenix and Seattle. None of the bills requires that a new Ninth Circuit's headquarters would remain in San Francisco, although it certainly could. S. 1845 and S. 1296 specify that the Twelfth Circuit headquarters be located in Phoenix. None of the other bills proposing a two-way split specify headquarters locations for a Twelfth Circuit. A fifth billâ H.R. 212 (Representative Michael Simpson)âalso proposes a two-way split, but with different boundaries. (See Figure 3 .) H.R. 212 would create a new Ninth Circuit including Arizona, California, and Nevada. The Twelfth Circuit would include Alaska, Guam, Hawaii, Idaho, Montana, the Northern Mariana Islands, Oregon, and Washington. Under H.R. 212 , the new Ninth Circuit would meet in Pasadena, Phoenix, and San Francisco; the Twelfth Circuit would meet in Portland and Seattle. The bill does not specify headquarters locations. Two other bills introduced in the 109 th Congress would take an alternate approach. Under H.R. 211 (Representative Michael Simpson), and S. 1301 (Senator John Ensign), the current Ninth Circuit would be divided into three circuits instead of two. (See Figure 4 .) Both bills would establish a new Ninth Circuit including California, Hawaii, Guam, and the Northern Mariana Islands. The Twelfth Circuit would include Arizona, Idaho, Montana, and Nevada. The Thirteenth Circuit would include Alaska, Oregon, and Washington. Under these bills, the new Ninth Circuit would meet in Los Angeles and San Francisco. The Twelfth and Thirteenth Circuits would meet in Las Vegas and Phoenix and Portland and Seattle, respectively. Neither bill specifies headquarters locations. Proposals to split the Ninth Circuit into three appellate courts were also introduced during previous Congresses. During the 109 th Congress, the debate over splitting the circuit has generally focused on splitting the current Ninth Circuit into two circuits. Although Senator Ensign sponsored S. 1301 , which proposes a three-way split, Senators Murkowski ( S. 1845 ) and Ensign have also stated their support for S. 1845 , which proposes a two-way split. There was, however, some general discussion of a three-way split at the September 20, 2006, Senate Judiciary Committee hearing. The debate over splitting the Ninth Circuit generally focuses on six areas: (1) geography and population, (2) judgeships and caseloads, (3) how quickly the circuit disposes of cases, (4) cost of splitting the circuit, (5) en banc procedures, and (6) the circuit's rulings. Proponents of splitting the Ninth Circuit argue that the court is too big and covers too many people to operate effectively. Opponents of a split generally respond that although the Ninth Circuit is big, it still delivers effective justice and provides legal continuity for the western United States. Opponents of a split also often assert that dividing the court is a backdoor method of eliminating the current Ninth Circuit due to its reputation as the nation's most liberal appellate court. Proponents of a split deny that the Ninth Circuit is targeted for division based on its sometimes controversial rulings, saying instead that effective judicial administration is the prime concern. Opponents of a split also say that the Ninth Circuit handles its large number of appeals well, and that professional case management helps facilitate circuit operations. For example, former Ninth Circuit Chief Judge James R. Browning has argued that the Ninth Circuit's innovations, such as computerized docketing and long-range planning, serve as models for other courts. Those against a split also contend that duplicating staff and administrative functions in a reorganized circuit would be costly and unnecessary. Opponents warn that existing Ninth Circuit staff expertiseâwhich they contend enhances the current circuit's functioningâcould not necessarily be replicated in proposed Twelfth or Thirteenth Circuits. Those supporting a split counter that the Ninth Circuit is overworked. They contend that reducing the circuit's caseload by dividing the circuit falls within Congress's responsibility to manage the federal courts, and that failing to do so jeopardizes timely access to justice. Proponents fear that judges are too busy to effectively manage the court and say that dividing the circuit and adding new judgeships would allow judges to follow cases more closely. Finally, those who support a split maintain that the Ninth Circuit's administrative innovations are ultimately a short-term solution to a long-term problem. The Ninth Circuit's efficiency is often discussed in the debate over whether Congress should split the circuit. Although "efficiency" is commonly cited on both sides of the debate, measurements for the term are rarely defined. Efficiency could be measured in a variety of ways, with varying results. Because there is no universally accepted definition of "efficiency" in the current debate over splitting the Ninth Circuit, this report discusses various Ninth Circuit outputs, such as caseloads and how quickly the circuit disposes of cases, but does not address the Ninth Circuit's efficiency per se. The Ninth Circuit's geography and population are controversial for two reasons: the large area the circuit encompasses, and a feeling among some observers that cases originating in California dominate the court's docket. In both land area and population, the Ninth Circuit surpasses all other federal circuits. In 2004, the area covered by the Ninth Circuit included more than 58 million people, almost 36 million of whom lived in California. Currently, the Sixth Circuit (Kentucky, Michigan, Ohio, and Tennessee) is the second-most-populous circuit, with a 2004 estimated population of more than 31 million. Proponents of a split contend that decreasing the current Ninth Circuit's population could improve judicial administration and suggest that rapid population growth in the West will exacerbate the Ninth Circuit's workload challenges. Those opposing a split contend that the Ninth Circuit's large geography is essential in maintaining one legal voice for the western United States. Senator Dianne Feinstein, a member of the Judiciary Committee who opposes a split, stated during an October 2005 committee hearing that: [t]he uniformity of law in the West is a key advantage of the 9 th Circuit, providing consistency among western states that share many common concerns. For example, splitting the circuit could result in one interpretation of a law governing trade with Mexico in California and a different one in Arizona, or in the application of environmental regulations one way on the California side of Lake Tahoe, and another way on the Nevada side. By contrast, Ninth Circuit Judge Diarmuid O'Scannlain, who supports a split, testified that the need for a unified legal voice for the West and Pacific Coast is "a red herring." He also argued that the Atlantic Coast has "five separate circuits," and that "[t]here is no corresponding 'Law of the South' nor 'Law of the East.'" For the 11 numbered circuits and the D.C. Circuit, there are currently 167 authorized judgeships, which are filled with full-time, active judges. In many circuit courts, temporary judges and senior judges also help handle the judiciary's business. Temporary judgeships are filled by additional appointments to the bench, which temporarily increase the number of judgeships for a particular circuit or district. The total number of judgeships authorized for the district or circuit reverts back to the number of permanently authorized judgeships at a future point specified by statute, in this case, when the next two vacancies among authorized Ninth Circuit judges occur at least 10 years after two temporary judges are appointed (see the Appendix ). Senior judges are those who have taken "senior status," a specialized form of judicial retirement. Although many senior judges carry large caseloads and contribute significantly to the court's workforce, specific duties and volume of work for senior judges can vary substantially. Therefore, senior judges are not included in caseload estimates presented later in this report. As shown in Table 1 , the Ninth Circuit has 28 authorized circuit judgeships, although two seats on the court are currently vacant. The other circuits have between six (First Circuit) and 17 (Fifth Circuit) authorized judgeships. In addition to the Ninth Circuit's 26 filled, authorized circuit judgeships, 23 senior judges are assigned to the circuit. In total, 49 judges currently serve the Ninth Circuit. In FY2005, the Ninth Circuit led the nation in appellate filings, with 16,037 of 68,473 nationwide, as shown in Table 2 . By contrast, the other circuits' appeals filings in FY2005 ranged from 1,912 for the First Circuit, to 9,052 for the Fifth Circuit. As Table 2 shows, data from the Administrative Office of the United States Courts (AO) indicate that the Ninth Circuit was responsible for 21-27% of the nation's appellate workload (in appeals filed, terminated, and pending) in FY2005. Table 2 also shows that the Ninth Circuit's appeals filings increased substantially (75.3%) between FY2000 and FY2005, from 9,147 to 16,037. During the same period, all other circuits' filings increased by a comparatively small 15.1%, from 45,550 to 52,436. As a result, the percentage of all filings assumed by the Ninth Circuit has increased in recent years. The same is generally true with regard to appeals terminated and appeals pending. The most recently available AO data suggest that the Ninth Circuit continues to experience a large workload. For the one-year period ending March 31, 2006, 15,953 appeals were filed in the Ninth Circuit; 13,590 appeals were terminated; and 17,262 appeals were pending. Those figures all represented increases over the previous year. As Figure 5 shows, the appellate courts' FY2005 caseloadâmeasured in this report as filed appeals per authorized judgeshipâfalls into two groups: those circuits with fewer than 400 appeals filed per judge, and those with more than 500 appeals filed per judge. Four circuits have caseloads in the latter group. In FY2005, the Eleventh Circuit had the highest caseload in the nation: 644.3 filed appeals per authorized judgeship. The Ninth Circuit's caseload was the second-highest, with 572.8 appeals filed per authorized judgeship. Two other circuit courts trailed slightly behind the Ninth Circuit: the Second Circuit (541.2 appeals filed per authorized judgeship) and the Fifth Circuit (532.5 appeals filed per authorized judgeship). By contrast, eight other circuits' caseloads ranged from 114.9 appeals filed per authorized judgeship in the D.C. Circuit, to 353.8 cases per authorized judgeship for the Fourth Circuit. As is stated above, the Ninth Circuit currently has 28 authorized judgeships. In 2005 (the same year all the bills proposing to split the Ninth Circuit were introduced in the 109 th Congress), the Judicial Conferenceâthe judiciary's primary internal policymaking bodyârecommended that the Ninth Circuit receive five additional permanent judgeships (for a total of 33 authorized judgeships) and two temporary judgeships. As the Appendix shows, all the bills introduced during the 109 th Congress that propose to split the Ninth Circuit follow those recommendations. The bills differ in how those judgeships would be allocated to a new Ninth Circuit versus proposed Twelfth or Thirteenth Circuits after a split. Of the 33 judgeships that would be authorized for the current Ninth Circuit, most bills that authorize a two-way split would place 19 of those judgeships in a new Ninth Circuit, and 14 in a Twelfth Circuit. The two temporary judgeships would go to the new Ninth Circuit and would generally be housed in California. Under a three-way split proposed by H.R. 211 and S. 1301 , the new Ninth Circuit would receive 19 authorized judgeships, compared with eight and six authorized judgeships, respectively, for the Twelfth and Thirteenth Circuits. Under all seven bills, senior judges would be allowed to choose the circuit to which they would be assigned. To gauge a reorganized Ninth Circuit's caseload, a representative from the AO reports that, in October 2005, the office developed an approximation of how appeals would have been divided between proposed new Ninth and Twelfth Circuits for the year ending June 30, 2005. During that one-year period, the Ninth Circuit, as currently structured, received a total of 15,717 filed appeals. Of those, the AO estimated that a total of 11,275 appeals from district courts and federal agencies were filed in what would be the new Ninth Circuit (under H.R. 4093 and S. 1845 , with the same boundaries established in S. 1296 and H.R. 3125 ) compared with 4,442 cases filed in what would be the Twelfth Circuit. This suggests that a new Ninth would have carried 71.7% of cases of the current Ninth Circuit, compared with 28.3% for a new Twelfth Circuit. The following analysis extends the AO's estimates of how appeals would have been divided among circuits for the year ending June 30, 2005âthe latest available AO projectionsâto all seven bills introduced in the 109 th Congress that would split the Ninth Circuit. As Figure 6 shows, the seven bills introduced in the 109 th Congress to split the Ninth Circuit would produce somewhat different caseload results, both compared with caseloads for the current Ninth Circuit, and for a new Ninth Circuit compared with proposed Twelfth or Thirteenth Circuits. Five of the bills produce a new Ninth Circuit, for the year ending June 30, 2005, that is each somewhat higher (based on authorized judgeships) than the caseload of the current Ninth Circuit during the same period. However, when the two temporary judgeships the bills designate for a new Ninth Circuit are included, estimated caseloads fall below current levels. Specifically, as Figure 6 shows, the caseload in the current Ninth Circuit is 561.3 appeals filed per authorized judge, whereas H.R. 4093 , S. 1296 , H.R. 211 , and S. 1301 âall of which propose the same boundaries for a new Ninth Circuitâwould produce an estimated 593.4 appeals for 19 authorized judges. S. 1845 , with the same boundaries for a new Ninth Circuit but with 20 authorized judgeships, would produce an estimated caseload of 563.8 appeals filed per judge in the new circuitâslightly higher than the current Ninth Circuit's caseload. On the other hand, one bill ( H.R. 212 ) is estimated to reduce a new Ninth Circuit's caseload somewhat (to 542 cases per authorized judge ) compared with the current Ninth Circuit's caseload for the same period. Another bill ( H.R. 3125 ) would have reduced the Ninth Circuit's caseload substantially, producing an estimated caseload for a new Ninth Circuit of 469.8 appeals filed per authorized judge for the year ending June 30, 2005. This caseload would be less than the estimated caseload for the Twelfth Circuit. By contrast, the data suggest that six of the seven bills (all except H.R. 3125 ) would yield higher caseloads for the new Ninth Circuit than the projected caseloads for proposed Twelfth or Thirteenth Circuits. Caseload estimates from other sources, conducted at other times or employing different methodologies, can produce somewhat different results. In his September 20, 2006, Senate testimony, Ninth Circuit Judge Sidney R. Thomas, who opposes a split, testified "using calendar 2005 figures" that under S. 1845 , caseload for judges in a new Ninth Circuit would have been 526 cases per judgeship, compared with 316 cases per judgeship for the Twelfth Circuit. Judge Thomas also suggested that "allocation of cases per judgeship does not tell the real story" because new Ninth Circuit judgeships could initially be unfilled, dramatically increasing caseloads for judges who are serving immediately after a split. By contrast, at the same hearing, relying on data for the year ending March 31, 2006, Chief District Judge John Roll, who supports a split, testified that under a two-way split proposed in S. 1845 , a new Ninth Circuit would have yielded 518 cases per active judgeship, compared with 351 cases per active judgeship for a Twelfth Circuit. Ninth Circuit Judge Richard Tallman, who supports a split, found that a new Ninth Circuit would yield 495 cases per active judge, compared with 341 for those active judges in a Twelfth Circuit. The quantitative data presented throughout this report provide information about how many cases each circuitâunder current proposals and assuming that all judgeships are filledâwould carry. Context (e.g., complexity, types of cases courts handle, and additional vacancies) could also play a role in caseload considerations. As the following section explains, immigration cases are particularly prominent in the Ninth Circuit. Caseload and Immigration Cases . Opponents of a split say that the Ninth Circuit's backlog of cases has been temporarily increased by the large number of administrative petitions from Board of Immigration Appeals (BIA) cases, slowing the court's overall work. According to the AO, as of October 2005, 41% of Ninth Circuit filings were BIA appeals, and 88% of those were filed in California. In 2005, Ninth Circuit Judge Sidney R. Thomas, who opposes a split, testified that from 2001 to 2005 (through June 30), BIA appeals for the circuit had increased 570%, but added that, "while the courts can expect continued volume [of BIA appeals] for the next several years, the volume of immigration cases should decrease as the BIA becomes current in its case processing." Judge Thomas also said that centralized circuit staff resolve "well over 80 percent" of immigration petitions before they reach judges, and added that although many BIA appeals take time to resolve, much of the delay is due to what he sees as slow government filings, not the Ninth Circuit itself. On a related note, during the spring of 2006, Congress considered proposals to transfer immigration appeals from the regional circuit courts to the Court of Appeals for the Federal Circuit or another entity. On April 3, 2006, the Senate Judiciary Committee held hearings on immigration litigation reform, which briefly addressed a proposed Ninth Circuit split. In response to a question from Senator Jeff Sessions, Ninth Circuit district judge John M. Roll stated his opinion that centralizing immigration appeals outside the regional circuits would not, on its own, alleviate the need to split the Ninth Circuit. Writing in The National Law Journal before the hearing, Judge Roll called for centralizing immigration appeals and splitting the Ninth Circuit to reduce the circuit's caseload. According to Judge Roll, if S. 1845 or H.R. 4093 were adopted, and all BIA appeals were transferred to the Federal Circuit, "the new 9 th Circuit would keep 60% of the current 9 th Circuit caseload and have 61% of the judges allotted to the new 9 th and 12 th circuits. The new 12 th Circuit would have 40% of the current caseload and 39% of the allotted judges." The Judicial Conference reportedly opposed centralizing immigration appeals, and some observers opposed to centralizing immigration litigation reportedly believed that the move, in part, was an attempt to reduce the Ninth Circuit's influence on immigration law. In FY2005, the Ninth Circuit disposed of cases in a median of 16.1 months after filing, ranking it last among the 12 circuits (see Table 3 ). Those favoring a split contend that this length of time is another indicator that the Ninth Circuit is too big and has too much work. Opponents of a split argue that the current Ninth Circuit functions well given its heavy caseload, and that its judges and large, experienced staff are essential in doing so. Potential mitigating factors, such as the type or complexity of cases filed, or the contention by many Ninth Circuit judges that the court reaches decisions quickly once judges hear cases, could also affect caseload considerations. Writing jointly in the March 2006 edition of Engage (a journal published by the Federalist Society), more than 30 Ninth Circuit judges argued that, although backlogs delay consideration of cases in the Ninth Circuit, "once the cases are submitted to the judges, we are the second- fastest among the circuits in disposing of them." Opponents of a split say that administrative costs associated with splitting the Ninth Circuit and establishing new headquarters, staff support, and related administrative expenses in the proposed Twelfth Circuit (or Twelfth and Thirteenth Circuits) are unnecessary and would strain limited financial resources. Those who favor a split generally concede that there will be short-term costs associated with dividing the circuit, but suggest that long-term savings and improved judicial administration will outweigh those costs. Cost estimates for splitting the Ninth Circuit vary depending on the source and level of detail. In October 2005, the AO estimated that if a Twelfth Circuit's headquarters were located in Phoenix (as specified in S. 1296 and S. 1845 ), the startup cost would be more than $94 million, and annual recurring costs would be more than $10 million. If the Twelfth's headquarters were in Seattle (another site discussed as a possible headquarters), the AO estimated that the expense would be substantially lessâmore than $12 million in startup costs, with $7 million in annual recurring costs. The Phoenix-versus-Seattle estimates reportedly vary largely because of costs associated with constructing a new headquarters facility versus renovating an existing one. In another estimate, the Congressional Budget Office (CBO) stated that establishing a headquarters for a Twelfth Circuit "could range from about $20 million to over $80 million over the 2006-2010 period," depending on the location of the new headquarters and whether an existing facility would be renovated or a new facility constructed. CBO estimated that staff expenses for the Twelfth Circuit, such as relocation costs, severance pay for staff who did not relocate, and equipment, could require "$6 million in fiscal year 2006 and $28 million over the 2006-2010 period." Research conducted for this report reveals no publicly available cost estimates for a Thirteenth Circuit. Proponents of a split generally argue that the Ninth Circuit is too large to hold effective en banc hearings. En banc hearings in other circuits typically involve all a court's active judges, and are normally reserved for cases in which the full court wishes to reconsider the opinion of a three-judge appellate panel. Unlike other circuits, though, the Ninth Circuit employs a "limited en banc " procedure, which, until January 2006, allowed 11 judges (rather than the entire court) to serve as a full en banc panel. Proponents of a split contend the Ninth Circuit's reliance on limited en banc procedures allows a minority of judges to speak for the entire court. According to Ninth Circuit judge Andrew Kleinfeld (testifying in October 2005), who supports a split, "When the full court purports to speak, it doesn't.... A majority of an en banc panelâsix judgesâis not even one-fourth of the full court when fully staffed." Although noting that the limited en banc procedure "has a number of virtues," Ninth Circuit Judge Pamela Ann Rymer wrote in March 2006 that "[T]here is a systematic flaw in the limited en banc concept that is not without consequence. The limited en banc is premised at least in part on the notion that some number of judges smaller than the whole can represent the entire court. However, the premise is in inapposite to the judiciary." Some supporting a split also contend that limited en banc  decisions might have changed if different judges had been assigned to en banc panels, therefore potentially producing inconsistent circuit rulings. Ninth Circuit Chief Judge Mary M. Schroeder announced on October 1, 2005, that beginning on January 1, 2006, the circuit would increase the size of en banc panels from 11 to 15 judges. According to Chief Judge Schroeder, although she has been satisfied with the 11-judge panels, the decision to increase panel size was "intended to respond to criticism that we should have a majority of our judges sit on each en banc [panel]." According to a court staff member, the first enlarged en banc panels began hearing cases in March 2006. Opponents of a split contend that the en banc issue is not a major concern because so few of the court's cases are appealed for rehearing en banc . According to Judge Sidney R. Thomas, who serves as the Ninth Circuit's en banc coordinator and opposes a split, "Out of 5,783 cases decided in the Ninth Circuit between September 2003 and September 2004, only 13 (or .2%) were reheard en banc. This experience is consistent with the practices of other circuits." Judge Thomas challenged claims that the views of en banc panels are unrepresentative of the entire circuit, saying that "very few decisions made by the en banc panels involved close votes," and that the circuit's Evaluation Committee has been satisfied that en banc opinions are representative of the entire circuit. Judge Thomas also stated that, although en banc panels currently do not include the entire court, voting on whether a matter should be granted an en banc hearing is still open to all active judges on the circuit, and that any active or senior judge may request an en banc hearing. Some of the Ninth Circuit's rulings have, on occasion, been controversial. Recently, the circuit's rulings on social issues (e.g., holding in 2002 that the phrase "under God" in the Pledge of Allegiance violated the Constitution) have reportedly fueled opposition to the circuit. Some proponents of a split also say that some Ninth Circuit rulings do not represent the conservative political culture of much of the western United States, reflecting what some observers perceive as a division between California and much of the rest of the circuit. Proponents of splitting the Ninth Circuit also contend that the Supreme Court reverses the Ninth Circuit, often unanimously, more frequently than any other circuit court. For the 2004 term (which ended in 2005), of 43 Supreme Court reversals for the circuit courts, 12 reversed the Ninth Circuitâmore than any other circuit. Opponents of a split respond that only a small fraction of the circuit's rulings are granted review by the Supreme Court, and that Ninth Circuit reversals are not dramatically different than reversal rates for other circuits in recent years. Similarly, some opposed to splitting the Ninth Circuit also suggest that efforts to divide the circuit threaten judicial independence. Supporters of splitting the circuit deny that position. For example, Ninth Circuit Judge Diarmuid O'Scannlain testified in October 2005 that "the case for the split stands on the grounds of effective judicial administration, supported by the statistics which show the ongoing caseload explosion." At the September 2006 Senate Judiciary Committee hearing, former Senator and California Governor Pete Wilson suggested that a split would not necessarily create a conservative Twelfth Circuit any time in the near future, since the new circuit would presumably adopt precedents of the current Ninth Circuit. According to Governor Wilson, "[A]ny change will be so gradual and time-consuming as to not likely be noticed much in our own lifetimes." Governor Wilson also noted his continued opposition to splitting the Ninth Circuit. Although a few Ninth Circuit judges vocally support a split, the majority of the court's active judges reportedly do not. Since late 2005, however, public statements from some judges suggested possible divisions on the split issue between most active circuit judges on one hand, and some retired circuit judges and district judges on the other. According to Ninth Circuit Chief Judge Mary Schroeder, in April 2004, Ninth Circuit judges held a retreat to discuss splitting the circuit, followed by "a mail ballot" to the judges on the court. Judges were asked to select from three options: "(1) oppose a division of the Ninth Circuit; or (2) favor a division of the Ninth Circuit; or (3) abstain from voting." In a May 5, 2004, letter to members of the Senate Judiciary Committee, Judge Schroeder reported the results: The Court currently has a total of 47 judges serving on the court, 26 active judges and 21 senior judges, plus two vacancies. The vote concluded on April 30, 2004. Of the 47 judges, 30 judges voted in opposition to circuit division, nine voted in favor of circuit division and eight judges abstained from voting. Of the 26 active judges, only four active judges favor division, fifteen active judges oppose division, and six active judges abstained from voting. Of the 21 senior judges, fifteen senior judges oppose circuit division, five senior judges favor division, and two senior judges abstained. As was noted previously, more than 30 Ninth Circuit judges wrote a joint Engage article in March 2006 arguing against a split. Chief Judge Schroeder also reiterated many of her objections to a split during remarks at the July 2006 Ninth Circuit Judicial Conferenceâa gathering of the circuit's judges, court employees, agency representatives, and attorneys. According to Judge Schroeder, "If the United States Senate Judiciary Committee is seriously considering the subject [of a split], we deserve a full, fair and adequately noticed opportunity to explain why so many of us think it is a bad idea, to look at its real costs, the imbalance in caseload it would produce, as well as its implications for law enforcement at the border." Ninth Circuit judge Carlos Bea has also reportedly raised concerns about a split shifting all sitting Latino judges to a new Ninth Circuit. According to an Arizona Republic  columnist who wrote in October 2006 that Judge Bea contacted him about the split, the judge was concerned "that Arizona would no longer have any Latino judges on its new court. All six Latinos on the current court would probably end up in the reconfigured 9 th Circuit." If the President chose to do so, factors such as race, ethnicity, or gender could be used in filling the additional five seats most bills propose for a new Ninth Circuit, or for future Twelfth Circuit appointments. Those against a split say that opposition from the majority of the circuit's judges is one of the most compelling arguments in favor of keeping the circuit intact. In addition, several state and local bar associations housed in the Ninth Circuit reportedly oppose a split. The same is true for a group of more than 350 law professors, a coalition of environmental organizations, coordinated by Earthjustice, and other groups. (By contrast, the U.S. Chamber of Commerce is supporting S. 1845 , which would split the circuit.) In October 2005, the U.S. Judicial Conference "agreed not to take a position" on bills proposing to split the Ninth, but also stated that "consideration of splitting the Ninth Circuit should be independently based on the circuit split issue alone and not driven by possible linkage of that issue to a judgeship bill," an apparent reference to the judgeship provisions contained in H.R. 4093 . Some who support a split suggest that district judges within the Ninth Circuit would not necessarily oppose a split. District Judge John M. Roll, who maintains chambers in Arizona, testified in 2005 that "Notwithstanding statements to the contrary, I am aware of no overwhelming opposition to a circuit split among Ninth Circuit district judges.... My perception is that there is much support for a split of the circuit among district judges, particularly among the judges of the proposed new Twelfth Circuit." On June 29, 2006, a group of 24 Ninth Circuit judgesâmany of whom are retired circuit judges or active district judgesâwrote to Senate Judiciary Committee chairman Arlen Specter urging hearings and "ultimate passage" of S. 1845 . On a related note, at the September 20, 2006, Senate Judiciary Committee hearing, Rachel L. Brand, Assistant Attorney General for Legal Policy, testified that the U.S. Justice Department "supports legislation providing for additional federal judgeships and for a split of the [Ninth Circuit]." According to Brand, DOJ supports a split because of concerns regarding "the efficient administration of justice generally" and sometimes long delays in cases in which the federal government is a party. During hearing questioning, Senator Dianne Feinstein noted that the Justice Department has previously opposed splitting the circuit, and requested additional information about DOJ's current position. Congress has, thus far, chosen to leave the Ninth Circuit intact. The impact of splitting the Ninth Circuit would likely vary depending on the final boundaries of a split and related provisions, such as changes in the number of authorized judges, or other day-to-day realities encountered by judges, staff, and litigants operating in a reorganized Ninth Circuit, that cannot be anticipated. As noted previously, the debate over splitting the Ninth Circuit generally focuses on six areas: (1) geography and population, (2) judgeships and caseloads, (3) how quickly the circuit disposes of cases, (4) cost of splitting the circuit, (5) en banc procedures, and (6) the circuit's rulings. Analysis suggests that splitting the Ninth Circuit would have different effects on each of these six areas. History suggests that the Ninth Circuit's population is likely to continue increasing. All seven bills introduced during the 109 th Congress would reduce the number of states, geographic area, and population in proposed new Ninth, Twelfth, or Thirteenth Circuits compared with the current Ninth Circuit. As explained above, six of seven bills introduced in the 109 th Congress (all except H.R. 212 ) would create a new Ninth Circuit including California, Guam, Hawaii, and the Northern Mariana Islands, which, in 2004, included an estimated 37 million people. Currently, the Sixth Circuit (Kentucky, Michigan, Ohio, and Tennessee) is the second-most-populous circuit, with a 2004 estimated population of more than 31 million. By contrast, the current Ninth Circuit includes approximately 58 million people. Therefore, creating a new Ninth Circuit that included only California, Guam, Hawaii, and the Northern Mariana Islands would remove approximately 20 million people in the Mountain West and Pacific Northwest from the current Ninth Circuit and place them in proposed Twelfth or Thirteenth Circuits. A new Ninth Circuit would still be the nation's most populous circuit, although its population would be closer to other circuits than is the current Ninth Circuit's population. A new Ninth Circuit including only California, Guam, Hawaii, and the Northern Mariana Islands would be the only circuit including just two states (California and Hawaii), although it would house more total jurisdictions (states and territories) than some other circuits. Those who oppose splitting the circuit generally believe that a caseload disparity between reorganized circuits would unfairly increase work for judges remaining in a new Ninth Circuit, while creating smaller caseloads for judges in proposed Twelfth or Thirteenth Circuits. Proponents of a split point out that California would receive additional permanent and temporary judgeships to aid the new Ninth's caseload, and contend that states located in the rest of the circuit should not be bogged down by the large number of cases originating in California. Analysis of the latest available estimates (for the year ending June 30, 2005) suggests that under six of seven bills introduced during the 109 th Congress, caseloads (i.e., filed appeals per authorized judgeship) in proposed Twelfth or Thirteenth Circuits would have been lower than caseloads in a new Ninth Circuit (as shown in Figure 6 ), although two bills ( H.R. 212 and H.R. 3125 ) would have also produced lower caseload estimates (based on authorized judgeships) for a new Ninth Circuit than for the current Ninth Circuit. If two temporary judgeships designated for a new Ninth Circuit are included, all seven bills would have yielded caseload estimates below current levels. One bill ( H.R. 3125 ) would have produced a higher estimated caseload in a Twelfth Circuit than in a new Ninth Circuit. Unlike the other six bills introduced during the 109 th Congress to split the Ninth Circuit, H.R. 3125 would provide rough caseload parity between proposed new Ninth and Twelfth Circuits. Qualitative factors, such as the complexity of cases circuits handle, types of cases, and other factors, could also affect caseloads and, as the next section discusses, how quickly circuits dispose of cases. Although the Ninth Circuit took a median of more than 16 months to dispose of cases in FY2005, it also faced the second-highest per-judge caseload in the nation. By contrast, the Sixth Circuit in FY2005 carried a comparatively small 325.7 filed appeals for each of its 16 authorized judges, but took almost as long as the Ninth Circuitâa median of 14.5 monthsâto dispose of those cases. At the same time, the Eleventh and Fifth Circuitsâcreated in 1981 from the old Fifth Circuitâboth had high caseloads in FY2005, but disposed of those cases faster than virtually any other circuit court (see Table 3 ). These findings suggest that there is not necessarily a uniform relationship between the number of filed appeals per authorized judgeship and the speed with which those cases are resolved. It is unclear whether a new Ninth, Twelfth, or Thirteenth Circuit would necessarily dispose of cases faster than the current Ninth Circuit. As explained previously, depending on source and level of detail, estimated costs for splitting the Ninth Circuit vary widely. AO and CBO cost estimates suggest that start-up costs for a split could range between $20 million and $94 million, plus annual recurring costs and costs related to additional judgeships. Those estimates also suggest that renovating existing courthouses, rather than constructing new facilities, could be a way to limit costs. In addition to facilities, administrative expenses are likely to influence cost estimates. None of the legislation currently before Congress proposing to split the Ninth Circuit would alter en banc procedures. Under P.L. 95-486 , any circuit with more than 15 active judges may devise rules to sit en banc without all the circuit's active judges. A Twelfth Circuit (and Thirteenth Circuit under H.R. 211 and S. 1301 ) would presumably sit en banc with all authorized judges because none of the bills splitting the Ninth Circuit authorizes more than 14 judges for the Twelfth Circuit (or Thirteenth Circuit). By contrast, all bills introduced during the 109 th Congress that would split the Ninth Circuit authorize at least 19 judges for a new Ninth Circuit, meaning that a new Ninth would still be allowed to employ a limited en banc procedure if the court chose to do so. If Congress wanted to curtail the use of limited en banc procedures, or require minimum numbers of judges to sit on en banc panels, legislative action would be necessary. On March 2, 2005, Representative Michael Simpson introduced H.R. 1064 , which would prohibit the Ninth Circuit from employing the limited en banc procedure. The bill was referred to committee on April 4, 2005, but has not been acted upon since. The degree to which the current Ninth Circuit's rulings motivate calls for a split is hotly debated. Those opposed to a split generally contend that attempts to divide the circuit threaten judicial independence by separating conservative areas of the Mountain West or Pacific Northwest into their own circuit or circuits. Supporters of a split reject that argument, saying that their efforts to split the circuit are based on administrative concerns. If the current Ninth Circuit were split, three-judge appellate panels, whose members would be drawn from around the circuit, would still hear most cases (all except those heard en banc ). If the circuit were split before January 2009, President George W. Bush would be authorized to make nominations for the additional judgeships each bill specifies, although the appointing president is not necessarily an indication of how particular judges might rule. Some observers caution that a new Ninth would be more "liberal" than the current court allegedly is, because there would be little geographic diversity in a reorganized Ninth Circuit compared with the current Ninth Circuit. Overall, it is unclear how splitting the Ninth Circuit would impact rulings in a new Ninth, Twelfth, or Thirteenth Circuits. Proposals to split the Ninth Circuit introduced during the 109 th Congress are the latest in a decades-long debate over the circuit's future. Recent events suggest that the debate continues today, making the future of current legislative proposals uncertain. During the first session of the 109 th Congress, language splitting the circuit (incorporated into H.R. 4241 from H.R. 4093 ) passed the House as part of the budget reconciliation process, but was dropped in the Senate. Senate Judiciary Committee Chairman Arlen Specter and Ranking Member Patrick Leahy objected to first-session attempts to split the circuit as part of the budget reconciliation process. Senator Dianne Feinstein also stated prior to December 2005 conference negotiations on the Deficit Reduction Actâwhich, as passed by the House, would have split the Ninth Circuitâthat she would object to the language by invoking the Senate's "Byrd rule," which can be used to strike "extraneous matter in reconciliation matters." During the second session, there has been no official legislative action on H.R. 4093 in the House beyond reporting the bill from committee, and placing it on the Union Calendar. The FY2007 budget resolution agreed to by the House ( H.Con.Res. 376 ) reportedly "assumes the 9 th U.S. Circuit Court of Appeals will be reorganized and additional judgeships createdâreviving a battle from last year's budget." The Senate Judiciary Committee held a hearing on S. 1845 on September 20, 2006. That hearing echoed many of the same themes, and featured some of the same witnesses, as other recent hearings on splitting the Ninth Circuit. As of this writing, there has been no additional legislative action on proposals to split the Ninth Circuit. In the 109 th Congress, these two billsâ H.R. 4093 in the House, and S. 1845 in the Senateâhave received the most legislative and media attention. H.R. 4093 was the focus of first-session attention, while Senate action on S. 1845 has commanded more attention during the second session. As Table 1 shows, both bills offer substantially similar revisions of the Ninth Circuit. The major difference between the bills is that H.R. 4093 does more than simply reorganize the Ninth Circuit. The bill also authorizes more than 60 additional judgeships throughout the nation, and creates an Article III court in the U.S. Virgin Islands (a topic not addressed in this report). By contrast, S. 1845 concentrates solely on splitting the Ninth Circuit, adding judgeships only in a new Ninth Circuit. History suggests that if Congress maintains the status quo for the Ninth Circuit, the issue will likely remain active. Several Members of Congress reportedly remain interested in splitting the circuit, and proponents of a split argue that rapid population growth in the current Ninth Circuit will only exacerbate the court's alleged management challenges. Many proponents of a split view dividing the circuit as "inevitable," with only the timing of a division and some details remaining uncertain. Others are equally determined to oppose dividing the circuit, asserting that a split is not a solution to perceived problems, and that the Ninth Circuit continues to function effectively. The data and analysis presented throughout this report suggest that splitting the Ninth Circuit would have different impacts in different areas common to the debate over the circuit's future, such as caseload, cost, and en banc procedures. In some cases, the impact of splitting the circuit is unclear. In every case, the impact of splitting the Ninth Circuit would vary with context. Each dimension of the debate over splitting the Ninth Circuit offers Congress potential benchmarks to consider in deciding whether to split the Ninth Circuit or maintain the status quo. Different measures of the concepts discussed here, or different variables altogether, might produce alternative findings to the analysis presented in this report. | Proposals to split the Ninth Circuit Court of Appeals have been before Congress for decades. Proponents of a split generally argue that the current Ninth Circuit is overburdened, and that creating two or more new circuits with reduced geography, population, and caseloads would improve judicial administration. Opponents of a split reject those claims, saying that the current Ninth Circuit functions well and that the court is a model of innovation. Opponents of a split also suggest that efforts to divide the circuit represent an attack on judicial independence, a claim supporters of a split deny. In November 2005, the House of Representatives passed the Deficit Reduction Act of 2005 ( H.R. 4241 ), which, among many other provisions, contained language splitting the current Ninth Circuit into a new Ninth Circuit and a Twelfth Circuit. During December 2005 House-Senate conference negotiations, language splitting the Ninth Circuit was dropped from the budget reconciliation package. Seven bills proposing to split the Ninth Circuit ( H.R. 211 , H.R. 212 , H.R. 3125 , H.R. 4093 , S. 1296 , S. 1301 , and S. 1845 ) remained under consideration. Most recently in the House, on February 8, 2006, H.R. 4093 was reported by the Judiciary Committee and placed on the Union Calendar. On the Senate side, the Judiciary Committee held a hearing on S. 1845 on September 20, 2006. This report provides information and analysis on the debate concerning proposals to split the Ninth Circuit. The debate over splitting the Ninth Circuit generally focuses on six areas: (1) geography and population, (2) judgeships and caseloads, (3) how quickly the circuit disposes of cases, (4) cost of splitting the circuit, (5) en banc procedures, and (6) the circuit's rulings. Splitting the Ninth Circuit would have different effects in each of these six areas. Caseload is particularly prominent in the debate over splitting the Ninth Circuit. Proponents of a split suggest that reduced caseloads would improve judicial administration. Opponents suggest that if a split occurred, judges in a new Ninth Circuit would have higher caseloads than their counterparts in proposed Twelfth or Thirteenth Circuits. Analysis of the most recently available estimates from the Administrative Office of the U.S. Courts suggests that if the current Ninth Circuit had been reorganized in 2005, five of seven bills introduced in the 109 th Congress splitting the circuit would have yielded somewhat higher caseloads (based on authorized judgeships) in a new Ninth Circuit than in the current Ninth Circuit during the same time period. Six of the bills would have yielded higher caseloads in a new Ninth Circuit than in proposed Twelfth or Thirteenth Circuits. By contrast, one bill ( H.R. 3125 ) would have yielded a higher caseload in a Twelfth Circuit than a new Ninth Circuit. Caseload estimates can vary by source and methodology. Other factorsâsuch as how quickly the circuit disposes of cases and complexity of casesâcould also affect caseload considerations. Neither chamber of the 109 th Congress passed legislation related to splitting the Ninth Circuit. This report will not be updated. |
The Bureau of Reclamation (Reclamation), part of the Department of the Interior, operates the multipurpose federal Central Valley Project (CVP) in California, one of the nation's largest water conveyance systems (see Figure 1 ). The CVP extends from the Cascade Range in Northern California to the Kern River in Southern California. In an average year, it delivers approximately 5 million acre-feet of water to farms (including some of the nation's most valuable farmland), 600,000 acre-feet to municipal and industrial (M&I) users, 410,000 acre-feet to wildlife refuges, and 800,000 acre-feet for other fish and wildlife needs, among other purposes. The project is made up of 20 dams and reservoirs, 11 power plants, and 500 miles of canals, as well as conduits, tunnels, and other storage and distribution facilities. A separate major project operated by the state of California, the State Water Project (SWP), delivers about 70% of its water to urban users (including water for approximately 25 million users in the South Bay [San Francisco Bay], Central Valley, and Southern California); the remaining 30% is used for irrigation. Two federal and state pumping facilities in the southern portion of the Sacramento and San Joaquin Rivers Delta (Delta) near Tracy, CA, are a hub for water deliveries from both systems. The confluence of the Sacramento and San Joaquin Rivers and the San Francisco Bay is often referred to as the Bay-Delta. After five years of drought, rain and snowstorms in Northern and Central California in the winter of 2016-2017 improved water supply conditions in the state in 2017. According to the U.S. Drought Monitor, as of April 18, 2017, less than 1% of the state was in severe drought conditions. This represents a drastic improvement from one year ago, when 73% of the state was in severe drought conditions, and two years ago, when 92% fell under this designation. The stress on water supplies due to the drought resulted in cutbacks in water deliveries to contractors receiving water from the CVP and SWP. In 2015, California Governor Jerry Brown mandated the first-ever 25% statewide reduction in water use for nonagricultural users. On May 18, 2016, California's State Water Resources Control Board (SWRCB) adopted a new regulation that replaces the prior percentage reduction-based water conservation standard with a localized "stress test" approach, which remains in effect. On April 7, 2017, the governor lifted the statewide drought emergency, but maintained a number of prior executive actions aimed at saving water. After several consecutive years of cutbacks, in a series of announcements in spring 2017, Reclamation provided its estimated water allocations for CVP contractors in water year 2017 (October 2016 through September 2017). For the first time in years, water allocations for most CVP water contractors were 100%. Although some contractors south of the Sacramento and San Joaquin Rivers' Delta (Bay Delta) received a lower allocation in the initial March 2017 announcement (65% for agricultural contractors and 90% for municipal and industrial contractors, respectively), Reclamation subsequently revised these allocations upward to 100% in April. Legislation enacted in the 114 th Congress (Subtitle J of S. 612 , the Water Infrastructure Improvements for the Nation ([WIIN] Act) incorporated provisions from multiple California drought-related bills that had been considered dating to the 112 th Congress. These provisions directed pumping to "maximize" water supplies for the CVP (in accordance with applicable biological opinions), allowed for increased pumping during certain high water events, and authorized expedited reviews of water transfers. It is unclear the extent to which these provisions were used prior to 2017 allocations. The 115 th Congress is considering legislation that proposes additional changes to CVP operations. H.R. 23 , the Gaining Responsibility on Water Act (GROW Act), incorporates a number of provisions that were included in legislation during the 112 th -114 th Congresses, including those that were proposed in the 114 th Congress but were not included in the final version of the WIIN Act. The current Congress may consider these and other related changes, as well as oversight of CVP operations and implementation of WIIN Act CVP provisions. This report provides high-level summary information on recent hydrologic conditions in California and their impact on state and federal water management, with a focus on deliveries related to the federal CVP. It also summarizes some of the issues pertaining to CVP operations that are being debated in the 115 th Congress. As of April 18, 2017, less than 1% of California was in severe drought, as defined by the U.S. drought monitor. This amount represents a dramatic improvement from this time one year ago, when 73% of the state was subject to severe drought conditions, and two years ago, when 92% fell under this designation. The improvement was in large part due to heavy rain and snowfall in the winter of 2016-2017. As of March 2017, rainfall and snow-water content was 221% of average for the current water year. The April 1 snow-water equivalent is another important measure of California's water supplies. As of that date in 2017, statewide snow-water equivalent was approximately 164% of the historical average. As a result of increased precipitation, water levels at several of California's largest reservoirs also continued to rebound in 2017 relative to prior years (see Figure 2 ). In March 2017, all five of California's largest reservoirs were at more than 100% of their historical average and 73%-99% of their total capacity at this time. For the reservoirs specifically serving the CVP (i.e., Shasta, Trinity, Folsom, New Melones, Millerton Lake, and the federal half of San Luis ), water year 2017 began with a total of 4.9 million acre-feet in storage but by mid-March this amount had almost doubled, with more than 9 million acre-feet in storage. Proposals and debates related to water allocations in California typically revolve around the two major water projects that serve the state's agricultural and municipal water suppliers: the federal CVP and the state of California's SWP. Although these projects supply water to users throughout the state, the major CVP and SWP pumps that supply water for Central and Southern California are located at the southern end of the Bay-Delta. Thus, an important distinction when discussing CVP water allocations and deliveries is between "North-of-Delta" (NOD) and "South-of-Delta" (SOD) water users. Each year, Reclamation announces estimated deliveries for its CVP contractors in the upcoming water year. The CVP—which covers approximately 400 miles in California, from Redding to Bakersfield—supplies water to hundreds of thousands of acres of irrigated agriculture throughout the state, including some of the most valuable cropland in the country. It also supplies water supplies to some wildlife refuges and municipal and industrial (M&I) water users. More than 9.5 million acre-feet of water per year is potentially available for delivery from the CVP to its contractors. This figure includes water that is available for delivery based on prior agreements with the holders of water rights that predate the CVP (i.e., Sacramento River Settlement Contractors, San Joaquin River Exchange Contractors ) or contracts with CVP agricultural and M&I water service contractors. Figure 3 , below, depicts an approximate division of maximum available delivery amounts, by percentage. The largest contract holders by percentage are CVP's Friant Division contractors (24%), located on the east side of the San Joaquin Valley; the Sacramento River Settlement Contractors (22%), located on the Sacramento River; CVP SOD water service contractors (22%), located in the project area south of the Sacramento and San Joaquin River's Delta; and the San Joaquin River Exchange Contractors (9%), located west of the San Joaquin River. In a normal water year, the CVP delivers much less than the maximum contracted amount. On average, approximately 7 million acre-feet of water is made available to CVP contractors (including 5 million acre-feet to agricultural contractors). In recent years, Reclamation has made significant cutbacks to water deliveries for many CVP contractors due to the drought, among other factors. In a series of announcements in February, March, and April 2017, Reclamation provided its initial allocations for the 2017 water year (see Table 1 , below). Reclamation announced that for 2017, it expected that a total of 8.8 million acre-feet of supplies would be available. In contrast to recent years, Reclamation estimated that it would be able to provide 100% of CVP water supplies for most water rights contractors with senior water rights predating the project, including Sacramento River Settlement Contractors and San Joaquin River Exchange Contractors. NOD CVP agricultural and M&I water service contractors also were expected to receive their full contract allotments in 2017, as were Friant Division contractors. Most CVP SOD agricultural water service contractors, including those in many of the state's largest and most prominent agricultural areas, received an initial allocation of 65% of contracted supplies, and SOD M&I contractors initially received a 90% allocation for 2017. However, these allocations were subsequently revised upward to 100% in April 2017. Prior to 217, the last time these users received 100% of their maximum contract allocations was 2006, and they have received their full maximum contract allocations only three times since 1990. Reclamation previously had noted that its lower initial allocation for SOD agricultural water service contractors was largely a result of two factors: (1) a conservative estimate of water supplies expected to be added to the system for the remainder of the year (thus, if the remainder of the year is not abnormally dry, the initial allocation might increase) and (2) limits to available water supplies in the federal half of San Luis Reservoir (an important provider of SOD water storage) due to rescheduled and carryover water from 2016. Reclamation noted that for 2017, environmental restrictions (e.g., Endangered Species Act and state water quality requirements) were expected to account for a relatively small share of cutbacks relative to prior years. To minimize future limitations on storage and allocations associated with the second item above, Reclamation stated that it plans to limit the availability of water to be carried over to the 2018 contract year to a maximum of 150,000 acre-feet. In increasing its 2017 allocation for SOD contractors up to 100%, Reclamation noted that the carryover limit of 150,000 would remain in place. The other major water project serving California, the SWP, is operated by the state of California's Department of Water Resources (DWR). As stated previously, the SWP primarily provides water to M&I users and some agricultural users. For 2016 and 2017, SWP water deliveries were significantly higher than they were in 2015 (when deliveries were limited to 20%). In April 2016, DWR estimated that SWP would be able to meet 60% of requested deliveries for water year 2016, or 2.5 million acre-feet. In April 2017, DWR increased its 2017 allocation estimate from 60% of requested supplies to 85%. Recent SWP allocations are shown in Table 2 . Widespread drought conditions over the previous five years—coupled with low water supplies in the state's major reservoirs and regulatory restrictions on CVP and SWP operations—affected sectors and areas throughout California. In 2015 and 2016, total statewide farm receipts declined sharply; cities and counties were required to institute major cutbacks and even water rationing in some cases. Many plant and animal populations declined, and a number of major wildfires occurred throughout the state. Some of these effects may linger for years. Thus, considerable attention is likely to be paid to CVP and SWP allocations in 2017 and beyond. Although agriculture constitutes a much smaller percentage of California's economy now than it did in the early and mid-20 th century, California agriculture is still the nation's largest producer in terms of cash farm receipts—accounting for 12.5% of the U.S. total in 2015, the last year for which national data are available. According to the U.S. Department of Agriculture/National Agricultural Statistics Service Crop Year Report, California farm and ranch receipts totaled $47 billion in 2015, down from $57 billion and $55 billion in 2014 and 2013, respectively. Although some agricultural users with access to groundwater or other supplies may have seen receipts grow despite the drought, others had to fallow land or uproot trees and shrubs. Some livestock producers had to purchase supplemental hay and grain. Fruit and nut orchards largely rely on irrigation to keep trees alive, and hundreds of thousands of acres were fallowed because sufficient water was not available. In addition to agriculture, water flows are also critical for hydropower, recreation, and fish and wildlife. For example, cool temperatures are needed in waterways and lakes to maintain aquatic ecosystems and species viability. Some salmon runs experienced a 95% loss of eggs laid in 2015 due to warm water temperatures, and surveys of Delta smelt in June 2016 found 13 adult smelt, the lowest catch in the history of the survey (the total population is estimated at 13,000—a record low. Although recent rains and projected runoff may improve conditions for salmon and smelt, poor ocean conditions in 2015 and 2016 will affect adult returns for coho and Chinook salmon; thus, 2017 returns remain uncertain. In addition to fisheries, recreational reservoirs, river-rafting opportunities, and recreational and commercial fisheries are all potentially at risk during a drought. California wetlands, which might adversely be affected by drought, also provide Pacific Flyway habitat, which is critical to migrating birds. Thus, some observers pay close attention to the allocations not only for irrigators but also to wildlife refuges and species. Complicating the hydrologic situation and water supply allocations is a complex web of state and federal regulatory requirements on CVP and SWP operations. These requirements affect how much water is delivered from the projects. They address releases of water from reservoirs and limits on pumping from the Bay-Delta to protect habitat, threatened and endangered species (e.g., salmon and Delta smelt), and water quality. In many years, pumping restrictions to protect state-set water quality levels, particularly increases in salinity levels, are greater than restrictions to protect endangered species. In contrast, in wet years, pumping restrictions due to regulations under the federal Endangered Species Act (ESA; 16 U.S.C. §§1531 et seq.) may have a higher impact on exports than water quality restrictions, and they may have proportionally higher impacts in certain months. There is disagreement over how much water might be available absent state and federal restrictions. Reclamation estimated that ESA restrictions accounted for a reduction of 62,000 acre-feet from the long-term average for CVP deliveries in 2014, while water quality restrictions accounted for another 176,300 acre-feet of this reduction. For 2015, Reclamation estimated that ESA accounted for approximately 144,800 acre-feet of CVP delivery reductions from the long-term average, but did not have a comparable estimate for water quality restrictions. For its part, DWR estimated that ESA restrictions resulted in a reduction of 47,000 acre-feet to SWP deliveries in water year 2014, and a reduction of 92,000 acre-feet in water year 2015. Comparable figures were not available for water quality restrictions. Ongoing cutbacks to CVP contractor allocations during times of increased water supplies have caused continuing criticism of Reclamation's operation of the CVP. As previously noted, Reclamation argued that its 2017 allocations for SOD users were largely the result of rescheduled and carryover storage in San Luis Reservoir requested by service contractors and contained minimal restrictions associated with environmental regulations. However, some users have noted that they would not need to be so reliant on carryover and rescheduled water in San Luis Reservoir if there were more certainty of additional water supplies during drought years. In recent years, debates have focused on the extent to which factors other than drought (e.g., endangered species and water quality requirements) have led to curtailments. To address these concerns and provide more water to agricultural and municipal contractors, some have proposed, among other approaches, that Congress amend Reclamation's directives in operating the CVP, including directing altered implementation of regulatory requirements under ESA that may restrict pumping operations (some of these proposals were enacted in the WIIN Act, see " WIIN Act ," below). Others, however, are opposed to modifying the implementation of ESA regulations and propose water conservation, water recycling, and increased storage, among other strategies, to provide more water for users and avoid possible extinction of certain species. Congress plays a role in CVP water management and has previously attempted to make available additional water supplies in the region by facilitating water banking, water transfers, and new storage. In recent years, Congress has enacted drought-related provisions aiming to benefit the CVP and the SWP, including extending authorization for the Reclamation States Emergency Drought Relief Act ( P.L. 102-250 ), providing authority to incorporate water storage into dam safety projects ( P.L. 114-113 ), and providing additional funding to Reclamation for western drought response in FY2015 ($50 million) and FY2016 ($100 million) Energy and Water Development appropriations bills, and most recently, Subtitle J of the WIIN Act ( P.L. 114-322 ; S. 612 ). Legislation enacted at the end of the 114 th Congress (the WIIN Act, enacted December 16, 2016) incorporated provisions from multiple California drought-related bills that had been under consideration. Among other things, these provisions directed agency officials to pump at the highest levels allowable under existing biological opinions, for longer periods. The WIIN Act also authorized higher levels of pumping than currently allowed during certain temporary storm events, unless managers showed that the increased levels would harm the long-term health of the listed species. These and other changes had been proposed in legislation dating to the 112 th Congress. However, other provisions from those previous bills were not included in the WIIN Act. During consideration of the bill, supporters of CVP operational changes contended that they could potentially make available additional water to users facing curtailed deliveries, while also improving the flexibility and responsiveness of the management and operations of the CVP and SWP. Opponents worried that the changes may have detrimental effects on species' survival in both the short and long terms and may limit agency efforts to manage water supplies for the benefit of species. Some of the notable CVP operational provisions in the WIIN Act aimed to provide the Administration with authority to make available more water supplies during periods in which pumping otherwise would have been limited. According to Reclamation, changes in the WIIN Act that directed increased communication and transparency in certain operational decisions influenced some decisions in the early part of winter 2016-2017 and led to the avoidance of certain pumping restrictions. However, Reclamation also has stated that many of the act's other authorities seem most applicable to drought years, when sensitivity to reverse flows in the delta is particularly acute and the need to preserve and maximize the use of available water supplies often is at its highest. Thus, it appears that for the relatively wet water year of 2017, the changes had a minimal effect on water allocations. Similar to recent congresses, the 115 th Congress is expected to consider new legislation that proposes additional changes to CVP operations. H.R. 23 , the Gaining Responsibility on Water Act (GROW Act) incorporates a number of provisions that were included in previous legislation in the 112 th , 113 th , and 114 th Congresses but were not enacted in the final version of the WIIN Act. Congress may consider this and similar legislation, as well as oversight of CVP operations and implementation of WIIN Act CVP provisions. | After five years of drought, rain and snowstorms in Northern and Central California in the winter of 2016-2017 significantly improved water supply conditions in the state in 2017. According to the U.S. Drought Monitor, as of late April 2017, less than 1% of the state was in severe drought conditions. This represents an improvement from one year prior to that date, when 73% of the state was in severe drought conditions, and two years prior, when 92% fell under this designation. Stress on water supplies due to drought resulted in cutbacks in water deliveries to districts receiving water from federal and state facilities, in particular the federal Central Valley Project (CVP, operated by the Bureau of Reclamation) and the State Water Project (SWP, operated by the State of California). In 2015, California mandated a 25% reduction in water use for nonagricultural water users, and overall SWP deliveries were limited to 20% of contractor requests. Some of these restrictions have since been relaxed. Reclamation estimated its initial water allocations for CVP contractors for the 2017 water year in a series of announcements in February, March, and April 2017. For the first time in years, initial water allocations for most CVP water contractors were 100%. Contractors south of the Sacramento and San Joaquin Rivers' Delta (Bay Delta) initially received lower allocations in March 2017 (65% for agricultural contractors and 90% for municipal and industrial contractors, respectively), but Reclamation subsequently revised these allocations upward to 100% in April. The allocations represented a drastic change from recent years, in which no supplies were made available to many of these contractors, who farm some of the most valuable irrigated agricultural land in the country. Most expect that the historically wet conditions of 2016-2017 will not continue in future years and that future water years will continue to see deliveries limited to some extent. Previous cutbacks to CVP deliveries (in particular during periods of increased precipitation) have caused some to criticize Reclamation's management of the CVP and question the extent to which factors beyond limited water supplies (e.g., restrictions to protect endangered species and water quality) influence water management and the quantity of water delivered to contractors. They argue that congressionally directed changes in the operation of the CVP that would result in increases to water allocations are needed. Other stakeholders argue that some of these changes could undercut environmental regulations, harm fish and wildlife, and potentially lower water quality. They also worry that legislative proposals that would alter the implementation of the Endangered Species Act could harm species in the region and set a precedent that could be used to affect other listed species in the future. Legislation enacted in the 114th Congress (Subtitle J of S. 612, the Water Infrastructure Improvements for the Nation [WIIN] Act) incorporated provisions from multiple California drought-related bills that had been considered dating to the 112th Congress. Among other things, these provisions directed pumping to "maximize" water supplies for the CVP (in accordance with applicable biological opinions), allowed for increased pumping during certain high water events, and authorized expedited reviews of water transfers. Similar to recent congresses, the 115th Congress is considering legislation that proposes additional changes to CVP operations. H.R. 23, the Gaining Responsibility on Water Act (GROW Act) incorporates a number of provisions that were included in previous legislation but were not in the final version of the WIIN Act. Congress may consider this and similar legislation, as well as oversight of CVP operations and implementation of WIIN Act CVP provisions. This report provides an abbreviated background on the CVP and SWP. It also provides a summary of recent hydrologic conditions in California and their effect on water deliveries. |
Members of Congress and the public are increasingly concerned about the ability of the Food and Drug Administration (FDA) to ensure that the drugs sold in the United States are safe and effective. Legislators, industry, the public, and FDA scientists have raised questions about FDA's collection and release of safety data, and whether the agency has the authority and resources to ensure adequate research over the marketing life of the pharmaceutical products it regulates. In 2004, the regulatory, medical, and industry debate became very public with reports of cardiovascular hazards posed by the pain medicine Vioxx (one of several COX-2 nonsteroidal anti-inflammatory drugs then on the market), and of children facing increased risk of suicidal thoughts and actions when taking certain antidepressants (such as the selective serotonin reuptake inhibitors Paxil and Zoloft). Not only was Congress asking whether the manufacturers knew of these risks while continuing to market the drug, but also whether FDA should have known of the risks and done more to protect the public. At the height of public and Congressional attention, FDA asked the Institute of Medicine (IOM) to "conduct an independent assessment of the current system for evaluating and ensuring drug safety postmarketing and make recommendations to improve risk assessment, surveillance, and the safe use of drugs." IOM released its report in September 2006. FDA issued its response in January 2007 and noted relevant activities the agency has begun and others it has planned. Among the planned activities are those in its proposal for a reauthorization of the prescription drug user fee program (PDUFA IV). In the meantime, several Members of Congress have introduced bills to address drug safety and FDA's role in protecting the public's health. This report provides a side-by-side comparison of: Institute of Medicine: recommendations in its September 2006 report, The Future of Drug Safety: Promoting and Protecting the Health of the Public ; Food and Drug Administration: announced actions and plans to address problems identified in the IOM report; S. 468 / H.R. 788 (the Food and Drug Administration Safety Act of 2007), introduced on January 31, 2007, by Senators Grassley, Dodd, Mikulski, and Bingaman, and Representatives Tierney and Ramstad; S. 484 (the Enhancing Drug Safety and Innovation Act of 2007), introduced on February 1, 2007, by Senators Enzi and Kennedy; and H.R. 1165 (the Swift Approval, Full Evaluation (SAFE) Drug Act), introduced on February 16, 2007, by Representative Markey. The bills and the IOM report address many of the same issues, often with similar approaches though at times with major differences. The IOM report addressed only drugs, not biological products (e.g., vaccines), in keeping with the charge FDA gave it. FDA's response to the IOM recommendations, therefore, relates to drugs, but also states that the approach to drug safety is relevant to all medical products. All the bills would amend the Federal Food, Drug, and Cosmetic Act (regarding the regulation of drugs); S. 484 would also amend the Public Health Service Act (regarding the regulation of biologics). Highlighted below are a few of the more significant items regarding drug safety. S. 468 / H.R. 788 would remove the post-approval drug safety activities from FDA's Center for Drug Evaluation and Research (CDER) and create a new Center for Postmarket Evaluation and Research for Drugs and Biologics (the Center). The IOM report does not suggest that approach to strengthen FDA's postmarket activities, nor do the other pending bills. The bills and the IOM recommendations aim to strengthen FDA's ability to make sure drug manufacturers (application sponsors) appropriately design and conduct postmarket studies and disclose the results to the public. S. 468 / H.R. 788 lays out requirements that the new Center for Postmarket Evaluation and Research for Drugs and Biologics would administer; S. 484 would achieve this with a process it calls a Risk Evaluation and Mitigation Strategy (REMS); and H.R. 1165 would allow the Secretary to require certain studies. The IOM recommended and all the bills would allow the Secretary to penalize (through civil fines, injunctions, or withdrawal of marketing approval or licensure) sponsors who do not conduct required studies or complete them on time, or who fail to report study results. The IOM report and the bills address the need for FDA authority to require pre- and postmarket studies. S. 468 alone would give FDA the authority to require that those studies compare a drug's safety and effectiveness with that of other drugs. All three bills would require a variety of drug safety activities. They differ in how to fund them. S. 468 / H.R. 788 would authorize appropriations to carry out the bill's provisions; S. 484 would rely on user fees, expanding FDA's existing authority to use such fees; and H.R. 1165 does not address funding. The IOM committee not only recommended that Congress provide "substantially increased resources" to FDA, but noted that all its other recommendations could not be implemented without those resources. Table 1 addresses the range of FDA drug safety activities that the IOM recommended, along with FDA's response, and activities that the bills would authorize or require. The table structure follows the 25 IOM recommendations within the five categories of organizational culture, science and expertise, regulation, communication, and resources. | Members of Congress and the public are increasingly concerned about the ability of the Food and Drug Administration (FDA) to ensure that the drugs sold in the United States are safe and effective. In November 2004, FDA asked the Institute of Medicine (IOM) to assess the current system for evaluating and ensuring drug safety and to make recommendations to improve risk assessment, surveillance, and the safe use of drugs. IOM released The Future of Drug Safety: Promoting and Protecting the Health of the Public in September 2006, and FDA issued its response in January 2007. The following drug safety bills have been introduced in the 110th Congress: S. 468 / H.R. 788, S. 484, and H.R. 1165. Although the legislation and the IOM report address many of the same drug safety issues, the bills differ in their treatment of FDA authority to require action and to enforce compliance, comparative effectiveness studies, and how to fund any additional agency activities. For example, S. 468 / H.R. 788 would strengthen FDA's post-approval drug safety activities by creating a new Center for Postmarket Evaluation and Research for Drugs and Biologics. The other bills would leave these activities where they currently reside in the Center for Drug Evaluation and Research. All the bills would allow the FDA to penalize (through civil fines, injunctions, or withdrawal of marketing approval or licensure) drug manufacturers who did not conduct required postmarket studies or who failed to report study results. The IOM committee recommended that Congress provide substantially increased resources to FDA to bolster its drug safety activities. S. 468 / H.R. 788 would authorize appropriations to carry out the bill's provisions, S. 484 would rely on user fees, expanding FDA's existing authority to use such fees, and H.R. 1165 does not address funding. |
The brownfields tax incentive in section 198 of the Internal Revenue Code expires on December 31, 2007. It was first enacted in the Taxpayer Relief Act of 1997 ( P.L. 105-34 ), and has been extended four times, most recently in 2006. The provision is intended as a stimulus to the development of brownfields by allowing developers to recoup some of their cleanup costs. There is now more information available to the Congress as it considers the future of section 198 than was available when previous extensions were enacted. The 110 th Congress may consider another short-term (or long-term) extension, making the tax extension permanent, or allowing it to expire. Another possibility is to repeal the recapture provision. A brownfield is a commercial or industrial site that is abandoned or underutilized, and where redevelopment has not occurred because of the presence, or perception of the presence, of hazardous substances, and the fear of the accompanying liability for the costs of environmental cleanup. These are not traditional Superfund sites, which are the nation's worst hazardous waste locations. Generally (though not always), they are not highly contaminated and therefore present lower risks to health, and cost comparatively less to clean up than Superfund sites. In a 2004 report, the Environmental Protection Agency (EPA) estimated that there are between 500,000 and 1 million brownfield sites, though how many would require cleanup to make them safe for reuse is unknown. Based on information from EPA's brownfield assistance programs, 70% of them (350,000—700,000) might require some degree of cleanup expenditure. Using rough estimates, EPA also calculated that total expenditures at state sites, excluding those on the Superfund National Priorities List, by both public and private entities have been about $1 billion annually in recent years. During this same period cleanup has been accomplished at about 5,000 state and private party sites per year. At this rate, 150,000 sites would be cleaned up, at a cost of $30 billion over the next 30 years, which was the time horizon of the EPA report. To help address this problem, Congress enacted EPA's brownfields program of grants and technical assistance, and also relaxed certain Superfund liability provisions, established a "brightfields" demonstration program (for brownfield sites redeveloped using solar energy technologies), authorized tax-exempt facility bonds for qualified green building and sustainable design projects, and provided two brownfield tax incentives. (See Table 1 .) This report examines the extent to which one of these, the federal section 198 tax incentive, has been used. The section 198 brownfields tax incentive expires on December 31, 2007. First enacted as part of the Taxpayer Relief Act of 1997 ( P.L. 105-34 ), the incentive allows a taxpayer to fully deduct the costs of environmental cleanups in the year the costs were incurred (called "expensing"), rather than spreading the costs over a period of years ("capitalizing"). Its purpose is to encourage developers to rehabilitate sites where environmental contamination stands in the way of bringing unproductive properties back into use. (The provision has no direct application for public sector entities, such as municipalities, that develop brownfields and do not pay income taxes.) To take advantage of the brownfields tax incentive, the developer of a property has to obtain a statement from the state environmental agency that the parcel is a "qualified contaminated site" as defined in the law. A significant factor concerning the tax incentive is that it is subject to "recapture." This means that the gain realized from the value of the property when it is later sold must be taxed as ordinary income (rather than at the generally lower capital gains rate) to the extent of the expensing allowance previously claimed. This dilutes the benefit of the tax break and has the effect of simply postponing a certain amount of the developer's tax liability until the property is resold. As a stimulus to development, the overall value of the brownfields tax break is dependent on a number of factors, including the total cost of the project, the cost of cleanup, how long the developer intends to hold the property before selling it, and the developer's individual tax situation. Repeal of the recapture provision has been favored by the Real Estate Roundtable and its partner associations representing various aspects of the real estate industry (architects, building owners and managers, mortgage bankers general contractors, and others). Federal tax law generally requires that the cost of improvements to a property must be deducted over a period of years, whereas other expenses, such as repairs, may be deducted in the same year they are incurred. Being able to deduct the costs in the year when they are incurred is a financial benefit to the taxpayer. A 1994 ruling by the Internal Revenue Service (IRS) held that the costs of cleaning up contaminated land and groundwater are deductible in the current year, but only for the person who contaminated the land . In addition, the cleanup would have to be done without any anticipation of putting the land to a new use. Further, any monitoring equipment with a useful life beyond the year it was acquired would have to be capitalized. On the other hand, a person who acquired previously contaminated land, such as a brownfield site, would have to capitalize the costs of cleanup, spreading them out over a number of years. Some have noted that this is a somewhat perverse situation that works against one who would want to buy and clean up a contaminated property, and put it to use. Cleanup costs are a major barrier to redevelopment of contaminated land. The Taxpayer Relief Act of 1997, which included the brownfields tax incentive, thus had the effect of expanding benefits and allowing developers who had not caused the contamination to deduct cleanup costs from their taxable income in the current year, rather than having to capitalize them. As initially enacted, the brownfields tax incentive was available only to a property that was located in a "targeted area." The law defined a targeted area as a census tract with greater than 20% poverty, an adjacent commercial or industrial census tract, an Empowerment Zone or Enterprise Community, or one of the 76 brownfields to which EPA had awarded a brownfield grant at that time. Congress repealed the targeted area geographic restrictions and extended the tax break to all brownfields ("qualified contaminated sites") in the Consolidated Appropriations Act, 2001 ( P.L. 106-170 ). Since FY2003, the Administration's budget proposals have proposed making the tax incentive permanent. It has been in effect continuously since its enactment in 1997 and has been extended four times, most recently in the Tax Relief and Health Care Act of 2006, P.L. 109-432 (Division A, title I, § 109). This extension through 2007, which was enacted on December 20, 2006, was made retroactive to December 31, 2005, when the previous extension expired. EPA supports the permanent extension, as does the Real Estate Roundtable and its partners noted above. This 2006 enactment also broadened the definition of hazardous substances to include petroleum products (including crude oil, crude oil condensates, and natural gasoline) for purposes of the tax incentive (but not for any other part of the Superfund Act). Until recently, there was no official information available at the federal level on the extent of use of the § 198 provision. It did not have its own separate line on either individual or corporate federal income tax forms (which is why CRS was first asked to perform the state survey in 2003). In 2004 the IRS introduced a new form, Schedule M-3, which provides information, for the first time, on the use of the section 198 brownfields tax incentive. Only large and midsize businesses (corporations and partnerships with total assets of $10 million or more) are required to file the new Schedule M-3 with their returns. Use of the schedule was phased in, and in the first year of use, tax year 2004 (for returns submitted in 2005), only some corporations and no partnerships were required to file it. Those corporations that did use it were not required to complete the whole form, and part of the information on the brownfields tax incentive was in the optional part of Schedule M-3. A number of corporations completed it anyway. The results for 2004 only recently became available, and show section 198 remediation costs of $294,970,000, reported by 110 corporations out of a population of 5,557,965 corporate returns. This information is obviously limited, since the response for 2004 excluded more than half the corporations and all the partnerships, response on the brownfields tax incentive was at the corporations' discretion, and it was limited to those companies with assets of $10 million or more. Also, the data show how much the 110 corporations spent on cleanup costs, but do not reveal at how many brownfields the money was spent. The compilation of data from tax year 2005 (when reporting was mandatory for all corporations) is ongoing, and will be available to the public in February 2008. Partnerships with assets over $10 million were required to use Schedule M-3 beginning with tax year 2006, and those results will be available in February 2009. Even when fully phased in, though, the form will not be applied to entities with assets under $10 million. For more information on Schedule M-3, see Appendix . CRS surveyed the appropriate environmental agency in each state in 2003, and again in 2007, to determine the number of brownfield certifications they had issued. In 2003, 27 states reported that since the enactment of the provision in August 1997 until the time of the survey in April-June 2003 they had received a total of 161 requests for certification, of which 147 were approved, and 14 were denied. Twenty-three states reported receiving no formal requests. In the 2007 survey, there was a modest increase. Twenty-nine states reported receiving 175 requests from 2003 until the second survey in February-April 2007, of which 170 were granted. Twenty-one states received no requests. There were four additional states that received and approved requests in 2003-2007 (New Mexico, Colorado, West Virginia, and New Hampshire), and two that had received requests in the 2003 survey, but none in the 2007 survey (Georgia and Kentucky). The 175 requests are equivalent to just under 44 per year for 2003-2007. In the earlier period August 1997 to spring 2003) the average was about 28 per year. The state-by-state responses are presented in Table 2 . While this is a significant increase on a percentage basis, about 57%, the numbers are far below what was anticipated prior to the original enactment of the tax break in 1997. According to hearing testimony, EPA and the Treasury Department expected the incentive to "be used at 30,000 sites over the 3-year life of the incentive" (10,000 sites per year), but as of summer 1999 it had been used at "only a couple dozen sites." The conference report accompanying the 1997 bill estimated the budget effect of the provision as costing the Treasury $417 million over 5 years ($83.4 million per year). In 1999, as Congress was considering making the tax incentive permanent, Treasury estimated it would be used to clean up 18,000 brownfields over the next 10 years (1,800 per year); the department anticipated that the loss in revenue resulting from the tax incentive would be $600 million for 5 years ($120 million per year), and that it would induce an additional $7 billion in private investment. The conference report in that year estimated a revenue loss of $114 million over 5 years ($22.8 million per year). Because of this discrepancy between expectations and the apparent results, CRS asked the state agency representatives who responded to the survey for their opinions as to why so few brownfield developers were taking advantage of the tax incentive. CRS also contacted four private developers and the editor of a brownfields trade publication to solicit their viewpoints on the subject, as well. A summary of their comments follows. Land development is a large and diverse industry. There is only a very limited number of developers who specialize in brownfields. The size of brownfield projects ranges from one acre to about a thousand acres; 25 to 50 acres is typical. They take longer to complete—probably double the time of non-brownfield development—because environmental cleanup can be unpredictable. Several respondents felt that the incentive doesn't offer that much financial benefit, especially when one considers the recapture provision, and particularly if the property is sold in the short term. It is not a driving factor that will tip the decision toward cleanup. Also, a number of states offer tax breaks and other incentives that are more generous than the federal incentive, which by comparison may not seem worth the effort. On the other hand, one developer observed that it was necessary to have the right circumstances to successfully use the section 198 incentive. Depending on the project, and the tax status of the different investors, he indicated it might be more advantageous to employ other tax strategies. Another agreed that the benefit was meaningful, especially when used at a larger site. It is another way to make a deal incrementally successful. The provision has been extended only for periods of a year or two at a time, and twice the extensions were partially retroactive, since it had expired before the extension was passed. This on-again, off-again history creates uncertainty regarding its future availability, and makes it difficult for developers to plan, particularly for large-scale, multi-year projects. Even smaller projects can encounter unforseen delays, pushing them past the provision's end date, and causing forfeiture of anticipated benefits. For an economically marginal project, this uncertainty could be enough to decide against going forward. One state official mentioned that at times he was unsure of the incentive's status, which made him reluctant to recommend it. Lack of information about the incentive's availability was also blamed for the level of use. Sometimes this was accompanied by criticism of EPA for insufficient leadership, although it was also acknowledged that the agency had improved in recent years. Some states also recognized their own shortcomings in promoting the incentive. A few mentioned that the new eligibility of petroleum-contaminated sites might increase its use. One developer observed that publicity, or an outreach program aimed at accountants might be what was needed. Another commented that even after 10 years, the provision remained somewhat "esoteric," and even tax advisors were not all aware of it. A corollary of the previous point is that it is possible that many developers, especially smaller ones, are unaware of both the 1994 IRS ruling and the existence of the section 198 brownfields tax incentive. These persons would simply claim their environmental cleanup costs on their tax returns in the same way they claimed other development costs. The IRS authority on section 198 said that she found this plausible, and while there is no direct information on how much it is used, an indirect indicator is that she has received no inquiries from IRS auditors about taxpayers who use the incentive. One state thought it was possible that developers used the agency's "milestone letters" (certifying that the developer has reached a certain point in the cleanup process) for other purposes, including supporting their income tax returns. A few states mentioned that LLCs (limited liability companies) are sometimes created for brownfield projects. In the first few years, when the environmental cleanup would be carried out, they would have no income tax, so the incentive would be useless. In the 110 th Congress, one bill has been introduced that addresses section 198. H.R. 1753 makes the brownfields tax incentive permanent and repeals the recapture provision. Introduced by Representatives Jerry Weller and Xavier Becerra on March 29, 2007, the bill was referred to the Ways and Means Committee. There has been no further action. CRS conducted the interviews before learning of the existence of Schedule M-3. None of the interviewees knew of the form either, judging by the conversations. The early information from the new IRS form shows that the brownfields tax incentive is indeed being used by large and midsize businesses, and somewhat more than the survey indicated. The number of corporations reporting its use are likely to rise from 110 as other corporations and partnerships begin filing the M-3. There will also continue to be an unknown number of smaller businesses with total assets of less than $10 million that will take advantage of section 198. The survey showed an average of about 44 brownfield certifications per year in 2003-2007, and the IRS form revealed that 110 corporations reported deductions for cleanup costs of $295 million in 2004, an average of $2.68 million per company. One would expect, but there is no way to know, that the companies worked on more than one site each. The Schedule M-3 data confirm the survey findings that the provision is not used as much as was expected when section 198 first became law. Nevertheless, these first results show that $295 million was reported as a deduction item on Schedule M-3 for tax purposes by the private sector for cleaning up brownfields in 2004, and that was the goal of the provision: to provide an incentive to bring contaminated lands back into productive use. The $295 million figure is from voluntary reporting by only a portion of the pertinent taxpayer universe, and it is very likely to increase now that the use of Schedule M-3 is mandatory for all corporations and partnerships. There is probably no way to measure whether the tax incentive has proven to be the reason why any certain number of brownfields have been cleaned up. Nor are we likely to know if repeal of the recapture provision would lead to more cleanups at economically marginal sites. The best observation may be what the interviewed developers said: that it can be a useful tool in some circumstances in putting a brownfield remediation/land development deal together. In that sense, brownfield supporters note that it has been a help in cleaning up the half million or more brownfield sites around the United States. It should be remembered that there is a certain unknown number of cleanups being accomplished by firms with assets under $10 million. From the survey, it does not seem that there are a great many of them, but it is also plausible that a fair number are also being done by individuals with no knowledge of IRS's 1994 revenue ruling or the section 198 tax incentive, and are simply treating their cleanup costs as normal development expenses. A factor that has sometimes affected the passage of the brownfields tax incentive is that it is one of a number of tax credits, deductions, and taxpayer benefits that have all been considered together in recent years. This group changes from year to year. For more information, see CRS Report RL32367, Certain Temporary Tax Provisions ( " Extenders " ) Expired in 2007 , by [author name scrubbed] and [author name scrubbed]. Table 2 presents the results of the survey in detail. Nineteen states reported in both the 2003 and 2007 surveys that they had received no applications for certification. Many in that group said they had received inquiries but no formal applications, and some of those states added that they had made efforts to publicize the availability of the incentive through their websites and at in-person presentations at various meetings. The 19 states that reported receiving no applications were: Four states reported receiving no requests in 2003, but did receive and approve requests in the 2003-2007 period. These are New Mexico, Colorado, West Virginia, and New Hampshire. Two states that received requests for certification in the first survey period reported receiving none in the 2003-2007 period: Georgia and Kentucky. In 2003, seven states had 10 or more applications: Wisconsin had 20; Massachusetts, 17; Delaware, 16; New York, 14; Virginia 11; and Michigan and Pennsylvania, 10 each. In 2007, six states had at least 10 applications: Wisconsin had 19; Massachusetts, 16; Rhode Island, 15; Maryland and Texas, 12 each; and Pennsylvania, 10. In addition to their income tax returns, corporate and partnership taxpayers are required to file financial statements (also called "balance sheets" or "books") which provide an overview of a business's profitability and financial condition, and permit comparisons both with the entity's financial statements of previous periods, and with other taxpayers. Ideally, a business's income tax return and its financial statement will agree with, and be consistent with each other. For a variety of reasons, "adjustments must be made to reconcile the differences between financial accounting based books and records[,] and the presentation required for federal income tax return purposes.... Schedule M-1, Reconciliation of Income (Loss) per Books with Income per Return fulfilled this role for corporate tax returns of all sizes for over forty years." Schedule M-1 is very short, only 10 lines long. As the national and international business environment evolved, and tax and financial issues became more complex over the last four decades, M-1 proved less and less useful. The major purpose of the form is to flag which returns should be examined further, and possibly audited. But as more and more information was aggregated into M-1's 10 lines, its strength as an analytical tool declined. Consequently, Schedule M-3 was developed for use by large and midsize businesses (those with total assets of $10 million or more). Compared to the 10 items of information collected on the M-1, the new M-3 collects about 300 data points on more than 75 lines. The additional information enables the IRS to more easily identify returns that may be using questionable means ("aggressive transactions," as they are sometimes referred to) to reduce their tax burden. It also increases efficiency by allowing prompt identification of returns that do not require further review. The increased transparency should have a deterrent effect, as well. On a broader level, the new M-3 provides a wealth of information for research and can bring to light trends that IRS may wish to investigate further. Another feature of the M-3 that IRS views as particularly significant is the form's distinction between temporary and permanent differences. It has been explained as follows: Temporary (timing) differences occur because tax laws require the recognition of some items of income and expense in different periods than are required for book purposes. Temporary differences originate in one period and reverse or terminate in one or more subsequent periods.... By their very nature, [they] involve issues regarding the correct year for the item's inclusion in income or deduction as an expense. From a tax administration standpoint, they concern the time value of money.... Purely temporary differences are generally low risk for tax administration—and important in terms of the magnitude of the difference and the time before the temporary difference turns—because of the time value of money. In contrast to temporary differences, permanent differences are adjustments that arise as a result of fundamental permanent differences in financial and tax accounting rules. Those differences result from transactions that will not reverse in subsequent periods.... [P]ermanent differences have the potential to substantially influence reported earnings per share computations, and, in the case of public companies, stock prices. Accordingly, permanent differences of a comparable size generally have a greater audit risk than temporary differences. Schedule M-3 was phased in for tax year 2004 for firms reporting total assets greater than $10 million filing the regular Form 1120 corporation income tax return. The M-3 is optional for firms with total assets less than $10 million. Some of these firms did report an M-3. It was not used for the following return types: 1120S for S corporations, 1120-L for life insurance companies, 1120-PC for property and casualty insurance companies, 1120-F for foreign corporations, 1120-RIC for regulated investment companies, 1120-REIT for real estate investment trusts, and 1120-A for small firms. Those using M-3 for 2004 were not required to complete the whole form; certain parts were optional, but the whole M-3 was required for 2005 (if the taxpayer's total assets exceeded $10 million). For three of the other Form 1120 return types (1120S, 1120-L, and 1120-PC), 2005 was the phase-in year, and 2006 was the full compliance year. Form 1120-F had phase-in in 2007, and the whole form will be required for 2008. Tax year 2005 information will be available in February 2008. There were 5,557,965 corporate taxpayers for 2004, of whom 35,929 filed the accompanying Schedule M-3. Partnerships (which use Form 1065) were required to use Schedule M-3 beginning with tax year 2006 (phase-in). That information will be available in February 2009. For tax year 2004, there were 2,546,877 partnership filers. Schedule M-1 is still being used by corporations with total assets under $10 million. It contains no information on the section 198 brownfields tax incentive. | What was regarded as a key brownfields tax incentive in the Internal Revenue Code expires on December 31, 2007. Originally enacted in the Taxpayer Relief Act of 1997 (P.L. 105-34), the provision allows a taxpayer to fully deduct the costs of environmental cleanup in the year the costs were incurred (called "expensing"), rather than spreading the costs over a period of years ("capitalizing"). The provision was adopted to stimulate the cleanup and development of less seriously contaminated sites by providing a benefit to taxpaying developers of brownfield properties. It also contains a "recapture" provision, which diminishes its benefits. In each of its budget proposals since FY2003, the administration has proposed that Congress make the incentive permanent. The 109th Congress renewed the provision (for the fourth time) through 2007 (P.L. 109-432) and made it effective retroactively to December 31, 2005, when the previous extension expired. The law also made sites contaminated by petroleum products eligible for the tax incentive. The 110th Congress may consider a variety of options, including granting another extension, making the incentive permanent, allowing it to expire, or repealing the recapture requirement. Until recently, information on the extent of use of the brownfields tax incentive could not be determined from federal income tax returns. Use of a new tax form, Schedule M-3, for corporations and partnerships with assets over $10 million began being phased in with tax year 2004. The first of those data, covering the 2004 tax year, became available in February 2007. They showed that section 198 environmental remediation costs of $295 million were reported by 110 corporations, out of a population of 5,557,965 corporate returns. This information is understated because it excluded more than half of all corporations, and all partnerships. To take advantage of the tax break, a developer has to obtain a certification from the state environmental agency that the site qualifies as a brownfield. CRS surveyed the agencies of all states in 2003, and again in 2007, to ask how many certification applications they had received and approved. In 2003, 27 states reported that they had received a total of 161 applications since enactment in 1997, of which 147 were approved. In 2007, 29 states reported that they had received 175 applications over the previous four years, of which 170 were approved. The results were somewhat surprising; before enactment in 1997 the Treasury Department and the Environmental Protection Agency had expected it to be used as many as 10,000 times per year. Accordingly, CRS also asked the state agencies, four private developers, and the editor of a trade publication for their views on why the tax incentive was so little used. There was divided opinion on the utility of the tax incentive, and criticism of its stop-and-go nature due to its expiration and renewal every one or two years. The Schedule M-3 data for firms with more than $10 million in assets confirm the CRS survey findings of modest use of the section 198 brownfields tax incentive. The tax form was fully phased in with tax year 2006, and full information will be available in February 2009. However, as discussed in this report, it appears that the section 198 tax break is a useful tool in some brownfield situations. |
President Bush and Moroccan King Mohammed VI announced at a meeting in Washington, D.C. on April 23, 2002, that the two countries would seek to negotiate a free trade agreement. On October 1, 2002, U.S. Trade Representative Robert Zoellick sent Congress formal notification of the Administration's intention to begin FTA talks with Morocco. In his notification letter, Zoellick stated that the completion of an FTA with Morocco would "support this Administration's commitment to promote more tolerant, open and prosperous Muslim societies." Negotiations for the FTA were launched on January 21, 2003, in Washington. After a total of eight negotiating rounds, U.S. Trade Representative Robert Zoellick and Moroccan Minister Taib Fassi-Fihri reached agreement on March 2, 2004 on a comprehensive FTA. After the required 90-day congressional notification period expired, the two sides signed the agreement on June 15, 2004. Both the Senate and House approved implementing legislation in July 2004, and President Bush signed the legislation into law ( P.L. 108-302 ) on August 3, 2004. The Moroccan Parliament ratified the agreement on January 18, 2005, but subsequently had to legislate changes in the country's intellectual property laws to implement its FTA obligations. According to the Office of the U.S. Trade Representative, Morocco was chosen as an FTA partner for multiple reasons. First, USTR officials stated that a trade agreement with Morocco would further the executive branch's goal of promoting openness, tolerance, and economic growth across the Muslim world. Second, Morocco has been a strong ally in the war against terrorism. Third, the FTA would ensure stronger Moroccan support for U.S. positions in WTO negotiations. Fourth, USTR officials maintained that an FTA would help Morocco strengthen its economic and political reforms. Fifth, the agreement is expected to provide U.S. exporters and investors with increased market access. The Moroccan trade pact is now the fourth FTA (after Israel, Jordan, and Bahrain) the United States has in force with a Middle Eastern country. An agreement with Oman has been signed, but not yet considered by Congress. Each agreement is intended to be an integral part of President Bush's strategy to create a Middle East Free Trade Area by 2013. Morocco is a moderate Arab state which maintains close relations with Europe and the United States. Situated in North Africa on a land mass slightly larger than California, Morocco borders the North Atlantic ocean and Mediterranean Sea between Algeria and Western Sahara. Approximately 99% of its 30 million people are Muslim. The government of Morocco today is a constitutional monarchy. King Mohammed VI, who assumed the throne in July 1999, is the head of state. The constitution grants the King extensive powers, including the authority to appoint the prime minister and several key ministers individually, and approve the Council of Ministers, the power to dismiss the government, the power to dissolve the parliament, and the power to rule by decree. The King also serves as the supreme commander of the armed forces and serves as Morocco's religious leader or "Commander of the Faithful." The King, and not the Prime Minister, also defines the policy directions and priorities of the government. On the one hand, there have been some calls from elements of the Moroccan press for reform of the constitution to reduce the powers of the King, while enhancing the powers of the Parliament. On the other hand, many analysts believe that King Mohammed VI is dedicated to addressing Morocco's underlying social problems, while gradually liberalizing the political system further. Following September 2002 parliamentary elections, King Mohammed named Driss Jettou as Prime Minister and head a six-party center-left coalition government. Mr. Jettou is often described as a forceful technocratic leader. Yet Morocco's over 20 political parties create a fragmented political system, making it difficult for the government to reach consensus on how best to address its many social and economic problems. Critically, high unemployment that averages over 20% in urban areas, increasing income inequality, and widespread poverty provide fertile ground for increasing support for a fundamentalist Islamist movement, al-Adl wal-Ihsane (Justice and Charity). With a per capita income of about $2,000 (2002), Morocco also faces challenges typical of many poor developing countries. These include preparing the economy for freer trade, reducing public sector wage rates and bloated ministries, increasing labor market flexibility and skills, restoring a crumbling infrastructure, and reducing dependence on imported energy. Morocco's economy is based on mining, agriculture, fishing, tourism, a growing manufacturing sector, and a deregulated telecommunications sector. Morocco has the world's largest phosphate reserves, and exports of phosphates from state-owned companies account for about 17% of Morocco's total exports. Agriculture accounts for between 15-20% of GDP and employs between 40-45% of its workforce (services employs around 35% and industry around 15%). Morocco is a net exporter of fruits and vegetables and a net importer of cereals, oilseeds, and sugar. Severe droughts often hurt Morocco's farm production, thereby serving as a drag on economic growth. The Moroccan economy also depends heavily on the inflow of funds from Moroccans working abroad. The illegal production and export of cannabis also plays a role in the economy, particularly in the north. The European Union is its primary trading partner, accounting for nearly 67% of its exports and 55% of its imports in 2002. France is Morocco's single largest trading partner by a wide margin. The United States is a relatively small trading partner, accounting for about 5% of Morocco's total trade. The Bush Administration's decision to negotiate a FTA with Morocco was a surprise to a number of observers. A U.S. Chamber of Commerce official, for example, questioned the decision on the grounds that the United States does not do a lot of business with Morocco and that other Middle Eastern countries, such as Egypt and Turkey, would be more suitable partners. The Bush Administration, backed by a coalition of U.S. companies that support the negotiation, responded that both U.S. economic and political interests (see below) will be well served by the proposed FTA. Before the FTA, U.S. exports to Morocco faced an average tariff of 20% versus a 4% average tariff that Moroccan exports face in the U.S. market. By moving towards duty-free treatment, two-way trade flows should expand beyond the current small $ 854 million level (comprising U.S. exports of $469 million and imports of $385 million in 2003). In addition to the current leading U.S. exports to Morocco (aircraft, corn, and machinery), U.S. exports of products such as wheat, soybeans and feed grains, beef and poultry are expected to increase under the FTA. New commercial opportunities for U.S. exporters may also be derived by offsetting current tariff preferences as embodied in the European Union-Morocco Association Agreement, which became effective on March 1, 2000. This agreement provides preferential tariff treatment for most EU industrial goods, but largely excludes agriculture. Because agriculture will be included in the U.S.-Moroccan FTA, many U.S. agricultural interests believe they can enhance their position vis-a-vis European producers. The U.S.-Moroccan Business coalition also argues that the FTA will increase the access American firms have to Morocco's service sector. Besides telecommunications and tourism, the coalition maintains that new opportunities for U.S. firms in the banking, energy, audio-visual, telecommunications, finance, and insurance sectors are likely to be opened up as a result of Moroccan economic reforms. In addition, the FTA could support the Bush Administration's trade strategy of "competitive liberalization." By helping a developing country that recognizes the importance of trade liberalization as a key ingredient of development, the Moroccan FTA could demonstrate to other developing countries the benefits of economic reform and trade liberalization, including the WTO round of multilateral negotiations - the Doha Development Agenda. As a Chair of the G-77 and Africa Group within the WTO, the Bush Administration maintains that Morocco is in a leading position to promote the benefits of the Doha Round to other developing countries. Similar to the Jordan-U.S. FTA, the FTA with Morocco is viewed by the Administration as a tool to support a moderate Muslim state in the region. By contributing to increased development and prosperity in Morocco, the FTA is intended to contribute to the stability of the region and send a concrete signal to countries in the Middle East about the benefits of closer economic and political ties with the United States. The FTA is also a mechanism for advancing the overall U.S.-Moroccan relationship. As Morocco is one of the strongest U.S. allies in the war on terrorism in the Middle East, the FTA is intended as a reward for its support, as well as send a signal to the rest of the Arab world that the United States wants closer ties. At a time many voices in the Arab and Muslim world are calling for boycotts against the United States, Morocco is seeking a closer economic relationship. The agreement provides that more than 95% of bilateral trade in consumer and industrial products will become duty-free immediately, and all other remaining tariffs will be eliminated within nine years. U.S. export sectors such as information technology products, construction equipment, and chemical stand to benefit. For the import-sensitive textile and apparel sector, trade will be duty-free if imports meet the Agreement's rules of origin. The Agreement requires qualifying apparel to contain either U.S. or Moroccan yarn and fabric and a limited amount of third country content. On agriculture, U.S. poultry, beef, and wheat exports will benefit from liberalization of Morocco's tariff-rate quotas. Morocco will also provide immediate duty-free access on products such as pecans, frozen potatoes, and breakfast cereals and more graduated duty-free access on other products such as soybeans, sorghum, and grapes. For its part, the United States will phase-out all agricultural tariffs, most in fifteen years. Morocco will provide U.S. service providers such as audiovisual, express delivery, telecommunications, computer and related services, construction, and engineering with enhanced access to its market. U.S. banks and insurance companies will have the right to establish subsidiaries and joint ventures in Morocco, as well as the right to establish branches, subject to a four year phase-in for most insurance providers. Protections and non-discriminatory treatment are provided for digital products such as U.S. software, music, text, and videos. Protections for U.S. patents, trademarks, and copyrights parallel and in some cases deepen the standards of other U.S. FTAs. In the area of telecommunications, each government commits to that users of the telecom network will have reasonable and non-discriminatory access to the network. U.S. phone companies will have the right to interconnect with former monopoly networks in Morocco at non-discriminatory, cost-based rates. The agreement provides for anti-corruption measures in government contracting. U.S. companies are provided access to bidding on a range of Moroccan government contracts and procurement. Both countries also commit to enforce their domestic labor and environmental laws, and the agreement includes a cooperative mechanism in both labor and environmental areas. Agricultural producers in the United States welcome the tariff reductions that will be phased in as a result of the FTA. In particular, the American Soybean Association said that the duty on soybeans for processing will be eliminated immediately, and soybeans imported for other uses and processed soy products will be reduced by 50% in the first year of the agreement and phased out over the next five years. Previous import duties in Morocco were 2.5% on soybeans for processing, 25% on soybean meal, and 75.5% for soy products that are used in human food. The National Cattlemen's Beef Association looks forward to increased market access to Morocco's hotel and restaurant industry as Morocco opens its market to U.S. beef with a low in-quota tariff that goes to zero quickly. According the U.S. Trade Representative's Office, producers of poultry, wheat, corn, and sorghum will also gain from the agreement. Most U.S. trade advisory committees endorsed the agreement. The most senior committee, the Advisory Committee for Trade Policy and Negotiations, found the agreement "to be strongly in the U.S. interest and to be an incentive for additional bilateral and regional agreements." Advisory committees on services, goods, and intellectual property also expressed broad support. However, the Labor Advisory Committee expressed concerns that were echoed by several Ways and Means Committee Democrats at the July 7, 2004 hearing. These concerns were basically whether the trade agreement goes far enough in encouraging Morocco to meet basic international labor standards. However, the accord generally is credited with influencing significant labor reforms in Morocco. For example, a new labor law that went into effect on June 8, 2004 (1) raises the minimum employment age from 12 to 15 to combat child labor; (2) reduces the work week from 48 to 44 hours with overtime rates payable for additional hours; (3) calls for periodic review of the Moroccan minimum wage; and (4) guarantees rights of association and collective bargaining and prohibits workers from taking actions against workers because they are union members. The U.S. Department of Labor, meanwhile, has created an assistance program with a budget of nearly $9.5 million to improve industrial relations and child labor standards in Morocco, and the Moroccan government has ratified seven of the eight core International Labor (ILO) conventions. | The United States and Morocco reached agreement on March 2, 2004 to create a free trade agreement (FTA). The Senate approved implementing legislation ( S. 2677 ) on July 2, 2004 by a vote of 85-13 and the House approved identical legislation ( H.R. 4842 ) on July 22, 2004 by a vote of 323-99. The next day, the Senate passed House approved H.R. 4842 without amendment by unanimous consent. The legislation was signed by President Bush into law ( P.L. 108-302 ) on August 3, 2004. The agreement entered into force on January 1, 2006, a year later than planned due to the need for Morocco's Parliament to pass amendments to its intellectual property laws. The FTA is intended to strengthen bilateral ties, boost trade and investment flows, and bolster Morocco's position as a moderate Arab state. More than 95% of bilateral trade in consumer and industrial products became duty-free upon entry into force, while most other remaining barriers are to be phased out over a number of years. This report will be updated later this year. |
Congress has long had an interest in the revitalization of distressed areas through expanded business and employment opportunities. This interest continues today, with combined federal government expenses of $10.9 billion and $5.1 billion in foregone tax revenue in FY2009 for the purpose of community and regional development. Given this commitment towards the goal of economic development, it is natural to ask about the effectiveness of the underlying programs. Empowerment Zones (EZs), Enterprise Communities (ECs), and Renewal Communities (RCs) are federally designated geographic areas characterized by high levels of poverty and economic distress, where businesses and local governments may be eligible to receive federal grants and tax incentives. The objective of this report is to provide a comparative overview of the similarities and differences among the three programs, specifically policies to target and provide federal incentives to economically distressed zones. The report also examines studies that have evaluated the impact of EZs, ECs, and RCs, and provides information on their current status. Finally, the report discusses recent legislative activity and congressional issues and options. Since 1993, Congress has authorized three rounds of EZs (1993, 1997, 1999), two rounds of ECs (1993, 1997), and one round of RCs (2000) with the objective of revitalizing selected economically distressed communities. In addition, Round I contained a supplemental round established by the Clinton Administration. The three programs have different benefits and eligibility criteria. For example, the nine initial EZs each received tax incentives and grants of $100 million (urban) and $40 million (rural), whereas the 95 initial ECs each received tax benefits and smaller grants of $2.95 million for smaller urban counties and rural communities. RCs did not receive grants, but benefitted from wage credits, and tax investment incentives. Eligibility varied depending on levels of population, unemployment, and poverty. In its FY2010 and FY2011 budgets, the Administration requested that Congress extend tax incentives for EZs and RCs until December 31, 2010 and 2011. EZ and RC tax incentives were extended in the Emergency Economic Stabilization Act of 2008 ( P.L. 110-343 ), through December 31, 2009. EZ and RC tax benefits lapsed from January 2010 until December 2010. Currently, the estimated $1.8 billion in grant incentives provided to EZs and ECs since 1993 have mostly been expended. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ), enacted on December 17, 2010, extended EZ tax benefits, but not RCs, until the end of 2011. In addition, legislation such as the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) provided broadband education, training, and equipment for selected facilities located within EZs and ECs, and recovery zone bonds for EZs. In 2009, P.L. 111-8 and P.L. 111-80 provided $3 million in appropriations for EZs and ECs. While a short-term extension of EZ tax incentives was enacted in the 111 th Congress, a similar extension of the RC tax incentives might continue to be an issue in the 112 th Congress. After Congress authorized the programs, federal agencies responsible for administering the programs held competitions to designate a selected number of communities. According to estimates by the Government Accountability Office (GAO), 993 communities applied for designation and 184 were selected. In addition to funding authorized through legislation in the three rounds, designated communities also received funding through annual appropriations laws from 1999 to 2009. Federal block grant funds for Round I remained available to finance qualified projects until December 31, 2004. By contrast, Round II funds are available to communities until expended, with the exception of FY2003 appropriations for Round II, which were available until September 30, 2005. Tax incentives expired on December 31, 2009. Table 1 summarizes the three rounds of EZ, EC, and RC programs and the number of designated communities by urban and rural category. As shown in Table 2 , four federal agencies are responsible for administering the programs. Federal grants for the EZ and EC programs are administered by the Department of Health and Human Services (HHS), the Department of Housing and Urban Development (HUD) and the Department of Agriculture (USDA). Although EZ and EC grants have mostly been expended, Congress has provided funding for selected EZs and ECs through annual HUD and USDA appropriations (see section " Grant Incentives "); in addition, legislation such as the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) provided broadband education, training, and equipment for selected facilities located within ECs. HHS is responsible for providing EZ and EC grants under the Social Services Block Grant program to (1) help prevent, reduce, or eliminate dependence on public assistance; (2) help individuals achieve or maintain self-sufficiency; and (3) prevent neglect, abuse, or exploitation of children and adults. HUD administers the urban programs under its CDBG program to provide flexible economic development funds for local communities. Economic development activities include job creation and training, entrepreneurial activities, small business expansion, and job support services such as affordable child care and transportation services that would help EZ and RC residents gain employment in jobs that offer upward mobility. USDA oversees the EZ and EC program in rural areas and administers the grants to Round II rural EZ and ECs and Round III EZs. According to the USDA, more than 53 million people live in rural areas of the United States, 16.4% of whom live in households with incomes below the federal poverty level. EZ and EC grants target economic development projects in rural areas experiencing persistent poverty and unemployment levels. The Internal Revenue Service (IRS) is responsible for administering the tax benefits available under the EZ, EC, and RC programs. A list of census tracts eligible for EC and EZ funding can be obtained from HUD. A Community Empowerment Board was established in 1993 to coordinate the EZ, EC program. The Board had 26 members from federal agencies, including the U.S. vice president, who served as chair. According to GAO: The board's function was to consult in the designation of Round I and II EZs and ECs and coordinate the various federal agency resources that EZs and ECs would use to implement their strategic plans. For example, the Community Empowerment Board encouraged other agencies to provide preference points to EZs and ECs in selection competitions for other federal programs. The Community Empowerment Board was disbanded prior to Round III of the EZ program in 2004. Communities nominated for EZ, EC, or RC designations have been required to meet certain eligibility criteria based largely on the socioeconomic characteristics of the residents living in the nominated areas. Specifically, during their initial application, nominated census tracts have been required to meet statutory or regulatory requirements for (1) poverty in each census tract, (2) overall unemployment, and (3) total population. In most cases, these requirements were initially based on 1990 census data since the programs were authorized in 1993. The levels required for eligibility differed by round, by program, and between urban and rural nominees, as shown in Table 3 . In addition to the socioeconomic criteria, communities have also been required to meet criteria regarding geographic size and general economic distress. Further, Indian reservations were excluded from Round I EZ or EC designation. Only census tracts within nominated areas designated by HUD were eligible for tax credits. The enterprise zone concept originated in Great Britain in the mid-1970s. In 1978, Sir Geoffrey Howe, a member of the British Parliament, argued for the establishment of market-based enterprise zones, which would provide government tax relief in economically distressed areas. By the mid-1980s, more than two dozen enterprise zones were established in England. In the United States, enterprise zone legislation was introduced in Congress as early as 1980. Republican Representative Jack Kemp introduced the first enterprise zone bill in May 1980 ( H.R. 7240 , the Urban Jobs and Enterprise Zone Act of 1980). Democratic Representative Robert Garcia co-sponsored with Representative Kemp H.R. 3824 , the Urban Jobs and Enterprise Zone Act of 1981. Although federal legislation was not enacted in the 1980s, several states did implement enterprise zone programs. By the late 1980s, over two thirds of the states had embraced the concept, enacted legislation, and started enterprise zone initiatives. According to one estimate, by July 1993, before the establishment of the federal programs, 37 states had established enterprise zone programs with different eligibility criteria, and benefits. Congress has authorized three rounds for the designation of Empowerment Zones, Enterprise Communities, and Renewal Communities. Three designation rounds—in 1993-1994, 1997-1999, and 2000—applied to EZ programs, while only the first two rounds applied to ECs, and the third round applied to the RC program. In addition, Round I contained a supplemental round established by the Clinton Administration. The designation process is discussed in more detail below, and a list of EZ/E and RC communities is available in Appendix A to this report. The 103 rd Congress established the EZ and EC programs in 1993 through the Omnibus Budget Reconciliation Act of 1993 ( P.L. 103-66 ). The legislation provided both grant and tax incentives to companies located in EZs and ECs that employed local residents and conducted business in economically distressed neighborhoods. Distressed neighborhoods were identified at the census tract level based on several indicators such as the percent of the population in poverty, the unemployment rate, and total population, as shown in Table 3 . To be considered in the first round of EZ and EC programs, areas had to be nominated by one or more local governments and the state or states in which they were located. Areas on Indian reservations were not eligible to apply in Round I. An area could also have met this nomination requirement if nominated by an economic development corporation chartered by the state. The nominations were presented to the federal agencies responsible for administering the programs, including HHS, HUD, and USDA, where the appropriate Secretary made a final designation. By the end of 1994, HHS, HUD, and USDA announced the designation of 104 EZs and ECs—pursuant to the 1993 authorizing legislation. The designated communities were chosen from over 500 communities that applied in a competitive selection process. The roughly $1 billion in federal grant funding for the first round was allocated for use over the 10-year life of the program, from December 1994 to December 2004. Businesses were provided the following tax credits: (1) a 20% wage credit for the first $15,000 of wages paid to a zone resident who worked in the empowerment zone, (2) an additional $20,000 of section-179 expensing for qualifying zone property, and (3) tax-exempt financing for certain qualifying zone facilities. In 1994, HUD also created two additional supplemental designations, Supplemental Empowerment Zones and Enhanced Enterprise Communities. Unlike EZs or ECs, these designations were not legislatively mandated. Rather, under Executive Order 13005 (May 21, 1996), President Clinton authorized HUD to designate two communities as Supplemental Empowerment Zones and four communities as Enhanced Enterprise Communities. HUD provided these communities with certain grants and loan guarantees, which could be used for activities eligible under the Community Development Block Grant program. The two supplemental EZs and four enhanced ECs received total federal grant funding of $300 million. In addition to the first round of funding authorized in 1993, Congress authorized the designation of two other rounds of competitions for EZs and ECs, with both grant and tax incentives. The Taxpayer Relief Act of 1997 (TRA, P.L. 105-34 ) authorized the second round of Enterprise Zones and Enterprise Communities and expanded eligibility to Indian tribes. Rural communities in the second round were authorized under the Omnibus Consolidated and Emergency Supplemental Appropriations Act of 1999 ( P.L. 105-277 ). Unlike Round I communities, Round II EZs and ECs received federal grant funding through HUD and USDA appropriations. The Consolidated Appropriations Act for the Fiscal Year Ending September 2001 ( P.L. 106-554 ) authorized a third round of Enterprise Zones and Enterprise Communities to provide tax incentives for communities; no federal grant funding was authorized for Round III communities. Congress authorized a new program in 2001 known as "Renewal Communities" under Appendix G of the Consolidated Appropriations Act for the Fiscal Year Ending September 2001. As with the EZ and EC communities, Renewal Communities encouraged local businesses to hire local residents, open branches, and expand their business activities in designated areas. The incentives included employment credits, a zero percent tax on capital gains, increased tax deductions on equipment purchases, accelerated real property depreciation, and other incentives, and programs such as bonds to finance school programs; these are discussed in more detail below. The Renewal Community (RC) legislation also authorized public schools that met certain criteria in enterprise communities and empowerment zones for qualified zone academy bonds (QZABs). Qualified zone academies are public schools and programs that provide education and training at the secondary level and below. QZABs are bonds designated for school modernization and renovation where the federal government offers annual tax credits to the bondholders in lieu of interest payments from the issuer. Issuers of QZABs are required to use the proceeds to finance public school partnership programs in economically distressed areas. The federal government is effectively paying the interest on the bonds for the state or local government issuers. QZAB holders are limited to banks, insurance companies, and corporations actively engaged in the business of lending money. In addition, the RC legislation allowed a 15% wage credit on the first $10,000 of wages for qualified workers and an additional $35,000 in capital equipment expensing in the designated regions. These qualified businesses were also allowed partial deductibility of qualified buildings placed in service. Renewal community tax benefits were available through December 31, 2009. Several tax incentives for the District of Columbia were adopted in 1997, through the designation of the District of Columbia as an Enterprise Zone: a wage tax credit of $3,000 per employee for wages paid to a District resident, tax-exempt bond financing, and additional first-year expensing of equipment. These incentives apply to areas with poverty rates of 20% or more. There is also a zero capital gains tax rate for business sales in areas with 10% poverty rates. These provisions were originally available through December 31, 2007, and subsequently extended through 2009 by the Emergency Economic Stabilization Act of 2008 ( P.L. 110-343 ). Figure 1 presents a map with the location of EZs, ECs, and RCs by state and congressional district. A total of 40 EZs (30 urban and 10 rural), 95 ECs (65 urban and 30 rural), and 40 RCs (28 urban and 12 rural) have been authorized since 1993. The District of Columbia EZ was also authorized in the TRA and is afforded the same tax incentives as the other EZs. The DC Enterprise Zone incentives were extended through December 31, 2005, by P.L. 108-311 , through 2007 by P.L. 109-432 , through 2009 by P.L. 110-343 , and through 2011 by P.L. 111-312 . Communities designated as EZs, ECs, and RCs are eligible for a combination of tax, grant incentives to encourage economic development, and preferences. Since the initial authorizing legislation was enacted, the number of tax incentives offered has grown, while the value of grant incentives has declined. In dollar terms, for example, the value of grants provided through the first 15 years of the programs is roughly equal to the tax incentives currently being offered every 16.5 months. Tax incentives, or tax expenditures, are in many ways equivalent to entitlement spending. That is, tax expenditures are available to everyone who qualifies and federal budgetary costs depend on program rules (the tax code), economic conditions, and behavioral responses. Furthermore, they often remain in the tax code until changed or eliminated by congressional action. Federal tax incentives for community development have historically taken the form of either employment or investment incentives. Table 4 describes the tax incentives available to businesses located in Empowerment Zones and Renewal Communities on the basis of their designation. Descriptions of the provisions are provided below. Incentives for employers to hire workers are used by both the EZ and RC programs with the goal of fostering economic development in those areas. From an economic perspective, these incentives reduce the after-tax wage paid by the employer and should result in an increase in employment, compared to a no incentive alternative. Both the EZ and RC employment credits are based upon similar criteria. That is, the credits are calculated using similar formulas and eligibility is defined using similar criteria. Both credits are equal to a set percentage of an eligible employee's wages, up to a cap. For the Empowerment Zone employment credit, the credit is equal to 20% of the first $15,000 in wages paid to an employee who is a resident of the empowerment zone and who performs most of their work within the empowerment zone. In the case of the Renewal Community employment credit, the credit is equal to 15% of the first $10,000 in wages paid to an employee who is a resident of the renewal community and who performs most of their work within the renewal community. In both cases, the credit is claimed by the employer. Investment incentives are used by both the EZ and RC programs with the goal of fostering economic development through an increase in the capital stock within the designated geographic areas. In contrast to the employment incentives, a variety of investment incentives are available. Under section 179 of the Internal Revenue Code (IRC), firms in all lines of business and all sizes have the option of expensing the cost of new and used qualified property (or assets) they acquire in the year when the assets are placed in service, within certain limits. The maximum expensing allowance is $250,000 for qualified assets bought and placed in service in 2010 by firms located outside Empowerment Zones and Renewal Communities. Firms located within Empowerment Zones or Renewal Communities are allowed to claim an additional $35,000, for a total of $285,000. The commercial revitalization deduction reduces the after-tax cost of commercial construction within a Renewal Community. The deduction allows a taxpayer to either deduct one-half of the commercial revitalization expenditures for the taxable year the building is placed in service, or amortize all the expenditures on a pro-rata basis over the 120-month period beginning with the month the building is placed in service. Under either choice, capital cost recovery occurs significantly faster than under standard tax rules. To avoid assigning benefits twice, no depreciation is allowed for amounts deducted under this provision and the adjusted basis of the building is reduced by the amount of the commercial revitalization deduction. Empowerment zone bonds are a type of tax-exempt private activity bond that can be issued for qualified economic development projects in the EZ. The EZ and RC programs have been implemented in rounds and each round is subject to different tax-exempt debt rules. Round I EZ bonds are subject to the state volume cap and each zone can have only $3 million of EZ bonds outstanding. There are also limits on the amount of Round I EZ bonds any one borrower can have outstanding. An EZ borrower can have an aggregate of $20 million outstanding for all EZ projects throughout the country. Round II EZs (and all EZs established after December 31, 2001) are subject to designation "lifetime" caps depending on the urban versus rural designation, and population for urban EZs. For the lifetime of the EZ designation, rural EZs can issue up to $60 million; urban EZs with population less than 100,000 can issue up to $130 million; and urban EZs with population greater than 100,000 can issue up to $230 million. In contrast to Round I EZs, there are no limits on the amount any one entity can borrow for Round II EZs. Qualified RC assets that are held for more than five years are eligible for an exclusion from capital gains taxes. Qualified assets include original-issue stock purchased for cash in an RC business, a partnership interest acquired for cash in an RC business, and tangible property originally used in an RC business by the taxpayer that is purchased or substantially improved after December 31, 2001. Taxpayers can elect to defer recognition of gain on the sale of a qualified EZ asset held for more than one year and replaced within 60 days by another qualified EZ asset in the same zone. 34 The deferral is accomplished by reducing the basis of the replacement asset by the amount of the gain recognized on the sale of the asset. For taxpayers other than corporations, 50% of the gain from the sale of qualified small business stock held for more than five years is excluded from gross income. 35 In the case of qualified small business stock acquired after December 21, 2000, in a corporation which is a qualified business entity (as defined in section 1397C(b)) during substantially all of the taxpayer's holding period, the exclusion is increased to 60%. 36 For all qualified small business stock acquired after February 17, 2009, and before January 1, 2011, the exclusion is increased to 75%. Grant incentives for the EZ, EC, and RC programs are estimated to have been nearly $1.8 billion from 1993 through 2009. A total of $1 billion was provided in the form of grants for the first round in 1994. A total of $300 million was provided in Community Development Block Grant (CDBG) supplementary funding for Supplemental Empowerment Zones and Enhanced Enterprise Communities in Round I. Annual HUD and USDA appropriations provided over $480 million through FY2009 for Round II communities. Communities in Round III only received tax incentives and no grants. Table 5 below presents a summary of grant incentives provided for EZs and ECs. The Community Empowerment Board—established in 1993 to coordinate federal agencies implementing the EZ and EC programs—recommended that preference points be given to EZs and ECs in competition for other federal benefits. According to GAO, several federal agencies followed the guidance proposed by the Community Empowerment Board and provided preference points for EZs and ECs. For example, EZs and ECs designated as part of Round I received preference for federal economic development programs, such as the Environmental Protection Agency's 2003 National Brownfields Assessment, Revolving Loan Fund, and Cleanup Grants. According to GAO: In 2003, the U.S. Department of Education's Teacher Quality Enhancement Grants program provided a competitive priority to applicants who proposed to carry out activities in EZs or ECs. In addition, Congress has regularly earmarked federal funds, such as grants for low-income housing repair or direct loans for rural development projects, to projects located in EZs and ECs. In addition, the U.S. Department of Justice's Weed and Seed program, provided assistance to reduce crime and drug abuse, and offered preferences for EZs, ECs, and RCs in Round I. Other communities that competed for, but did not receive, EZ or EC status received preferences for federal technical assistance programs. For example, USDA named some communities that competed, but did not win, rural EZ and EC designation as "Champion Communities." These communities were eligible for technical assistance from USDA and preferences for other government programs. According to GAO, 118 Champion Communities were named by USDA. In addition, EZs and ECs sometimes received preferences from state and local government economic development programs. In addition, legislation such as the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) provided preference for broadband education, training, and equipment for selected facilities located within ECs. Due to the lack of reporting data, it is difficult to determine the use and impact of these preferences. GAO indicated that the preferences may have decreased after the Community Empowerment Board disbanded. Finally, GAO concluded that limited data existed and that "the extent to which these applicants have taken advantage of these preferences is not known." A number of studies have evaluated the effectiveness of the EZ, EC, and RC programs. Government-sponsored studies by the Government Accountability Office (GAO) and the Department of Housing and Urban Development (HUD) have failed to link EZ and EC designation with improvement in community outcomes. It is worth noting that these studies examined the Round I EZs and ECs, which received significant grant funding for community organizations. In addition, several non-governmental economic studies have evaluated the effectiveness of zone incentives. Overall, these studies have found modest, if any, effects and call into question the cost-effectiveness of these programs. This inability to link these programs to improvements in community level outcomes should not be interpreted as meaning that the EZ, EC, and RC programs did not aid economic development. Clearly, businesses and investors that received program benefits were made better off. The main conclusion from these studies is that the EZ, EC, and RC programs have not been shown to have caused a general improvement in the economic conditions of the locals. One possible cause for this inability to generalize the program effects is the size of the programs is small compared to the economic activity within any of the zones. In 2001, HUD published a progress report covering the first five years of the Empowerment Zone and Enterprise Communities programs. HUD's study presented mixed results concerning the effectiveness of the programs. Taken together, the study's mixed results were inconclusive and did not show that the EZ and EC programs result in community improvement. To date, no final report has been published. HUD's interim assessment studied the performance of several urban EZs and urban ECs over the first five years of the EZ and EC programs. The report evaluated performance based on four metrics: economic opportunity, community-based partnerships, sustainable community development, and strategic vision for change. Applicants for empowerment zone designation were required to incorporate these four principles into the strategic plans submitted with their applications. HUD made several tentative findings consistent with a positive impact by the EZ and EC programs. In aggregate, the Interim Report found that job growth accelerated in the six empowerment zones; job growth in four of the six empowerment zones outpaced job growth in comparison areas; the number of both EZ resident-owned and minority-owned businesses increased substantially across all six empowerment zones; and workforce development activities created as many as 16,000 jobs for EZ and EC residents. These results might not be robust given that the results are sensitive to the selection of comparison areas. The rounds studied in the report may suggest grant funding as an important factor to consider in economic development policy. On the other hand, other econometric findings were consistent with little or no positive impact. During the period studied, there was a general economic upturn, making it difficult to separate employment growth attributable to the EZ and EC programs from the overall rising economy. In addition, given the low take-up rate of the tax incentives, employment increases may have been attributable to activities not related to EZ activities. The Community Renewal Tax Relief Act of 2000 ( P.L. 106-554 ) mandated that GAO audit the effectiveness of the EZ, EC, and RC programs. The mandate specifically required GAO to examine the programs' effect on poverty, unemployment, and economic growth. The 2004 GAO report documented the use of selected tax benefits, but did not attempt to determine their impact on community outcomes. Using IRS data, the report found that corporations and individuals claimed an estimated $251 million in EZ employment credits between 1995 and 2001. During the same time period, 36 different series of tax-exempt bonds, with an aggregate value of $315 million, were issued to benefit businesses in EZs, Round I ECs, and the DC Enterprise Zone. Data on other tax benefits were not available from the IRS information. Given the lack of available data, GAO did not attempt to determine the impact of the programs on community outcomes and instead reported on earlier impact studies. The 2006 GAO study analyzed the impact of Round I EZ and EC designation on community level outcomes using multiple methods, but researchers were unable to conclude that community designation improved community outcomes. In one case, GAO used descriptive statistics to analyze the statistical significance of changes in community level outcomes and generally found improved community outcomes (reduced unemployment or poverty). A limitation of this methodology is the inability to attribute community outcomes to the EZ and EC programs. In the second case, GAO used an econometric methodology in an attempt to tie community outcomes to the EZ program. As in the first case, however, GAO was unable to determine whether the changes were a response to the program or other economic conditions. Taken together, the GAO reports highlight the difficulty in indentifying a causal linkage between the EZ, EC, and RC programs and economic development. The 2004 report identifies data limitations which, effectively, eliminate large-scale econometric evaluation. Further, the 2006 report reiterates the observation from the HUD Interim Report that comparative methods are sensitive to the choice of comparable jurisdictions. In addition to studies conducted by federal agencies, several studies have been completed by academic researchers on the potential impact of federal empowerment zones. Overall, these studies have found modest, if any, effects and call into question the cost-effectiveness of these programs. One persistent issue in conducting these studies is the inherent difficulty of identifying the effect of the programs from overall economic conditions. Evaluators might be required to track individuals, households, businesses, and local governments that receive benefits; in addition, researchers would have to match these with similar individuals, households, and businesses that do not receive the benefits, to prospectively estimate statistical differences between beneficiary and non-beneficiary groups. Studies similar to the 2006 GAO study, examined four empowerment zones and found no economically significant effect. One study found that, while poverty and unemployment decreased in some EZ areas, similar changes occurred in comparison areas that did not receive the EZ designation. A second study was also unable to isolate an effect from EZ designation. These results suggest that the program had no statistically significant effect on income, unemployment, or poverty, a finding shared by recent research on state level enterprise zones. In addition, a number of studies have focused on the effect of the programs on the housing market. These studies have reached conflicting conclusions. Two studies have found that owner-occupied housing increased between 22% and 25% with zone designation. A third study, however, found that empowerment zone renters are made worse off as rents rise faster than earnings. Congress has shown an ongoing interest in extending and reforming the EZ, EC, and RC programs, and several bills were introduced in the 111 th Congress proposing changes. At the end of the 111 th Congress, Empowerment Zone tax incentives were extended through December 31, 2011, by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ). Some of the bills in the 111 th Congress would have extended tax benefits and revised benefits and requirements for these programs. Changes would have included a temporary extension of the programs, changes in eligibility requirements, adjustment of tax and grant benefits, and changes in boundaries. Changes would also have included the use of the empowerment zone concept to target federal assistance for other programs. In addition, some of the proposed legislation would have incorporated the Department of Commerce—previously not involved in the EZ, EC, and RC initiatives—and allowed for the provision of grants through this new venue. Although most of the grant funding of EZs, ECs, and RCs expired several years ago, some of the legislation would have initiated new grant programs, and created new tax incentives for the EC program. One congressional proposal would have targeted EZ funds to manufacturing, clean energy, and agricultural enterprises by establishing an EZ revolving loan fund for small and medium-sized manufacturers to improve energy efficiency and to produce clean energy technology; the legislation would have provided a tax credit for farmers' investments in value-added agriculture. Finally, one bill would have created an Air and Health Quality Empowerment Zone under the Environmental Protection Agency. These policy issues and legislation are discussed in more detail below. In the 111 th Congress, H.R. 4213 , the Tax Extenders Act of 2009, passed the House on December 9, 2009, by a vote of 241 to 181 and would have temporarily extended tax benefits for EZs and ECs. The legislation was enacted as P.L. 111-205 , the Unemployment Compensation Extension Act of 2010—a vehicle to extend unemployment benefits—but the extension of RC and EZ incentives was not included in the enacted law. Section 201 of the House-passed version of the legislation would have extended Empowerment Zone tax incentives through December 31, 2010. The increased exclusion of gain on stock of EZ businesses would have been extended through December 31, 2015. Section 202 would have extended Renewal Community tax incentives through December 31, 2010. H.R. 1677 , the Empowerment Zone, Renewal Community and Enterprise Community Enhancement Act of 2009, and its identical companion bill in the Senate, S. 1222 , would have extended the designation of Round I, II, and III EZs, ECs, and RCs through December 31, 2015. H.R. 3500 , the Small and Medium Urban Regions Growth and Empowerment Act of 2009, would have extended the period of designation for EZs, ECs, and RCs through December 31, 2019. S. 3787 would also have extended Rounds I, II, and III designations from December 31, 2009, through December 31, 2019. Finally, at the end of the 111 th Congress, Empowerment Zone tax incentives were extended through December 31, 2011 by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ). The extension of EZ and RC benefits, which expired on December 31, 2009, was an issue for the 111 th Congress and for local communities since early 2009. In its 2010 report, GAO indicated that communities responsible for managing the RC and Round III EZ programs identified several "pending or potential projects that could be implemented if the programs were extended beyond December 31, 2009." GAO surveyed a total of 50 RC and EZ projects and 39 communities, nearly 80%, indicated that they had pending projects. As a result of the expiration of the RC and EZ tax incentives at the end of 2009, most of these projects were on hold, pending the renewal of the tax incentives for the programs. In both its FY2010 and FY2011 budget documents, the Obama Administration requested that Congress extend RC and EZ benefits. Because of competing economic priorities, such as the extension of unemployment benefits, legislation that originally included RC and EZ benefits was instead used as a vehicle to address unemployment issues. While a short-term extension of EZ tax incentives was enacted in the 111 th Congress, a similar extension of the RC tax incentives might continue to be an issue in the 112 th Congress. In the 111 th Congress, H.R. 1677 , the Empowerment Zone, Renewal Community and Enterprise Community Enhancement Act of 2009, and its identical companion bill in the Senate, S. 1222 , would have established job creation criteria to revise the requirement that 35% of employees be residents of EZs. For example, if a business located in a zone creates 500 full-time jobs within EZ boundaries in three years, or a business outside the zone creates 1,000 full-time jobs within EZ boundaries, the residency requirement would be met. The bills would also have eliminated other residency requirements for the empowerment zone employment tax credit and would have granted authority to expand the boundaries of EZs and ECs, including those located in rural areas. Over the last decade, several legislative proposals have sought to amend the process to designate the boundaries of Empowerment Zones. In the 110 th Congress, S. 942 , and in the 109 th Congress, S. 2596 , both proposed the modification of the boundaries for empowerment zone designation. In the 111 th Congress, H.R. 3500 , the Small and Medium Urban Regions Growth and Empowerment Act of 2009, would have provided authority to expand the boundaries of empowerment zones and enterprise communities, including those located in rural areas. Changing eligibility requirements for EZ, EC, and RC programs, such as those pertaining to the hiring of residents living in distressed communities, might encourage more businesses to establish projects in these areas. Linking these requirements to the creation of full-time jobs might also contribute to further economic activity. On the other hand, a long-standing criticism of geographically targeted incentives is that they might encourage businesses to move from one location to another. That is, the result might be the redistribution of business activity that improves one geographic area at the expense of another rather than the addition of newly created business activity. Proponents of adjusting the geographic boundaries of EZs, ECs, and RCs have argued that economic distress changes over time and census tracts that might have previously met unemployment, poverty, and population thresholds, might no longer meets these requirements. They have also argued that allowing for changes in designated census tracts over time based on data provided by the U.S. Census Bureau might help to target federal aid more effectively. Critics might argue that the law does not allow census tracts that were designated as economically distressed to have their designation removed. HUD and USDA are required by law in the EZ, EC, and RC programs to ensure that a community does not modify the boundaries of designated areas. Selected legislation in the 111 th Congress would have made changes to both tax and grant incentives available in EZs, ECs, and RCs. For example, H.R. 1677 and S. 1222 would have made changes to EZ and RC tax benefits, and would have allowed carryovers of unused expensing allowances for EZ businesses. In addition, certain EZ businesses would have been allowed to elect to receive payments in lieu of tax benefits. Local governments would have been permitted to issue tax-exempt rural EC bonds and EZ facility bonds to finance projects and to provide federal guarantees and tax exemptions for eligible businesses located in EZs and RCs. S. 3787 would also have modified the benefits available in EZs and other tax-incentive areas, to require the Secretary of Commerce to establish a program for the award of grants to States to establish revolving loan funds for small and medium-sized manufacturers to improve energy efficiency and produce clean energy technology, to amend the Internal Revenue Code of 1986 to provide a tax credit for farmers' investments in value-added agriculture, and for other purposes. H.R. 3500 , the Small and Medium Urban Regions Growth and Empowerment Act of 2009, would have expanded the use of tax-exempt Gulf Opportunity Zone and facility bonds in such areas, and have authorized the Secretary of the Treasury to make grants to states, local governments, or nonprofit organizations to make businesses aware of the tax benefits of enterprise zones and to provide technical assistance to small businesses eligible for such benefits. Several bills have proposed adjusting, changing, and increasing both tax and grant incentives for EZs, ECs, and RCs. Supporters of these changes have argued that additional benefits may lead to more economic activity in distressed areas. In addition, creating a Revolving Loan Fund through the Department of Commerce may provide an ongoing source of funding for the EZ, EC, RC programs as the loans are lent and repaid back. Critics might argue that adding another federal agency to the administration of the program might create challenges coordinating federal efforts dispersed across different entities. In addition, opponents might argue that creating new grant and loan programs might contribute to a higher federal deficit on the long term. In the 111 th Congress, H.R. 5296 , the Air and Health Quality Empowerment Zone Designation Act of 2010, was introduced by Representative Jerry McNerney on May 13, 2010. The companion bill in the Senate, S. 3373 , was introduced on the same day by Senator Barbara Boxer. Although unrelated to the EZ, EC, and RC programs, the bills would have used a model similar to that of Empowerment Zones to authorize the Administrator of the Environmental Protection Agency to designate areas nominated by local air pollution control districts as air and health quality empowerment zones, eligible for grants for replacing or retrofitting polluting vehicles and/or engines to improve the health of the population living in the zones. The legislation would have established eligibility criteria and matching fund requirements. The lack of evaluation information to determine the effectiveness of EZ, EC, and RC programs continues to be a challenge. Thus, critics may question the use of geographically targeted incentives to provide federal benefits, while supporters might argue that these programs may provide a mechanism to provide resources to areas in economic distress. Using the concept of geographic targeting to provide federal benefits, without evaluation information, may lead critics to question these types of programs. In its final 2010 report, GAO indicated that In summary, in many cases economic conditions improved in communities where the EZ/EC/RC grants and tax benefits were used. But as we reported previously, it has been difficult to isolate the impacts of these programs on conditions in distressed communities without the ability to attribute the tax benefits to EZ/EC/RC areas. We recognize the challenges inherent in evaluating economic development programs. However, without linking tax benefits to the communities where they are taken, important information remains unclear—for example, the extent to which various tax benefits are being used within each community. Such tax-related information, coupled with more current data on poverty and employment data in such areas, could help program administrators assess the effectiveness of a revitalization program. There are several options that Congress can consider regarding the EZ, EC, and RC programs in particular, and for federal economic development policy in general. Two contrasting options are to permanently extend the programs as currently constituted or to allow the programs to expire. Allowing the EZ, EC, and RC programs to expire as scheduled might marginally improve the nation's fiscal condition, but could result in a slight reduction in economic recovery in these areas. On the other hand, permanently extending the programs would not weaken the economic recovery, but would worsen the longer-term fiscal outlook. In addition to these options, other options or combinations of options are also available. The number of competing federal government economic development programs suggests a diffuse national economic development policy. This fragmented policy is the result of years of initiatives that have occurred in the absence of a unifying set of economic development principles. This may follow from the inherent difficulty in identifying economic distress using metrics. Current policy typically uses metrics such as unemployment and poverty rates as proxies for economic distress. Supporters of the current diffuse approach could argue that the numerous federal economic development programs allow for the targeted application of policy tools to a diverse set of economic development needs. Proponents could further assert that the current federal approach best allows for Congress to target efforts as economic development needs evolve over time. Detractors might argue that the absence of unifying principles renders current federal efforts ineffectual. That is, detractors may argue that without a clear goal, it is unlikely federal policy can efficiently spur economic development. Further, detractors argue that the current set of efforts increase the difficulty in conducting objective effectiveness studies, which hinders congressional oversight of these programs. If the lack of unifying economic development principles is seen as a detriment to effective economic development policy, then a straightforward policy prescription is apparent. That is, a consolidation of economic development programs could result in the application of a unifying set of principles to the ongoing issue of economic development. As an alternative to consolidation, Congress could allow the existing programs to expire and implement a new program built around a single set of economic development principles. The various competing federal economic development programs have evolved little over time. In most cases, the designation of economic development zones is a "one-time" event that may not be revisited. One result of this stagnation is that current efforts are not likely targeted at the areas of greatest current need for economic development. For example, some may argue that the current reliance on unemployment or poverty rates results in poor targeting of scarce economic development resources. They may argue that metrics such as foreclosure rates, retail vacancy rates, or the long-term unemployment rate would lead to more efficient targeting of these monies. Others may argue that the stability inherent in the current set of programs acknowledges the long-term nature of any solution to economic distress. If this stagnation is seen as a detriment to effective economic development policy, then a straightforward policy prescription is apparent. That is, the existing programs could be retained, but with a redesignation of the various economic development zone designation. This option would allow Congress to realign its economic development efforts to the areas of greatest current need for economic development assistance. In several reports, GAO has indicated that conducting effective program oversight on these economic development programs is difficult. Specifically, GAO has noted that data limitations make a conclusive study of program effectiveness difficult and made recommendations to allow increased oversight. If Congress chooses to implement these recommendations, then, GAO argues, these programs can be properly evaluated. Coupled with a limited term extension, this option could allow Congress to reevaluate the programs after a full consideration of their effectiveness. Appendix A. List of Empowerment Zones, Enterprise Communities, and Renewal Communities Round I Urban EZs (6) Atlanta, GA Baltimore, MD Chicago, IL Detroit, MI New York, NY Philadelphia, PA/Camden, NJ Round I Rural EZs (3) Kentucky Highlands, KY Mid-Delta, MS Rio Grande Valley, TX Round I Urban ECs (65) Akron, OH Albany, GA Albany/Schenectady/Troy, NY Albuquerque, NM Birmingham, AL Boston, MA Bridgeport, CT Buffalo, NY Burlington, VT Charleston, SC Charlotte, NC Cleveland, OH Columbus, OH Dallas, TX Denver, CO Des Moines, IA East St. Louis, IL El Paso, TX Flint, MI Harrisburg, PA Houston, TX Huntington, WV Indianapolis, IN Jackson, MS Kansas City, MO/Kansas City, KS Las Vegas, NV Little Rock/Pulaski, AR Los Angeles, CA Louisville, KY Lowell, MA Manchester, NH Memphis, TN Miami/Dade County, FL Milwaukee, WI Minneapolis, MN Muskegon, MI Nashville/Davidson, TN New Haven, CT New Orleans, LA Newark, NJ Newburgh/Kingston, NY Norfolk, VA Oakland, CA Ogden, UT Oklahoma City, OK Omaha, NE Ouachita Parish, LA Phoenix, AZ Pittsburgh, PA Portland, OR Providence, RI Rochester, NY San Antonio, TX San Diego, CA San Francisco, CA Seattle, WA Springfield, IL Springfield, MA St. Louis, MO St. Paul, MN Tacoma, WA Tampa, FL Waco, TX Washington, DC Wilmington, DE Round I Supplemental Empowerment Zones (2) Cleveland, OH Los Angeles, CA Round I Enhanced Enterprise Communities (4) Boston, MA Houston, TX Kansas City, MO/Kansas City, KS Oakland, CA Round I Rural ECs (30) Accomack and Northampton County, VA Arizona Border Region, AZ Beadle/Spink Counties, SD Central Appalachia, WV Central Savannah River Area, GA Chambers County, AL City of East Prairie, MO City of Lock Haven, PA City of Watsonville, CA Crisp/Dooly County, GA East Arkansas, AR Fayette/Haywood County, TN Greater Portsmouth, OH Greene-Sumter, AL The Halifax/Edgecombe/Wilson Empowerment Alliance, NC Imperial County, CA Jackson County, FL Josephine County, OR La Jicarita, NM Lake County, MI Lower Yakima County, WA Macon Ridge, LA McDowell County, WV Mississippi County, AR North Delta Mississippi, MS Northeast Louisiana Delta, LA Robeson County, NC Scott, Tennessee/McCreary, KY Southeast Oklahoma, OK Williamsburg-Lake City, SC Round II Urban EZs (15) Boston, MA Cincinnati, OH Columbia/Sumter, SC Columbus, OH Cumberland County, NJ El Paso, TX Gary/Hammond/East Chicago, IN Ironton, OH/Huntington, WV Knoxville, TN Miami/Dade County, FL Minneapolis, MN New Haven, CT Norfolk/Portsmouth, VZ Santa Ana, CA St. Louis, MS/East St. Louis, IL Round II Rural EZs (5) Desert Communities, CA Griggs-Steele, ND Oglala Sioux Tribe, SD Southernmost Illinois Delta, IL Southwest Georgia United, GA Round II Rural ECs (20) Allendale ALIVE, SC Bowling Green, KY City of Deming, NM Clare County, MI Clinch-Powell, TN Empower Lewiston, ME Empowerment Alliance of Southwest Florida, FL Fayette, PA Five Star, WA Fort Peck Assiniboine & Sioux Tribe, MT Four Corners, AZ FUTURO Communities, TX Huron-Tule, CA Metlakatla Indian Community, AK Molokai, HI Northwoods NiiJii, WI Town of Austin, IN Tri-County Indian Nations, OK Upper Kanawha, WV Wichita County, KS Round III Urban EZs (8) Fresno, CA Jacksonville, FL Oklahoma City, OK Pulaski County, AR San Antonio, TX Syracuse, NY Tucson, AZ Yonkers, NY Round III Rural EZs (2) Aroostook County, ME Futuro, TX Urban RCs (28) Atlanta, GA Buffalo-Lackawanna, NY Camden, NJ Charleston, SC Chattanooga, TN Chicago, IL Corpus Christi, TX Detroit, MI Flint, MI Hamilton, OH Lawrence, MA Los Angeles, CA Lowell, MA Memphis, TN Milwaukee, WI Mobile, AL New Orleans, LA Newark, NJ Niagara Falls, NY Ouachita Parish, LA Philadelphia, PA Rochester, NY San Diego, CA San Francisco, CA Schenectady, NY Tacoma, WA Yakima, WA Youngstown, OH Rural RCs (12) Burlington, VT Central Louisiana, LA Eastern Kentucky, KY El Paso County, TX Greene-Sumter, AL Jamestown, NY Northern Louisiana, LA Orange Cove, CA Parlier, CA Southern Alabama, AL Turtle Mountain Band of Chippewa, ND West-Central Mississippi, MS Source: U.S. General Accounting Office, Federal Revitalization Programs Are Being Implemented, but Data on the Use of Tax Benefits Are Limited , GAO-04-306, March 2004, p. 55, http://www.gao.gov/ new.items/ d04306.pdf . Appendix B. Federal Tax Incentives Available to Distressed Communities | Empowerment Zones (EZs), Enterprise Communities (ECs), and Renewal Communities (RCs) are federally designated geographic areas characterized by high levels of poverty and economic distress, where businesses and local governments may be eligible to receive federal grants and tax incentives. Congress remains interested in these programs to revitalize selected areas affected by unemployment and a decline in economic activity, despite increased concern over the size and sustainability of the long-term budget outlook. The objective of this report is to provide a comparative overview of the similarities and differences between the EZ, EC, and RC programs, and a review of congressional policy choices to target and provide federal incentives to economically distressed zones. The report also examines studies that have evaluated the impact of EZs, ECs, and RCs, and provides information on their current status. Finally, the report discusses recent legislative activity and congressional issues and options. Since 1993, Congress has authorized three rounds of EZs (1993, 1997, 1999), two rounds of ECs (1993, 1997), and one round of RCs (2000) with the objective of revitalizing selected economically distressed communities. The three programs have different benefits and eligibility criteria. For example, the nine initial EZs each received tax incentives and grants of $100 million (urban) and $40 million (rural), whereas the 95 initial ECs each received tax benefits and smaller grants of $2.95 million for smaller urban counties and rural communities. RCs did not receive grants, but benefitted from wage credits, and tax investment incentives. Eligibility varied depending on levels of population, unemployment, and poverty. In its FY2010 and FY2011 budgets, the Administration requested that Congress extend tax incentives for EZs and RCs until December 31, 2010 and 2011. EZ and RC tax incentives were extended in the Emergency Economic Stabilization Act of 2008 (P.L. 110-343), through December 31, 2009. Currently, the estimated $1.8 billion in grant incentives provided to EZs and ECs since 1993 have mostly been expended. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312) enacted on December 17, 2010, extended EZ tax benefits, but not RCs, until the end of 2011. In addition, legislation such as the American Recovery and Reinvestment Act of 2009 (P.L. 111-5) provided broadband education, training, and equipment for selected facilities located within EZs and ECs, and recovery zone bonds for EZs. In 2009, P.L. 111-8 and P.L. 111-80 provided $3 million in funding for EZs and ECs. While a short-term extension of EZ tax incentives was enacted in the 111th Congress, a similar extension of the RC tax incentives might continue to be an issue in the 112th Congress. A number of studies have evaluated the effectiveness of the EZ, EC, and RC programs. Several government-sponsored studies have failed to link EZ and EC designation with a general improvement in community outcomes. In addition, several academic researchers have evaluated the effectiveness of zone incentives. Overall, these studies have found modest, if any, effects, and call into question the cost-effectiveness of these programs. There are several options that Congress can consider regarding the EZ, EC, and RC programs. These options may range from permanently extending the programs to allowing them to expire. Other options include a temporary extension, increased oversight, a redesignation of economic development zones, program consolidation, or a combination of these options. This report will be updated as legislative developments warrant. |
Most federal employees (59.1%) are paid on the General Schedule (GS), a pay scale that consists of 15 pay grades in which an employee's pay increases are to be based on job performance and length of service. Some Members of Congress, citizens, and public administration scholars have argued that federal employee pay advancement should be more closely linked to job performance. With explicit congressional authorization, the Department of Defense (DOD) developed the National Security Personnel System (NSPS) as a unique personnel and pay system attempting to more closely link employee pay to job performance. NSPS was beset by criticisms since it went into effect in 2006. The system faced legal and political challenges from unions and employees who claimed it was inconsistently applied and caused undeserved pay inequities, among other concerns. On October 7, 2009, House and Senate conferees reported a version of the National Defense Authorization Bill for Fiscal Year 2010 that included language to terminate NSPS. On October 8, 2009, the House agreed to the conference report. The Senate agreed to the conference report on October 22, 2009. On October 28, 2009, the President signed the bill into law ( P.L. 111-84 ). DOD must now return employees currently enrolled in NSPS to the GS or to the pay system in which they were previously enrolled. The return to the GS or other pay system must be completed by January 1, 2012, pursuant to the law. NSPS was initially intended to cover all DOD employees, but had a final total enrollment of roughly 227,000 DOD employees or 31.7% of the department's 717,000-person workforce. In October 2010, DOD sent a report to Congress that said 76% (171,985) of employees formerly in the NSPS pay system had been converted to the GS. Another 20% of employees will be placed in pay scales other than the GS, and 4% of NSPS employees may have their jobs eliminated as a result of closing military bases pursuant to the 2005 Defense Base Realignment and Closure Commission (BRAC) findings. Of those employees who moved into the GS, 72% (124,200) received a pay raise when they were placed in the proper GS grade and step. Every U.S. state has employees who were or are on NSPS. According to DOD, Virginia and California had the largest number of NSPS employees with 38,200 and 22,100, respectively. Vermont had the fewest employees with fewer than 20. Figure A-1 , in the Appendix, includes a U.S. map with NSPS employee counts for each state. As of January 2011, roughly 54,000 DOD employees remain in NSPS. P.L. 111-84 included language preventing any employee from suffering a loss or decrease in pay as a result of the elimination of NSPS. Pursuant to statute (5 U.S.C. § 5363), 35,117 transitioning employees have been placed on "retained pay," which allows them to maintain their NSPS rate of pay, but requires that they receive half of the annual pay adjustment distributed to employees at the step 10 level of their position's assigned GS pay grade. Some GS employees may argue that the NSPS employees who were in NSPS and who collect a retained pay rate receive a higher pay rate for similar work than does an employee who remained in the GS. Some NSPS employees, however, may argue that the cap on their annual pay increase amounts to a loss in pay. Employees who were in NSPS as of January 2, 2011, and who received a performance rating of "3" or above for 2010, may receive a performance-based bonus or pay raise in 2011. Employees who were in the pay system for only part of 2010, or who received a performance rating of "2" or below, do not qualify for an NSPS performance-based bonus or pay raise. DOD does not require additional appropriations to fund NSPS pay bonuses and salary increases in 2011. Instead, the bonuses and increases will be funded using money already allocated to the pay system. NSPS pools the funding that the GS and other similar pay systems use to fund increases in pay, such as step increases and promotions. In contrast, NSPS uses these so-called pay pools to fund performance-based pay increases. Office of Personnel Management (OPM) guidance said NSPS bonuses do not violate the freeze in federal pay for FY2011, enacted in P.L. 111-322 . According to DOD, 98.5% of NSPS employees rated "3" or higher on their 2010 annual performance reviews—making nearly 53,200 employees eligible for a performance-based bonus. The 112 th Congress may choose to continue its congressional oversight of NSPS employees' transition to other pay systems. This report focuses on the transition of employees from NSPS to non-NSPS pay scales. It does not address the operation of NSPS or other pay schedules. The report discusses how the transition is scheduled to occur and analyzes congressional options for oversight or legislative action. P.L. 111-84 required DOD to begin transitioning NSPS employees to non-NSPS pay scales six months after enactment of the law, which occurred on October 28, 2009. DOD was given until January 1, 2012, to convert all employees in NSPS to the pay system in which they were previously enrolled. If an employee was previously enrolled in a system that no longer exists, if his or her job and description did not exist prior to enrollment in NSPS, or if a new pay system is to be created for an employee to enter into, DOD is required by statute to determine the employee's pay system and transition him or her into that pay system by the January 1, 2012 deadline. Employees not entering the GS are expected to be transitioned to their designated pay systems between spring 2011 and January 1, 2012. According to DOD's NSPS Transition Office, the office in charge of implementing the elimination of NSPS, 171,985 employees (about 76%) had transitioned from NSPS to the GS as of September 30, 2010. Another 20% of employees will be returned to or placed in other systems, including some pay systems that have not yet been created. In addition, 4% of employees will have their jobs eliminated as a result of closing military bases pursuant to the 2005 Defense Base Closure and Realignment Commission (BRAC) findings. As noted above, some NSPS employees will be moved into personnel systems that have not yet been established. P.L. 111-84 §1105 authorized DOD to create demonstration pay systems at certain defense-related laboratories. Some of the federal employees at certain laboratories were in NSPS. By the end of April 2011, DOD must create new personnel systems at these laboratories and move eligible employees from NSPS into these personnel systems. Most positions in the NSPS system were formerly under GS position classification and grade and step parameters. An employee who occupies a position that previously had a GS grade and step assignment is to be moved to the GS and assume the grade assigned to his or her job classification. The employee's step within the assigned grade would be selected to ensure that the employee's level of pay does not decrease because of his or her return to the GS scale. Pursuant to P.L. 111-84 , an employee's level of pay may not be reduced as a result of his or her transition from NSPS. For example, if an employee's NSPS pay level falls between two GS steps, then the employee would be assigned to the higher step. In some cases, employees in NSPS who were or will be transitioned to the GS or a similar pay scale may have been collecting pay rates higher than the position's GS grade classification permits. Pursuant to P.L. 111-84 , an employee who meets this criterion will continue to receive his or her NSPS rate of pay under pay retention statutes once he or she converts to the GS system. The employee's pay rate cannot be used as a factor in performance evaluation. For example, if an employee's position is evaluated and classified as a GS-13, the highest base pay level (step 10) for such an employee in 2011 is $93,175. If this employee were working in the Washington, DC, locality pay area, his or her locality-adjusted rate of basic pay (annual pay + locality pay) would be $115,742 ($93,175 * 1.2422) in 2011. A supervisory employee in NSPS was not capped at this pay rate, and could have been collecting an annual salary of $95,000 if he or she received positive performance evaluations. Pursuant to statute, this employee would continue to receive a salary of $95,000 after transitioning from NSPS and being assigned to the GS. NSPS provides standard local market supplements, which are identical to GS locality pay rates, so the adjusted basic pay rate of the hypothetical NSPS employee living in Washington, DC, including the standard local market supplement for 2011, would be estimated at $118,009 (95,000 * 1.2422). Pursuant to statute, this hypothetical employee would continue to receive a salary of $118,009 after being transitioned to the GS. The continued NSPS pay rate is defined in statute (5 U.S.C. §5363) as "pay retention." The employee's manager would evaluate the employee's job duties and responsibilities based on the GS grade assigned to the position—without regard for the employee's pay rate. The statute requires agencies to provide employees on pay retention with half of the annual pay increase given to employees at the maximum payable rate for the GS grade (step 10) to which his or her position is classified. An employee on retained pay, therefore, would not have his or her annual pay increase calculated as a percentage of his or her basic pay. His or her pay increase, instead, would be calculated as a percentage of a pay increase given to an employee who is at step 10 of the GS grade to which his or her position is assigned. The employee would continue to receive a retained rate of pay, until the employee's GS rate of pay eclipsed his or her retained NSPS rate of pay. The length of time it may take for the GS rate to be greater than the NSPS rate would depend on a number of variables, including the level of pay increases enacted by Congress in future years as well as the employee's pay level in relation to the step 10 pay rate of the GS grade to which his or her position is classified. Of the 171,985 former NSPS employees who have already been placed on the GS, approximately 72% (124,200) received a salary increase because of the transition. The average increase in salary was $1,454 per year. Some 7% (12,668) of those who transitioned to the GS kept a salary identical to their NSPS pay rate, while 21% (35,117) of those who transitioned are receiving a retained NSPS pay rate despite a GS classification that is assigned a lower rate of pay. NSPS employees placed in a new pay system have opportunities to grieve certain aspects of their new assignments. A DOD employee may contact his or her human resources office to find out more information about filing an administrative grievance or to seek alternative dispute resolution. Additionally, more than 913 NSPS employees are in a bargaining unit and may contact their local union representatives if they wish to pursue a negotiated grievance procedure. An employee may also appeal his or her case to the Merit Systems Protection Board (MSPB), which is an independent, quasi-judicial agency with jurisdiction over appeals claiming a reduction in pay, pursuant to 5 C.F.R. §§752 and 1201. An employee appealing to MSPB would have to establish that the transition from NSPS led to a reduction in pay. An employee moving to the GS who disagrees with his or her position's classification may challenge it pursuant to the process outlined in 5 C.F.R. §511.601-606. Employees who were covered by NSPS who are then placed on pay retention when moved to a different pay schedule may suggest that they are experiencing a loss in pay because they are not receiving the full annual pay increase that is provided to other federal employees. As explained earlier in this report, an employee who is moved to the GS but who receives a retained pay rate keeps his or her NSPS pay rate—if the NSPS pay rate is above the GS grade classification pay level. The employee, however, receives half of the annual pay increase given to GS employees at the step 10 level of the employee's assigned grade until the pay rate he or she would receive in the GS eclipses his or her retained NSPS pay rate. Once removed from NSPS, these employees can no longer receive annual NSPS performance-based pay increases. A retained pay rate, however, allows the employee to collect higher pay than a similar employee in the GS system. The employee on retained pay also qualifies for larger pension benefits than could have been accrued in the GS. On the other hand, those who disagree with the employees on retained pay may suggest that these employees are receiving a higher rate of pay than would otherwise be permitted on the GS. The employees on retained pay, in fact, may receive pay rates much higher than employees who have the same GS classification and who perform at levels that are quite similar. An employee who remained on the GS, and who never entered the NSPS, did not have the opportunity to increase his or her pay based largely on performance and has no access to a retained pay rate. According to DOD, as of October 10, 2010, five employees who were required to transition from NSPS to the GS have appealed their GS classification. One appeal was denied and four other appeals are pending. When Congress eliminated NSPS in the National Defense Authorization Act for 2010 ( P.L. 111-84 ), it required DOD to return all employees to the pay system in which they were previously enrolled. Congress also required that no employee who was in NSPS experience a loss or reduction in pay as a result of being removed from NSPS and placed in a different pay scale. Some employees in NSPS, however, occupy positions that did not exist prior to NSPS's creation, and they cannot, therefore, be returned to a pre-existing pay scale. Other employees achieved pay rates that are not aligned with rates on their non-NSPS pay scale. Still other employees cannot be returned to a pre-existing pay scale because the pay scale was eliminated while NSPS was active. DOD has been examining ways to place employees who fit into these categories into appropriate pay schedules for their positions, including a solution that involves developing a new pay system. Congress has a variety of options to address these pay and personnel issues, including passing a law that would require all employees receive the full annual pay increase, modifying the GS to better coincide with NSPS pay rates, or permitting DOD to determine the most effective course of action. Congress required DOD to determine where to place NSPS employees who are or were to convert out of the NSPS. DOD must place employees in a variety of pay systems while adhering to all statutory requirements—both requirements in P.L. 111-84 and those that existed prior to the law's enactment. DOD has placed certain employees on retained pay. This policy has led to complaints from some employees who claim that retained pay, in effect, amounts to a loss in pay. Others, however, may claim that retained pay allows certain employees to maintain a higher rate of pay than an employee who is not eligible for retained pay, even though they perform the same work at similar performance levels. Congress may determine that DOD's policies follow the requirements of both P.L. 111-84 and Title 5 of the U.S. Code, which governs most of the civil service. Conversely, Congress may decide that allocating half of the GS step 10 annual pay increase to those on a retained pay rate is contrary to its intention in the language in P.L. 111-84 , which states that employees removed from NSPS should not suffer a loss in pay as a result of the transition to a non-NSPS pay scale. If Congress determines that the reduced pay increase is contrary to its intention in P.L. 111-84 , it could choose to enact legislation that ensures employees who convert to the GS or another pay system and who are on retained pay receive the full annual pay increase. Such legislation, however, would cause the retained pay rates to remain above GS pay rates in perpetuity. GS employees who performed similar work at similar performance levels may never receive the same pay as an employee who receives both the retained pay rate and a full annual pay increase. A policy option that could offset concerns about loss of pay exists. Employees who are on retained pay could also receive a performance-based cash award to supplement their pay to account for any pay they will not receive as a result of the cap on their annual pay adjustment. Pursuant to 5 U.S.C. §4505a, a federal employee who receives a performance rating of fully successful or above may receive a one-time cash award in an amount deemed appropriate by the head of the agency. The cash award can be up to $10,000 without OPM approval, or up to $25,000 with OPM approval. DOD could use the authority in 5 U.S.C. §4505a to pay federal employees on retained pay the other half of the annual pay adjustment. Pursuant to statute, the rating-based award could not be given to an employee with performance rating lower than fully successful. In addition, the award would not be considered part of an employee's basic pay and, therefore, would not count toward the employee's annuity. This option, however, may be controversial. The one-time cash award was designed to reward exemplary performance by federal employees. The Code of Federal Regulations lists three reasons why an employer would give an employee this cash incentive. The award may be provided on the basis of the following: A suggestion, invention, superior accomplishment, productivity gain, or other personal effort that contributes to the efficiency, economy, or other improvement of government operations or achieves a significant reduction in paperwork; A special act or service in the public interest in connection with or related to official employment; or Performance as reflected in the employee's most recent rating of record … provided that the rating of record is at the fully successful level (or equivalent) or above. If an employee on retained pay does not meet one of these criteria, using the award authority may be an improper means of providing that employee additional pay. For employees who do qualify for the cash award, however, DOD could provide the award until the GS rate of basic pay for the employee's position eclipsed the retained NSPS pay rate. If DOD chose to use the performance-based cash award, the agency may need additional appropriation from Congress to fully fund it. Additionally, employees in the GS who perform similar work at similar performance levels will not receive the same pay for their work as the employee on the retained rate of pay. Congress could also choose to modify the GS to better coincide with the pay rates on NSPS. Congress could enact legislation that adds steps to the GS, allowing for NSPS pay rates to be incorporated in the personnel system and also for continued movement up the personnel system's pay scale for all GS employees. Such action, however, could complicate GS operations and policies by requiring new regulations to govern the additional steps. The addition of new GS steps may also prompt additional costs to fund the new pay levels. P.L. 111-84 also required DOD to create a new performance management system and hiring process. Congress may choose to use its oversight authority to ensure that all parties that may be affected by the establishment of such new system and process are afforded an opportunity to offer suggestions and present concerns prior to implementation. | Most federal employees (59.1%) are paid on the General Schedule (GS), a pay scale that consists of 15 pay grades in which an employee's pay increases are to be based on performance and length of service. Some Members of Congress, citizens, and public administration scholars have argued that federal employee pay advancement should be more closely linked to job performance than it currently is on the GS. With these concerns in mind and with explicit congressional authorization, the Department of Defense (DOD) began developing the National Security Personnel System (NSPS) in 2003 as a unique pay scale attempting to more closely link employee pay to job performance. NSPS was beset by criticisms since it went into effect in 2006. The system faced legal and political challenges from unions and employees who claimed it was inconsistently applied and caused undeserved pay inequities, among other concerns. On October 7, 2009, House and Senate conferees reported a version of the National Defense Authorization Act for Fiscal Year 2010 that included language to terminate NSPS. On October 8, 2009, the House agreed to the conference report. The Senate agreed to the conference report on October 22, 2009. On October 28, 2009, the President signed the bill into law (P.L. 111-84). DOD must now return employees currently enrolled in NSPS to the GS or to the pay system that previously applied to them or their position. If the employee's position did not exist prior to NSPS or if the previous pay scale was abolished during NSPS's lifetime, DOD must determine an appropriate pay scale for the employee. The return to the GS or other pay system must be completed by January 1, 2012, pursuant to the law. NSPS was initially intended to cover all DOD employees, but had a total final enrollment of roughly 227,000 DOD employees or 31.7% of the department's 717,000-person workforce. In October 2010, DOD sent a report to Congress that said 76% (171,985) of employees formerly in the NSPS pay system had been converted to the GS. Of those employees who moved into the GS, 72% (124,200) received a pay raise when they were placed in the proper GS grade and step. Employees who have not yet been transitioned out of NSPS are to be placed in pay scales other than the GS. As of January 2011, roughly 54,000 DOD employees remain in NSPS. P.L. 111-84 included language preventing any employee from suffering a loss or decrease in pay as a result of the elimination of NSPS. Pursuant to statute, 35,117 employees who transitioned to GS have been placed on "retained pay," which allows them to maintain their NSPS rate of pay instead of transitioning to the GS pay rate assigned to their job's grade. In such cases, the GS rate of pay assigned to the employee's position may not reach the pay level the employee achieved under NSPS. Retained pay, pursuant to statute, requires that an employee receive half of the annual pay adjustment given to employees who are at the maximum payable rate for their GS grade (step 10). Some NSPS employees may argue that the cap on their annual pay increase amounts to a loss in pay, and, therefore, violates P.L. 111-84. The 112th Congress may choose to continue congressional oversight of NSPS employees' transition to other pay systems. This report focuses on the transition of employees from NSPS to non-NSPS pay systems. It does not address the operation of NSPS or other pay schedules. The report discusses how the transition is scheduled to occur and analyzes congressional options for oversight or legislative action. |
There are more than 60 offices of inspectors general (OIGs) in executive and legislative branch agencies, as well as special inspectors general (SIGs), who are responsible for audits and investigations related to particular programs or expenditures. Inspectors General (IGs) draw their authorities and duties, either in whole or in part, from the Inspector General Act of 1978, as amended (IG Act). For example, while several legislative branch IGs have been created in separate statutes, their establishing acts reference several of the provisions of the IG Act. Similarly, Congress has established SIGs such as the SIG for Iraq Reconstruction (SIGIR), the SIG for Afghanistan Reconstruction (SIGAR), and the SIG for the Troubled Asset Relief Program (SIGTARP), and has granted these IGs many of the authorities and responsibilities listed in the IG Act. The IG Act addresses the authorities and duties of two types of IGs: (1) federal establishment IGs, who are appointed by the President with the advice and consent of the Senate and may be removed only by the President; and (2) designated federal entity (DFE) IGs, who are appointed and may be removed by the agency head. The latter are typically found in the smaller agencies. IGs have been granted a substantial amount of independence, authority, and resources in their statutes to combat fraud, waste, and abuse. IGs operate under only the "general supervision" of the agency head, who is prohibited (with a few exceptions) from preventing or prohibiting an IG from carrying out an audit or investigation or issuing a subpoena. The statutory purposes of the OIGs include: conducting and supervising audits and investigations within an agency; providing policy recommendations for activities to promote the economy, efficiency, and effectiveness of agency programs and operations; and conducting, supervising, or coordinating activities designed to prevent and detect fraud and abuse in agency programs and operations. IGs must also keep the agency head and Congress "fully and currently informed" about problems with the administration of agency programs and operations through specified reports and otherwise (which includes testifying at hearings and meeting with Members and staff). The reports include semi-annual reports as well as immediate reports regarding "particularly serious or flagrant problems." The connections between IGs and Congress may enhance legislative oversight capabilities and provide IGs with potential support for their findings and recommendations for corrective action. To carry out these and other duties, IGs have access to agency information and subpoena power for records and documents, as well as independent law enforcement authority. IGs must report suspected violations of federal criminal law immediately to the Attorney General. Agencies may also have a separate office that is responsible for conducting criminal investigations under the statutes that the agency is responsible for administering and enforcing, which may make recommendations for further investigation and prosecution to the U.S. Department of Justice. Including the newest IG for the Federal Housing Finance Agency, there are presently 30 establishment IGs that have been appointed by the President. They are located in the following departments and agencies: (1) Agriculture; (2) Commerce; (3) Defense; (4) Education; (5) Energy; (6) Health and Human Services; (7) Housing and Urban Development; (8) Interior; (9) Justice; (10) Labor; (11) State; (12) Transportation; (13) Homeland Security; (14) Treasury; (15) Veterans Affairs; (16) Environmental Protection Agency; (17) General Services Administration; (18) National Aeronautics and Space Administration; (19) Nuclear Regulatory Commission; (20) Office of Personnel Management; (21) Railroad Retirement Board; (22) Federal Deposit Insurance Corporation; (23) Small Business Administration; (24) Corporation for National and Community Service; (25) Agency for International Development; (26) Social Security Administration; (27) Federal Housing Finance Agency; (28) Tennessee Valley Authority; (29) Export-Import Bank; and (30) Treasury Inspector General for Tax Administration. The IG Act also provides that IGs may be established in commissions created under 40 U.S.C. § 15301, which are the Southeast Crescent Regional Commission, the Southwest Border Regional Commission, and the Northern Border Regional Commission. Not including the IG for the Federal Housing Finance Board, as that agency has become part of the new Federal Housing Finance Agency, there are currently 29 DFE IGs, appointed by the agency head and located in the following agencies: (1) Amtrak; (2) Appalachian Regional Commission; (3) Board of Governors of the Federal Reserve System; (4) Commodity Futures Trading Commission; (5) Consumer Product Safety Commission; (6) Corporation for Public Broadcasting; (7) Denali Commission; (8) Equal Employment Opportunity Commission; (9) Farm Credit Administration; (10) Federal Communications Commission; (11) Federal Election Commission; (12) Election Assistance Commission; (13) Federal Maritime Commission; (14) Federal Labor Relations Authority; (15) Federal Trade Commission; (16) Legal Services Corporation; (17) National Archives and Records Administration; (18) National Credit Union Administration; (19) National Endowment for the Arts; (20) National Endowment for the Humanities; (21) National Labor Relations Board; (22) National Science Foundation; (23) Peace Corps; (24) Pension Benefit Guaranty Corporation; (25) Securities and Exchange Commission; (26) Smithsonian Institution; (27) United States International Trade Commission; (28) Postal Regulatory Commission; and (29) United States Postal Service. There are several additional types of IGs that draw their authorities in part from the IG Act. The five legislative branch IGs are located in the following entities: (1) Government Accountability Office; (2) Architect of the Capitol; (3) Government Printing Office; (4) Library of Congress; and (5) Capitol Police. There are three Special IGs: (1) SIGIR, (2) SIGAR, and (3) SIGTARP. Finally, there is an IG for the Central Intelligence Agency (CIA) and an IG for the Office of the Director of National Intelligence (ODNI). The IG Act of 1978 created IGs in a small number of executive branch agencies known as establishments. The IG Act Amendments of 1988 expanded the number of presidentially appointed establishment IGs and also created DFE IGs. The House Report on an earlier version of the 1988 amendments stated that although most of the DFEs at the time had "audit units and some also have investigative units ... the extension of the 1978 act is necessary, because many of these entities have failed to comply with longstanding requirements regarding independence" of such units. The most notable difference between establishment IGs and DFE IGs is the individual who appoints and who may remove or transfer the IG—for establishment IGs, this individual is the President and for DFE IGs, this person is the agency head. Another key difference between establishment and DFE IGs is that establishment IGs receive a separate appropriations account or a line item in the establishment's appropriations. In contrast, each DFE IG's budget is part of the parent entity's budget process. A 1992 guidance memorandum from the Office of Management and Budget (OMB) stated that "because of the reporting relationship established by the IG Act, entity heads must make entity budget formulation and budget execution decisions affecting the IG." OMB stated that it was "expected that entity heads will apply agency budget reductions, redistributions, sequestrations, or pay raise absorptions to the Office of the IG with due consideration to the effect that such application would have on the Office's ability to carry out its statutory responsibilities." OMB's guidance added that the IG was to "have an ongoing dialogue with the OMB budget examiner" regarding the IG's "operational plans, activities, and accomplishments." The Reform Act created additional safeguards for IG budgets. Section 8 of the Reform Act addressed the reporting of the IG's initial budget estimate to the head of the establishment or DFE. The budget estimate includes the budget request, a request for funds for training, and amounts necessary to support the newly created Council of the Inspectors General on Integrity and Efficiency (CIGIE). The establishment or DFE head must then include this information, as well as comments of the IG, when transmitting the request to the President. The President, in turn, must then include in his budget submission: the IG's budget estimate; the President's requested amounts for the IG, IG training, and support of the CIGIE; and comments of the affected IG, if the IG determines that the President's budget would "substantially inhibit" the IG from performing his or her duties. Other less apparent differences also exist between establishment IGs and DFE IGs, such as how the two types of IGs may be selected and how they may select their own employees. The DFE IGs are exempt from the sections of the IG Act (§§ 6(a)(7) and (a)(8)) that mandate the selection, appointment, and employment of officers and employees in establishment IG offices according to civil service employment laws. The House Report on a version of the 1988 IG Act amendments stated that "the committee recognizes that not all Federal entities operate under the Civil Service personnel system," and therefore Congress did not extend such provisions regarding employee hiring to DFE IGs. DFEs have been exempt from these requirements for establishment OIGs since DFEs were created. DFE IGs must be appointed by the head of the agency "in accordance with the applicable laws and regulations governing appointments within" the agency. The DFE IGs, in turn, must hire employees for their offices "subject to the applicable laws and regulation that govern such selections, appointments, and employment, and the obtaining of such services, within the [DFE]." Another difference relates to the use of legal counsel by IGs. The different relationships between establishment and DFE IGs and their attorneys were delineated in the Reform Act. The act specified that an establishment IG must receive legal advice from an attorney who is hired under civil service laws and reports directly to the IG or to another IG. The Reform Act also provided three ways for a DFE to obtain counsel. First, a DFE IG could obtain counsel from an attorney appointed by the IG (according to the DFE-specific laws and regulations governing appointments within the DFE) who reports directly to the IG. Second, DFE IGs, on a reimbursable basis, could obtain services from a counsel who is appointed by and who reports to another IG. Third, the DFE IG may obtain the legal services of an appropriate person on the CIGIE. The Reform Act continued preexisting differences between the two types of IGs addressed in the IG Act. For example, the Reform Act increased the pay of establishment IGs, the CIA IG, SIGIR, and SIGAR to the rate of level III of the Executive Schedule, plus 3%. The Reform Act increased the pay of DFE IGs as well, but did not link them to the Executive Schedule. The Reform Act provided that DFE IGs should be classified for pay purposes at a level at or above a majority of the senior level executives of the DFE (such as a General Counsel or Chief Acquisition Officer), but that the pay could not be less than the average total compensation, including bonuses, of those senior level executives. The Reform Act also provided that a DFE IG's pay could not increase by more than 25% of the DFE IG's average total pay for the previous three fiscal years. Prior to the Reform Act, additional disparities existed between establishment and DFE IGs. That act required DFE IGs, like their establishment IG counterparts, to be appointed based only on the individual's skills in auditing or other relevant areas. In the conference report for the Inspector General Act Amendments of 1988, the conferees indicated that they "intend that the head of the designated Federal entity appoint the Inspector General without regard to political affiliation and solely on the basis of integrity and demonstrated ability in accounting, auditing, financial analysis, law, management analysis, public administration, or investigations." However, this sentiment was not added to the law until the Reform Act was enacted. Additionally, the Reform Act provided that the CIGIE must submit recommendations for nominees to establishment, DFE, CIA, and ODNI IG positions. The Reform Act also granted law enforcement authority to DFE IGs, which was previously only available to establishment IGs, including the authority to carry firearms, make arrests without warrants, and seek and execute arrest warrants. Additionally, the Reform Act addressed a protection that DFE IGs enjoyed that was not previously available for establishment IGs—the Reform Act added a provision regarding transfers of establishment IGs to the clause regarding how the establishment IGs may be removed by the President. The removal clause for DFE IGs previously mentioned transfers of DFE IGs, but did not provide the notification requirement added by the Reform Act. As mentioned previously, the Reform Act provided that the President and the agency head must notify Congress of the reasons for a removal or transfer of an IG in writing at least 30 days before removing or transferring the IG. Previously, the DFE heads had to notify Congress in writing when removing an IG, while the President was not required to communicate the reasons for removal to Congress in writing. This section will discuss proposed changes affecting offices of inspectors general (OIGs) or establishing new OIGs in select bills in the 111 th Congress: H.R. 885 / S. 1354 , the Improved Financial Commodity Markets Oversight and Accountability Act; H.R. 3126 , the Consumer Financial Protection Agency Act of 2009; and H.R. 3962 , the Affordable Health Care for America Act. On June 6, 2009, the House passed H.R. 885 , which would elevate five DFE IGs in entities that address financial issues—the IGs for the Board of Governors of the Federal Reserve System; the Commodity Futures Trading Commission (CFTC); the National Credit Union Administration (NCUA); the Pension Benefit Guaranty Corporation (PBGC); and the Securities and Exchange Commission (SEC)—to the status of presidentially appointed, Senate-confirmed IGs. The changes would take effect 30 days after the law is enacted. The IGs that currently serve as the head of the OIG offices in those DFEs could continue serving as the IGs until the President makes an appointment under the IG Act procedures. Nothing in H.R. 885 would prohibit the President from appointing the individuals currently serving as the DFE IGs to the new presidentially appointed IG positions. Initially, H.R. 885 provided that IGs acting in that capacity would remain subject to current DFE limitations, such as those on authorities and pay. However, as amended, H.R. 885 "ensures that the changes made by the legislation do not interfere with existing pay structures ... as they relate to the position of inspector general and other employees." Other amendments to H.R. 885 , as passed by the House, included provisions relating to the continuation of personnel. As mentioned above, these five DFE IGs are exempt from the sections of the IG Act (§§ 6(a)(7) and (a)(8)) that mandate the selection, appointment, and employment of officers and employees in establishment IG offices according to civil service employment laws. H.R. 885 would preserve that distinction for these five IGs, though they would be elevated to presidentially appointed IGs. H.R. 885 would change the authorities of the five DFE IGs in the bill in a significant way with respect to other establishment and DFE IGs, as H.R. 885 would grant these IGs the ability to subpoena testimony as well as documents. Under H.R. 885 , the five DFE IGs would be able to subpoena testimony not just of agency employees, but also of contractors, grantees, and persons or entities regulated by the establishment. Presently, § 6(a)(4) of the IG Act provides IGs with the authority to subpoena "documentary evidence necessary in the performance of the functions assigned by this Act." Subpoena authority under the IG Act is delegable, and subpoenas issued under the act are judicially enforceable. The IG Act contains no explicit prohibition on disclosure of the existence or specifics of a subpoena issued under this authority. Finally, H.R. 885 would create a new provision regarding the responses of establishment agency heads to reports by these five IGs. A similar provision was included with respect to reports issued by the SIGTARP in § 4 of P.L. 111-15 , the Special Inspector General for the Troubled Asset Relief Program Act of 2009, which was passed by Congress earlier this year. Under H.R. 885 , the heads of these five establishments must either "take action to address deficiencies identified by a report or investigation" of the establishment's IG or "certify to both Houses of Congress that no action is necessary or appropriate in connection with" such a deficiency. Sections 115(a)(3) and 181 of the discussion draft of H.R. 3126 appear to create a DFE IG for the proposed Consumer Financial Protection Agency (CFPA). Section 115(a) of the discussion draft states that the Director of the CFPA shall appoint the CFPA IG, who shall have the authority and functions of a DFE IG . Section 181 of the discussion draft would amend the IG Act to add the CFPA to the list of DFEs. Section 1647 of H.R. 3962 would create a presidentially appointed, Senate-confirmed establishment IG for the Health Choices Administration (HCA). In addition to the authorities provided to establishment IGs in the IG Act, H.R. 3962 would grant the HCA IG the authority to conduct, supervise, and coordinate audits, evaluations, and investigations of the programs and operations of the HCA, including matters relating to fraud, abuse, and misconduct in connection with the admission and continued participation of any health benefits plan participating in the Health Insurance Exchange. The IG also would have the authority to conduct audits, evaluations, and investigations relating to any private Health Insurance Exchange-participating health benefits plan. In consultation with the HHS IG, the IG for the HCA would have the authority to conduct audits, evaluations, and investigations relating to the public health insurance option. The IG would also have access to all relevant records, including records relating to claims paid by the health benefits plans that participate in the Health Insurance Exchange. The authorities that would be granted to the HCA and the IG would not limit the duties, authorities, and responsibilities of the HHS IG, as in existence as of the date of enactment of the act, to oversee HHS programs and operations. The HHS IG would retain primary jurisdiction over fraud and abuse in connection with payments made under the public health insurance option. Elevating DFE IGs, such as the five identified in H.R. 885 , to presidentially appointed, Senate-confirmed (PAS) positions would be within Congress's discretion, as provided for in the Constitution. Article II, section 2, clause 2 states that "the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments." Many PAS positions other than high-level policy positions have been created because Congress saw a need to establish such position as one requiring advice and consent. This section discusses several potential considerations, which could be construed as advantages or disadvantages of establishing these five DFE IGs as PAS positions. There are several approaches that Congress could pursue—(1) taking no action; (2) converting some DFE IGs into PAS positions; (3) converting all DFE IGs into PAS positions; or (4) converting some or all DFE IGs into PAS positions but including a sunset provision. If a sunset provision were added to a statute converting some or all of the DFE IGs, Congress could then evaluate the benefits and drawbacks of granting PAS status to some or all of these IGs. The PAS positions could automatically revert to agency appointments after a period of time unless Congress made such changes permanent. CRS takes no position as to which of these options would be most desirable. A conversion of some or all of these positions to PAS positions could have both positive and negative effects. Some of the advantages may be that the PAS process ensures that potential appointees are subject to more extensive ethical and political scrutiny, and IGs appointed under the PAS process may have greater credibility than their agency head appointed counterparts. Congress, specifically the Senate, may indirectly exert greater influence over the selection process and prevent unqualified individuals from being appointed. The prestige of a presidential appointment may also attract additional candidates. Some of the disadvantages of the PAS process may be that the politicization of the process could deter well-qualified candidates (although politicization may be less likely with IGs, due to their statutory qualifications regarding appointment without regard to political affiliation). Potential nominees may be required to submit a large quantity of paperwork as the President, and later the Senate, considers the individual's merits. As a result, the establishment of additional PAS positions may increase the workload of Senate committees and consume time and resources that could be used for other pending issues. If an appointee is confirmed by the Senate, that IG may be seen as more credible and accountable to Congress than an appointee who does not require Senate confirmation. During the confirmation hearing, the Senate may obtain commitments from the IG appointee to respond to future requests for testimony. Such specific commitments with regard to future testimony may not be necessary, as the IG Act provides that the IGs have a duty to keep Congress "fully and currently informed." However, such commitments may ease the process for obtaining IG testimony in the future. The Senate may also seek additional commitments during the confirmation process and explain its vision for the position or for the agency. At the same time, the PAS process may increase congressional involvement in the organization and activities of the DFE. Confirmation hearings for the IG could be used as a vehicle to conduct oversight of the DFE and its programs and operations. Additionally, the IG appointee may have developed relationships with Senators and congressional staff throughout the appointment process. However, the practical effect of these considerations may be limited as the IG Act indicates that DFE and establishment IGs are accountable to Congress, due, in part, to their reporting requirements. Alternatively, it could be argued that maintaining the status quo for these IGs provides the President with greater flexibility in terms of managing staff, in that a typical conversion of a non-PAS position into a PAS position might make such IGs more amenable to indirect congressional control. Such amenability could undermine presidential control as compared to the status quo. The President could stand to lose, as IGs appointed by the agency heads alone may be more responsive and accountable to the President and more likely to implement his priorities, if any, for the IG office. Allegiance from DFE IGs under the current system arguably may assist the President's ability to address problems quickly. However, unlike other positions being considered for conversion to the level of a presidential appointment, IGs are perhaps unique because they are already accountable to Congress in terms of their statutory responsibilities, and they also have specified qualifications required for appointment. As a result, the potential loss of presidential power may not be as great with the conversion to a PAS position as it would otherwise seem to be due to a potential increase in indirect congressional control with the change to a PAS appointment, because Congress already retains and exerts control with regard to DFE IGs. Because of the nature of the agencies being considered in H.R. 885 , the President would only appear to retain more control over the appointment of the five DFE IGs under the status quo if he also gained more control over the agency boards. The Federal Reserve, CFTC, NCUA, and the SEC are independent agencies. These independent agencies are insulated from complete Executive Branch control as they are headed by multi-member boards. For example, the boards of the CFTC, SEC, and NCUA are comprised of members of both political parties, but may have no more than a simple majority from one political party. In addition, the board membership at these agencies is determined according to staggered terms, so that not all of the members may be replaced at once. The Federal Reserve Board of Governors and the SEC Commissioners have for cause removal protection. Therefore, arguably, the President may have more control over the five IGs if they are converted to PAS positions and the President is able to appoint those IGs himself. This would appear to be true even though the nominee would be approved through the advice and consent process. Furthermore, DFE heads, who are politically aligned with the President, would likely prefer to maintain their influence on the selection process of the DFE's IG. Such appointment power may enable the DFE head to exercise greater control over the agency, posing questions of intrusion on the IG's independence. A DFE head's appointment power may help curry favor with the IG, as the DFE head is responsible for hiring and firing the IG. If the DFE IGs were converted to PAS positions, the agency head may still have some level of influence as the President may consult with the agency head when making an appointment to the IG position or when removing an IG. Presidential appointees may also encounter procedural or political complications during the Senate confirmation process, such as a hold placed on a nomination. The confirmation process arguably provides the Senate with greater leverage during its negotiations with the Executive Branch over matters that may or may not be related to the appointment. Holds may be placed on nominations for various reasons. Whether as a result of a hold or other factors, the appointment process may be lengthy, thus potentially leading to longer vacancies. The Government Accountability Office (GAO) has issued several reports dealing with IG structural and organizational changes. The reports considered the conversion of DFE IGs from agency head appointments and removals to presidential appointments and removals, which would affect the status and control of the current DFE IG offices. GAO concluded that such an arrangement would strengthen the independence, efficiency, and effectiveness of the DFE IG offices. In its 2002 report, GAO found no consensus among DFE and establishment IGs regarding the perceived impact of conversion. The report noted that the presidentially appointed IGs "generally indicated that DFE IG independence, quality, and use of resources could be strengthened by conversion," while the DFE IGs "indicated that there would be either no impact or that these elements could be weakened." GAO called for dialogue among Congress, the IG community, and the affected agencies regarding specific conversions of DFE IGs. In 2003, the Comptroller General similarly testified regarding GAO's determination that "if properly implemented, conversion ... and consolidation of IG offices could increase the overall independence, economy, efficiency, and effectiveness of IGs." GAO testimony on March 25, 2009, similarly indicated that a change in the appointment of the IGs would result in a different level of independence. | This report addresses the duties and functions of statutory Inspectors General (IGs); the numbers of each type of IG; the differences between IGs appointed by the President and those appointed by the agency head; considerations for whether certain IGs should be appointed by the President as opposed to the agency head; and the Inspector General Reform Act of 2008 (Reform Act), P.L. 110-409. In October 2008, Congress enacted the Reform Act, which created additional protections and authorities for IGs with regard to removal or transfer of an IG, budgets, law enforcement authority, pay, subpoena power, and websites. This report also addresses proposed changes affecting offices of inspectors general (OIGs) or establishing new OIGs in select bills in the 111th Congress: H.R. 885/S. 1354, the Improved Financial Commodity Markets Oversight and Accountability Act; H.R. 3126, the Consumer Financial Protection Agency Act of 2009; and H.R. 3962, the Affordable Health Care for America Act. On March 25, 2009, the House Committee on Oversight and Government Reform's Subcommittee on Government Management, Organization, and Procurement held a hearing entitled, "The Roles and Responsibilities of Inspectors General within Financial Regulatory Agencies," at which the subcommittee discussed H.R. 885 and other issues. The House passed H.R. 885 on a voice vote under suspension of the rules on June 8, 2009. |
A number of farm products are promoted through the use of congressionally authorizedgeneric promotion programs. (1) To fund these programs, the authorizing statutes (and orders)require that an assessment be collected based on the amount of product that a covered party sells,produces, or imports. Some producers have opposed the use of, or message in, genericadvertisements and have brought First Amendment challenges in court, three of which the SupremeCourt has decided. The Supreme Court's first two attempts at addressing First Amendment challenges tocheck-off programs -- California fruits and mushrooms, respectively -- resulted in contrastingopinions and some confusion for lower courts. Subsequent circuit court decisions for the beef, pork,and dairy check-off programs, for example, have all seemed to struggle with determining theapplicable level of scrutiny to apply to the programs. Nonetheless, in each case the appellate courtsrejected the government's argument that the check-off programs were "government speech" immunefrom First Amendment scrutiny and found the programs to unconstitutionally compel speech (orcompel the subsidy for the support of some type of speech). In May 2005, the Supreme Court issued its third opinion in eight years regarding theconstitutionality of a check-off program (beef). In Johanns v. Livestock Marketing Association , (2) the Supreme Court upheld thecheck-off program on "government speech" grounds -- a legal theory not addressed by the SupremeCourt in the earlier check-off cases. This ruling is likely to have far-reaching effects for check-offprograms. For example, it has already been used to vacate the circuit court decisions mentionedabove and will undoubtedly be used to defend other check-off programs from First Amendmentchallenges. The decision may also serve to inform and encourage future legislation creating oramending such programs. This report begins with a brief introduction on check-off programs and then describes theapplicable First Amendment principles argued in many of the check-off cases. Next is an analysisof the first two challenges that reached the Supreme Court, as well as a brief discussion ofsubsequent appellate court decisions. This report concludes with a discussion of Johanns v.Livestock Marketing Association and its possible implications for check-off programs. Congress has provided for the generic promotion of farm products since the 1930s. (3) These programs -- commonlyknown as "check-off" programs -- are requested, administered, and funded by the industriesthemselves, and, in part, operate under promotion and research orders or agreements issued by theSecretary of Agriculture. General oversight of these programs is provided by the U.S. Departmentof Agriculture's (USDA) Agricultural Marketing Service; however, there is still some debate as toactually how much control and responsibility the USDA has over the check-off programs. Farmproduct check-off programs are designed to strengthen the position of each respective commodityin the marketplace by increasing domestic demand and consumption and by expanding foreignmarkets. Typically, the statutory language authorizing a check-off program calls on the Secretary ofAgriculture to appoint a board (e.g., National Dairy Promotion and Research Board), council (e.g.,Mushroom Council) or other type of representative body, based on nominations made by theproducers, to pursue the statute's goals. To fund the programs, the authorizing statutes and orderscall on the board or council to collect an assessment based on the amount of product that a coveredparty sells, produces, or imports. The collected funds may finance a variety of programs, includingadvertising, consumer education, nutrition, production, marketing research, and new product andforeign market development. In some cases, large percentages of the collected funds are used toimplement generic promotions and advertisements. (4) The Secretary of Agriculture must approve each promotional projector plan before it can be implemented. (5) The First Amendment to the Constitution provides that "Congress shall make no law ...abridging the freedom of speech, or of the press...." (6) In general, the First Amendment prohibits the government fromregulating private speech based on its content and may prevent the government from compellingindividuals to express certain views (7) or to pay subsidies for speech to which they object. (8) However, the right to speakor refrain from speaking is not absolute. Courts, for example, look at the context and purpose of thespeech and allow greater government regulation for some types of speech than others. In consideringchallenges to check-off programs, courts have generally looked to the "commercial speech,""compelled speech," and "government speech" doctrines that have been developed under FirstAmendment jurisprudence. Commercial Speech. Commercial speech isspeech that "proposes a commercial transaction" (9) or relates "solely to the economic interests of the speaker and itsaudience." (10) Thegovernment may regulate commercial speech, even truthful expressions, more than it may regulatefully protected speech, and it also may ban false or misleading commercial speech, or advertisementsthat promote an illegal product. Courts typically use a four-prong test that was articulated by the Supreme Court in CentralHudson Gas & Electric Corp. v. Public Service Commission of New York to determine whether agovernmental regulation of commercial speech is constitutional. (11) The Central Hudson testasks (1) whether the commercial speech at issue is protected by the First Amendment (that is,whether it concerns a lawful activity and is not misleading) and (2) whether the assertedgovernmental interest in restricting it is substantial. "If both inquiries yield positive answers," thento be constitutional the restriction must (3) "directly advance the governmental interest asserted," and(4) be "not more extensive than is necessary to serve that interest." (12) Determining whether thespeech in question is "commercial speech" is important because it allows a court to apply the moreflexible intermediate scrutiny test of Central Hudson . As discussed below, courts have oftenstruggled with placing check-off programs solely within the parameters of "commercial speech." Compelled Speech. The First Amendment hasbeen interpreted to prevent the government from compelling individuals to express certain views orto pay subsidies for certain speech to which they object. Agricultural check-off cases havetraditionally been analyzed within this category or some modification of it. Initially, courts looked to the Supreme Court cases of Abood v. Detroit Board ofEducation (13) and Kellerv. State Bar of California (14) when analyzing check-off programs under the principles ofcompelled speech or subsidies. In Abood , non-union employees objected to paying a "service fee"equal to union dues because the fees subsidized economic, political, professional, scientific, andreligious activities not related to the union's collective bargaining agreement. The Supreme Courtheld that the union could constitutionally finance ideological activities that were not germane to theunion's collective bargaining but only with funds provided by non-objecting employees. (15) Since collectivebargaining was the authorized purpose of the union, and the union's political activities were notgermane to that purpose according to the Court, employees who disagreed with the political activitiescould not be compelled to support them. Similarly, in Keller , the Supreme Court held that the StateBar of California could constitutionally fund activities germane to its goals of regulating the legalprofession out of the mandatory dues of all members, but could not use compulsory dues foractivities of an ideological nature that fell outside of activities germane to the Bar's goals. (16) From these two cases, courts have fashioned a "germaneness" test for "compelled speech"or more particularly, "compelled subsidy" cases. (17) Under this test, courts are called on to "draw a line" betweenthose activities that are germane to a broader and legitimate government purpose and those that arenot -- a test both the Abood and Keller courts acknowledged would be difficult to apply. Government Speech. Generally, courts have"permitted the government to regulate the content of what is or is not expressed when thegovernment is the speaker or when the government enlists private entities to convey its ownmessage." (18) So longas the government bases its actions on legitimate goals, the government may speak despite citizendisagreement with the content of the message. Indeed, the government, with some exceptionspertaining to religion, may deliver a content-oriented message. "When the government speaks, forinstance to promote its own policies or to advance a particular idea, it is, in the end, accountable tothe electorate and the political process for its advocacy. If the citizenry objects, newly electedofficials later could espouse some different or contrary position." (19) In analyzing whether the "government speech" doctrine applies, courts typically consider thegovernment's responsibility for, and control over, the speech in question. The more control thegovernment exerts, the more likely it will be determined to be the speaker. Although there seemsto be some debate as to the scope of the "government speech" doctrine, (20) its effect is still broad, inthat it can provide immunity to First Amendment scrutiny. Over the years, a number of parties assessed under check-off programs have claimed that themandatory assessments are unconstitutional restraints on their right to free speech. Generally,opponents argue that they should not be required to pay for advertisements with which they disagree. For example, in a challenge against the dairy check-off program, the claimants were traditional dairyfarmers that did not use the genetically engineered and controversial "recombinant Bovine GrowthHormone." Consequently, they objected to subsidizing generic advertisements that they feltconveyed a message that milk is a fungible product that bears no distinction based on where and howit is produced. (21) Thesetypes of challenges were most often successful under a "compelled speech" analysis, even thoughthe cases varied in their analysis of "germaneness" and their attention to whether a "governmentspeech" approach might be more appropriate. The Supreme Court's recent expansive view of whatcan constitute "government speech," however, has put the entire line of earlier case law in question. California Tree Fruits Check-off Program. In Glickman v. Wileman Brothers and Elliot, Inc. , several producers of California tree fruits (peaches,nectarines, and plums) challenged the constitutionality of a USDA marketing order that requiredassessments be imposed on producers to fund costs associated with the orders, including genericadvertising. (22) Themarketing order at issue was derived from the Agricultural Marketing Agreement Act of 1937 (7U.S.C. §§ 601 et seq. ) and provides regulatory guidelines and restraints on its participants, includingquality and quantity controls, uniform price measures, and grade and size standards. Ultimately, theSupreme Court determined that the marketing orders were a species of economic regulation andupheld the constitutionality of the assessments imposed on the fruit growers to cover the costs ofgeneric advertising. The Supreme Court began its analysis by describing the regulatory guidelines and restraintsthat the marketing order posed on the industry as a whole and concluded that they fostered a "policyof collective, rather than competitive marketing." (23) The Court then distinguished the regulatory scheme at issue fromlaws that had previously been found suspect under the First Amendment by determining that theorders (1) posed no restraint on the freedom of any producer to communicate any message to anyaudience, (2) did not compel any person to engage in any actual or symbolic speech, and (3) did notcompel the producers to endorse or to finance any political or ideological views. (24) Next, the Courtdetermined that the standards established in "compelled speech" case law favored a finding ofconstitutionality because (1) the generic advertising was unquestionably germane to the purposes ofthe marketing orders, and (2) the assessments were not used to fund political or ideologicalactivities. (25) The Glickman Court further dismissed the argument that the compelled assessments required the levelof scrutiny usually applied in "commercial speech" cases because this level was inconsistent withthe very nature and purpose of the collective action of marketing orders at issue. (26) Based on these findings and the general cooperative nature of the regulatory scheme, theCourt found that the assessments imposed did not raise First Amendment concerns. The Courtdetermined that the respondent's criticisms of generic advertising "provid[ed] no basis for concludingthat factually accurate advertising constitutes an abridgment of anybody's right to speak freely." (27) The Supreme Courtconcluded by stating that the marketing orders in question were a "species of economic regulationthat should enjoy the same strong presumption of validity that we accord to other policy judgementsmade by Congress." (28) Mushroom Check-off Program. In 2001, theSupreme Court revisited the issue of compelled marketing assessments for generic advertisementsin United States v. United Foods, Inc. (29) In United Foods , the Court was faced with determining whetherthe mandatory assessments for the mushroom check-off program established pursuant to theMushroom Promotion, Research, and Consumer Information Act of 1990 (7 U.S.C. §§ 6101 et seq .)violated the First Amendment. The Supreme Court concluded that the program authorized by theMushroom Promotion Act differed fundamentally from the marketing orders at issue under Glickman and found the program unconstitutional. The Court started its analysis by declaring that it was not going to view the case in light of"commercial speech" jurisprudence because the government never raised the issue; however, theCourt determined that First Amendment issues arose "because of the requirement that producerssubsidize speech with which they disagree." (30) Accordingly, the Court began its examination by viewing theentire regulatory program at issue and comparing it with the scheme under scrutiny in Glickman. The Court determined that the features of the marketing scheme found important in Glickman werenot present in the case before it. For example, the Court concluded that "[i]n Glickman , themandated assessments for speech were ancillary to a more comprehensive program restricting marketautonomy" and that under the mushroom check-off "the advertising itself, far from being ancillary,is the principal object of the regulatory scheme." (31) By underscoring these differences, the Court moved away fromthe precedent established by Glickman . The Court next turned to the "compelled speech" arguments before it and found that the"mandated support is contrary to the First Amendment principles set forth in cases involvingexpression by groups which include persons who object to the speech, but who, nevertheless, mustremain members of the group by law or necessity." (32) In so holding, the United Foods Court found that the compelledspeech in the mushroom check-off program was not germane to a purpose related to an associationindependent from the speech itself. The only purpose the compelled contributions served, accordingto the Court, was the advertising scheme for the mushroom check-off program, which was not likethe broader cooperative marketing structure relied upon by a majority of the Court in Glickman . (33) Accordingly, the Courtstruck down the mandatory assessments used to fund generic advertisements imposed by themushroom check-off program. The government also attempted to assert "government speech"arguments; however, the Court refused to hear such substantive claims because they had not beenraised at the lower levels. (34) Since this decision, the Mushroom Council, which administers the check-off program underUSDA supervision, voted to reduce the mandatory assessments and divert their revenue tonon-promotional activities such as research into mushrooms' health and nutritional attributes. Since United Foods , there have been challenges to the constitutionality of the beef, dairy, andpork check-off programs. These challenges were all successful at the appellate level. (35) In each case, the appellatecourts rejected the government's argument that the check-off programs were "government speech"immune from First Amendment scrutiny. Generally, the courts found that the government exertedinsufficient control and responsibility over the check-off programs to support the applicability of the"government speech" doctrine. After declaring that the check-off cases presented private speech,the courts typically compared the check-off program at issue with those presented in Glickman and United Foods . All three circuit courts found the check-off programs in question more akin to theteachings and holdings of United Foods and thus unconstitutional. In so holding, each courtappeared to struggle with placing the check-off programs within the "commercial speech -- compelled speech" rubric. All three appellate decisions were appealed to the Supreme Court. The Court, however,heard arguments only in Livestock Marketing Ass'n v. Dep't of Agriculture , where the Eighth Circuithad ruled that the beef check-off program, authorized under the Beef Promotion and Research Actof 1985 (7 U.S.C. §§ 2901 et seq .) and its implementing regulations was unconstitutional. (36) The Court decided to holdthe petitions for writ of certiorari for the pork and dairy check-off cases until the beef case wasdecided. The Court heard oral arguments in December 2004, and released its opinion on May 23,2005, upholding the constitutionality of the beef check-off program. The Supreme Court vacatedall three appellate court decisions and remanded each case for further consideration in light of theruling. (37) In Johanns v. Livestock Marketing Association , the Supreme Court, in a 6-3 opinion, ruledthat the beef check-off funds the government's own speech, and it is therefore not susceptible to aFirst Amendment compelled-subsidy challenge. (38) The Court vacated the judgment by the Eighth Circuit andremanded the case to the appellate court for further proceedings consistent with its decision. (39) The Court began its analysis by declaring that it has upheld First Amendment challenges incases involving "compelled speech" and "compelled subsidy," but had never considered the FirstAmendment consequences of "government-compelled subsidy of the government's ownspeech." (40) In all thecases invalidating requirements to subsidize speech, the Court stated, "the speech was, or waspresumed to be, that of an entity other than the government itself." (41) The Court added (quotingan earlier Supreme Court case), that "'[t]he government, as a general rule, may support validprograms and policies by taxes or other exactions binding on protesting parties.'" (42) After recognizing theseprinciples, the Court observed that it has generally assumed, but not squarely held, that "compelledfunding of government speech does not alone raise First Amendment concerns." (43) The Court next rejected respondent's argument that the beef check-off program was not"government speech," and instead, found the promotional campaigns to be "effectively controlledby the Federal Government itself" and "from beginning to end the message established by the FederalGovernment." (44) TheCourt seemed to come to these conclusions primarily because: (1) Congress and the Secretary set outthe overarching message of the beef check-off program; (2) all proposed promotional messages arereviewed for substance (and possibly rejected or rewritten) by USDA officials; and (3) officials ofthe USDA attend and participate in the open meetings at which proposals are developed. (45) Noting the overall degreeof governmental control over the check-off messages, the Court stated that "the government is notprecluded from relying on the government-speech doctrine merely because it solicits assistance fromnongovernmental sources in developing specific messages." (46) The Court also dismissed the respondent's argument that the beef check-off program neededto be funded by general revenues, rather than targeted assessments, to qualify as "governmentspeech." In so concluding, the Court pointed out that the respondents have no right under the FirstAmendment not to fund government speech, irrespective of where the money comes from (i.e.,broad-based taxes or targeted assessments). (47) In addition, the Court concluded that the beef check-off programprovides political safeguards that are "more than adequate" to ensure that the message is kept apartfrom private interests. (48) Finally, the Court rejected respondent's argument that they were unconstitutionally forced to endorsea message with which they disagreed because the promotions used the tag-line "America's BeefProducers." The Court stated that such an argument involved compelled speech , rather thancompelled subsidy . (49) The Court suggested in dictum, nonetheless, that a compelled speech cause of action might lie if aparty could show that an objectionable beef advertisement was attributable to it. That is, even if astatute is constitutional on its face, a party may show that the government has applied it in anunconstitutional manner. Justices Souter, Stevens, and Kennedy dissented from the majority opinion. The dissentargues that the generic beef advertisements should not qualify for treatment as speech by thegovernment mainly because the statute does not require the government to indicate that it is thesponsor of the message. (50) If the government wishes to rely on the "government speech"doctrine to compel specific groups to fund speech with targeted taxes, the dissent states, "it mustmake itself politically accountable by indicating that the content actually is a government message.. . ." (51) Because the"government speech" doctrine is not applicable, the dissent noted, the case should have been decidedin line with United Foods . The Supreme Court's decision to uphold the beef check-off program on the "governmentspeech" doctrine is likely to have far-reaching implications for check-off programs. Johanns , ingeneral, appears to have fortified the constitutionality of check-off programs and has likely enhancedthe ability of Congress to provide similar promotional support for more agricultural products. Accordingly, this ruling will undoubtedly be used to defend other check-off programs from FirstAmendment challenges, to reevaluate those already decided, and to inform future legislation creatingor amending check-off programs. This opinion will probably clear up much of the confusion that the Glickman -- UnitedFoods dichotomy established. By classifying the beef check-off program as a type of "governmentspeech," the Court has now made it possible for lower courts to avoid (1) placing a check-offprogram within or (2) applying a test from, the "commercial speech -- compelled speech" line ofcases -- a task many lower courts struggled with. On the other hand, attorneys for the respondentclaim that with five different opinions from the Court (i.e., majority, three concurrences, dissent),"there are as many questions left open as there were answers." (52) Moreover, the extent towhich United Foods is, as the dissent points out, a "dead letter" is unclear, since the ruling did notexpressly overrule it. (53) These observations notwithstanding, the decision establishes a precedent by which check-offprograms may be immune from First Amendment scrutiny. The Johanns ruling put into question many of the earlier check-off appellate courtdecisions. (54) Indeed,the Supreme Court has already vacated the appellate court decisions that invalidated the federal dairyand pork check-off programs and has remanded each case, including the beef check-off case, forreconsideration in light of the decision. If it can be shown that these cases are analogous to the beefcheck-off program, it appears that a court would now likely find these check-off programsconstitutional "government speech." This finding seems probable, since the programs are authorizedand administered much in the same fashion and were all declared almost identical to the mushroomcheck-off program in United Foods . Opponents, accordingly, may attempt to reformulate their arguments outside the beefcheck-off holding. For example, some may attempt to use an "as-applied" challenge, which wassuggested by the Court (without expressing a view on the issue) as possibly being available. In theNinth Circuit case Charter v. U.S. Dep't of Agriculture , the court vacated and remanded a districtcourt decision that had found the beef check-off program to be government speech because ofevidence that the individual appellants could be associated with speech to which they objected. (55) Others might pursuerecourse under completely different legal theories. Opponents of the pork check-off program, forinstance, are reportedly pursuing a "freedom of association" claim that was not addressed by theSupreme Court in the beef check-off decision. (56) The USDA has stated that it is studying the beef check-offopinion to determine its impact on other First Amendment challenges to check-off programs. (57) Some have claimed that the decision might spur Congress into reconsidering the underlyingauthority and purposes of the check-off programs to accommodate some of the concerns raised bythe parties or noted by the courts. (58) Congress, for instance, might consider exempting certaincategories of producers who disagree with generic advertising from paying mandatory assessmentsunder a commodity promotion law similar to the exemption that Congress established in the 2002Farm Bill for persons that produce and market solely 100% organic products. (59) Congress might also seekto further define or expand current provisions in commodity promotion laws that already requirecouncils and projects to "take into account similarities and differences" between certain products andproducers. (60) Congress may also wish to reexamine its position on requiring the advertisements to showthat they are, in fact, speech by the Government, since this was a major criticism in the dissent andall circuit courts found insufficient governmental control. A clear indication of who is the speakermay be important, as mentioned by Justice Ginsburg in her concurring opinion and some experts,to reconcile the message in check-off programs with other speech that is overtly sponsored by thegovernment, particularly the nutritional and dietary guidelines ( e.g. , "Food Pyramid"). (61) The most recent federalDietary Guidelines, for example, encourage greater consumption of fruits, vegetables, whole grains,and low-fat dairy, within a balanced, lower-calorie intake diet, while check-off programs generallyencourage more consumption of both low-fat and high-fat beef, pork, and dairy products. (62) These apparentinconsistencies, it has been argued, might undermine one or both federal government messages andcould lead to consumer confusion. (63) Some also speculate, given the Court's acceptance of the "government speech" argument, thatthe ruling will prompt the USDA to exert greater effort in supervising check-offs and addressing theconcerns of some of the opposing parties. (64) With respect to programs that are still operating, many maycontinue operating as usual. Others that have modified their practices, such as the mushroomcheck-off program, may look to return to the status quo , pre- United Foods , and impose mandatoryassessments for generic promotion campaigns. Overall, the ruling is expected to call more attentionto the operation of check-off programs. | For decades, Congress has enacted laws authorizing generic promotion programs for anumber of farm products to increase overall demand and consumption of the agricultural product. These generic promotion programs, commonly known as "check-off" programs, are funded throughthe payment of mandatory assessments imposed on the amount of product that a covered party sells,produces, or imports. Some producers have opposed the use of generic advertisements and havebrought First Amendment challenges in court. Generally, these parties claim that they should notbe required to pay for advertisements (i.e., speech ) with which they disagree. The Supreme Court has ruled on the constitutionality of check-off programs three times inthe last eight years, the most recent of which occurred in May 2005. The Court's first two attemptsat addressing First Amendment challenges to check-off programs resulted in contrasting outcomesand some confusion for lower courts. In Johanns v. Livestock Marketing Association , the SupremeCourt's third and most recent decision concerning a check-off program (beef), the Court ruled thatthe generic advertising under the program was the government's own speech, and was therefore notsusceptible to the First Amendment challenge before it. The Supreme Court's decision was basedon grounds that had not been previously addressed by the Court in the earlier check-off cases andmay have far-reaching effects. For example, three circuit court rulings that invalidated othercheck-off programs have already been vacated by the Court for reconsideration in light of Johanns . This report begins with a brief introduction to check-off programs and then describes manyof the First Amendment principles that have been discussed in check-off cases. Next is an analysisof the first two challenges that reached the Supreme Court, as well as a brief discussion ofsubsequent lower court decisions. This report concludes with a discussion of Johanns v. LivestockMarketing Association and its possible implications for check-off programs. This report will beupdated as warranted. |
Subsets and Splits